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Invalda INVL

Annual Report • Apr 6, 2018

2247_10-k_2018-04-06_bded58fe-5c20-4966-aee7-a0bb03fde389.pdf

Annual Report

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AB INVALDA INVL Consolidated Annual Report, Consolidated and Company's Financial Statements for the year ended 31 December 2017

prepared in accordance with International Financial Reporting Standards as adopted by the European Union presented together with independent auditor's report

INDEPENDENT AUDITOR'S REPORT 3
CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS:
DETAILS OF THE COMPANY 9
CONSOLIDATED AND COMPANY'S INCOME STATEMENTS 10
CONSOLIDATED AND COMPANY'S STATEMENTS OF COMPREHENSIVE INCOME 11
CONSOLIDATED AND COMPANY'S STATEMENTS OF FINANCIAL POSITION 12
CONSOLIDATED AND COMPANY'S STATEMENTS OF CHANGES IN EQUITY 13
CONSOLIDATED AND COMPANY'S STATEMENTS OF CASH FLOWS 15
NOTES TO THE FINANCIAL STATEMENTS 17
1. GENERAL INFORMATION 17
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 20
3. BUSINESS COMBINATIONS, INVESTMENTS INTO ASSOCIATES, DISPOSALS 41
4. SEGMENT INFORMATION 44
5. OTHER INCOME AND EXPENSES 48
5.1.
Net changes in fair value on financial instruments 48
5.2.
Other income 48
5.3.
Other expenses 48
6. INCOME TAX 49
7. EARNINGS PER SHARE 53
8. DIVIDENDS PER SHARE 54
9. PROPERTY, PLANT AND EQUIPMENT 54
10. INTANGIBLE ASSETS 55
11. FINANCIAL INSTRUMENTS BY CATEGORY 57
12. FAIR VALUE ESTIMATION 59
13. FINANCIAL ASSETS AVAILABLE-FOR-SALE, AT FAIR VALUE THROUGH PROFIT AND LOSS AND HELD TO MATURITY 64
14.
15.		 LOANS GRANTED 65
TRADE AND OTHER RECEIVABLES 66
16. CASH AND CASH EQUIVALENTS, TERM DEPOSITS 67
17. RESTRICTED CASH 68
18. SHARE CAPITAL AND SHARE PREMIUM 68
19. RESERVES 68
20. BORROWINGS 70
21. TRADE PAYABLES 70
22. OTHER LIABILITIES 71
23. FINANCIAL RISK MANAGEMENT 71
23.1.
Financial risk factors 71
23.2.
Capital management 74
24. COMMITMENTS AND CONTINGENCIES 75
25. RELATED PARTY TRANSACTIONS 76
26. EVENTS AFTER THE REPORTING PERIOD 81
CONSOLIDATED ANNUAL REPORT 82
-- --------------------------------
Overall Company and Group
materiality		 Overall Company and Group materiality: EUR 640 thousand
$(2016 - EUR 520 thousand)$
How we determined it 1% of the Company's and the Group's total equity
Rationale for the materiality
benchmark applied		 We chose the Company's and the Group's equity as a
benchmark because, in our view, it is an appropriate measure
of the size of the entity, and changes in it indicate the

Consolidated and Company's income statements

Group Company
Notes 2017 2016 2017 2016
Revenue 4 7,094 5,067 - -
Other income 5.2 1,215 920 1,196 892
Net changes in fair value of financial instruments at fair
value through profit loss		 5.1 11,552 5,176 11,509 5,142
Employee benefits expenses 4 (3,701) (3,187) (367) (541)
Funds distribution fees (1,093) (913) - -
Information technology maintenance expenses (247) (396) (8) (11)
Depreciation and amortisation 9, 10 (338) (331) (4) (7)
Premises rent and utilities (308) (305) (29) (30)
Advertising and other promotion expenses (171) (167) (2) -
Impairment, write-down and provisions 4 (3) - 3
Other expenses 5.3 (1,360) (1,073) (129) (131)
Operating profit 12,647 4,788 12,166 5,317
Finance costs (3) (15) (12) (8)
Share of net (loss) profit of subsidiaries accounted for
using the equity method		 3 - - 596 (595)
Profit before income tax 12,644 4,773 12,750 4,714
Income tax expense 6 (1,337) (3) (1,443) 56
NET PROFIT FOR THE YEAR 11,307 4,770 11,307 4,770
Attributable to:
Equity holders of the parent 11,307 4,770 11,307 4,770
Basic earnings per share (in EUR) 7 0.98 0.41 0.98 0.41
Diluted earnings per share (in EUR) 7 0.97 0.41 0.97 0.41

Consolidated and Company's statements of comprehensive income

Group Company
2017 2016 2017 2016
NET PROFIT FOR THE YEAR 11,307 4,770 11,307 4,770
Net other comprehensive income that may be
subsequently reclassified to profit or loss		 - - - -
Net other comprehensive income not to be reclassified to
profit or loss		 - - - -
Other comprehensive income for the year, net of tax - - - -
TOTAL COMPREHENSIVE INCOME FOR THE YEAR,
NET OF TAX		 11,307 4,770 11,307 4,770
Attributable to:
Equity holders of the parent 11,307 4,770 11,307 4,770
Consolidated and Company's statements of financial position
------------------------------------------------------------- --
Group Company
Notes As at 31
December
2017		 As at 31
December
2016		 As at 31
December
2017		 As at 31
December
2016
ASSETS
Non-current assets
Property, plant and equipment 9 72 72 2 2
Intangible assets 10 3,514 3,749 3 6
Investments into subsidiaries 1, 12, 3 13,994 5,449 21,990 12,962
Investments into associates 1, 12, 3 20,008 23,554 20,008 23,554
Investments available-for-sale 13 494 494 494 494
Financial assets at fair value through profit loss 12, 13 20,804 14,485 20,804 14,485
Deferred income tax asset 6 625 778 - 164
Total non-current assets 59,511 48,581 63,301 51,667
Current assets
Trade and other receivables 15 1,903 1,285 217 -
Current loans granted 14 - 437 - 437
Prepaid income tax 48 24 45 21
Prepayments and deferred charges 58 101 7 48
Financial assets at fair value through profit loss 12, 13 2,976 2,418 1,560 901
Held to maturity 13 395 - - -
Restricted cash 17 - 103 - 103
Cash and cash equivalents 16 2,133 1,464 1,050 384
Total current assets 7,513 5,832 2,879 1,894
TOTAL ASSETS 67,024 54,413 66,180 53,561
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent
Share capital 1, 18 3,441 3,441 3,441 3,441
Own shares 18 (1,214) (1,108) (1,214) (1,108)
Share premium 4,996 4,996 4,996 4,996
Reserves 19 12,071 11,944 12,054 11,940
Retained earnings 44,702 33,408 44,719 33,412
Total equity 63,996 52,681 63,996 52,681
Liabilities
Non-current liabilities
Deferred income tax liability 6 1,316 82 1,316 -
Total non-current liabilities 1,316 82 1,316 -
Current liabilities
Current borrowings 20 - - 398 398
Trade payables 21 190 198 3 8
Income tax payable 31 61 - -
Other current liabilities 22 1,491 1,391 467 474
Total current liabilities 1,712 1,650 868 880
Total liabilities 3,028 1,732 2,184 880
TOTAL EQUITY AND LIABILITIES 67,024 54,413 66,180 53,561

Consolidated and Company's statements of changes in equity

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Consolidated and Company's statements of changes in equity (cont'd)

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Consolidated and Company's statements of cash flows

Group Company
Notes 2017 2016 2017 2016
Cash flows from (to) operating activities
Net profit for the year 11,307 4,770 11,307 4,770
Adjustment to reconcile result after tax to net cash flows:
Non-cash:
Depreciation and amortisation 9, 10 338 331 4 7
Realized and unrealized loss (gain) on investments
Share of net (loss) profit of subsidiaries accounted for		 5.1 (11,552) (5,176) (11,509) (5,142)
using the equity method 3 - - (596) 595
Interest income (57) (135) (49) (121)
Interest expenses - - 12 8
Deferred taxes 6 1,287 (58) 1,443 (56)
Current income tax expenses 6 50 61 - -
Allowances (4) 3 - (3)
Share-based payment 19 114 346 41 173
Loss from acquisition of subsidiaries 3 58 - - -
Dividend income 5.2 (1,115) (739) (1,115) (739)
426 (597) (462) (508)
Working capital adjustments:
Decrease (increase) in trade and other receivables (775) (488) - 31
Decrease (increase) in other current assets 43 (56) 41 (37)
Increase (decrease) in trade payables (16) (144) (12) (3)
Increase (decrease) in other current liabilities 122 393 18 (14)
Transfer to/from restricted cash 103 (20) 103 (20)
Cash flows from (to) operating activities (97) (912) (312) (551)
Dividends received 1,297 642 1,297 700
Acquisition of held-for-trading financial assets (59) (50) (59) (50)
Loans granted (165) (1,035) (165) (1,035)
Repayment of granted loans 437 1,530 437 1,530
Interest received 27 63 13 49
Income tax paid (33) - - -
Net cash flows from (to) operating activities 1,407 238 1,211 643

(cont'd on the next page)

Consolidated and Company's statements of cash flows (cont'd)

Group Company
Notes 2017 2016 2017 2016
Cash flows from (to) investing activities
Acquisition of non-current assets (except investment
properties)		 (98) (38) (1) (6)
Proceeds from sale of non-current assets (except for
investment properties)		 - 13 - 1
Acquisition and establishment of subsidiaries, net of cash
acquired		 3 (68) (3) (217) (1,337)
Acquisition of associates, net of cash acquired 3 (16) - (16) -
Proceeds from sales of subsidiaries 3 - 53 - 53
Acquisition of financial assets designated at fair value
through profit and loss on initial recognition		 (682) (726) (182) (28)
Sale of financial assets designated at fair value through
profit and loss on initial recognition		 637 682 - -
Acquisition of held to maturity investments (394) - - -
Net cash flows from (to) investing activities (621) (19) (416) (1,317)
Cash flows from (to) financing activities
Cash flows related to company shareholders:
Dividends paid to equity holders of the parent (11) (12) (11) (12)
Acquisition of own shares 18 (106) (558) (106) (558)
(117) (570) (117) (570)
Cash flows related to other sources of financing:
Proceeds from borrowings - - - 390
Repayment of borrowings - - - -
Interest paid - - (12) -
- - (12) 390
Net cash flows to financing activities (117) (570) (129) (180)
Impact of currency exchange on cash and cash
equivalents		 - - - -
Net increase (decrease) in cash and cash equivalents 669 (351) 666 (854)
Cash and cash equivalents at the beginning of the year 16 1,464 1,815 384 1,238
Cash and cash equivalents at the end of the year 16 2,133 1,464 1,050 384

(the end)

Notes to the financial statements

1. General information

AB Invalda INVL (hereinafter the Company) is a public limited liability company registered in the Republic of Lithuania on 20 March 1992. The address of its registered office is:

Gynėjų str. 14, Vilnius, Lithuania.

The Company is incorporated and domiciled in Lithuania. AB Invalda INVL is one of the leading asset management groups and one of the major companies investing in other businesses in the Baltic whose primary objective is to steadily increase the investors equity value, solely for capital appreciation or investment income (in the form of dividends and interest). The Company's main investments are in asset management, agriculture, facility management, real estate (from 2016) segments. Asset management segment is strategical investment of the Company. The entities of the asset management segment manage pension, bond and equity investments funds, alternative investments, individual portfolios, private equity and other financial instruments. They serve more than 190 thousand clients in Lithuania and Latvia, plus international investors, with total assets under management of over EUR 600 million.

In respect of each business the Company defines its performance objectives, sets up the management team, participates in the development of the business strategy and monitors its implementation. The Company plays an active role in making the decisions on strategic and other important issues that have an effect on the value of the Group companies.

The Company's shares are traded on the Baltic Secondary List of Nasdaq Vilnius.

Given the fact that the treasury shares do not grant voting rights, the total amount of voting rights in the Company equalled to 11,563,533 units as at 31 December 2017 (as at 31 December 2016 – 11,586,609 units, Note 18). As at 31 December 2017 and 2016 the shareholders of the Company were (by votes)*:

2017 2016
Number of
votes held		 Percentage (%) Number of
votes held		 Percentage (%)
UAB LJB Investments 3,515,855 30.40 3,515,855 30.35
Mrs. Irena Ona Mišeikiene 3,369,435 29.14 3,369,435 29.08
UAB Lucrum Investicija 2,638,309 22.81 2,638,309 22.77
Mr. Alvydas Banys 910,875 7.88 910,875 7.86
Ms. Indrė Mišeikytė 236,867 2.05 236,867 2.04
Other minor shareholders 892,192 7.72 915,268 7.90
Total 11,563,533 100.00 11,586,609 100.00

* One shareholder sold part of his shares under repo agreement (so do not hold the legal ownership title of shares), but he retained the voting rights of transferred shares.

The shareholders of the Company – Mr. Alvydas Banys, UAB LJB Investments, Mrs. Irena Ona Mišeikienė, Ms. Indrė Mišeikytė, Mr. Darius Šulnis and UAB Lucrum Investicija – have signed the agreement on the implementation of a long-term corporate governance policy. So their votes are counted together (92.28%).

All the shares of the Company are ordinary shares with the par value of EUR 0.29 each and were fully paid as at 31 December 2017 and 2016. Subsidiaries and associates did not hold any shares of the Company as at 31 December 2017 and 2016.

As at 31 December 2017 the number of employees of the Group was 489 (as at 31 December 2016 – 468). As at 31 December 2017 the number of employees of the Company was 7 (as at 31 December 2016 – 7).

According to the Law on Companies of Republic of Lithuania, the annual financial statements prepared by the Management are authorised by the General Shareholders' meeting. The shareholders hold the power not to approve the annual financial statements and the right to request new financial statements to be prepared.

1 General information (cont'd)

The Group consists of the Company and the following consolidated directly and indirectly owned subsidiaries (hereinafter the Group).

Country of
incorporation		 Proportion of shares (voting rights)
directly/indirectly held by the
Company/Group (%)
and place of As at 31 December As at 31 December
Name business 2017 2016 Nature of business
Asset management segment:
UAB INVL Asset Management Lithuania 100.00 100.00 Pension and investments
funds, alternative
investments, clients'
portfolio management
Pension and investments
funds, clients' portfolio
IPAS INVL Asset Management Latvia 100.00 100.00 management
nd pillar pension funds
3
AS INVL Atklātais Pensiju Fonds Latvia 100.00 - management
UAB FMĮ INVL Finasta Lithuania 100.00 100.00 Financial brokerage
Land administration
UAB INVL Farmland Management Lithuania 100.00 100.00 services
UAB Invalda INVL Investments Lithuania 100.00 100.00 Dormant

As at 31 December 2017 and 2016 the Group has also the following subsidiaries, which measured at fair value through profit or loss.

Country of Proportion of shares (voting rights)
directly/indirectly held by the
Company/Group (%)
Name incorporation and
place of business		 As at 31 December
2017		 As at 31 December
2016		 Nature of business
Facility management segment:
UAB Inservis Lithuania 100.00 100.00 Facilities management
UAB IPP Integracijos Projektai* Lithuania 100.00 100.00 Dormant
UAB Priemiestis* Lithuania 100.00 100.00 Facilities management
UAB Jurita* Lithuania 100.00 100.00 Facilities management
SIA Inservis* Latvia 100.00 - Facilities management
Investment into facilities
UAB Įmonių Grupė Inservis Lithuania 100.00 100.00 management entities
Other production and services
segments:
UAB Kelio Ženklai Lithuania 100.00 100.00 Road signs production,
wood manufacturing
Social initiatives
VšĮ Iniciatyvos Fondas Lithuania 100.00 100.00 activities
UAB Aktyvo Lithuania 54.55 54.55 Management of bad debt
UAB Aktyvus Valdymas Lithuania 100.00 100.00 Dormant
Investment into
agriculture entity
UAB Cedus Invest Lithuania 100.00 100.00 (investment entity)
UAB MGK Invest Lithuania 100.00 100.00 Dormant
UAB MBGK* Lithuania 100.00 100.00 Dormant
UAB RPNG Lithuania 100.00 100.00 Dormant
UAB Regenus Lithuania 100.00 100.00 Dormant
UAB Consult Invalda Lithuania 100.00 100.00 Dormant
UAB Cedus Lithuania 100.00 100.00 Dormant
*These entities are owned indirectly by the Company as at 31 December 2017 and/or 2016.

1 General information (cont'd)

The Group has not any significant restriction on ability to access or use its assets and settle its liabilities. The Company has not any significant restriction on the ability of an unconsolidated subsidiary to transfer funds to the Company.

If the unconsolidated subsidiary has liquidity difficulties, the Company grants loans to the subsidiary after analysis of its needs. The Company has not any contractual commitments to provide financial support to unconsolidated subsidiary. In 2016 the Company has granted EUR 312 thousand of loans to maintain the activity of the subsidiaries, from which EUR 70 thousand was repaid. In 2017 the Company has granted EUR 165 thousand of loans to maintain the activity of the subsidiaries.

As at 31 December 2017 the Group has the following associates, which measured at fair value through profit or loss:

Name Country of
incorporation and
place of business		 Proportion of shares
(voting rights)
directly/indirectly held
by the Company/Group
(%)		 Nature of business
Agriculture segment:
UAB Litagra* Lithuania 36.88 The primary crop and livestock (milk)
production and feed production
Real estate segment:
Special Closed-Ended Type Real
Estate Investment Company
INVL Baltic Real Estate		 Lithuania 32.13 Real estate owner and lessor
Facility management segment:
UAB Informacinio Verslo Paslaugų
Įmonė		 Lithuania 36.67 Payments administration for public
utilities

*In December 2017 was sold trading business and grain elevators network of the group of UAB Litagra (Note 3).

As at 31 December 2016 the Group has the following associates, which measured at fair value through profit or loss:

Name Country of
incorporation and
place of business		 Proportion of shares
(voting rights)
directly/indirectly held
by the Company/Group
(%)		 Nature of business
Agriculture segment:
UAB Litagra Lithuania 36.88 The primary crop and livestock (milk)
production, grain processing and
agricultural services
Real estate segment:
Special Closed-Ended Type Real
Estate Investment Company
INVL Baltic Real Estate		 Lithuania 32.08 Real estate owner and lessor
Facility management segment:
UAB Informacinio Verslo Paslaugų
Įmonė		 Lithuania 36.67 Payments administration for public
utilities

UAB Litagra and UAB Informacinio Verslo Paslaugų Įmonė have not any significant restriction on the ability of the associates to transfer funds to the Group as at 31 December 2016 and 2017. Special Closed-Ended Type Real Estate Investment Company INVL Baltic Real Estate (hereinafter INVL Baltic Real Estate) has the right to pay dividends without bank consent only if the ratio of EBITDA (earnings before interest, tax, depreciation and amortization) divided by the sum of debt service costs (interest and principal repayments) and dividends would be higher than 1.1.

2. Summary of significant accounting policies

The principal accounting policies applied in preparing the Group's and the Company's financial statements for the year ended 31 December 2017 are as follows:

2.1. Basis of preparation

Statement of compliance

The financial statements of the Company and the consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (hereinafter the EU).

These financial statements have been prepared on a historical cost basis, except for financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, investments to subsidiaries and associates measured at fair value through profit and loss and available-for-sale investments that have been measured at fair value. The financial statements are presented in thousands of euro (EUR) and all values are rounded to the nearest thousand except when otherwise indicated. From 1 January 2015 the euro became local currency of the Republic of Lithuania.

Adoption of new and/or changed IFRSs and IFRIC interpretations

The Group has adopted the new and amended IFRS and IFRIC interpretations as of 1 January 2017:

  • − Amendments to IAS 7: Disclosure Initiative effective 1 January 2017;
  • − Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses effective 1 January 2017;
  • − Annual Improvements to IFRSs 2014-2016 Cycle (changes to IFRS 12) effective 1 January 2017.

The principal effects of these changes are as follows:

Amendments to IAS 7: Disclosure Initiative

The amended IAS 7 will require disclosure of a reconciliation of movements in liabilities arising from financing activities. The amendments did not have any impact on the Group's and Company's financial position or performance, but the additional disclosures were added in Note 8 and Note 20.

Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses

The amendment has clarified the requirements on recognition of deferred tax assets for unrealised losses on debt instruments. The entity will have to recognise deferred tax asset for unrealised losses that arise as a result of discounting cash flows of debt instruments at market interest rates, even if it expects to hold the instrument to maturity and no tax will be payable upon collecting the principal amount. The economic benefit embodied in the deferred tax asset arises from the ability of the holder of the debt instrument to achieve future gains (unwinding of the effects of discounting) without paying taxes on those gains. The amendments had no material effect on the Group's and the Company's financial statements for the year ended 31 December 2017.

Annual Improvements to IFRSs 2014-2016 Cycle (changes to IFRS 12)

The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to an entity's interests in other entities that are classified as held for sale or discontinued operations in accordance with IFRS 5. The amendments had no material effect on the Group's and the Company's financial statements for the year ended 31 December 2017.

2.1 Basis of preparation (cont'd)

Standards adopted by the EU but not yet effective

IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)

Key features of the new standard are:

  • − Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost, those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently at fair value through profit or loss (FVPL).
  • − Classification for debt instruments is driven by the entity's business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in a portfolio where an entity both holds to collect assets' cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition.
  • − Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss.
  • − Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated as at fair value through profit or loss in other comprehensive income.
  • − IFRS 9 introduces a new model for the recognition of impairment losses the expected credit losses (ECL) model. There is a 'three stage' approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables.
  • − Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard currently does not address accounting for macro hedging.

The business model of the Company and the Group is to manage investment into subsidiaries together with non-current loans granted to subsidiaries as one portfolio and evaluate their performance on a combined fair value basis. On this basis information on portfolio is provided to the Board of the Company. Therefore, the portfolio is neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Consequently, such portfolio of financial assets must be measured at fair value through profit or loss. Before adopting of IFRS 9 the Company and the Group has attributed investment into subsidiaries together with non-current loans granted to subsidiaries to 'Assets at fair value through profit or loss' and measured them also at fair value through profit or loss. The Group and the Company have measured investments into associates at fair value through profit or loss and retained that after adoption of new standard. Other financial investments into shares were attributed to 'Assets at fair value through profit or loss'. After adoption of new standard they have also to be measured at fair value through profit or loss. The Group and the Company have financial assets attributed to the categories of financial assets 'Loans and receivables' and 'Held to maturity', which according to new standard would be measured at amortised cost as before as the business model for these assets is held to collect contractual cash flows and they are SPPI. Unquoted ordinary shares attributed to the categories available-for sale was measured at cost. After adoption of new standards they have to be measured at fair value through profit or loss. The Group and the Company is not expected that fair value of this investment substantially differs from cost. The Group and the Company have only financial liabilities attributed to the category 'Other financial liabilities'. Therefore, there will be no impact on the Group's and the Company's accounting for financial liabilities. The changes in hedge accounting will not have impact on the Group's and the Company's financial statements as the Group and the Company have no hedge accounting.

The new impairment model requires the recognition of impairment provisions based on ECL rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, contract assets under IFRS 15 Revenue from Contracts with Customers. Based on the assessments undertaken to date, it may result in an earlier recognition of credit losses in future, but at the date of initial application the Group and the Company assessed that there will be no significant impact on allowance of trade receivables, cash and cash equivalents and held to maturity investments. Therefore, there will be no material impact on the Group's/Company's financial position or performance due to application of IFRS 9. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group's and the Company's disclosures of their financial instruments, particularly in the year of the adoption of the new standard – in 2018. The Group/the Company will apply the new rules retrospectively from 1 January 2018, with the practical expedients permitted under the standard. Comparatives for 2017 will not be restated.

2.1 Basis of preparation (cont'd)

Standards adopted by the EU but not yet effective (cont'd)

IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018) Amendments to IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018)

The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed.

The amendments do not change the underlying principles of the standard but clarify how those principles should be applied. The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract; how to determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and how to determine whether the revenue from granting a licence should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new standard. The Group and the Company is currently assessing the impact of the amendments on its financial statements.

The Group have made judgements regarding separate contracts that the customer of asset management entities for pension and investment funds, clients portfolio is investor (funds participants). According to IFRS 15 recognition of performance fee revenue from managed private equity funds or from investment companies would be deferred until end of performance period often. Recognition of management fee revenue would not change from currently practise. Costs to obtain investor would be capitalised as assets and amortized on a systematic basis consistent with the pattern of transfer of the services to the customer. As at 1 January 2018 the Group capitalised EUR 1,510 thousand of fees paid to brokers to obtain customer as assets with corresponding amount recognised in retained earnings. The assets would be amortized during five years period. As at 1 January 2018 the Group has also recognised deferred tax liability amounted to EUR 226 thousand. The Group/the Company will apply the new rules retrospectively from 1 January 2018, with the practical expedients permitted under the standard. Comparatives for 2017 will not be restated.

IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019)

The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group and the Company are currently assessing the impact of the standard on their financial statements. The Group and the Company would have to recognise assets and liabilities for its premises lease contracts (Note 24). In the income statement depreciation of lease assets and interest on lease liabilities would replace currently recognised lease expenses. The Group and the Company do not intend to adopt IFRS 16 before its mandatory date.

2.1 Basis of preparation (cont'd)

Standards adopted by the EU but not yet effective (cont'd)

Amendments to IFRS 2 Share-based Payments (effective for annual periods beginning on or after 1 January 2018)

The amendments mean that non-market performance vesting conditions will impact measurement of cash-settled share-based payment transactions in the same manner as equity-settled awards. The amendments also clarify classification of a transaction with a net settlement feature in which the entity withholds a specified portion of the equity instruments, that would otherwise be issued to the counterparty upon exercise (or vesting), in return for settling the counterparty's tax obligation that is associated with the share-based payment. Such arrangements will be classified as equity-settled in their entirety. Finally, the amendments also clarify accounting for cash-settled share based payments that are modified to become equity-settled, as follows (a) the share-based payment is measured by reference to the modification-date fair value of the equity instruments granted as a result of the modification; (b) the liability is derecognised upon the modification, (c) the equity-settled share-based payment is recognised to the extent that the services have been rendered up to the modification date, and (d) the difference between the carrying amount of the liability as at the modification date and the amount recognised in equity at the same date is recorded in profit or loss immediately. The Group and the Company is currently assessing the impact of the amendments on its financial statements.

Annual Improvements to IFRSs 2014-2016 Cycle (effective for annual periods beginning on or after 1 January 2018 (changes to IFRS 1 and IAS 28)

The improvements impact two standards effective from 1 January 2018. IFRS 1 was amended to delete some of the short-term exemptions from IFRSs after those short-term exemptions have served their intended purpose. The amendments to IAS 28 clarify that venture capital organisations or similar entities have an investment-by- investment choice for measuring investees at fair value. Additionally, the amendment clarifies that if an investor that is not an investment entity has an associate or joint venture that is an investment entity, the investor can choose on an investment-by-investment basis to retain or reverse the fair value measurements used by that investment entity associate or joint venture when applying the equity method. The Group and the Company is currently assessing the impact of the amendments on its financial statements.

IFRIC 22 Foreign Currency Transactions and Advance Consideration (effective for annual periods beginning on or after 1 January 2018)

The interpretation applies where an entity either pays or receives consideration in advance for foreign currency-denominated contracts. The interpretation clarifies that the date of transaction, i.e the date when the exchange rate is determined, is the date on which the entity initially recognises the non-monetary asset or liability from advance consideration. However, the entity needs to apply judgement in determining whether the prepayment is monetary or non-monetary asset or liability based on guidance in IAS 21, IAS 32 and the Conceptual Framework. The Group and the Company is currently assessing the impact of the interpretation on its financial statements.

The following new standards adopted by the EU bur not yet effective are not relevant for the Group and the Company:

  • − Amendments to IAS 40 Transfers of Investment Property (effective for annual periods beginning on or after 1 January 2018)
  • − Amendments to IFRS 9 Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019).
  • − Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (effective, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply overlay approach).

2.1 Basis of preparation (cont'd)

Standards not yet adopted by the EU

IFRIC 23, Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1 January 2019 once adopted by the EU)

IAS 12 specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. The interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. An entity should determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty. An entity should assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. If an entity concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of uncertainty will be reflected in determining the related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates, by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty. An entity will reflect the effect of a change in facts and circumstances or of new information that affects the judgments or estimates required by the interpretation as a change in accounting estimate. Examples of changes in facts and circumstances or new information that can result in the reassessment of a judgment or estimate include, but are not limited to, examinations or actions by a taxation authority, changes in rules established by a taxation authority or the expiry of a taxation authority's right to examine or re-examine a tax treatment. The absence of agreement or disagreement by a taxation authority with a tax treatment, in isolation, is unlikely to constitute a change in facts and circumstances or new information that affects the judgments and estimates required by the Interpretation. The Group and the Company is currently assessing the impact of the interpretation on its financial statements.

Annual Improvements to IFRSs 2015-2017 cycle (effective for annual periods beginning on or after 1 January 2019 once adopted by the EU)

The narrow scope amendments impact four standards. IFRS 3 was clarified that an acquirer should remeasure its previously held interest in a joint operation when it obtains control of the business. Conversely, IFRS 11 now explicitly explains that the investor should not remeasure its previously held interest when it obtains joint control of a joint operation, similarly to the existing requirements when an associate becomes a joint venture and vice versa. The amended IAS 12 explains that an entity recognises all income tax consequences of dividends where it has recognised the transactions or events that generated the related distributable profits, eg in profit or loss or in other comprehensive income. It is now clear that this requirement applies in all circumstances as long as payments on financial instruments classified as equity are distributions of profits, and not only in cases when the tax consequences are a result of different tax rates for distributed and undistributed profits. The revised IAS 23 now includes explicit guidance that the borrowings obtained specifically for funding a specified asset are excluded from the pool of general borrowings costs eligible for capitalisation only until the specific asset is substantially complete The Group and the Company is currently assessing the impact of the amendments on its financial statements.

Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2019 once adopted by the EU).

The amendments clarify that reporting entities should apply IFRS 9 to long-term loans, preference shares and similar instruments that form part of a net investment in an equity method investee before they can reduce such carrying value by a share of loss of the investee that exceeds the amount of investor's interest in the investee. The Group and the Company is currently assessing the impact of the amendments on its financial statements.

The following new standards not yet adopted by the EU are not relevant for the Group and the Company:

  • − IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2021 once adopted by the EU)
  • − Amendments to IAS 19: Plan Amendment, Curtailment or Settlement (effective for annual periods beginning on or after 1 January 2019 once adopted by the EU)

The adoption of the following new standards and amendments are postponed by the EU indefinitely:

  • − IFRS 14 Regulatory Deferral Accounts (effective for annual periods beginning on or after 1 January 2016 once adopted by the EU)
  • − Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after a date to be determined by the IASB once adopted by the EU)

The Group and the Company has not yet analysed impact of them to its financial statements.

2.2. Investment entity and consolidated financial statements

Investment entity

The Company has multiple unrelated investors and holds multiple investments. Ownership interests in the Company are in the form of equity securities issued by the Company – ordinary registered shares. In the management's opinion, the Company meets the definition of an investment entity as the following conditions exist:

(i) The Company obtains funds from investors for the purpose of providing them with investment management services.

(ii) The Company commits to investors that its business purpose in to invest funds solely for capital appreciation, investment income, or both. And

(iii) The management measures and evaluates its investments and makes investment decisions on a fair value as a key criterion.

Subsidiaries

The Company has no subsidiaries other than those determined to be controlled subsidiary investments and those who provide services that are related to the entity's investment activities. Controlled subsidiary investments are measured at fair value through profit or loss and not consolidated, in accordance with IFRS 10. The fair value of controlled subsidiary investments is determined on a consistent basis to all other investments measured at fair value through profit or loss, and as described in the Note 2.12 below. The subsidiaries that provide services that are related to the entity's investment activities are consolidated.

Associates

An associate is an entity, over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Investments that are held as part of the Company's investment portfolio are carried at fair value even though the Company may have significant influence over those companies. This treatment is permitted by IAS 28 'Investments in associates and joint ventures' as exception from applying the equity method.

2.3. Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries that provide services that are related to the entity's investment activities. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

Subsidiaries are all entities (including structured entities) over which the group has control and that provide services that are related to the entity's investment activities. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All intra-group balances, transactions, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions that are recognised in assets, are eliminated in full.

Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent and is presented separately in the consolidated income statement and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. The group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to noncontrolling interests are also recorded in equity.

2.3 Basis of consolidation (cont'd)

Total comprehensive income (losses) within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

When the group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss or retained earnings, as appropriate.

2.4. Functional and presentation currency

From 1 January 2015 the euro became local currency of the Republic of Lithuania. The financial statements are prepared in euro (EUR), which is local currency of the Republic of Lithuania, and presented in EUR thousand. Euro is also the local currency of the Republic of Latvia. Euro is the Company's and the Group's functional and presentation currency. The exchange rates in relation to other currencies are set daily by the European Central Bank and the Bank of Lithuania.

As these financial statements are presented in euro thousand, individual amounts were rounded. Due to the rounding, totals in the tables may not add up.

2.5. Property, plant and equipment

Property, plant and equipment is stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of the plant and equipment when the cost is incurred, if the recognition criteria are met. Replaced parts are written off.

The carrying values of property, plant and equipment are reviewed for impairment when events or change in circumstances indicate that the carrying value may not be recoverable.

Depreciation is calculated using the straight-line method over the following estimated useful lives.

Vehicles 6 years
Other non-current assets 3–6 years

The asset residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end to ensure that they are consistent with the expected pattern of economic benefits from items in property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement within "other income" in the year the asset is derecognised.

2.6. Intangible assets other than goodwill

Intangible assets are measured initially at cost. Intangible assets are recognised if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of asset can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets other than goodwill are assessed to be finite. Intangible assets are amortised using the straightline method over the best estimate of their useful lives.

Funds' management rights

Funds' management rights include investment, pension funds and portfolio of clients acquired during asset management entities acquisition. Funds' management rights acquired in a business combination are capitalised at the fair value at the acquisition date and treated as an intangible asset. Following initial recognition, funds' management rights are carried at cost less any accumulated impairment losses. Funds' management rights are amortised during 5 - 20 years.

Software

The costs of acquisition of new software are capitalised and treated as an intangible asset if these costs are not an integral part of the related hardware. Software is amortised during 3-5 years.

Costs incurred in order to restore or maintain the future economic benefits that the Group and the Company expect from the originally assessed standard of performance of existing software systems are recognised as an expense when the restoration or maintenance work is carried out.

2.7. Business combinations and goodwill

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of annual impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated:

− represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and − is not larger than an operating segment determined in accordance with IFRS 8 Operating Segments.

Where goodwill forms part of a cash generating unit (group of cash generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained.

2.8. Investments in subsidiaries, associates (the Company)

Investments in unconsolidated subsidiaries, associates are measured at fair value through profit or loss. Non-current loans granted to unconsolidated subsidiaries are considered as part of investments to subsidiaries. They are measured together with equity part of investments to subsidiaries at fair value through profit or loss.

Interest on loans granted at fair value through profit or loss is recognised in the income statement within 'other income' based on the effective interest rate.

When the fair value of investments into subsidiaries together with non-current loans granted to subsidiaries is determined, the value is split into legal components, i.e. between debt and equity instruments. The amortised cost of loans granted is attributed to debt instruments. The remaining value is attributed to equity instruments of the subsidiary.

Investments in consolidated subsidiaries are accounted for using the equity method of accounting. Under the equity method, the investment in the subsidiary is carried in the statement of financial position at cost plus post acquisition changes in the Company's share of net assets of the subsidiary. Goodwill relating to a subsidiary is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The statement of comprehensive income reflects the share of the results of operations of the subsidiary. Where there has been a change recognised in the other comprehensive income of the subsidiary, the Company recognises its share of any changes and discloses this, when applicable, in the other comprehensive income. Company's share in the changes in the net assets of the subsidiary that are not recognised in profit or loss or other comprehensive income (OCI) of the subsidiary, are recognised in equity. Unrealised gains and losses (unless the transaction provides evidence of the impairment of asset transferred) resulting from transactions between the Company and the subsidiary are eliminated to the extent of the interest in the subsidiary.

The reporting dates of the subsidiary and the Company are identical and the subsidiary's accounting policies conform to those used by the Company for like transactions and events in similar circumstances. After application of the equity method, the Company determines whether it is necessary to recognise an additional impairment loss of the Company's investment in its subsidiaries. The Company determines at each reporting date whether there is any objective evidence that the investment in subsidiary is impaired. If this is the case the Company calculates the amount of impairment as being the difference between the recoverable amount of the subsidiary and its carrying value and recognises the amount in the statement of comprehensive income. When the Company's share of losses in a subsidiary equals or exceeds its interest in the subsidiary, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the subsidiary.

2.9. Non-current assets (or disposal groups) held-for-sale and discontinued operations

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.

In the consolidated income statement of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing activities as a single amount as profit or loss after tax from discontinued operations in the income statement, even when the Group retains a noncontrolling interest in the subsidiary after the sale, e.g. subsidiary becomes an associate.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

When preparing the consolidated statement of income, all inter-company transactions between discontinued and continuing operations that the Group intends to conduct after the discontinuance, are presented in continuing operation without elimination, i.e. they are presented as if they were conducted with third parties. In this case the elimination entry is recorded in discontinued operations. All inter-company transactions between discontinued and continuing operations that the Group does not intend to conduct after the discontinuance, are eliminated from continuing operation.

2.10. Impairment of non-financial assets

The Group and the Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group and the Company makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Impairment losses of continuing operations are recognised in the income statement within "impairment, write-down and provisions".

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group and the Company makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement. Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in its recoverable amount.

The following criteria are also applied in assessing impairment of specific assets:

Goodwill

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash generating unit (or group of cash generating units), to which the goodwill relates. Where the recoverable amount of the cash generating unit (or group of cashgenerating units) is less than the carrying amount of the cash-generating unit (group of cash-generating units) to which goodwill has been allocated, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill as at 31 December.

2.11. Financial assets

Financial assets within the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The classification depends on the purpose for which the financial assets were acquired The Group and the Company determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial asset or financial liability not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company considers whether a contract contains an embedded derivative when the entity first becomes a party to it. The embedded derivatives are separated from the host contract which is not measured at fair value through profit or loss when the analysis shows that the economic characteristics and risks of embedded derivatives are not closely related to those of the host contract.

All regular way purchases and sales of financial assets are recognised on the settlement date. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

2.11 Financial assets (cont'd)

Financial assets at fair value through profit or loss

The Group and the Company classifies its investments in debt and equity securities, and derivatives, as financial assets at fair value through profit or loss.

This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception.

  • (i) Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separable embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments or financial guarantee contracts.
  • (ii) Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. The Group's and the Company's policy requires the Management Board to evaluate the information about these financial assets on a fair value basis together with other related financial information.

Gains or losses on financial assets at fair value through profit or loss are recognized in profit and loss within "Net change in fair value of financial instruments at fair value through profit or loss". Interest on debt securities at fair value through profit or loss is recognized within other income based on the effective interest rate. Dividends earned on investments are recognised in the income statement as other income when the right of payment has been established. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through amortisation process. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The group's loans and receivables comprise 'loans granted', 'trade and other receivables', 'deposits', 'restricted cash' and 'cash and cash equivalents' in the statement of financial position (see Notes 14, 15, 16, 17).

Available-for-sale financial instruments

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of other categories. After initial measurement, available-for-sale financial assets are measured at fair value with unrealised gains or losses being recognised as other comprehensive income in the fair value reserve. When the investment is disposed of, the cumulative gain or loss previously accumulated in equity is recognised in the income statement. Interest earned on the investments is reported as interest income or expense using the effective interest rate. Dividends earned on investments are recognised in the income statement as other income when the right of payment has been established. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Unquoted ordinary shares, which fair value cannot be measured reliably, are measured at cost.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.12. Fair value estimation

The fair value of investments traded in active markets is based on quoted market prices at the close of trading, which is the date closest to the reporting date. The fair value of investments that are not traded in active markets is determined by using valuation techniques. Such valuation techniques may include the most recent transactions in the market, the market price for similar transactions, discounted cash flow analysis or any other valuation models.

2.13. Impairment of financial assets

Assets carried at amortised cost

The Group and the Company assesses at each reporting date whether is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the group uses to determine that there is objective evidence of an impairment loss include:

  • − Significant financial difficulty of the issuer or obligor;
  • − A breach of contract, such as a default or delinquency in interest or principal payments;
  • − The group, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
  • − It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
  • − The disappearance of an active market for that financial asset because of financial difficulties; or
  • − Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
  • (i) Adverse changes in the payment status of borrowers in the portfolio; and
  • (ii) National or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group and the Company first assesses whether objective evidence of impairment exists.

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss within "impairment, write-down, allowances and provisions".

The Group and the Company assesses whether objective evidence of impairment exists individually for financial assets. When financial asset is assessed as uncollectible and all collateral has been realised or has been transferred to the Group and the Company the impaired asset is derecognised. The objective evidence for that is insolvency proceedings against the debtor is initiated and the debtor has not enough assets to pay to creditors, the debtor could not be found.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss within "impairment, write-down, allowances and provisions", to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group and the Company will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

2.13 Impairment of financial assets (cont'd)

Available-for-sale financial investments

The Group and the Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the group uses the same criteria as financial assets carried at amortised cost. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-forsale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income. If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

2.14. Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.15. Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.

For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand and in current bank account as well as deposit in bank with an original maturity of three months or less.

The cash or short-term deposits, which use is restricted, are presented in caption 'restricted cash' in the statement of financial position (see Note 17).

2.16. Financial liabilities

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, other financial liabilities, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group and the Company determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of other financial liabilities, plus directly attributable transaction costs.

All financial liabilities of the Company and the Group are classified as other financial liabilities. The measurement of financial liabilities depends on their classification as follows:

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

2.17. Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

  • the rights to receive cash flows from the asset have expired;

  • the Group and the Company retain the right to receive cash flows from the asset, but have assumed an obligation to pay them in full without material delay to a third party under a "pass through" arrangement; or

  • the Group or the Company have transferred their rights to receive cash flows from the asset and either (a) have transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.

Where the Group and the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group's and the Company's continuing involvement in the asset.

In that case, the Group and the Company's also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

2.18. Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:

  • a) There is a change in contractual terms, other than a renewal or extension of the arrangement;
  • b) A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term;
  • c) There is a change in the determination of whether fulfilment is dependent on a specified asset; or
  • d) There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios a), c) or d) and at the date of renewal or extension period for scenario b).

Operating lease

Group as a lessee

Leases where the lessor retains all the risk and benefits of ownership of the asset are classified as operating leases. Operating lease payments (net of any incentives received from the lessor) are recognised as an expense in the income statement on a straight-line basis over the lease term.

If the result of sales and lease back transactions is operating lease and it is obvious that the transaction has been carried out at fair value, any profit or loss is recognised immediately. If the sales price is lower than the fair value, any profit or loss is recognised immediately, except for the cases when the loss is compensated by lower than market prices for lease payments in the future. The profit is then deferred and it is amortised in proportion to the lease payments over a period, during which the assets are expected to be operated. If the sales price exceeds the fair value, a deferral is made for the amount by which the fair value is exceeded and it is amortised over a period, during which the assets are expected to be operated.

2.19. Revenue recognition

The Group and the Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group's activities as described below. The Group and the Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognised.

Revenue from the asset management and brokerage services

Revenue from the asset management services is recognized in the income statement as a percentage from asset under management in the period it is attributable.

Success fees are recognised when received. Revenue from brokerage services is recognized when actual service is provided.

Disposal of investments

Gain (loss) from sale of investment is recognised when the significant risk and rewards of ownership of the investment have passed to the buyer and are recognised within operating activity, as the parent company treats the securities trading as its main activity.

Interest income

Income is recognised as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

Dividends income

Income is recognised when the Group's and the Company's right to receive the payment is established.

2.20. Cash and non-cash distribution to equity holders of the parent

The Company recognises a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorised and the distribution is no longer at the discretion of the Company. In Lithuania a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. The liability for non-cash distributions is measured at the fair value of the assets to be distributed with subsequent fair value re-measurement recognised directly in equity as adjustment to the amount of the distribution.

Upon distribution of non-cash assets, any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognised in the statement of profit or loss.

2.21. Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

The standard income tax rate in Lithuania and in Latvia was 15 % in 2017 and in 2016. Starting from 2010, tax losses can be transferred within Lithuania at no consideration or in exchange for certain consideration between the group companies if certain conditions are met.

Deferred income taxes are calculated using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse based on tax rates enacted or substantially enacted at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

  • − Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
  • − In respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

By Lithuanian Income Tax Law shall be not taxed sale of shares of an entity, registered or otherwise organised in a state of the European Economic Area or in a state with which a treaty for the avoidance of double taxation has been concluded and brought into effect and which is a payer of corporate income tax or an equivalent tax, to another entity or a natural person where the entity transferring the shares held more than 25% of voting shares in that entity for an uninterrupted period of at least two years. If mentioned condition is met or will be met by judgement of the management of the Company, there are not recognised any deferred tax liabilities or assets in respect of temporary differences associated with this investments.

Deferred income tax asset has been recognised in the statement of financial position to the extent the management believes it will be realised in the foreseeable future, based on taxable profit forecasts. If it is believed that part of the deferred income tax asset is not going to be realised, this part of the deferred tax asset is not recognised in the financial statements.

Deferred tax asset are not recognised:

  • − Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
  • − In respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

In Lithuania tax losses can be carried forward for indefinite period, except for the losses incurred as a result of disposal of securities and/or derivative financial instruments. In Lithuania such carrying forward is disrupted if the Company changes its activities due to which these losses incurred except when the Company does not continue its activities due to reasons which do not depend on the Company itself. In Lithuania the losses from disposal of securities and/or derivative financial instruments can be carried forward for 5 consecutive years and only be used to reduce the taxable income earned from the transactions of the same nature. From 1 January 2014 current year taxable profit could be decreased by previous year tax losses only up to 70% in Lithuania.

2.21 Current and deferred income tax (cont'd)

From 1 January 2018 according to the new Corporate Income Tax Act of Latvia the annual profit would be not taxed. Corporate income tax would be paid on distributed profit, including conditional distributed profit as for example: expenditure not related to economic activities, some loans granted to related parties, some provisions for doubtful debts. The tax rate on (net) distributed profit would be 20/80. Until 31 December 2017 gains from the sale of shares are not taxed, and losses are not deductible in Latvia. From 1 January 2018 the tax base would be reduced by the gain on sale of shares, if the shares were held for an uninterrupted period of at least 36 months. The excess gain can be transferred and utilized in the future periods.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.22. Provisions

Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group and the Company expect some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Contingent liabilities recognised in a business combination (applicable as of 1 January 2010)

A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of:

  • − the amount that would be recognised in accordance with the general guidance for provisions above (IAS 37) or
  • − the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition (IAS 18).

2.23. Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decisionmaker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as Board of Directors that makes strategic decisions.

2.24. Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognised in equity as a deduction, net of tax, from the retained earnings. Where any group company purchases the company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company's equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company's equity holders.

2.25. Employee benefits

Social security contributions

The Company and the Group pay social security contributions to the state Social Security Fund (the Fund) on behalf of its employees based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under which the Group pays fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period. Social security contributions are recognised as expenses on an accrual basis and included in payroll expenses.

Termination benefits

Termination benefits are payable whenever an employee's employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits at the earlier of the following dates: (a) when the group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after reporting date are discounted to their present value.

Bonus plans

The Company and the Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

Pension obligations

If there is an individual arrangement with an employee the Company and the Group may make payments into defined contribution pension plans. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

2.26. Share - based payments

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the group. The fair value of the employee services received in exchange for the grant of the options is recognised as an employee benefits expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

  • − including any market performance conditions;
  • − excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
  • − excluding the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

When the options are exercised, the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

2.26 Share - based payments (cont'd)

Share - based payments – modification and cancellation

If the terms of an equity-settled award are modified, at a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

If an equity award is cancelled by forfeiture, when the vesting conditions (other than market conditions) have not been met, any expense not yet recognised for that award, as at the date of forfeiture, is treated as if it had never been recognised. At the same time, any expense previously recognised on such cancelled equity awards are reversed from the accounts effective as at the date of forfeiture.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

2.27. Contingencies

Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognised in the financial statements but disclosed when an inflow or economic benefits is probable.

2.28. Events after the reporting period

Events after the reporting period that provide additional information about the Group's position as at the end of the reporting period (adjusting events) are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes when material.

2.29. Significant accounting judgements and estimates

The preparation of financial statements requires management of the Group and the Company to make judgements and estimates that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities, at the end of reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

2.29 Significant accounting judgements and estimates (cont'd)

Judgements

In the process of applying the Group accounting policies, management has made the following judgement, which has most significant effect on the amounts recognised in the consolidated financial statements:

Investment entity

According to the management, the Company meets all the defining criteria of an investment entity from the split-off in 2014 and henceforth investments in unconsolidated subsidiaries and associates are measured at fair value through profit or loss. The management periodically reviews whether the Company meets all the defining criteria of an investment entity. In addition, the management assesses the Company's operation objective, investment strategy, origin of income and fair value models.

Financial assets designated at fair value through profit and loss on initial recognition

The shares of Special Closed-ended Type Private Capital Investment Company INVL Technology (hereinafter – INVL Technology), AB Šiaulių bankas (acquired in 2015) and the financial assets acquired during asset management entities acquisition were designated at fair value through profit or loss on initial recognition because the Management believes that this presentation represents best the way these investments are managed and their performance is evaluated and provides more relevant information to the users of financial statements.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

The significant areas of estimation used in the preparation of these financial statements are discussed below.

Fair value of investments in subsidiaries and associates in financial statements

The fair values of investments in unconsolidated subsidiaries and associates are determined by using valuation techniques, primarily earnings multiples, discounted cash flows and recent comparable transactions. The models used to determine fair values are periodically reviewed and compared against historical results to ensure their reliability. Details of the inputs and valuation models used to determine Level 3 fair value, is provided in Note 12.

The fair value of the investments in unconsolidated subsidiaries and associates of the Group and the Company as at 31 December 2017 was EUR 13,994 thousand and EUR 20,008 thousand, respectively (as at 31 December 2016 - EUR 5,449 thousand and EUR 23,554 thousand, respectively) (described in more details in Note 12).

2.29 Significant accounting judgements and estimates (cont'd)

Estimates and assumptions (cont'd)

Useful lives of funds' management rights

The useful lives of funds' management rights acquired through business combinations are disclosed in Note 2.6 and amortisation charge for the year is disclosed in Note 10. The useful lives are determined by management at the time the asset is acquired and reviewed on an annual basis for appropriateness. The lives are based on historical experiences with similar assets as well as anticipation of future events, which may impact their life. As at 31 December 2017 and 2016 the Group assessed that there is no impairment indication of funds' management rights. If the estimated useful lives of funds' management rights have been one year shorter, the amortisation charge for the year ended 31 December 2017 and 2016 would have increased by EUR 24 thousand.

Deferred income tax assets

Deferred income tax assets are recognised for tax losses carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing and amount of future taxable profits together with future tax planning strategies.

Deferred income tax asset is recognized on individual company basis taking into account future performance plans of those companies. No deferred tax asset is recognized from Group's tax losses carry forward for indefinite period of time of EUR 4,707 thousand as 31 December 2017 (as at 31 December 2016 – EUR 5,797 thousand) due to future uncertainties related with the performance of those companies. As at 31 December 2017 the Company has not recognised deferred tax asset from EUR 2,152 thousand tax losses arising from disposal of securities arising from disposal of securities, as they mature in 2018. As at 31 December 2016 the Company has not recognised deferred tax asset from EUR 6,275 thousand tax losses arising from disposal of securities arising from disposal of securities, as they mature in 2017 and 2020. As at 31 December 2017 in the total deferred tax asset balance of the Group the amount of EUR 588 thousand (as at 31 December 2016 – EUR 1,105 thousand) relates to deferred income tax asset recognized from the taxable losses of the Company and EUR 781 thousand (as at 31 December 2016 – EUR 746 thousand) was recognized from the taxable losses of other Group's entities (Note 6). As at 31 December 2017 recognition of deferred income tax asset from the taxable losses of acquired asset management entities are supported on the estimation of these entities' profitability, which is based on the forecasted growth of managed funds and participants portfolio, on the level of management fees, on future funds return and number of participants (Note 10). If the profitability estimation would be change by 5%, deferred income tax asset would be recognised by EUR 39 thousand more/less (as at 31 December 2016 – EUR 37 thousand).

Other areas involving estimates include useful lives of property, plant and equipment and allowances for accounts receivable. According to the management, these estimates do not have significant risk of causing a material adjustment.

3. Business combinations, investments into associates, disposals

The movement of investments in associates was as follows:

Group
Company
2017 2016 2017 2016
At 1 January 23,554 14,897 23,554 14,897
Acquisition of additional shares in associate*
Reclassification to associates from financial assets at fair value		 16 6,219 16 6,219
through profit or loss* - 1,996 - 1,996
Reclassification to subsidiaries due to disposals of associate** (9,428) - (9,428) -
Changes in fair value 5,866 442 5,866 442
At 31 December 20,008 23,554 20,008 23,554

*In 2016 the shares of associate acquired by converting of loans granted into its share capital. Afterwards the Company and the Group has owned more than 20 percent of votes of entity and the entity became an associate of the Group and the Company. **In 2017 the Group has sold trading business and grain elevator network of associate UAB Litagra for cash that remained in the unconsolidated subsidiary UAB Cedus Invest. Therefore, the realised value of investment was attributed to unconsolidated subsidiary and reclassified from investments in associates.

The movement of investments in subsidiaries of the Company was as follows:

Company
2017 2016
At 1 January 12,962 12,369
Share of net profit (loss) of subsidiaries accounted for using equity method 596 (595)
Establishment of subsidiaries and increase of share capital 217 1,392
Disposals - -
Dividends (394) (58)
Share-based payments 73 173
Reclassification from associates to subsidiaries due to disposals (see above) 9,428 -
Loans granted 165 -
Interest charged 37 46
Changes in fair value (1,094) (365)
At 31 December 21,990 12,962
At equity method 7,996 7,513
At fair value - shares 13,047 4,704
At fair value - loans granted 947 745

3 Business combinations, investments into associates, disposals (cont'd)

The movement of investments in unconsolidated subsidiaries of the Group was as follows:

Group
2017 2016
At 1 January 5,449 5,765
Loans granted 165 -
Interest charged 37 46
Reclassification from associates to subsidiaries due to disposals (see
above)		 9,428 -
Increase of share capital 9 3
Changes in fair value (1,094) (365)
At 31 December 13,994 5,449
Shares
Loans granted		 13,047
947		 4,704
745
Acquisitions in 2017 and 2016
Analysis of cash flows on acquisition:
2017 2016
Consideration paid in cash on acquisition of consolidated subsidiaries (103) -
Cash acquired with the consolidated subsidiary 43 -
Consideration paid in cash on acquisition or share capital increase of unconsolidated subsidiaries (8) (3)
Acquisition of subsidiaries, net of cash acquired (68) (3)

Acquisition of AS INVL Atklātais Pensiju Fonds in 2017

In July 2017 the Group has acquired 100% shares of AS INVL Atklātais Pensiju Fonds for EUR 103 thousand (all amount paid in cash). Acquired entity operates in Latvia and manages six 3rd pillar pension funds. As of 31 December 2017 the entity managed EUR 1.2 million of assets. The assets and liabilities, profit or loss from the acquired business was included into the Group results from 1 August 2017. In the reporting period of 2017 EUR 8 thousand of revenue and EUR 16 thousand of loss from the acquired business were included into the Group results. By Latvian law asset management entities, which manage 3rd pillar pension funds, have to return to the managed funds all earned profit in excess of previous years suffered losses. Therefore, the fair value of managed funds is equal to nil and the Group has recognized loss amounting to the excess of paid consideration over identifiable net assets.

The fair values of the identifiable assets and liabilities of AS INVL Atklātais Pensiju Fonds were:

Fair values
recognised on
acquisition
Intangible assets 5
Trade and other receivables 2
Cash and cash equivalents 43
Total assets 50
Current liabilities (5)
Total liabilities (5)
Total identifiable net assets 45
Loss on acquisition of subsidiaries 58
Total consideration transferred 103

There were not any consolidated subsidiaries acquisitions in 2016.

3 Business combinations, investments into associates, disposals (cont'd)

Acquisitions in 2017 and 2016 (cont'd)

Establishment of companies (increase or decrease of share capital) in 2017 and 2016

In January 2017 the Group's unconsolidated subsidiary investing in facility management segment's entities has established SIA Inservis in Latvia by investing EUR 3 thousand. SIA Inservis will provide facility management services in Latvia.

In March 2017 the Company has additional invested EUR 209 thousand into the share capital of UAB INVL Asset Management.

In 2017 the Company has additional invested EUR 8 thousand into the share capital of three dormant entities (UAB Cedus, UAB RPNG and UAB Consult Invalda).

In March 2016 the Company has additionally invested EUR 100 thousand into the share capital of UAB FMĮ INVL Finasta to ensure that the capital adequacy ratio of the financial brokerage entity complies with the requirements of the Bank of Lithuania.

In May 2016 the Company has additionally invested EUR 538 thousand into the share capital of UAB INVL Asset Management to ensure that the capital adequacy ratio of the asset management entity complies with the requirements of the Bank of Lithuania.

In June 2016 the Company has additionally invested EUR 350 thousand into the share capital of IPAS INVL Asset Management.

In April 2016 the Company has paid EUR 75 thousand to UAB INVL Farmland Management and EUR 270 thousand to UAB Invalda INVL investments (previous name – UAB Invalda LT investments) to cover the liabilities of previous years for subscribed shares.

In December 2016 the Company has additionally invested EUR 348 thousand into share capital of UAB Kelio ženklai by converting loans granted.

In December 2016 the Company has additionally invested EUR 3 thousand into the share capital of UAB Regenus.

In December 2016 the Company has additionally invested EUR 401 thousand into the share capital of UAB INVL Asset Management to ensure that the capital adequacy ratio of the asset management entity complies with the requirements of the Bank of Lithuania. The Company has paid EUR 1 thousand by cash instalments and has transferred shares of INVL Technology for EUR 400 thousand to UAB INVL Asset Management.

Acquisition of associates in 2017 and 2016

During 2017 the Company has additionally acquired shares of INVL Baltic Real Estate for EUR 16 thousand on the stock exchange.

In January 2016 the Company has additionally acquired shares of INVL Baltic Real Estate for EUR 12 thousand on the stock exchange. In March 2016 the Company has additionally invested EUR 6,219 thousand into the share capital of INVL Baltic Real Estate by converting loans granted. The entity became the associate of the Group.

In March 2016 the Group's unconsolidated subsidiary investing in facility management segment's entities has acquired 36.47% of the shares of UAB Informacinio Verslo Paslaugų Įmonė for EUR 350 thousand. In April 2016 the subsidiary has additional acquired 0.2% of the shares of UAB Informacinio Verslo Paslaugų Įmonė for EUR 2 thousand The acquired entity administers payments by Lithuanian residents for public utilities as a service to companies and institutions. A controlling stake in the entity is held by Statistics Lithuania. In 2016 the acquired entity had revenue of EUR 620 thousand and earned a net profit of EUR 102 thousand (unaudited data). In 2017 and 2016 the unconsolidated subsidiary has received dividends of EUR 28 thousand and EUR 44 thousand from acquired entity, respectively.

Disposals of subsidiaries in 2017 and 2016

There were not any disposals of subsidiaries in 2017.

The Company has sold 100% of shares of UAB Vilniaus Senamiesčio Restauravimo Direkcija in 2007. The sale agreement provided that if the deposit, which was paid to the court in the civil case by the former subsidiary, would be returned to it, then it would be transferred to the Company as part of the sale price. In January 2016 the deposit was returned by the court to the former subsidiary, and in February 2016 the part of sale price was paid to the Company. According to the Terms of split-off, completed in 2013, proportionally part of sale price was transferred to split-off entity AB Invalda Privatus Kapitalas. Therefore, the Company has recognised gain of EUR 53 thousand in the income statement within "Net changes in fair value of financial assets at fair value through profit or loss".

3 Business combinations, investments into associates, disposals (cont'd)

Disposals of associates in 2017 and 2016

On 1 March 2017 the Group and other shareholders of UAB Litagra have signed share purchase – sale agreement with UAB koncernas Achemos Grupė regarding sale of trading business and grain elevators network of the group of UAB Litagra. The disposal was completed on 15 December 2017 and the unconsolidated subsidiary UAB Cedus Invest has received EUR 9,427 thousand in cash. The group of UAB Litagra will continue to run its primary farming production business – companies in Lithuania that cultivate more than 9,000 hectares of land and the feed manufacturer UAB Joniškio Grūdai. The previous owners will retain the name "Litagra", though the disposed companies will be able to use it until 2019. Unconsolidated subsidiary has invested received cash to managed investment fund INVL Emerging Europe Bond Subfund (EUR 8,500 thousand) and has granted loan of EUR 800 thousand to INVL Baltic Real Estate.

There were not any disposals of associates in 2016.

4. Segment information

The Board of Directors monitors the operating results of the business units of the Group separately for the purpose of making decisions about resource allocations and performance assessment. After becoming investment entity the performance of segments excluding asset management segment is evaluated based on changes in fair value of investments, including dividends income received by the Company. Asset management segment's performance is evaluated based on net profit or loss. Group financing (including finance costs and finance income) and income taxes are allocated between segments as they are identified on basis of separate legal entities. Consolidation adjustments and eliminations are not allocated on a segment basis. Segment assets are measured in a manner consistent with that of the financial statements. All assets are allocated between segments, because segments are identified on a basis of separate legal entities. The granted loans by the Company are allocated to segment's, to which entities they are granted, assets. The impairment losses of these loans are allocated to a segment to which the loan was granted initially.

For management purposes, the Group is organised into following operating segments based on their products and services:

Asset management

The asset management segment includes pension, investment funds, private equity, alternative investments and portfolio management, financial brokerage and land administration services.

Agriculture

Agricultural activities include the primary crop and livestock (milk) production, feed production and grain processing and agricultural services. Until the disposal of trading business and grain elevators network the segment's companies have sold plant protection products, fertilizers, seeds, compound feed, feed supplements, veterinary products, have bought grain, provided grain and other raw materials drying, cleaning, handling and storage services.

Facility management

The facility management segment includes facility management of dwelling-houses, commercial and public real estate properties.

Real estate

The real estate segment is investing in investment properties held for future development and in commercial real estate and its rent. The entities of the segment were transferred during the split-off completed in 2014 to INVL Baltic Real Estate, but in 2016 the Company has subscribed for new shares of INVL Baltic Real Estate, and this entity become an associate of the Group.

All other segments

All other segments are involved in road signs production, wood manufacturing. The Group also presents investment, financing and management activities of the holding company in this column, as these are not analysed separately by the Board of Directors.

Segment revenue, segment expense and segment result include transfers between business segments. Those transfers are eliminated in column 'Inter-segment transactions and consolidation adjustments'. Capital expenditure consists of additions to property, plant and equipment, intangible assets and investment properties including assets from the acquisition of subsidiaries.

The following table presents measurement of segments results on the basis of changes in fair value:

Agriculture Facility
management		 Real estate All other
segments		 Total
Year ended 31 December 2017
Net changes in fair value on financial assets 4,029 (905) 1,837 6,548 11,509
Total changes in fair value 4,029 (905) 1,837 6,548 11,509
Year ended 31 December 2016
Net changes in fair value on financial assets 474 (160) (33) 4,861 5,142
Total changes in fair value 474 (160) (33) 4,861 5,142

The following table presents revenues, profit (loss) and certain assets and liabilities information regarding the Group's business segments for the year ended 31 December 2017:

Inter-segment
transactions
and
Asset
management		 Agriculture Facility
management		 Real estate All other
segments		 consolidation
adjustments		 Total
Year ended
31 December 2017
Revenue
Sales to external customers 7,094 - - - - - 7,094
Inter-segment sales - - - - - - -
Total revenue 7,094 - - - - - 7,094
Results
Net changes in fair value of
financial assets		 43 4,029 (905) 1,837 6,548 - 11,552
Interest income 8 - - - 49 - 57
Other income 12 280 365 253 249 (1) 1,158
Employee benefits expense
Depreciation and		 (3,333) - - - (368) - (3,701)
amortization (334) - - - (4) - (338)
Impairment, write-down,
allowances and provisions		 4 - - - - - 4
Interest expenses (3) - - - - - (3)
Other expenses (3,012) - - - (168) 1 (3,179)
Profit (loss) before income
tax		 479 4,309 (540) 2,090 6,306 - 12,644
Income tax credit
(expenses)		 107 - - - (1,444) - (1,337)
Net profit (loss) for the
year		 586 4,309 (540) 2,090 4,862 - 11,307
Attributable to:
Equity holders of the parent 586 4,309 (540) 2,090 4,862 - 11,307
Non-controlling interest - - - - - - -
As at 31 December 2017
Assets and liabilities
Segment assets 8,866 - 3,579 - 34,599 (28) 47,016
Investment in associates - 9,972 - 10,036 - - 20,008
Total assets 8,866 9,972 3,579 10,036 34,599 (28) 67,024
Segment liabilities 1,279 - - - 1,777 (28) 3,028
Other segment
information
Capital expenditure:
• Property, plant and
equipment
• Intangible assets		 33
68		 -
-		 -
-		 -
-		 2
-		 -
-		 35
68

The following table presents revenues, profit (loss) and certain assets and liabilities information regarding the Group's business segments for the year ended 31 December 2016:

Inter-segment
transactions
and
Asset
management		 Agriculture Facility
management		 Real estate All other
segments		 consolidation
adjustments		 Total
Year ended
31 December 2016
Revenue
Sales to external customers 5,067 - - - - - 5,067
Inter-segment sales - - - - - - -
Total revenue 5,067 - - - - - 5,067
Results
Net changes in fair value of
financial assets		 34 474 (160) (33) 4,861 - 5,176
Interest income 15 - - - 120 - 135
Other income 14 - 348 253 171 (1) 785
Employee benefits expense
Depreciation and		 (2,645) - - - (542) - (3,187)
amortization (324) - - - (7) - (331)
Impairment, write-down,
allowances and provisions		 (6) - - - 3 - (3)
Interest expenses (15) - - - - - (15)
Other expenses (2,683) - - - (172) 1 (2,854)
Profit (loss) before income
tax		 (543) 474 188 220 4,434 - 4.773
Income tax credit
(expenses)		 (59) - - - 56 - (3)
Net profit (loss) for the
year		 (602) 474 188 220 4,490 - 4,770
Attributable to:
Equity holders of the parent (602) 474 188 220 4,490 4,770
Non-controlling interest -
As at 31 December 2016
Assets and liabilities
Segment assets 8,364 - 4,921 - 17,574 - 30,859
Investment in associates - 15,371 - 8,183 - - 23,554
Total assets 8,364 15,371 4,921 8,183 17,574 - 54,413
Segment liabilities 1,250 - - - 482 - 1,732
Other segment
information
Capital expenditure:
• Property, plant and
equipment
• Intangible assets		 28
4		 -
-		 -
-		 -
-		 1
5		 -
-		 29
9

In 2017 employee benefits expense of the Group included EUR 744 thousand social security contribution paid by employer (2016: EUR 579 thousand) and EUR 248 thousand social security contribution paid by employee (2016: EUR 198 thousand). In 2017 employee benefits expense of the Company included EUR 77 thousand social security contribution paid by employer (2016: EUR 87 thousand) and EUR 23 thousand social security contribution paid by employee (2016: EUR 27 thousand).

In 2017 and 2016 all revenue was earned from services of asset management segment.

The Company is domiciled in the Lithuania and the Group operates in Lithuania and Latvia. The result of Group's revenue from external customers in the Lithuania is EUR 6,014 thousand (2016: EUR 4,116 thousand), and the total of revenue from external customers from Latvia is EUR 1,080 thousand (2016: EUR 951 thousand).

The table below presents distribution of the Group non-current assets (other than financial instruments and deferred tax assets) by geographical area as at 31 December 2017 and 2016:

Lithuania Latvia Total
As at 31 December 2017 3,036 550 3,586
As at 31 December 2016 3,198 623 3,821

5. Other income and expenses

5.1. Net changes in fair value on financial instruments

Group Company
2017 2016 2017 2016
Net gain (loss) from changes in fair value of subsidiaries and
associates		 4,772 130 4,772 130
Net gain (loss) from financial assets designated upon initial
recognition at fair value through profit or loss		 6,180 4,707 6,137 4,673
Net gain (loss) from financial assets held for trading 600 339 600 339
Net gain (loss) from financial assets at fair value through profit or
loss, total		 11,552 5,176 11,509 5,142

5.2. Other income

Group Company
2017 2016 2017 2016
Interest income from loans granted, held to maturity and cash 50 120 49 121
Interest income from financial assets at fair value through profit
loss 7 15 - -
Dividend income 1,115 739 1,115 739
Other income 43 46 32 32
1,215 920 1,196 892

5.3. Other expenses

Group Company
2017 2016 2017 2016
Vehicles maintenance costs (154) (123) (1) (7)
Repairs and maintenance cost of premises (44) (37) (2) (1)
Taxes (249) (221) (22) (23)
Professional services (193) (151) (41) (17)
Fees for securities (323) (275) (22) (20)
Other expenses (397) (266) (41) (63)
(1,360) (1,073) (129) (131)

6. Income tax

Group Company
2017 2016 2017 2016
Components of the income tax expense
Current year income tax (49) (61) - -
Prior year current income tax correction (1) - - -
Changes in Latvian Income Tax Law 75 - - -
Deferred income tax expense (1,362) 58 (1,443) 56
Income tax income (expense) charged to the income statement –
total		 (1,337) (3) (1,443) 56

There is no income tax expense recognised in other comprehensive income in 2017 and 2016.

Deferred income tax asset and liability were estimated at 15% rate in Lithuania and 0% rate in Latvia as at 31 December 2017.

The movement in deferred income tax assets and liabilities of the Group during 2017 is as follows:

Balance as at
31 December
2016		 Recognised in
the income
statement		 Transfer
of tax
losses		 Changes in
Latvian
Income Tax
Law		 Balance as at
31 December
2017
Deferred tax asset
Tax loss carry forward for indefinite period of time 1,779 (3) (100) - 1,676
Tax loss carry forward till 2018 – 2021 1,883 (1,161) - - 722
Receivables 2 - - - 2
Accruals 24 4 - (5) 23
Intangible assets 41 (39) - - 2
Deferred tax asset available for recognition 3,729 (1,199) (100) (5) 2,425
Less: unrecognised deferred tax asset from tax
losses carried forward for indefinite period of time
Less: unrecognised deferred tax asset from tax		 (869) 163 - - (706)
losses carried forward till 2018 – 2021 (942) 619 - - (323)
Recognised deferred income tax asset, net 1,918 (417) (100) (5) 1,396
Asset netted with liability of the same legal
entities		 (1,140) 364 - 5 (771))
Deferred income tax asset, net 778 (53) (100) - 625
Deferred tax liability
Property, plant and equipment (1) - - 1 -
Intangible assets (279) 24 - 79 (176)
Investments at fair value through profit and loss (895) (1,016) - - (1,911)
Investments to associates (47) 47 - - -
Deferred income tax liability (1,222) (945) - 80 (2,087)
Liability netted with asset of the same legal
entities 1,140 (364) - (5) 771
Deferred income tax liability, net (82) (1,309) - 75 (1,316)
Deferred income tax, net 696 (1,362) (100) 75 (691)

6 Income tax (cont'd)

Deferred income tax asset and liability were estimated at 15% rates as at 31 December 2016.

The movement in deferred income tax assets and liabilities of the Group during 2016 is as follows:

Balance as at
31 December
2015		 Recognised in
the income
statement		 Transfer of tax
losses		 Balance as at
31 December
2016
Deferred tax asset
Tax loss carry forward for indefinite period of time 1,591 232 (44) 1,779
Tax loss carry forward till 2017 – 2020 1,944 (61) - 1,883
Receivables 2 - - 2
Investments at fair value through profit and loss 4 (4) - -
Accruals 10 14 - 24
Intangible assets 109 (68) - 41
Deferred tax asset available for recognition 3,660 113 (44) 3,729
Less: unrecognised deferred tax asset from tax
losses carried forward for indefinite period of time
Less: unrecognised deferred tax asset from tax		 (730) (139) - (869)
losses carried forward till 2017 – 2020 (1,739) 797 - (942)
Recognised deferred income tax asset, net 1,191 771 (44) 1,918
Asset netted with liability of the same legal
entities		 (433) (707) - (1,140))
Deferred income tax asset, net 758 64 (44) 778
Deferred tax liability
Property, plant and equipment (1) - - (1)
Intangible assets (304) 25 - (279)
Investments at fair value through profit and loss (204) (691) - (895)
Investments to associates - (47) - (47)
Deferred income tax liability (509) (713) - (1,222)
Liability netted with asset of the same legal
entities 433 707 - 1,140
Deferred income tax liability, net (76) (6) - (82)
Deferred income tax, net 682 58 (44) 696

6 Income tax (cont'd)

The movement in deferred income tax assets and liabilities of the Company during 2017 is as follows:

Balance as at
31 December
2016		 Recognised in
the income
statement		 Transfer of tax
losses		 Balance as at
31 December
2017
Deferred tax asset
Tax loss carry forward for indefinite period of time 164 62 (37) 189
Tax loss carry forward till 2018 - 2021 1,883 (1,161) - 722
Accruals 1 - - 1
Deferred tax asset available for recognition 2,048 (1,099) (37) 912
Less: unrecognised deferred tax asset from tax
losses carried forward till 2018 – 2021		 (942) 619 - (323)
Recognised deferred income tax asset, net 1,106 (480) (37) 589
Asset netted with liability of the same legal
entities		 (942) 316 37 (589)
Deferred income tax asset, net 164 (164) - -
Deferred tax liability
Investments at fair value through profit and loss (895) (1,010) - (1,905)
Investments into subsidiaries/associates (47) 47 - -
Deferred income tax liability (942) (963) - (1,905)
Liability netted with asset of the same legal
entities		 942 (316) (37) 589
Deferred income tax liability, net - (1,279) (37) (1,316)
Deferred income tax, net 164 (1,443) (37) (1,316)

The movement in deferred income tax assets and liabilities of the Company during 2016 is as follows:

Balance as at
31 December
2015		 Recognised in
the income
statement		 Transfer of tax
losses		 Balance as at
31 December
2016
Deferred tax asset
Tax loss carry forward for indefinite period of time 136 57 (29) 164
Tax loss carry forward till 2017 - 2020 1,942 (59) - 1,883
Accruals 2 (1) - 1
Deferred tax asset available for recognition 2,080 (3) (29) 2,048
Less: unrecognised deferred tax asset from tax
losses carried forward till 2017 – 2020		 (1,739) 797 - (942)
Recognised deferred income tax asset, net 341 794 (29) 1,106
Asset netted with liability of the same legal
entities		 (204) (738) - (942)
Deferred income tax asset, net 137 56 (29) 164
Deferred tax liability
Investments at fair value through profit and loss (204) (691) - (895)
Investments into subsidiaries/associates - (47) - (47)
Deferred income tax liability (204) (738) - (942)
Liability netted with asset of the same legal
entities		 204 738 - 942
Deferred income tax liability, net - - - -
Deferred income tax, net 137 56 (29) 164

6 Income tax (cont'd)

The analysis of deferred tax assets and deferred tax liabilities is as follows:

Group Company
2017 2016 2017 2016
Deferred tax assets
Deferred tax assets to be recovered after more than 12 months 624 718 - 106
Deferred tax assets to be recovered within 12 months 1 60 - 58
625 778 - 164
Deferred tax liabilities
Deferred tax liability to be recovered after more than 12 months 1,316 82 1,316 -
Deferred tax liability to be recovered within 12 months - - - -
1,316 82 1,316 -

The reconciliation of the total income tax to the theoretical amount that would arise using the tax rate of the Group and the Company is as follows:

Group Company
2017 2016 2017 2016
Profit before income tax 12,644 4,773 12,750 4,714
Tax calculated at the tax rate of 15 % (1,897) (716) (1,913) (707)
Tax non-deductible (expenses) / non-taxable income 566 123 690 39
Deferred tax expenses arising from write-down, or reversal of a
previous write-down, of deferred tax asset due to changes in
probability to utilise it (85) 585 (220) 724
Prior year current income tax correction (1) - - -
Changes in Latvian Income Tax Law 75 - - -
Other 5 5 - -
Income tax credit (expenses) recorded in the income statement (1,337) (3) (1,443) 56

7. Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The weighted average number of shares for 2017 and 2016 was as follows:

Calculation of weighted average for the year
2017		 Number of shares
(thousand)		 Par value
(EUR)		 Issued/365
(days)		 Weighted average
(thousand)
Shares issued as at 31 December 2016 11,587 0.29 365/365 11,587
Own shares acquired as at 22 May 2017 (23) 0.29 223/365 (14)
Shares issued as at 31 December 2017 11,564 0.29 - 11,573
Calculation of weighted average for the year
2016		 Number of shares
(thousand)		 Par value
(EUR)		 Issued/366
(days)		 Weighted average
(thousand)
Shares issued as at 31 December 2015 11,722 0.29 366/366 11,722
Own shares acquired as at 23 May 2016 (135) 0.29 222/366 (82)

The following table reflects the income and share data used in the basic earnings per share computations:

Group Company
2017 2016 2017 2016
Net profit, attributable to the equity holders of the parent 11,307 4,770 11,307 4,770
Weighted average number of ordinary shares (thousand) 11,573 11,640 11,573 11,640
Basic earnings per share (EUR) 0.98 0.41 0.98 0.41

The following table reflects the share data used in the diluted earnings per share computations in 2017:

Number of
shares
(thousand)		 Issued/365
(days)		 Weighted average
(thousand)
Weighted average number of ordinary shares for basic earnings per share
Potential dilutive shares from share-based payment (granted on 31		 - - 11,573
December 2016) 41 365/365 41
Potential dilutive shares from share-based payment (granted on 3 May
2017)
Potential dilutive shares from share-based payment (granted on 16 May		 11 242/365 7
2017) 52 229/365 33
Weighted average number of ordinary shares for diluted earnings per share - - 11,654

The following table reflects the share data used in the diluted earnings per share computations in 2016:

Number of
shares
(thousand)		 Issued/366
(days)		 Weighted average
(thousand)
Weighted average number of ordinary shares for basic earnings per share
Potential dilutive shares from share-based payment (granted on 2 May		 - - 11,640
2016) 38 243/366 25
Weighted average number of ordinary shares for diluted earnings per share - - 11,665

7 Earnings per share (cont'd)

The following table reflects the income data used in the diluted earnings per share computations in 2017 and 2016:

Group Company
2017 2016 2017 2016
Net profit, attributable to the equity holders of the parent
Weighted average number of ordinary and potential shares		 11,307 4,770 11,307 4,770
(thousand) 11,654 11,665 11,654 11,665
Diluted earnings per share (EUR) 0.97 0.41 0.97 0.41

8. Dividends per share

In 2017 and 2016 dividends were not declared.

Changes in liabilities arising from financing activities (dividends) are presented in the table below:

Group/Company
Dividends payable
As at 31 December 2016 383
Dividends paid to equity holders of the parent (11)
Approved dividends -
As at 31 December 2017 372

9. Property, plant and equipment

Group Other property, plant and
Vehicles equipment Total
Cost:
Balance as at 31 December 2015 18 167 185
Additions - 29 29
Disposals and write-offs (14) (2) (16)
Balance as at 31 December 2016 4 194 198
Additions - 35 35
Disposals and write-offs - (1) (1)
Balance as at 31 December 2017 4 228 232
Accumulated depreciation:
Balance as at 31 December 2015 2 100 102
Charge for the year 1 26 27
Disposals and write-offs (2) (1) (3)
Balance as at 31 December 2016 1 125 126
Charge for the year 1 34 35
Disposals and write-offs - (1) (1)
Balance as at 31 December 2017 2 158 160
Net book value as at 31 December 2016 3 69 72
Net book value as at 31 December 2017 2 70 72

9 Property, plant and equipment (cont'd)

Company Other property, plant and equipment Total
Cost:
Balance as at 31 December 2015 93 93
Additions 1 1
Disposals and write-offs (2) (2)
Balance as at 31 December 2016 92 92
Additions 1 1
Disposals and write-offs - -
Balance as at 31 December 2017 93 93
Accumulated depreciation:
Balance as at 31 December 2015 87 87
Charge for the year 4 4
Disposals and write-offs (1) (1)
Balance as at 31 December 2016 90 90
Charge for the year 1 1
Disposals and write-offs - -
Balance as at 31 December 2017 91 91
Net book value as at 31 December 2016 2 2
Net book value as at 31 December 2017 2 2

The depreciation charge of the Group's and the Company's property, plant and equipment for the year 2017 amounts to EUR 35 thousand and EUR 1 thousand, respectively (in the year 2016 EUR 27 thousand and EUR 4 thousand, respectively). Any property, plant and equipment of the Group and the Company as at 31 December 2017 and 2016 was not have any encumbrance.

10. Intangible assets

Group Goodwill Funds' management rights Software Total
Cost:
Balance as at 31 December 2015 90 4,257 47 4,394
Additions - - 9 9
Disposals and write-offs - - - -
Balance as at 31 December 2016 90 4,257 56 4,403
Additions - 63 - 63
Acquisition of subsidiaries - - 5 5
Disposals and write-offs - - - -
Balance as at 31 December 2017 90 4,320 61 4,471
Accumulated amortisation:
Balance as at 31 December 2015 - 329 21 350
Charge for the year - 292 12 304
Disposals and write-offs - - - -
Balance as at 31 December 2016 - 621 33 654
Charge for the year - 291 12 303
Disposals and write-offs - - - -
Balance as at 31 December 2017 - 912 45 957
Net book value as at 31 December 2016 90 3,636 23 3,749
Net book value as at 31 December 2017 90 3,408 16 3,514

10 Intangible assets (cont'd)

Company Software Total
Cost:
Balance as at 31 December 2015 24 24
Additions 5 5
Disposals and write-offs - -
Balance as at 31 December 2016 29 29
Additions - -
Disposals and write-offs - -
Balance as at 31 December 2017 29 29
Accumulated amortisation:
Balance as at 31 December 2015 20 20
Charge for the year 3 3
Disposals and write-offs - -
Balance as at 31 December 2016 23 23
Charge for the year 3 3
Disposals and write-offs - -
Balance as at 31 December 2017 26 26
Net book value as at 31 December 2016 6 6
Net book value as at 31 December 2017 3 3

The amortisation charge of the Group's and the Company's intangible assets for the year ended 31 December 2017 amounts to EUR 303 thousand and EUR 3 thousand, respectively (in the year 2016 EUR 304 thousand and EUR 3 thousand, respectively).

The goodwill was acquired through business combination in the asset management segment and has been allocated to cashgenerating units of UAB INVL Asset Management. In 2017 the recoverable amount of cash generating units has been determined based on value in use calculation using cash flow projections based on financial forecasts approved by the Group management covering an 8-year period. The pre–tax discount rate applied to cash flow projections is 8.1 %, cash flows beyond 8-year period are extrapolated using 0 % growth rate. In 2016 the recoverable amount of cash generating units has been determined based on value in use calculation using cash flow projections based on financial forecasts approved by the Group management covering a 7-year period. The pre–tax discount rate applied to cash flow projections is 9.1 %, cash flows beyond 7-year period are extrapolated using 0 % growth rate.

The following table sets out the key assumptions for the valuation of the cash-generating unit to which goodwill is allocated in 2016 and 2017:

Assumptions Type of funds 2017 2016
Second pillar pension funds 3% 2%
Churn rate Third pillar pension funds 3% 2%
Investment funds and portfolio - -
Second pillar pension funds, 5% 3.48%
Capital gain Third pillar pension funds 5% 4%
Investment shares funds and portfolio 5% 4%
Average management revenue All funds EUR 8,888 thousand EUR 6,514 thousand
Average management expenses All funds EUR 7,735 thousand EUR 4,957 thousand
Long term growth rate All funds 0% 0%
Pre–tax discount rate All funds 8.1% 9.1%

10 Intangible assets (cont'd)

Management has determined the values assigned to each of the above key assumptions as follows:

Assumptions Approach uses to determining values
Churn rate Reflects the average loss of funds asset value per year on disbursements to
customers. The assumption based on the industry average rate.
Capital gain Reflects average annual growth of funds' investments value; based on long term
bonds' and/or shares' typical gain rate
Average management revenue Average revenue of cash-generating unit for the seven or eight-year forecast period.
Average management expenses Average expenses of cash-generating unit for the seven or eight-year forecast
period.
Long term growth rate This is the weighted average growth rate used to extrapolate cash flows beyond the
budget period. The rates are consistent with forecasts included in industry reports.
Pre–tax discount rate Reflects specific risks relating to the relevant segments and the countries in which
they operate.

Main intangible assets of the Group are as at 31 December 2017:

  • − 2nd pillar pension funds. The funds' with carrying amount of EUR 625 thousand remaining estimated useful live is 7 years (EUR 527 thousand of this carrying amount is related to Latvian entity). The funds' with carrying amount of EUR 1,093 thousand remaining estimated useful live is 11.75 - 12 years. The funds' with carrying amount of EUR 1,548 thousand remaining estimated useful live is 16.75 years.
  • − 3rd pillar pension funds. The funds' with carrying amount of EUR 128 thousand remaining estimated useful live is 6.75 10 years.
  • − Investments funds and portfolio of clients. Its carrying amount equals to EUR 14 thousand and remaining estimated useful live is 2 years.

Main intangible assets of the Group are as at 31 December 2016:

  • − 2nd pillar pension funds. The funds' with carrying amount of EUR 714 thousand remaining estimated useful live is 8 years (EUR 602 thousand of this carrying amount is related to Latvian entity). The funds' with carrying amount of EUR 1,186 thousand remaining estimated useful live is 12.75 - 13 years. The funds' with carrying amount of EUR 1,640 thousand remaining estimated useful live is 17.75 years.
  • − 3rd pillar pension funds. The funds' with carrying amount of EUR 74 thousand remaining estimated useful live is 7.75 8 years.
  • − Investments funds and portfolio of clients. Its carrying amount equals to EUR 22 thousand and remaining estimated useful live is 3 years.

11. Financial instruments by category

Group Available
for-sale		 Loans and
receivables		 Held to
maturity		 Assets at fair
value
through
the profit and
loss		 Total
31 December 2017
Assets as per statement of financial position
Investments into subsidiaries - - - 13,994 13,994
Investments into associates - - - 20,008 20,008
Investments available-for-sale 494 - - - 494
Trade and other receivables short term excluding
tax receivables - 1,866 - - 1,866
Financial assets at fair value through profit and loss - - - 23,780 23,780
Held to maturity - - 395 - 395
Cash and cash equivalents - 2,133 - 2,133
Total 494 3,999 395 57,782 62,670

11 Financial instruments by category (cont'd)

Group Available-for
sale		 Loans and
receivables		 Assets at fair
value through
the profit and
loss		 Total
31 December 2016
Assets as per statement of financial position
Investments into subsidiaries - - 5,449 5,449
Investments into associates - - 23,554 23,554
Investments available-for-sale 494 - - 494
Trade and other receivables short term excluding tax
receivables - 1,247 1,247
Financial assets at fair value through profit and loss - - 16,903 16,903
Current loans granted - 437 - 437
Restricted cash - 103 - 103
Cash and cash equivalents - 1,464 - 1,464
Total 494 3,251 45,906 49,651
Group 31 December
2017		 31 December
2016
Liabilities as per statement of financial position Financial liabilities at amortised
cost
Trade payables
Other current payables excluding tax payables and employee benefit payables		 190
732		 198
795
Total 922 993
Company Available-for
sale		 Loans and
receivables		 Assets at fair
value through
the profit and
loss		 Total
31 December 2017
Assets as per statement of financial position
Investments into subsidiaries
Investments into associates
Investments available-for-sale
Trade and other liabilities
Financial assets at fair value through profit and loss
Cash and cash equivalents
Total		 -
-
494
-
-
-
494		 -
-
-
217
-
1,050
1,267		 13,994
20,008
-
-
22,364
-
56,366		 13,994
20,008
494
217
22,364
1,050
58,127
Company Available-for
sale		 Loans and
receivables		 Assets at fair
value through
the profit and		 Total
31 December 2016
Assets as per statement of financial position
Investments into subsidiaries
Investments into associates
Investments available-for-sale		 -
-
494		 -
-
-		 loss
5,449
23,554
-		 5,449
23,554
494

11 Financial instruments by category (cont'd)

Company 31 December
2017		 31 December
2016
Liabilities as per statement of financial position Financial liabilities at amortised
cost
Borrowings
Trade payables		 398
3		 398
8
Other current payables excluding tax payables and employee benefit payables 438 447
Total 839 853

12. Fair value estimation

Financial instruments that are not carried at fair value

The Group's and the Company's principal financial instruments that are not carried at fair value in the statement of financial position are cash and cash equivalents, restricted cash, trade and other receivables, loans granted, borrowings, trade and other payables and investments available-for-sale.

The fair value represents the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

The carrying amount of the cash and cash equivalents, restricted cash, trade and other receivables, trade and other payables of the Group and the Company as at 31 December 2017 and 2016 approximated their fair value because they are short-term and the impact of discounting is immaterial.

The carrying amount of loans granted and borrowings by the Company and Group as at 31 December 2017 and 2016 approximates their fair value because the interest rates are reviewed and adjusted when market rates change. Their fair value of loans granted is based on cash flows discounted using 4.5 % and 4.5 % interest rate as at 31 December 2017 and 2016, respectively. Their fair value of borrowings is based on cash flows discounted using 3 % interest rate as at 31 December 2017 and 2016. It is Level 3 fair value measurement.

Financial instruments carried at fair value

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

As the split-off completed in 2014 the Company is investment entity in accordance with IFRS 10. Subsidiaries and associates are measured at fair value through profit or loss.

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange and those prices represent actual and regularly occurring market transactions on arm's length basis. The quoted market price used for financial assets held by the Group and Company is the measurement date exchange closing price.

The valuation of Level 3 instruments are performed by the Company's employees, analysts, every quarter. The value are estimated as at the last day of quarter. The management of the Company review the valuations prepared by analysts.

Investment into shares of UAB Litagra (agriculture segment) was measured using EBITDA multiplier method with deduction of net debt for the pieces of feed producers and agricultural productions and using EBITDA multiplier method with adding of differences between current asset and total liabilities of trading pieces. It was used EBITDA for last three trailing 12 months periods ended at the end of reporting period with bigger weight for last 12 months period figures. As at 31 December 2017 after disposal of trading business and grain elevator network investment was measured by average of two methods - using EBITDA multiplier method with deduction of net debt and using Price to book value (P/BV) multiplier method.

Investment in facility management entities was measured using trailing twelve months EBITDA and applying a multiplier of comparable entity City Service SE, operating in Lithuania and listed on the on the Warsaw Exchange. It was decided not to use other foreign companies' multipliers, which were higher than the one used in the calculations due to the fact that facility management is local business dependent on varying Lithuanian legal and business environment. Other facility management entities operating in Lithuania are not public companies.

Financial instruments carried at fair value (cont'd)

UAB Kelio Ženklai was measured according to fair value of its assets and liabilities. The main assets - buildings - of UAB Kelio Ženklai was valued using sales comparison method. On the assessment the value of UAB Kelio Ženklai reflects its liquidation value.

Dormant entities are measured according to its equity, because they have only cash and current liabilities.

The following table represents inputs and fair value valuation techniques of subsidiaries and associates used by the Company as at 31 December 2017

Profile of activities Fair value Valuation technique Inputs Values of inputs
Facility management Comparable companies EBITDA multiple 8
(Level 3) 3,579 in the market EBITDA, EUR thousand 392
Agriculture (UAB Litagra)
(Level 3)		 EBITDA multiple 7.29-8.88
P/BV
Comparable companies		 0.79-0.98
9,972 in the market EBITDA, EUR thousand 3,041
10%
Road signs production, wood
manufacturing and dormant
SPEs (Level 3)		 972 Fair value of net assets - -
Investment entity (UAB Cedus
Invest) (Level 2) (Note 3)		 9,428 Fair value of net assets - -
Dormant SPEs (Level 2) 15 Fair value of net assets - -

The following table represents inputs and fair value valuation techniques of subsidiaries and associates used by the Company as at 31 December 2016

Profile of activities Fair value Valuation technique Inputs Values of inputs
Facility management Comparable companies 6.9
(Level 3) 4,484 in the market EBITDA, EUR thousand 587
Agriculture (UAB Litagra)
(Level 3)		 EBITDA multiple 5.9-6.9
15,371 Comparable companies EBITDA, EUR thousand 5,489
in the market Discount for lack of
marketability		 10%
Road signs production, wood
manufacturing and dormant
SPEs (Level 3)		 953 Fair value of net assets - -
Dormant SPEs (Level 2) 12 Fair value of net assets - -

The table below presents the effect of changing one or more those assumptions behind the valuation techniques adopted based on reasonable possible alternative assumptions:

Profile of activities Unobservable inputs Reasonable Change in Valuation +/-
possible shift +/-
(absolute
value/bps/%)		 As at 31 December
2017		 As at 31 December
2016
Facility management (Level EBITDA multiple 1 392/(392) 587/(587)
3) EBITDA 5% 157/(157) 203/(203)
EBITDA multiple 0.5 180/(180) 799/(799)
Agriculture (UAB Litagra)
(Level 3)		 P/BV multiple 0.1 553/(553) -
EBITDA 5% 200/(200) 553/(553)
Discount for lack of
marketability		 100 bps (111)/111 (168)/168

Financial instruments carried at fair value (cont'd)

The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2017:

Level 1 Level 2 Level 3 Total balance
Assets
Subsidiaries
- Facilities management - - 3,579 3,579
- Other activities - 9,443 972 10,415
Associates
- Agriculture - - 9,972 9,972
- Real estate
Financial assets designated upon
initial recognition at fair value
through profit or loss		 10,036 - - 10,036
- Information technology 2,853 - - 2,853
- Bank sector 18,111 - - 18,111
- Other ordinary shares
- Collective investment undertakings -
funds		 1
-		 172
1,083		 -
-		 173
1,083
Financial assets held for trading
Equity securities
- Food industry 1,560 - - 1,560
Total Assets 32,561 10,698 14,523 57,782
Liabilities - - - -

The following table presents the Company's assets and liabilities that are measured at fair value at 31 December 2017:

Level 1 Level 2 Level 3 Total balance
Assets
Subsidiaries
- Facilities management - - 3,579 3,579
- Other activities - 9,443 972 10,415
Associates
- Agriculture - - 9,972 9,972
- Real estate
Financial assets designated upon
initial recognition at fair value
through profit or loss		 10,036 - - 10,036
- Information technology 2,521 - - 2,521
- Bank sector 18,111 - - 18,111
- Other ordinary shares - 172 - 172
Financial assets held for trading
Equity securities
- Food industry 1,560 - - 1,560
Total Assets 32,228 9,615 14,523 56,366
Liabilities - - - -

Financial instruments carried at fair value (cont'd)

The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2016:

Level 1 Level 2 Level 3 Total balance
Assets
Subsidiaries
- Facilities management - - 4,484 4,484
- Other activities - 12 953 965
Associates
- Agriculture - - 15,371 15,371
- Real estate
Financial assets designated upon
initial recognition at fair value
through profit or loss		 8,183 - - 8,183
- Information technology 3,370 - - 3,370
- Bank sector 11,505 - - 11,505
- Other ordinary shares
- Collective investment undertakings -
funds		 1
-		 2
779		 -
-		 3
779
- Government bonds 345 - - 345
Financial assets held for trading
Equity securities
- Food industry 901 - - 901
Total Assets 24,305 793 20,808 45,906
Liabilities - - - -

The following table presents the Company's assets and liabilities that are measured at fair value at 31 December 2016:

Level 1 Level 2 Level 3 Total balance
Assets
Subsidiaries
- Facilities management - - 4,484 4,484
- Other activities - 12 953 965
Associates
- Agriculture - - 15,371 15,371
- Real estate
Financial assets designated upon
initial recognition at fair value
through profit or loss		 8,183 - - 8,183
- Information technology 2,978 - - 2,978
- Bank sector 11,505 - - 11,505
- Other ordinary shares - 2 - 2
Financial assets held for trading
Equity securities
- Food industry 901 - - 901
Total Assets 23,567 14 20,808 44,389
Liabilities - - - -

During 2017 and 2016, there were no transfers between Level 1 and Level 2 fair value measurements.

The available-for-sale financial assets owned by the Group are measured at cost in accordance with IAS 39 because their fair value cannot be measured reliably, as they have no quoted market prices in an active market.

Financial instruments carried at fair value (cont'd)

Financial instruments in Level 3

The Group's policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer.

The following table presents the changes in Level 3 instruments of Company and Group for the period ended 31 December 2017:

Facilities
management		 Agriculture Other activities Total
Balance at 31 December 2016 4,484 15,371 953 20,808
Gains and losses recognised in profit or loss after
becoming investment entity (within 'Net changes
in fair value of financial assets at fair value
through profit or loss') (905) 4,029 (183) 2,941
Loans granted - - 165 165
Interest charged - - 37 37
Reclassification to subsidiaries due to disposals
of associate (transfer to Level 2)		 - (9,428) - (9,428)
Balance at 31 December 2017 3,579 9,972 972 14,523
Change in unrealised gains or losses for the
period included in profit or loss for assets held at
the end of the reporting period		 (905) 4,029 (183) 2,941

The following table presents the changes in Level 3 instruments of Company and Group for the period ended 31 December 2016:

Facilities
management		 Agriculture Other activities Total
Balance at 31 December 2015
Gains and losses recognised in profit or loss after
becoming investment entity (within 'Net changes		 4,644 14,897 1,106 20,647
in fair value of financial assets at fair value
through profit or loss')		 (160) 474 (199) 115
Interest charged - - 46 46
Balance at 31 December 2016
Change in unrealised gains or losses for the
period included in profit or loss for assets held at		 4,484 15,371 953 20,808
the end of the reporting period (160) 474 (199) 115

13. Financial assets available-for-sale, at fair value through profit and loss and held to maturity

Group Company
2017 2016 2017 2016
Available-for-sale
Ordinary shares – unquoted (carried at cost) 494 494 494 494
494 494 494 494
Held-for-trading
Ordinary shares – quoted 1,560 901 1,560 901
1,560 901 1,560 901
Designated at fair value through profit and loss on initial recognition
Ordinary shares – quoted 20,965 14,876 20,632 14,483
Bonds - 345 - -
Investment units 1,083 779 - -
Ordinary shares - unquoted 172 2 172 2
22,220 16,002 20,804 14,485
Total financial assets at fair value through profit and loss 23,780 16,903 22,364 15,386
Non-current financial assets at fair value through profit and loss 20,804 14,485 20,804 14,485
Current financial assets at fair value through profit and loss 2,976 2,418 1,560 901
Held to maturity
Bonds 395 - - -
395 - - -

In 2017 the Group have additional invested EUR 741 thousand by cash into financial assets at fair value through profit or loss and has sold them for EUR 637 thousand by cash. In 2016 the Group have additional invested EUR 776 thousand by cash into financial assets at fair value through profit or loss and has sold them for EUR 682 thousand by cash. In 2016 shares of INVL Technology was transferred by the Company to subsidiary for increase of share capital of EUR 400 thousand. In 2016 after reorganisation of Latvian investment funds by the merge with Lithuanian investments funds it was recognised sale and acquisition of investments funds units by swap for EUR 605 thousand.

The fair value of the quoted ordinary shares and listed bonds is determined by reference to published price quotations in the active market (Level 1).

The unquoted ordinary shares are measured at cost. The fair value of unquoted ordinary shares has not been disclosed because the fair value cannot be measured reliably. The Company, as a non-controlling shareholder, is getting only limited information about these investments. There are only a limited number of comparable companies in Europe. No liquid market for these securities exists, only small deals are noticed in recent years. The Company intends to dispose of these shares in case majority stake of the company is sold to another investor or if current shareholders will offer attractive price.

The fair value of bonds that are not traded in an active market is determined by using observable market data (taking for basis listed bonds of comparable issuers with similar remaining maturity, cash flow pattern, currency, credit risk and interest basis).

The credit quality of debt securities can be assessed by reference to external credit ratings of the issuer:

Group
2017 2016
Moody's ratings
From BAA1 till BAA3 - 345
From BA1 till BA3 395 -
395 345

14. Loans granted

The Group's and the Company's loans granted are described below:

Group
2017 2016 2017 2016
682 682 682 682
- 437 - 437
682 1,119 682 1,119
(682) (682) (682) (682)
-
(682) (682) (682) (682)
437
-
-		 -
437		 Company
-
-

Loans granted to other related parties and to subsidiaries are disclosed in more details in Note 25.

As at 31 December 2017 the Group's and the Company's loans granted with nominal value of EUR 682 thousand and EUR 682 thousand, respectively, were impaired (as at 31 December 2016 EUR 682 thousand and EUR 682 thousand, respectively). The net amounts of impaired loans of nil are recognised in the statement of financial position of the Group and the Company (nil in 2016, respectively).

Movements in the allowance for impairment of granted loans (assessed individually) were as follows:

Individually impaired
Group Company
Balance as at 31 December 2015 2,367 2,367
Charge for the year - -
Reversal of amounts previously written-off (3) (3)
Write-offs against the allowance (1,682) (1,682)
Balance as at 31 December 2016 682 682
Charge for the year - -
Reversal of amounts previously written-off - -
Write-offs against the allowance - -
Balance as at 31 December 2017 682 682

Changes in allowance for impairment of loans granted for the year 2017 and 2016 have been included within 'impairment, write down and provisions' expenses in the income statement.

In January 2016 bankrupt entity UAB Laikinosios Sostinės Projektai was removed from the Register of Legal Entities of Lithuania. Therefore, the Company's ownership of 50% of shares of UAB Laikinosios Sostinės Projektai and right of claim of EUR 1,682 thousand arising from loan agreements has expired. From the beginning of bankruptcy proceedings in 2011 the shares and loans granted was valued equal to nil in the statements of financial position of the Group and the Company. Therefore, the removing of the entity from the Register of Legal Entities of Lithuania did not affect the Company's and the Group's financial performance for year ended 31 December 2016.

The ageing analysis of loans granted of the Group and the Company as at 31 December 2017 and 2016 is as follows:

Granted loans past due but not impaired
Granted loans neither past due not
impaired		 Less than
30 days		 30–90
days		 90–180
days		 More than
180 days		 Total
2017 - - - - - -
2016 437 - - - - 437

All granted loans neither past due nor impaired as at 31 December 2017 and 2016 have no history of counterparty defaults.

15. Trade and other receivables

Group Company
2017 2016 2017 2016
Trade and other receivables, gross 1,876 1,258 217 -
Taxes receivable, gross 37 38 - -
Less: allowance for doubtful trade and other receivables (10) (11) - -
1,903 1,285 217 -

Changes in allowance for doubtful trade and other receivables for the year 2017 and 2016 have been included within 'impairment, write down and provisions' expenses in the income statement.

Trade and other receivables are non-interest bearing and are generally on 10–30 days terms. Receivables from related parties are disclosed in more details in Note 25.

As at 31 December 2017 the Group's trade and other receivables with gross carrying amount of EUR 10 thousand were impaired (as at 31 December 2016 EUR 14 thousand). The net amounts of nil are presented in the statement of financial position of the Group (as at 31 December 2016 EUR 3 thousand).

Movements in the allowance for accounts receivable of the Group and the Company (assessed individually) were as follows:

Individually impaired
Group Company
Balance as at 31 December 2015 5 -
Charge for the year 6 -
Reversal of amounts previously written-off - -
Balance as at 31 December 2016 11 -
Charge for the year - -
Reversal of amounts previously written-off (1) -
Balance as at 31 December 2017 10 -

The ageing analysis of trade and other receivables of the Group as at 31 December 2017 and 2016 is as follows:

Trade receivables past due but not impaired
Trade receivables neither past due nor
impaired		 Less than
30 days		 30–90
days		 90–180
days		 More than
180 days		 Total
2017 1,685 - 1 - 180 1,866
2016 1,231 - 10 2 1 1,244

The ageing analysis of trade and other receivables of the Company as at 31 December 2017 and 2016 is as follows:

Trade receivables past due but not impaired
Trade receivables neither past due nor
impaired		 Less than
30 days		 30–90
days		 90–180
days		 More than
180 days		 Total
2017 37 - - - 180 217
2016 - - - - - -

Credit quality of financial assets neither past due nor impaired

All trade receivables neither past due nor impaired as at 31 December 2017 and 2016 have no history of counterparty defaults. With respect to trade and other receivables that are neither past due nor impaired, there are no indications as at the reporting date that the debtors will not meet their payment obligations since the Group and the Company trades only with recognised, creditworthy third parties. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

16. Cash and cash equivalents, term deposits

Group Company
2017 2016 2017 2016
Cash at bank 2,133 1,464 1,050 384
2,133 1,464 1,050 384

Cash at bank earns interest at floating rates based on daily bank deposit rates.

The Group and the Company's cash and cash equivalents were not having any encumbrance.

As at 31 December 2017 and 2016, the Group and the Company had term deposits at banks with the maturity of more than 3 months, which are fully provided for:

Group Company
2017 2016 2017 2016
Deposit's certificate of AB Bankas Snoras 3,106 3,106 3,106 3,106
Accumulated interest 16 16 16 16
Less allowance for impairment as consequence of AB Bankas
Snoras insolvency		 (3,122) (3,122) (3,122) (3,122)
- - - -

On 24 November 2011, the Bank of Lithuania announced AB Bankas Snoras as insolvent and revoked the licence. According to the public information about AB Bankas Snoras, most likely is that bank's assets were significantly below the liabilities already on 30 September 2011. Therefore the management of the Company decided to recognise allowance for impairment of deposit's certificate in full amount.

The credit quality of cash can be assessed by reference to external credit ratings of the banks:

Group Company
2017 2016 2017 2016
Moody's ratings
Prime-1 1,668 1,036 892 347
Prime-3 465 - 158 -
Not Prime - 333 - 37
Not rated - 95 - -
2,133 1,464 1,050 384

17. Restricted cash

In 2015 the Company has deposited EUR 83 thousand within AB Šiaulių bankas to secure future commitment to purchase 100% of shares of AS "Finasta atklatais pensiju fonds" (entity managed 3rd pillar pension funds in Latvia, current name - INVL Atklātais Pensiju Fonds, Note 3). The above mentioned restricted cash was also pledged to AB Šiaulių bankas to secure future commitment. In 2016 The Company has additionally deposited EUR 20 thousand. In 2017 the restricted cash was released after completion of acquisition of shares of AS INVL Atklātais Pensiju Fonds.

18. Share capital and share premium

The total authorised number of ordinary shares is 11,865,993 (as of 31 December 2016: 11,865,993 shares) with a par value of EUR 0.29 per share. All issued shares are fully paid.

Changes during 2016

From 5 May 2016 until 19 May 2016 the Company implemented share buy-back through the tender offer market. Maximum number of shares to be acquired was 250,000. Share acquisition price established at EUR 4.11 per share. During buy-back 135,739 shares (1.14% of share capital) were acquired for EUR 558 thousand, including brokerage fees. The acquired shares were settled on 23 May 2016. Acquired own shares do not have voting rights.

Changes during 2017

From 4 May 2017 until 18 May 2017 the Company implemented share buy-back through the tender offer market. Maximum number of shares to be acquired was 120,000. Share acquisition price established at EUR 4.55 per share. During buy-back 23,076 shares (0.19% of share capital) were acquired for EUR 106 thousand, including brokerage fees. The acquired shares were settled on 22 May 2017. Acquired own shares do not have voting rights.

19. Reserves

The movements in legal and other reserves are as follows:

Group Legal reserve Reserve for acquisition
of own shares		 Share based payments
reserve		 Total
As at 31 December 2015 473 11,121 - 11,594
Transfer to reserves 4 - - 4
Share-based payment - - 346 346
As at 31 December 2016 477 11,121 346 11,944
Transfer to reserves 13 - - 13
Share-based payment - - 114 114
As at 31 December 2017 490 11,121 460 12,071

Reserves of the Company is the same as in the Group, except the legal reserve, which is amounted to EUR 473 thousand as at 31 December 2015, 2016 and 2017.

Legal reserve

Legal reserve is a compulsory reserve under Lithuanian legislation. Annual transfers of not less than 5 % of net profit, calculated in accordance with the statutory financial statements, are compulsory until the reserve reaches 10 % of the share capital. The reserve can be used only to cover the accumulated losses.

Reserve for the acquisition of own shares

Reserve for the acquisition of own shares is formed for the purpose of buying own shares in order to keep their liquidity and manage price fluctuations. It can be formed by shareholders' decision at the Annual Shareholders Meeting from the profit available for distribution. The reserve cannot be used to increase the share capital. The reserve does not change when Company acquires own shares, but is utilised when own shares are cancelled. The shareholders can decide to transfer unused amounts of the reserve back to retained earnings at the Annual Shareholders Meeting.

19 Reserves (cont'd)

Share based payments reserve

The share-based payment transactions reserve is used to recognise the value of equity-settled share-based payment transactions provided to key management personnel.

On 2 May 2016 the Company has signed with employees share options agreements for 52,906 shares of the Company. The main conditions of the agreements were:

  • The employee has the right to acquire the shares in 2019 after the Ordinary General Shareholders Meeting, which is three years after conclusion of the share options agreements, early exercising is not allowed;
  • Option exercise price EUR 1;
  • The agreements has not any vesting conditions;
  • When the time to exercise is matures the right to acquire the shares will be realized by selling of own shares of the Company or by offering to sign newly issued shares of the Company to employee;
  • The options could not be sold.

According to conditions of the agreements, the management judge that share options were grant to the employees for previously (till 2016) provided services to the Company. Therefore, the share-based payment expenses were recognised in the income statement of the Company and the Group within "Employee benefits expenses" as the fair value of granted share options right away (EUR 153 thousand) the fair value of one share option at the grant date (2 May 2016) was equalled to EUR 2.90. The value of share-based payments was calculated using the Black-Scholes formula. The main inputs for valuation of share options was share price in the exchange on 2 May 2016 (EUR 3.91), risk-free interest rate (-0.448%), historical volatility (36.52%), expected dividend yield (0%).

As at 31 December 2016 the Company and the Group have accrued expenses for share-based payment. It is expected that grant date would be in May 2017. The accruals were recognized for value of 68,000 shares of the Company. The main conditions of the agreements would be:

  • The employee has the right to acquire the shares in 2020 after the Ordinary General Shareholders Meeting, which is three years after conclusion of the share options agreements, early exercising is not allowed;
  • Option exercise price EUR 1;
  • The agreements has not any vesting conditions;
  • When the time to exercise is matures the right to acquire the shares will be realized by selling of own shares of the Company or by offering to sign newly issued shares of the Company to employee;
  • The options could not be sold.

According to conditions of the agreements, the management judge that share options will be granted to the employees for provided services to the Group for 2016. Therefore, the share-based payment expenses were recognised in the income statement of the Company and the Group within "Employee benefits expenses" as the fair value of share options right away. The Group has recognized EUR 193 thousand of expenses. The Company has recognised EUR 20 thousand of expenses and EUR 173 thousand as additional investment to consolidated subsidiaries. The fair value of one share option at the 31 December 2016 was equalled to EUR 2.84. The value of share-based payments was calculated using the Black-Scholes formula. The main inputs for valuation of share options was share price in the exchange on 31 December 2016 (EUR 3.86), risk-free interest rate (- 0.711%), historical volatility (34.01%), expected dividend yield (0%).

On 3 May 2017 and 16 May 2017 the Company has agreed with Group's employees regarding share options transactions for 15,765 and 64,806 shares of the Company, respectively. On 27 October 2017 the number of share-based payment of 3 May 2017 was decreased till 14,170 shares of the Company as one employee change position. The main conditions of transactions were:

  • The employee has the right to acquire the shares in 2020 after the Ordinary General Shareholders Meeting, which is three years after conclusion of the share options agreements, early exercising is not allowed;
  • Option exercise price EUR 1;
  • Transactions of 16 May 2017 have not any vesting conditions;
  • Transactions of 3 May 2017 have service vesting condition. The right to acquire share in the part of transactions come in to force in future (on 30 November 2017, on 30 April of 2018, 2019 and 2020), if the employment contract is not terminated until mentioned dates.
  • When the time to exercise is matures the right to acquire the shares will be realized by selling of own shares of the Company or by offering to sign newly issued shares of the Company to employee; - The options could not be sold.

According to conditions of the agreement, the management judge that share options of 16 May 2017 were grant to the employees for 2016 received services to the Group. Therefore, the share-based payment expenses were recognised in the income statement of the Company and the Group within "Employee benefits expenses" as the fair value of granted share options right away. Because in the financial statements for the year ended 31 December 2016 the Group has recognised accruals of EUR 193 thousand for these transaction, the Group during 2017 has additionally recognised EUR 36 thousand of expenses after recalculation of fair value of share option. The Company has additionally recognised EUR 6 thousand of expenses and EUR 30 thousand as additional investment to consolidated subsidiaries. The fair value of one share option at the grant date (16 May 2017) was equalled to EUR 3.53. The value of share-based payments was calculated using the Black-Scholes formula. The main inputs for valuation of share options was share price in the exchange on 16 May 2017 (EUR 4.55), risk-free interest rate (-0.578%), historical volatility (33.60%), expected dividend yield (0%).

19 Reserves (cont'd)

Share based payments reserve (cont'd)

Expenses of share-based payments of 3 May 2017 are recognised in proportion to the time worked by employees during vesting period. During 2017 the Group has recognised EUR 42 thousand of expenses regarding these share-based payment, the Company has recognised EUR 42 thousand as additional investment to consolidated subsidiaries. The fair value of one share option at the grant date (3 May 2017) was equalled to EUR 3.33. The value of share-based payments was calculated using the Black-Scholes formula. The main inputs for valuation of share options was share price in the exchange on 3 May 2017 (EUR 4.35), risk-free interest rate (-0.641%), historical volatility (33.58%), expected dividend yield (0%).

As at 31 December 2017 the Company and the Group have accrued expenses for share-based payment. It is expected that grant date would be in May 2018. The accruals were recognized for value of 8,363 shares of the Company. The main conditions of the agreements would be:

  • The employee has the right to acquire the shares in 2021 after the Ordinary General Shareholders Meeting, which is three years after conclusion of the share options agreements, early exercising is not allowed;
  • Option exercise price EUR 1;
  • The agreements has not any vesting conditions;
  • When the time to exercise is matures the right to acquire the shares will be realized by selling of own shares of the Company or by offering to sign newly issued shares of the Company to employee;
  • The options could not be sold.

According to conditions of the agreements, the management judge that share options will be granted to the employees for provided services to the Group for 2017. Therefore, the share-based payment expenses were recognised in the income statement of the Company and the Group within "Employee benefits expenses" as the fair value of share options right away. The Group and the Company has recognized EUR 36 thousand of expenses. The fair value of one share option at the 31 December 2017 was equalled to EUR 4.29. The value of share-based payments was calculated using the Black-Scholes formula. The main inputs for valuation of share options was share price in the exchange on 31 December 2017 (EUR 5.30), riskfree interest rate (-0.442%), historical volatility (34.86%), expected dividend yield (0%).

20. Borrowings

As at 31 December 2016 and 2017 the Company has received the borrowings from Invalda INVL Investments UAB. As at 31 December 2016 and 2017 the Group has not any borrowings.

Weighted average effective interest rates of borrowings during the year:

Group Company
2017 2016 2017 2016
Borrowings - - 3.00% 3.00%

Changes in liabilities arising from financing activities (borrowings) are presented in the table below:

Company
Borrowings
As at 31 December 2016 398
Interest paid (12)
Interest expenses 12
As at 31 December 2017 398

21. Trade payables

Trade payables are non-interest bearing and are normally settled on 14–60 day terms. For terms and conditions relating to related parties please refer to Note 25.

22. Other liabilities

The other current and non-current liabilities are presented in the table below:

Group Company
2017 2016 2017 2016
Financial liabilities
Dividends payable 372 383 372 383
Other amounts payable 360 412 66 64
732 795 438 447
Non – financial liabilities
Salaries and social security payable 713 549 29 27
Tax payable 16 16 - -
Other amounts payable 30 31 - -
759 596 29 27
Total other current and non-current liabilities 1,491 1,391 467 474
Non-current liabilities - - - -
Current liabilities 1,491 1,391 467 474

23. Financial risk management

23.1. Financial risk factors

The risk management function within the Group is carried out in respect of financial risks (credit, market and liquidity), operational risks and legal risks. On an overall Group level strategical risk management is executed by the Board of Directors. Operational risk management is carried out at each entity level by directors. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks.

The Group's and the Company's principal financial liabilities comprise trade and other payables. The main purpose of these financial liabilities is to raise finance for the Group's and the Company's operations. The Group and the Company have various financial assets such as trade and other receivables, loans granted, investments in equity and debt securities, deposits held in banks and cash which arise directly from its operations. The Group and Company has not used any of derivative instruments so far, as management considered that there is no necessity for them.

The Group is being managed the way so its main businesses would be separated from each other. This is to diversify the operational risk and create conditions for selling any business avoiding any risk to the Company and the Group.

The Company's policy is to not provide any guarantee or surety for the Group's companies. The Group's companies do not provide any guarantees one against another usually.

The main risks arising from the financial instruments are market risk (including currency risk, cash flow and fair value interest rate risk and price risk), liquidity risk and credit risk. The risks are identified and disclosed below.

23 Financial risk management (cont'd)

23.1 Financial risk factors (cont'd)

Credit risk

Credit risk arises from cash and cash equivalents, restricted cash, deposits with banks and financial institutions, as well as credit exposures to outstanding trade receivables, loans granted and debt securities.

The Group estimates the credit risk separately by the segments.

At the date of financial statements there are no indications of worsening credit quality of trade and other receivables, which are neither due, nor impaired, due to constant control by the Group of receivable balances. The maximum exposure to credit risk is disclosed in Notes 14 and 15. The maximum exposure to credit risk for loans granted classified as 'investments to subsidiaries measured at fair value through profit or loss' are their carrying amounts (EUR 947 thousand as at 31 December 2017 and EUR 745 thousand as at 31 December 2016). There are no significant transactions of the Group or the Company that occur outside Lithuania and Latvia.

With respect to credit risk arising from other financial assets of the Group and the Company, which comprise deposits at banks and cash and cash equivalents, restricted cash and debt securities, the Group's and the Company's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The maximum exposure to credit risk is disclosed in Notes 13 and 16.

Cash flow and fair value interest rate risk

The Group's and the Company's exposure to the risk of changes in market interest rates relates primarily to the debt obligations with floating interest rates and to the owned bonds.

The Group has not any borrowing as at 31 December 2017 and 2016. The Company has borrowing from its subsidiaries with fixed interest rates for one year as at 31 December 2017 and 2016. The Company and the Group has loans granted to its subsidiaries with fixed interest rates for one year. Therefore, the Group and the Company are not exposed to cash flow interest rate risk from loans granted.

In 2017 and 2016 bonds at fixed rates expose the Group to fair value interest rate risk, but it was insignificant.

Price risk

The Group and the Company are exposed to equity securities price risk because of investments held by the Group and the Company and classified on the statement of financial position either as available-for-sale or at fair value through profit or loss. The Group and the Company are not exposed to commodity price risk. To manage their price risk arising from investments in equity securities, the Group and the Company diversify their portfolio.

The Group's and the Company's investments in equity of other entities that are publicly traded are included in the equity index: OMX Baltic Benchmark Gross Index (OMXBBGI).

The table below summarises the impact of increases/decreases of the equity index on the Group's and the Company's profit before tax for the year. The analysis is based on the assumption that the equity index had increased/ decreased by 20 % with all other variables held constant and all the Group's and Company's equity instruments moved according to the historical correlation with the index:

Index Group Company
2017 2016 2017 2016
OMXBBGI 3,461 1,971 3,456 1,962

Profit before tax for the year would increase/decrease as a result of gains/losses on equity securities classified at fair value through profit or loss.

Foreign exchange risk

As a result of operations the statement of financial position of the Group can be affected by movements in the reporting currencies' exchange rates. The Group's and the Company's policy is related to matching of money inflows from the most probable potential sales with purchases by each foreign currency. The Group and the Company do not apply any financial instruments allowing to hedge foreign currency risks, because these risks are considered insignificant.

23 Financial risk management (cont'd)

23.1 Financial risk factors (cont'd)

Foreign exchange risk (cont'd)

The foreign currency risk at the Group and the Company is not large, taking into consideration that most monetary assets and obligations are denominated in euro. As at 31 December 2017 and 2016 the Group and Company has insignificant assets denominated in foreign currency.

Liquidity risk

The Group's and the Company's policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed credit facilities to meet their commitments at a given date in accordance with strategic plans. The liquidity risk of the Group and the Company is controlled on a level of subsidiaries. The Group's and the Company's objective is to maintain a balance between continuity of funding and flexibility through the use of borrowings. The liquidity risk management is divided into long-term and short-term risk management.

The aim of the short-term liquidity management is to meet daily needs for funds. Each operating segment is independently planning its internal cash flows. Short-term liquidity for the Group and the Company is controlled through monthly monitoring of the liquidity status and needs of funds according to the Group's operating segments.

Long-term liquidity risk is managed by analysing the predicted future cash flows taking into account the possible financing sources. Before approving the new investment projects the Group and the Company evaluate the possibilities to attract needed funds. The general rule is applied in the Group to finance the Group companies or to take loans from them through the parent company in order to minimise the presence of direct borrowings between the companies of different operating segments.

The table below summarises the maturity profile of the Group's financial liabilities as at 31 December 2017 and 2016 based on contractual undiscounted payments.

On demand Less than
3 months		 4 to 12
months		 2 to 5
years		 More than
5 years		 Total
Trade and other payables - 190 - - - 190
Other liabilities 372 287 73 - - 732
Balance as at 31 December 2017 372 477 73 - - 922
Trade and other payables - 140 58 - - 198
Other liabilities 383 345 67 - - 795
Balance as at 31 December 2016 383 485 125 - - 993

The table below summarises the maturity profile of the Company's financial liabilities as at 31 December 2017 and 2016 based on contractual undiscounted payments.

On demand Less than
3 months		 4 to 12
months		 2 to 5
years		 More than
5 years		 Total
Borrowings - - 410 - - 410
Trade and other payables - 3 - - - 3
Other current liabilities 372 66 - - - 438
Balance as at 31 December 2017 372 69 410 - - 851
Borrowings - - 410 - - 410
Trade and other payables - 8 - - - 8
Other current liabilities 383 64 - - - 447
Balance as at 31 December 2016 383 72 410 - - 865

The Group's liquidity ratio (total current assets / total current liabilities) as at 31 December 2017 was approximately 4.39 (3.5 as at 31 December 2016). The Company's liquidity ratio as at 31 December 2017 was approximately 3.32 (2.15 as at 31 December 2016). The Group's and the Company's management considers the liquidity position of the Group and the Company based on the current market conditions and takes actions to keep the favourable situation.

23 Financial risk management (cont'd)

23.2. Capital management

The primary objective of the capital management is to ensure that the Group and the Company maintain a strong credit health and healthy capital ratios in order to support their business and maximise shareholder value. The Company's management supervises the investments so that they are in compliance with requirements applied to the capital, specified in the appropriate legal acts and credit agreements, as well as provide the Group's management with necessary information.

The Group's and the Company's capital comprises share capital, share premium, reserves and retained earnings.

The Group and the Company manage their capital structure and make adjustments to it, in light of changes in economic conditions and specific risks of their activity. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year 2017 and 2016.

The Company is obliged to keep its equity ratio at not less than 50 % of its share capital, as imposed by the Law on Companies of Republic of Lithuania. As at 31 December 2017 and 2016 all the Group consolidated subsidiaries comply with above mentioned requirement. Pursuant to the Law on State Funded Pensions of Republic of Latvia the authorised share capital of an investment management entity must be not less than EUR 500,000, if it managed pension funds of total assets up to EUR 50 million, and must be not less than EUR 1,000,000, if it managed pension funds of total assets up to EUR 100 million. As of 31 December 2017 and 2016 IPAS INVL Asset Management complied with this requirement.

The Company's subsidiaries UAB INVL Asset Management and UAB FMĮ INVL Finasta are managing their capital and all relevant risks in accordance with requirements set by the Bank of Lithuania. The Company's subsidiary IPAS INVL Asset Management is managing their capital and all relevant risks in accordance with requirements set by the Financial and Capital Market Commission of Latvia. Internally there was approved a common risk level – to which extent the minimal capital adequacy requirement would not be violated and there would not be a real threat of its violation. UAB INVL Asset Management ensure that the capital adequacy ratio calculated according to the Bank of Lithuania requirements would be at least 1.1. UAB FMĮ INVL Finasta ensures that the capital adequacy ratio calculated according to the Bank of Lithuania requirements would be at least 8%. IPAS INVL Asset Management ensures that the capital adequacy ratio calculated according to the Financial and Capital Market Commission of Latvia requirements would be at least 8%.The capital adequacy ratios in these subsidiaries were:

2017 2016
UAB INVL Asset Management 1.61 1.86
UAB FMĮ INVL Finasta (%) 21.28 14.71
UAB IPAS INVL Asset Management (%) 46.14 56.17

24. Commitments and contingencies

Funds and individual portfolios managed by the Group

The table below presents the net assets of the Group's managed funds and individual portfolios and capitalisation of managed closed-end investment companies (cross-holding is not excluded):

2017 2016
nd pillar pension funds
2		 380,920 300,412
rd pillar pension funds
3		 24,167 18,264
Investment and alternative investments funds 109,395 100,087
Portfolios of clients 49,884 45,136
Closed-end investment companies 49,372 46,940
Total 613,738 510,839

Operating lease commitments – Group as a lessee

The Group and the Company concluded several contracts for operating lease. The terms of lease do not include restrictions on the activities of the Group and the Company in connection with the dividends, additional borrowings or additional lease agreements.

In 2017 and 2016, the lease expenses of the Group amounted to EUR 339 thousand and EUR 322 thousand, respectively. In 2017 and 2016, the lease expenses of the Company amounted to EUR 22 thousand and EUR 28 thousand, respectively.

Future lease payments according to the signed operating lease contracts are as follows:

Group Company
2017 2016 2017 2016
Within one year
- lease of premises 215 219 23 22
- other lease 8 15 1 1
223 234 24 23
From one to five years
- lease of premises 746 773 91 88
- other lease 30 30 3 3
776 803 94 91
After five years
- lease of premises 520 702 64 84
- other lease 21 29 2 3
541 731 66 87
1,540 1,768 184 201

Tax legislation

Tax authorities have right to examine accounting records of the Company and its subsidiaries at any time during the 5 year period after the current tax year and account for additional taxes and fines. In the opinion of the Company's management, currently there are no circumstances which would raise substantial liability in this respect to the Company and to the Group.

25. Related party transactions

The parties are considered related when one party has the possibility to control the other one or have significant influence over the other party in making financial and operating decisions.

The related parties of the Group in 2017 and 2016 were unconsolidated subsidiaries, associates, joint ventures, the shareholders of the Company, who have joint control or significance influence (Note 1) and key management personnel, including companies under control or joint control of key management and shareholders having significant influence or joint control and including companies, where shareholders having joint control over the Company are key management personnel or having significant influence. To the other related parties are attributed entities left the Group during split-off occurred in 2014, because shareholders having joint control over the Company are key management personnel of these entities or having significant influence.

Receivables from related parties are presented in gross amount (without allowance, with interests, which are calculated according to the agreement on gross amount disregarding the allowance). Interest income and expenses are presented in the 'revenue and other income' and 'purchases' columns, respectively.

Transactions of the Group with unconsolidated subsidiaries in 2017 and balances as at 31 December 2017 were as follows:

2017
Group		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Loans and borrowings 49 - 951 -
Transfer of tax losses 52 - - -
Dividends 645 - 180 -
Accounting services 3 - - -
Other services 2 - 1 -
751 - 1,132 -

The maturity of loans granted is 2018, effective interest rate is fixed at 4.5 %. Loans hold no collateral. The Group classifies part of loans granted as long term, because has policy to prolong them on maturity date.

Transactions of the Group with associates in 2017 and balances as at 31 December 2017 were as follows:

2017
Group		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Rent and utilities services 4 213 - 4
Dividends 253 - - -
Management and success fees 682 - 482 -
Accounting services 12 - - -
951 213 482 4

Transactions of the Group with other related parties in 2017 and balances as at 31 December 2017 were as follows:

2017
Group		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Accounting services
The group of INVL Technology (information		 15 - - -
technology maintenance services)
The group of AB INVL Baltic Farmland (land		 - 125 - 19
administration services) 56 - 13 28
Management fee (for INVL Technology) 390 - 101 -
461 125 114 47

Transactions of the Group with unconsolidated subsidiaries in 2016 and balances as at 31 December 2016 were as follows:

2016
Group		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Loans and borrowings 62 - 1,187 -
Transfer of tax losses 30 - - -
Dividends 348 - - -
Accounting services 3 - - -
443 - 1,187 -

The maturity of loans granted is 2017, effective interest rate is fixed at 4.5 %. Loans hold no collateral. The Group classifies part of loans granted as long term, because has policy to prolong them on maturity date.

Transactions of the Group with associates in 2016 and balances as at 31 December 2016 were as follows:

2016
Group		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Loans and borrowings 58 - - -
Rent and utilities services - 215 - 5
Dividends 253 - - -
Management fee 5 - 5 -
Distributions of new shares 187 - - -
Accounting services 14 - - -
Other services 3 - - -
520 215 5 5

Transactions of the Group with other related parties in 2016 and balances as at 31 December 2016 were as follows:

2016
Group		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Accounting services
The group of INVL Technology (information		 16 - - -
technology maintenance services)
The group of AB INVL Baltic Farmland (land		 - 151 - 29
administration services) 174 - 116 -
Management fee (for INVL Technology) 205 - 109 -
395 151 225 29

The Company's related parties were the subsidiaries, associates, joint ventures, shareholders, who have joint control or significance influence (Note 1), key management personnel, companies under control or joint control of key management and shareholders with significant influence or joint control and companies, where shareholders having joint control over the Company are key management personnel or having significant influence. To the other related parties are also attributed entities left the Group during split-off occurred in 2014, because shareholders having joint control over the Company are key management personnel of these entities or having significant influence.

Transactions of the Company with subsidiaries in 2017 and balances as at 31 December 2017 were as follows:

2017
Company		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Loans and borrowings 49 12 951 398
Dividends 645 - 180 -
Accounting services 4 - - -
Other services 1 - - -
699 12 1,131 398

The maturity of loans granted is 2018, effective interest rate is fixed at 4.5 %. Loans hold no collateral. The Company classifies part of loans granted as long term, because has policy to prolong them on maturity date. The maturity of borrowings is 2018, effective interest rate is fixed at 3 %.

Transactions of the Company with associates in 2017 and balances as at 31 December 2017 were as follows:

2017
Company		 Revenue and
other income from
related
Parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Rent and utilities services - 26 - 1
Dividends 253 - - -
Accounting services 12 - - -
265 26 - 1

Transactions of the Company with other related parties in 2017 and balances as at 31 December 2017 were as follows:

2017
Company		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
The group of INVL Technology (information
technology maintenance services)		 - 9 - 1
Accounting services 15 - - -
15 9 - 1

Transactions of the Company with subsidiaries in 2016 and balances as at 31 December 2016 were as follows:

2016
Company		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
Loans and borrowings
Increase of share capital in kind (transfer of		 62 8 1,187 398
owned shares) 400 - - -
Dividends 406 - - -
Transfer of tax losses 29 - - -
Accounting services 4 - - -
Other services 3 - - -
904 8 1,187 398

The maturity of loans granted is 2017, effective interest rate is fixed at 4.5 %. Loans hold no collateral. The Company classifies part of loans granted as long term, because has policy to prolong them on maturity date. The maturity of borrowings is 2017, effective interest rate is fixed at 3 %.

Transactions of the Company with associates in 2016 and balances as at 31 December 2016 were as follows:

2016
Company		 Revenue and
related
parties		 other income from
Purchases from
Receivables from
related parties
related parties		 Payables to
related parties
Loans and borrowings 58 - - -
Rent and utilities services - 26 - 3
Dividends 253 - - -
Accounting services 12 - - -
323 26 - 3

Transactions of the Company with other related parties in 2016 and balances as at 31 December 2016 were as follows:

2016
Company		 Revenue and
other income from
related parties		 Purchases from
related parties		 Receivables from
related parties		 Payables to
related parties
The group of INVL Technology (information
technology maintenance services)		 - 10 - 1
Accounting services 16 - - -
16 10 - 1

There were no movements and balances outstanding of loans granted to associates in 2017 and 2016.

The movements of loans granted to subsidiaries were:

Group Company
2017 2016 2017 2016
At 1 January 1,187 1,236 1,187 1,236
Loans granted during year 165 235 165 235
Loans repayment received (437) (70) (437) (70)
Loans and interest converted to increased share capital - (348) - (348)
Loans granted by set-off - 77 - 77
Interest charged 49 62 49 62
Interest received (13) (5) (13) (5)
At 31 December 951 1,187 951 1,187

The movements of loans granted to other related parties were:

Group Company
2017 2016 2017 2016
At 1 January - 6,862 - 6,862
Loans granted during year - 800 - 800
Loans repayment received - (1,458) - (1,458)
Loans and interest converted to increased share capital - (6,219) - (6,219)
Interest charged - 58 - 58
Interest received - (43) - (43)
At 31 December - - - -

The movements of borrowings from subsidiaries were:

Group Company
2017 2016 2017 2016
At 1 January - - 398 -
Borrowings received during year - - - 390
Borrowings repaid during year - - - -
Interest charged - - 12 8
Interest paid - - (12) -
At 31 December - - 398 398

Key management compensation and other payments

The management remuneration contains short-term employees' benefits and share-based payments. In 2017 and 2016 key management of the Company and Group includes Board members and Chief financial officer of the Company. In 2016 key management of the Group includes also the Supervisory Board and Board members of asset management entities UAB INVL Asset Management and IPAS INVL Asset Management and the General Manager of UAB FMĮ INVL Finasta.

Group Company
2017 2016 2017 2016
Wages, salaries and bonuses 244 565 216 210
Social security contributions 76 166 67 65
Payments to pensions funds - 17 - -
Share-based payments 40 291 40 54
Total key management compensation 360 1,039 323 329

There were no loans granted during the reporting period or outstanding at the end of the reporting period. In 2017 and 2016 dividends were not paid.

26. Events after the reporting period

Acquisition of UAB Mundus

On 2 February 2018 the Group has acquired 51% shares of UAB Mundus for EUR 265 thousand (all amount would be paid in cash). The acquiree operates in Lithuania and has managed one investment fund, which invest into private debt investments of fast growing alternative finance companies. As of 31 December 2017 the entity managed EUR 13.7 million of assets. The 49% shares of UAB Mundus are owned by two key management personnel of entity. With them is signed shareholders agreement in November 2017. According to the agreement it is required consent of one of other shareholder to direct the relevant activities of the entity. Therefore, on the preliminary management assessment, the Group has joint control over entity. Based on the preliminary assessment, the fair values of the acquired identifiable net assets of entity were EUR 234 thousand and the Group would recognise goodwill of EUR 31 thousand within investments into joint ventures.

Invalda INVL, AB Consolidated Annual Report for 2017

Prepared in accordance with The Information Disclosure Rules approved by the decision No. 03-127 of the Board of the Bank of Lithuania passed on 22 August 2017

Translation note:

This version of the Annual Report is a translation from the original, which was prepared in Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version takes precedence over this translation.

CONTENTS

A WORD FROM THE PRESIDENT OF THE COMPANY 85
I. GENERAL INFORMATION 86
1. Reporting period for which the report is prepared 86
2. General information about the Issuer and other companies comprising the Issuer's group 86
2.1. Information about the Issuer 86
2.2. Information on company's goals, philosophy and operating principles 86
2.3. Information about the Issuer's group of companies 88
II. FINANCIAL INFORMATION AND SIGNIFICANT EVENTS 89
3. Business environment 89
4. Performance results of the issuer and the group 90
5. Significant issuer's events for the reporting period and since the end of the last financial year 91
6. Information on the group's activities 93
6.1. Asset Management business 93
6.2. Other investments 95
7. Estimation of Issuer's and Group's activity last year and activity plans and forecasts 97
7.1. Evaluation of implementation of goals for 2017 97
7.2. Activity plans and forecasts 97
II. INFORMATION ABOUT SECURITIES 98
8. Information about Issuer's authorised capital 98
8.1. Adjustments of the authorised capital 98
8.2. Structure of the authorized capital 98
8.3. Information about the Issuer's treasury shares 98
9. The order of amendment of Issuer's Articles of Association 99
10. Shareholders 99
10.1. Information about shareholders of the company 99
10.2. Rights and obligations carried by the shares 100
11. Dividends 101
12. Trading in Issuer's securities as well as securities of the group companies' 102
12.1. Trading in Issuer's securities 102
12.2. Trading in securities of the group companies' 105
III. ISSUER'S MANAGING BODIES 108
13. Structure. authorities. the procedure for appointment and replacement 108
13.1. General Shareholders' Meeting 108
13.2. The Board 110
13.3. The President 112
14. Information about members of the Board. CFO and the Audit Committee of the Company 112
15. Information about the Audit Committee of the company 115
16. Information on the amounts calculated by the Issuer. other assets transferred and guarantees granted to
the Members of the Board, the president and CFO 117
V. OTHER INFORMATION 118
17. Agreements with intermediaries on public trading in securities 118
18. Information on Issuer's branches and representative offices 118
19. Risk management 118
19.1. A description of the principal risks and uncertainties 118
19.2. Information about the extent of risk and its management in the Company 119
19.3. The main indications about internal control and risk management systems related to the preparation
of consolidated financial statements 119
20. Issuer's and its group companies' non – financial results. Information related to social responsibility.
environment and employees 119
20.1. Responsible business actions in the company 119
20.2. Employees 120
20.3. Information about agreements of the Company and the members of the Board, or the employees'
agreements providing for compensation in case of the resignation or in case they are dismissed without a
due reason or their employment is terminated in view of the change of the control of the Company.121
21. Memberships in associations 121
22. Information on harmful transactions in which the issuer is a party 121
23. Information on the related parties' transactions 121
24. Information about significant agreements to which the issuer is a party, which would come into force, be
amended or cease to be valid if there was a change in issuer's controlling shareholder 122
25. Significant investments made during the reporting period 122
26. References to and additional explanations of the data presented in the financial statements and
consolidated financial statements 122
27. Information on audit company 122
FINANCIAL STATEMENT AUDIT SERVICES UNDER CONTRACTS (INCLUDING AUDIT SERVICES FOR FUNDS FINANCIAL
STATEMENTS) 122
28. Data on the publicly disclosed information 122
APPENDIX 1. INFORMATION ABOUT GROUP COMPANIES, THEIR CONTACT DETAILS 124
APPENDIX 2. DISCLOSURE CONCERNING THE COMPLIANCE WITH THE GOVERNANCE CODE 127
APPENDIX 3. COMPANY'S MANAGEMENT REPORT 149

A WORD FROM THE PRESIDENT OF THE COMPANY

Dear Shareholders, Partners and Employees,

Thank you for being together with Invalda INVL. It is only because of you that we can do ever more and improve in all we do. The year 2017 was successful for the Invalda INVL group and for the absolute majority of those who worked with us.

Outside circumstances, which strongly influence investment returns, were favourable in 2017. Global financial markets grew, and it was yet another good year for the Baltics. The Lithuanian Investment Index calculated by the Invalda INVL-owned company INVL Asset Management rose 6.3% during the year, influenced largely by the growth of the country's stock market.

We for our part are proud that in 2017 most of the products we manage were the best in their categories, and that with our knowledge, professional skills and work we benefitted our clients, for whom asset management companies of the group earned more than 34.6 million euros

during the year while the assets we are entrusted with managing surpassed 600 million euros at the end of the year.

During 2017 we continued to expand our range of activities. We brought some successful new investment products to the market, like the INVL Baltic Forests Fund I for example. And by acquiring a stake in the asset management company Mundus UAB we entered the market for fixed income products, which is growing significantly, at the same time strengthening our team with new talent and expert knowledge.

In growing our asset management business, we stress sustainability. During 2017 INVL Asset Management obtained a European AIFM licence which grants the right to manage funds for professional investors, and we joined the Principles for Responsible Investment (PRI). We embrace the mindset which is taking ever stronger hold in today's society that when investing we have to be responsible for the changes we can influence with our actions.

The value of investments owned by Invalda INVL increased significantly during 2017 and totalled about 57 million euros. Moreover, an agreement on the partial sale of the Litagra group was concluded, which made it possible to realize part of the value created and accumulate resources for new investments. In 2017 the value of the company's equity grew 21.5%, and the Invalda INVL group earned a profit of 11.3 million euros.

With the largest team of investment professionals in the Baltics (and we continue to strengthen that team), we are highly focused on managing the assets entrusted to us. While expanding both organically and by acquisitions, in 2018 we plan to introduce important new investment opportunities and, with our financial input and efforts, to contribute to the growth of the country and the region. In developing the Invalda INVL group's asset management activities, we give priority to sustainable business growth and focus first of all on creating long-term value. We are working hard to ensure that 2018 and later years are good for our clients, partners, employees and shareholders.

Darius Šulnis President of Invalda INVL

I. GENERAL INFORMATION

1. Reporting period for which the report is prepared

The report is prepared for 12 months of 2017 (January – December). The report also includes significant events of the company and the group that took place after the reporting period.

The report was audited.

2. General information about the Issuer and other companies comprising the Issuer's group

2.1. Information about the Issuer

Name of the Issuer The public joint-stock company Invalda INVL
Code 121304349
Address Gynėjų str. 14, LT-01109 Vilnius, Lithuania
Telephone +370 5 279 0601
E-mail [email protected]
Website www.invaldainvl.com
Legal form The public joint-stock company
Date and place of registration 20 March 1992. Register of Enterprise of Vilnius
Register in which data about the Company are
accumulated and stored		 Register of Legal Entities

2.2. Information on company's goals, philosophy and operating principles

The priority of Invalda INVL group is to ensure successful management of the assets entrusted to it.

Activity

Invalda INVL is one of the leading asset management groups in the Baltic countries. Invalda INVL group currently manages a total of more than 20 mutual, real-estate and pension funds (2nd and 3rd pillar), alternative investments, individual portfolios, private equity and other financial instruments. Companies of the group engaged in asset management manage over 600 million euros of assets entrusted to them by more than 190 thousand clients in Lithuania and Latvia as well as international investors.

We believe that our team's experience in investing and asset management creates value. That's why we now manage other investors' assets in addition to those of our shareholders. Every day we make decisions to ensure the intelligent investment of our clients' assets, which is why we highly value responsibility, a professional attitude, efficiency and openness.

Experience

Invalda INVL, AB started the activity in 1991 as the company Invalda, AB. From 1991 until 1997 it operated as a public investment company established during the state property privatization, which was implemented in accordance to the State Property Primary Privatization law of the Republic of Lithuania. From 1997 until 2003 the company operated as a licenced holding investment company (the license was issued by the Securities Commission of Lithuania). Company's shares have been traded on the Nasdaq Vilnius Exchange since 1995. On May 2015 the company changed its corporate name to the public joint-stock company Invalda INVL.

Over its history Invalda INVL implemented a few dozen corporate acquisitions and sales, capital raising transactions worth more than EUR 1.2 bln.

Having the biggest team of investment managers in Lithuania and Latvia, and more than 20 years of successful asset management, we generate significant returns for our investors.

Goals

The priority of Invalda INVL group is to ensure the successful management of the assets entrusted to it. Our aim is to achieve that the products managed by the group are among the best choices on the market in their categories.

Invalda INVL strives to be the leading asset management investment group in Lithuania and one of the leaders in the region. It is planned to continue growing and investing in the asset management business' organic growth and upon appearance of opportunities, new acquisitions in this business can be made. Alongside with the importance of the annual financial results, the priority will be given for the qualitative and quantitative asset management business growth and longterm value creation for customers, employees and shareholders.

1991 In 1991 the investment company Invalda began its activities.
1995 Since 1995 the shares of Invalda have traded on the Nasdag Vilnius exchange.
1997 From 1997 to 2003 the company was licensed as an investment holding company.
In 1998 Invalda acquired FMI Finasta which, with the acquisition of several other smaller brokers (Mifonda, Apyvarta, Klaipėdos Vertybiniai
Popieriai, Finansų Spektras and Sinkus), became Lithuania's leading financial brok
2003 2003 brought the creation of the asset management company Finasta Investicijų Valdymas, which within a few years became the Lithuanian asset
manager with the largest number of mutual fund clients.
2008 In 2008 the investment bank Finasta was established, It was sold along with other Finasta group companies in 2009,
2014 In 2014 it was decided to revise the group's business model and manage not only shareholders' assets but also those of other investors. In April
2014, three companies each managing uniform types of assets were split off fr
(UTIB) licences.
In 2014 the Bankas Finasta group was acquired, including the Finasta Asset Management companies in Lithuania and Latvia. During the year,
Invalda LT also acquired pension fund manager MP Pension Funds Baltic. Since March 2
2015 Since completion of the merger of INVL Asset Management, MP Pension Funds Baltic and INVL Fondai in October 2015, it is INVL Asset
Management that operates in the market.
In 2015 Invalda INVL sold its shareholdings in Bankas Finasta and the brokerage firm Finasta to Siauliu Bankas.
2016 In July 2016, the status of a closed-end investment company (UTIB) was granted to INVL Technology, and in December it was granted to INVL
Baltic Real Estate. On becoming UTIBs, the companies management was assumed by INVL
2017 In August 2017 Latvian asset management company INVL Asset Management presented new passive management 2nd pillar pension plan INVL
index Direct. In November 2017 Lithuanian company INVL Asset Management from the company S
2018 In February 2018 Lithuanian company INVL Asset Management has acquired 51 per cent stake in the asset management company Mundus

Fig. 2.2.2. Key development steps of asset management business of Invalda INVL group

2.3. Information about the Issuer's group of companies

Currently, the largest part of Invalda INVL group assets is concentrated in Lithuania and Latvia. At the end of the reporting period the company acted in the field of asset management business and managed other private equity investments, investing in IT, real estate, agricultural, facility management and banking areas.

The asset management business is the core of the company's strategic, while other investments may be sold receiving attractive offers.

List of group companies as well as their contact information is presented at Annex 1.

Fig. 2.3.1. The group companies of Invalda INVL as of 31 December 2017

II. FINANCIAL INFORMATION AND SIGNIFICANT EVENTS

3. Business environment

Baltic stock exchanges have recorded another successful year. In 2017 Vilnius stock exchange index increased a little more (16.97%) than last year's increase (15.61%). In addition, in the summer of 2017, after a 9.5-year break, Vilnius stock exchange index returned to pre-crisis level and overcame it. The Riga stock exchange grew even faster (35.76%) than last year (24.77%) and is recorded among the 10 stock exchanges in the world with the largest growth. The growth of the Tallinn stock exchange index (15.49%) was slower than last year (19.72%).

All-Share indexes (OMX Baltic, OMX Tallinn, OMX Riga, and OMX Vilnius) are available on both the local and Baltic level. They include the shares listed on the Main and Secondary lists of the Baltic exchanges and reflect the current status and changes in each market or the Baltic Market as a whole.

Table 3.1. Baltic stock market

Index/Shares 01.01.2017 31.12.2017 +/- %
OMX Tallinn 1,075.50 1,242.12 15.49
OMX Riga 733.77 996.13 35.76
OMX Vilnius 558.50 653.29 16.97

Source: Nasdaq Baltic

Momentum in the global economy has continued to build up in 2017. Even though GDP growth rates projected for the US, the UK and India have been revised down, the potential deceleration in the growth of these economies may be offset by stronger than-expected activity in the economies of the euro area, Japan, China and Russia as well as the European economies classified as emerging market economies.

Lithuania's economic growth has picked up notably in 2017 on the back of strong support from improvements in the international economic environment. This year the global demand for investment goods has recovered substantially from its previously recorded lows, giving a significant boost to international trade. Of all the components of aggregate demand, it is investment that usually has the closest relationship to external trade. That is why the increase in investment has made such a significant contribution towards the growth of imports and exports in various countries, including Lithuania's key trade partners, i.e. the euro area and other EU countries. Headline inflation in the country remains elevated. Current price developments are driven by both domestic economic factors and the evolving trends in global commodity markets. The latter, in particular, have pushed consumer prices to higher-than forecasted levels in recent months. A substantial contribution to inflation has come from domestic economic developments. Prices for services, which have been on an upward path and which, of all consumer prices, are the most affected by the situation in the labour market and domestic demand, have accounted for nearly one-third of inflation. Given that wage growth, which has been quite robust and prolonged, has been outpacing the growth of labour productivity by a rather high margin, labour costs have had an inflationary effect on prices. Higher household income has also created pressure on prices through the growth of domestic demand.

Table 3.2. Key economic indicators of Lithuania

Rate 2013 2014 2015 2016 2017
Real GDP annual change (excluding seasonal
and labour days, percent)		 3.4 3.5 1.7 2.2 3.8
Nominal GDP (EUR billion) 35.002 36.590 37.331 38.631 41.800
Retail
trade
turnover
(at
constant
prices,
excluding
vehicle
trade)
annual
change
(percent)		 4.4 5.7 5.4 7.0 4.6
Unemployment rate (according to the survey,
average, %)		 11.8 10.7 9.1 7.9 7.1
Average monthly wage change (%) 5.1 4.5 5.1 7.9 7.2

Source: SEB bank, Statistics Lithuania

4. Performance results of the issuer and the group

EUR thousand Company's Group's
2015 2016 2017 2015 2016 2017
Non-current assets 46,333 51,667 63,301 44,467 48,581 59,511
Current assets 2,648 1,894 2,879 5,099 5,832 7,513
Equity 48,123 52,681 63,996 48,123 52,681 63,996
Non-current liabilities - - 1,316 76 82 1,316
Current liabilities 858 880 868 1,367 1,650 1,712
Result before taxes 4,453 4,714 12,750 4,430 4,773 12,644
Net result 4,188 4,770 11,307 4,188 4,770 11,307
Net result attributable to
holders of the parent
Company		 - - - 4,188 4,770 11,307

Table 4.1. Main items of financial statements, thousand EUR

Net profit of Invalda INVL group for 2017 amounts to EUR 11.3 million.

Table 4.2. Calculation of the net asset value of Invalda INVL, AB

EUR thousand Evaluation criteria 2015 2016 2017
Investment into asset management Equity method 6,604 7,513 7,996
Cash and cash equivalents Book value 1,238 384 1,050
Deferred income tax asset Book value 137 164 -
Investments into INVL Baltic Real Estate Market price 1,985 8,183 10,036
Investments into INVL Technology Market price 3,831 2,978 2,521
Other listed shares Market price 513 901 1,560
Investments into Litagra, UAB (including
loans granted)		 Comparative method of
multipliers		 14,897 15,371 9,972
Investments into Šiauliai Bank Market price 6,363 11,505 18,111
Investments into Inservis, UAB (including
loans granted)		 Comparative method of
multipliers		 4,828 4,921 3,579
Investment into investment fund through
subsidiary		 Fair value of net assets - - 8,498
Investments into other subsidiary
companies (including loans granted)		 Fair value of net assets 1,121 965 1,917
Loans to group companies of INVL Baltic
Real Estate		 Book value 6,862 - -
Other loans, other assets Book value 602 676 940
Total assets Book value 48,981 53,561 66,180
Liabilities Book value 858 880 2,184
Net asset value Book value 48,123 52,681 63,996
Net asset value per share Book value 4.11 4.55 5.53
Company's Group's
2015 2016 2017 2015 2016 2017
Return on Equity (ROE), % 9.04 9.46 19.38 9.04 9.46 19.38
Debt ratio 0.02 0.02 0.03 0.03 0.03 0.05
Debt – Equity ratio 0.02 0.02 0.03 0.03 0.03 0.05
Liquidity ratio 3.09 2.15 3.32 3.73 3.53 4.39
Earnings per share (EPS),
EUR		 0.36 0.41 0.98 0.36 0.41 0.98
Price Earnings ratio (P/E) 9.57 9.42 5.42 9.57 9.42 5.42

Table 4.3. Financial ratios

https://invaldainvl.com/lit/en/investor-relations/reports/formulas-of-performance-indicators

Invalda INVL, AB is an asset management and investment company. The significant impact for the profit of the company has investments recalculation by the true value as well as acquisition and selling deals, therefore not all company performance indicators are suitable for the evaluation of Invalda INVL, AB. Furthermore, investments into main asset management business are recorded at equity method in financial reports which may be different from the market price. That is why some ratios can show not real situation of the company.

5. Significant issuer's events for the reporting period and since the end of the last financial year

Acquisitions and/or transactions

  • On 24 February 2017 Cedus Invest UAB, a company 100 per cent controlled by Invalda INVL, together with other shareholders of Litagra UAB, initialled share purchase – sale agreement with Achema Group regarding sale of Litagra group trading business and grain elevators network, i.e. Litagros Prekyba AB, with its Latvian subsidiary Litagra SIA. Invalda INVL, an investment and asset management company, acting jointly with other shareholders has sold Litagros Prekyba – one of the Baltic States' largest agricultural trading companies, which has grain elevator network – to Achema Group. Cedus Invest, a company controlled by Invalda INVL, received EUR 9.4 million for 36.9% of the shares in LP Group that controls Litagros Prekyba together with its Latvian subsidiary and Joniškio Elevatorius. The transaction was completed on 15 December 2017.
  • On 20 December 2017 he Board of Invalda INVL decided to transfer up to 22 percent of shares in the real estate investment company INVL Baltic Real Estate. Shares would be transferred to institutional investors and retail customers in 2018. Public offering of shares to retail investors would be possible only if the Bank of Lithuania approves the prospectus of INVL Baltic Real Estate, which would determine the share price and the order of the distribution.
  • On 21 December 2017 it was announced that Cedus Invest UAB, unconsolidated subsidiary of Invalda INVL, will invest up to EUR 8.5 mln into INVL Emerging Europe Bond Subfund managed by INVL Asset Management. This will be a short-term investment, carried out until the funds are needed for other projects.
  • INVL Asset Management, a part of Invalda INVL, has acquired 51 percent shares in the asset management company Mundus. The transaction was completed on 2 February.

New people

• On 28 April 2017 the General Meeting of Shareholders was held. The shareholders got acquainted with the Consolidated Annual Report of Invalda INVL and the auditor's report on the financial statements of Invalda INVL. The shareholders approved financial statements of Invalda INVL, profit distribution, conditions for the purchase of own shares and the issue regarding the number of ordinary shares of Invalda INVL for which during the year 2017 employees shall be offered options contracts. The meeting also approved the new wording of the regulations of the audit committee, the remuneration for independent members of the audit committee and elected the following 2 independent members of the audit committee for a 4 years term of office: Dangutė Pranckėnienė and Tomas Bubinas.

  • On 28 April 2017 the General Meeting of Shareholders elected the following members to the Board of Invalda INVL for the new 4 (four) years term of office: Alvydas Banys, Indrė Mišeikytė and Darius Šulnis. At the Board meeting held on 2 May 2017 Alvydas Banys was elected the Chairman of the Board.
  • On 7 September 2017 it was announced that Laura Križinauskienė will be a new CEO in INVL Asset management from 2 October 2017. She replaced Darius Šulnis, who remains the Chairman of the Management Board.

New products

  • On 16 August 2017 Latvian asset management company INVL Asset Management, belonging to Invalda INVL group, presented new passive management 2nd pillar pension plan INVL INDEX DIRECT, offering at that time the lowest commission nationwide for the management of the 2nd pillar pension index plan, as well as providing every new participant with the opportunity to become a shareholder of Invalda INVL.
  • On 22 January 2018 INVL Asset Management, a part of Invalda INVL group, has launched a new mutual fund the INVL Absolute Return Subfund – which is able to invest in diverse asset classes without restrictions on the proportions of the fund's assets that may be allocated, at times thus even reaching 100% equity or 100% bonds. The fund's main principal for choosing investments will be expert assessment in terms of regions, countries, asset classes or specific investment ideas.

New memberships

  • On 14 June 2017 Invalda INVL together with its INVL Asset Management companies in Lithuania and Latvia, has joined the UN-supported Principles for Responsible Investment (PRI).
  • Invalda INVL has joined the Investors' Association at the end of the reporting period. The main activities include the following areas: organization of meetings with business leaders and events on the financial markets of the members of the association, the minority investors' rights advocacy, development of centers of excellence, providing the scientific findings based on the recommendations of the Government and Parliament, drawing attention and warning about the opportunities and risks associated with investing.

Purchase of own shares

  • On 2 May 2017 it was announced that the board of the company, considering that EUR 10.013 thousand reserve for the acquisition of own shares have been formed and unused in the public limited company Invalda INVL and in line with the decision of shareholders on 28 April 2017, decided to buy ordinary registered shares of Invalda INVL through the Nasdaq Vilnius Stock Exchange's official offering. In addition, the terms for acquiring the treasury shares were announced.
  • On 18 May 2017 Invalda INVL announced that it will purchase 0.19 % of own shares for the total amount of EUR 104,995.80 (without brokerage fees). Invalda INVL could purchase up to 120.000 shares. During the share buy-back 23,076 units of shares were tendered. Every shareholder sold 100 % of offered shares for the price of EUR 4.55 per share. Share purchase procedure started from 4 May 2017 and was implemented through the market of official tender offers of Nasdaq Vilnius stock exchange until 18 May. The acquired shares were settled on 22 May.

Stock option contracts

• On 19 May 2017 it was announced that Invalda INVL, in the course of 29 April 2016 approved Employees Stock Option Policy and in accordance with 28 April 2017 decision of the general shareholders' meeting, have signed stock options contracts for 80.571 ordinary registered shares of the public company Invalda INVL. The stock options contracts were signed with employees of Invalda INVL and with employees of the companies where Invalda INVL owns at least 50%. In the year 2020, according to the procedure and terms specified in the stock option contracts, employees will acquire the right to purchase the above-mentioned amount of 0.29 euros e nominal value shares of Invalda INVL, paying the price of 1 (one) euro for each share acquired.

Financial results

  • On 30 May 2017 Invalda INVL announced unaudited results of Invalda INVL group for the 3 months of 2017. Company's and consolidated net profit amounted to EUR 2.31 million (during the same period of the last year the loss of EUR 0.18 mln. was suffered). Company's and consolidated equity capital for the 3 months of 2017 amounted to EUR 54.99 million (company's and consolidated equity capital for the 3 months of 2016 amounted to EUR 52.68 million).
  • On 31 August 2017 Invalda INVL announced unaudited results of Invalda INVL group for the 6 months of 2017. The net profit of Invalda INVL and consolidated net profit for 6 months of 2017 amounted to EUR 7.74 million. In the same period of 2016 the net loss of the company and consolidated net loss was EUR 0.21 million. Company's and consolidated equity capital for the 6 months of 2017 amounted to EUR 60.39 million, in the same period of 2016 it was EUR 47.51 million.
  • On 28 November 2017 Invalda INVL announced unaudited results of Invalda INVL group for the 9 months of 2017. The net profit of Invalda INVL and consolidated net profit for 9 months of 2017 amounted to EUR 8.27 million. In the same period of 2016 the net profit of the company and consolidated net profit was EUR 1.06 million. Company's and consolidated equity capital for the 9 months of 2017 amounted to EUR 60.92 million, in the same period of 2017 it was EUR 48.78 million.

6. Information on the group's activities

6.1. Asset Management business

Invalda INVL manages licensed asset management companies INVL Asset Management in Lithuania and Latvia, brokerage company INVL Finasta and land administration company INVL Farmland Management.

The INVL Baltic Fund had the biggest return. The year 2017 could be called a year of emerging market stocks and bonds, even if attention to those asset classes faded somewhat in the second half of the year. Assessing the performance of the mutual funds that INVL Asset Management operates, the INVL Baltic Fund delivered the highest return, at 18.9% for 2017 and 66.8% over the last five years. A bit behind that was the INVL Emerging Europe ex Russia TOP20 Subfund, which had gains of 17% in 2017 and 33.6% over the last five years. Funds with a focus on bonds also performed well in 2017: the INVL Emerging Europe Bond Subfund gained 4.9% (22.7% over the last five years) and the INVL Global Emerging Markets Bond Subfund had a return of 8.9%.

INVL Asset Management's pension funds were the leaders in all pension fund categories. In the last quarter of 2017, equity investors' attention again turned to developed-market stocks. During the period the [benchmark?] U.S. stock index, calculated in euros, gained 7.5%. The main factor behind that was tax reform, as a result of which U.S. companies' profittax rate will fall to 21%. The bond market, meanwhile, had a rather calm fourth quarter. Key events were the European Central Bank's decision to reduce its bond buying programme from 60 billion to 30 billion euros a month as of 2018 and the U.S. central bank's decision in December to raise the benchmark interest rate. But neither of those caused large market fluctuations. What earned the biggest return for INVL Asset Management's pension funds was investing in emerging market stocks and bonds. According to end-2017 data for pension funds published by the Bank of Lithuania, pension funds operated by INVL Asset Management were the country's top performers in all pension fund categories – both for their 2017 return and for their average annual return over the last five years.

Table 6.1.1. Results of investment funds managed by INVL Asset Management in Lithuania and Latvia

Fund name Fund / company
return
during
2017, %		 Fund return over
the past 5 years,
%		 Return
on
the
fund's benchmark
index
during
2017, %		 Return
on
the
fund's
benchmark
index over the past
5 years, %
INVL Asset Management (Lithuania) pension funds
2nd pillar
INVL EXTREMO II 16+ 9.5 64.8 9.4 68.5
INVL MEDIO II 47+ 7.3 43.8 6.9 51.8
INVL MEZZO II 53+ 5.8 28.7 5.9 30.0
INVL STABILO II 58+ 2.5 13.8 0.1 8.3
3rd pillar
INVL III Equity 10.2 46.6 6.2 37.4
INVL EXTREMO III 16+ 9.4 62.4 9.4 Applicable from
01.01.2013
INVL MEDIO III 47+ 7.3 42.3 6.9 Applicable from
01.01.2013
INVL STABILO III 58+ 5.2 19.0 3.1 19.4
Swedbank Supplementary Pension
Fund		 5.2 Inception date
13.05.2013		 7.8 Inception date
13.05.2013
INVL Asset Management (Lithuania) mutual funds
INVL Baltic Fund 18.9 66.8 20.0 77.3
INVL Emerging Europe ex Russia
TOP20 Subfund		 17.0 33.6 24.7 3.2
INVL
Emerging
Europe
Bond
Subfund		 4.9 22.7 5.3 24.6
INVL Russia TOP20 Subfund -2.3 20.4 -12.1 -17.2
INVL
Global
Emerging
Markets
Bond Subfund		 8.9 Inception date
01.07.2016		 7.3 Inception date
01.07.2016
INVL Asset Management (Lithuania) alternative investments
UTIB "INVL Baltic Real Estate" 25.5 Inception date
29.04.2014
UTIB "INVL Technology" -15.3 Inception date
29.04.2014
INVL Baltijos miškų fondas I 10.82 Inception date
13.02.2017
INVL
Partner
Energy
and
Infrastructure Fund		 -0.02 Inception date
20.11.2017

INVL Asset Management (Latvia) pension funds

2nd pillar
INVL EKSTRA 16+ 5.08 20.03 6.88 Inception date 01.01.2016
INVL KOMFORTS 47+ 3.32 26.2 5.62 Inception date 01.01.2016
INVL KONSERVATIVAIS 58+ 2.18 48.40 2.98 Inception date 01.01.2016
INVL INDEX DIRECT 3.02 Inception date
15.08.2017		 3.9 Inception date 15.08.2017
EUR million 2015 2016 2017
(if not stated otherwise) Lithuania Latvia Lithuania Latvia Lithuania Latvia
Number of clients, units 118.2 48.5 126.2 52.2 139.2 51.4
Asset under management* 265.2 63.0 422.4 86.3 533.7 77.8
2nd pillar pension funds 179.0 45.7 238.5 55.9 312.0 62.0
3rd pillar pension funds 10.6 1.2 15.5 1.2 21.1 1.2
Investment funds 31.7 1.9 71.5 - 87.4 -
Portfolios 33.6 1.3 39.2 0.6 43.7 0.2
Alternative assets 10.3 12.9 57.7 28.6 69.5 14.4
Revenues 2.9 0.7 4.1 1.0 6.0 1.1
Profit (loss) before tax, EUR
thousand**		 (709) 30 (687) 144 253 226

Table 6.1.6. Results of the asset management

*eliminated investments into own products, for which management fee is not charged

** according to accounting data of Invalda INVL

Table 6.1.7. Number of employees

Number of employees 2015 2016 2017
- 58 80 96

6.2. Other investments

Company Activity Owned
shares, %		 Value of the
owned
shares
31.12.2017,
thous. EUR
www.invltechnology.com ● Investments in information technology company;
>300 employees at group companies;
>200 clients served each year;
>50 countries where projects were implemented;
● Closed-ended type investment company license
obtained 14.07.2016. Management transferred to INVL
Asset Management;
● Listed on Nasdaq Vilnius stock exchange;
●
According
to
unaudited
data,
the
company's
investments in the businesses it owns totalled EUR 20.1
million at the end of December and increased by EUR
3.4 million from the start of 2017; the equity capital of
INVL Technology was EUR 23.146 million, or EUR 1.90
per share, at the end of 2017, and increased 17.3 per
cent during the year; the company's net profit for 2017,
taking into account a revaluation of financial assets, was
EUR 3.418 million.		 13.9 2,521
Company Activity Owned
shares, %		 Value of the
owned
shares
31.12.2017,
thous. EUR
www.invlbalticrealestate.com ● Investments in commercial real estate company;
● EUR 56 mln investment assets value;
● EUR 33.86 mln consolidated equity capital;
● INVL Baltic Real Estate earned EUR 3.58 mln net
profit in 2017
● Closed-ended type investment company license
obtained 22.12.2016. Management transferred to INVL
Asset Management;
● Listed on Nasdaq Vilnius stock exchange;
● In 2017 EUR 2,1 million earned from this investment
(included dividends received)		 32.1 10,036
www.litagragroup.lt ● Primary agricultural production
● 25 years of agriculture sector experience;
● Invalda INVL acting jointly with other shareholders has
sold Litagros Prekyba – one of the Baltic States' largest
agricultural trading companies, which has grain elevator
network.
● Litagra intends to concentrate on agriculture - the
cultivation of grain, milk and feed production.		 36.9 9,972
www.sb.lt >70 bank branches;
>20 years of banking sector experience;
● Listed on Nasdaq Vilnius stock Exchange;
● Sustainable results of the Bank, improved profitability
and capital ratios as well as growing awareness among
investors at international level have increased the
Bank's share price on the Nasdaq Vilnius Stock
Exchange. The price of the bank's shares rose 57 per
cent during 2017.
● In 2017, the Group earned 32.1 million euro, the Bank
- 30.9 million euro of audited net profit.		 6.79 18,111
www.inservis.lt ● Facility Management company;
● 2 mln sq. m. of premises managed;
● about 300 certified professionals;
● 8 Lithuanian cities where services are provided;
● Facility management companies sales increased by
7.7% to EUR 7.0 million, EBITDA decreased by 32.6%
to EUR 0.4 million and the net profit decreased by 6% till
EUR 0.43 million.		 100 3,579
www.keliozenklai.lt ● Solid wood, metal and road maintenance equipment
manufacturing company;
>70 employees;
● 35 years of road sign production experience.		 100 972

7. Estimation of Issuer's and Group's activity last year and activity plans and forecasts

7.1. Evaluation of implementation of goals for 2017

In 2017, the Invalda INVL group was aiming to expand the range of investment solutions and products offered in order to make the products managed by the group to be one of the best choices in the market in their categories.

In the year 2017, the new investment products for informed investors were presented: INVL Baltic Forest Fund I investing in forests started its activities in February, and closed-ended type investment fund INVL Partner Energy and Infrastructure Fund - in November. Moreover, at the end of January 2018, a new investment fund INVL Absolute Return Sub-Fund was set up by INVL Asset Management. Its uniqueness is the possibility to invest in different classes of assets, without limiting the share of assets managed by the fund, in certain stages reaching 100%. of shares or bonds.

The managed pension funds of INVL Asset Management, based on returns, have emerged as leaders in all categories of pension funds of the country according to both the results of 2017, and the results of the last five years. Results of the of the five investment funds in Lithuania in 2017, fluctuates from a negative 2.3% in INVL Russia TOP20 Sub-Fund up to 18.9% in the INVL Baltic fund (these funds earned respectively 20.4% and 66.8% in the last 5 years).

7.2. Activity plans and forecasts

The goal of Invalda INVL group is to ensure the successful management of the assets entrusted by clients, partners and shareholders. Therefore, in 2018, the focus, above all, will be on the managed investments, which at the beginning of the year already exceeds EUR 600 million. Therefore, we will continue strengthening the largest and, in our opinion, the most professional investment team of the Invalda INVL group in the Baltic States. We seek to achieve that products managed by the group become the most attractive and most popular choice in the market in their categories. We will continue the organic development by introducing new and significant investment opportunities and contributing to the growth of the country and the region through our financial and intellectual contributions.

We are actively looking for possibilities of the asset management business development through acquisitions. We will continue to strive giving priority to qualitative and quantitative growth of asset management business and long-term value creation for our clients, partners and shareholders rather than to short-term financial goals.

The change in the value of own investments makes a significant impact on the result of Invalda INVL. We plan to follow the policy that Invalda INVL invests together with its clients in the group's managed products. We believe that this creates an identity of interests and positively affects the mutual trust and long-term cooperation of interested parties.

We strive for Invalda INVL to be the leading specialised asset management and investment group in Lithuania and one of the leading companies in the region. We are working to ensure that 2018 and later years are good for our clients, employees and shareholders.

II. INFORMATION ABOUT SECURITIES

8. Information about Issuer's authorised capital

8.1. Adjustments of the authorised capital

Information concerning adjustments of Invalda INVL, AB authorised capital during past 10 years is presented below:

  • The reorganisation of Invalda, AB and one of the largest shareholders Nenuorama, AB was finished on 28 September 2007. Nenuorama, AB was merged with Invalda, AB. Changing Nenuorama, AB shares into Invalda, AB ones, 19,866,060 shares was issued. Following the terms of the reorganisation 22,305,587 Invalda, AB shares held by Nenuorama, AB were annulled. After reorganisation the authorised capital of Invalda, AB amounted to EUR 12.3 million.
  • The share capital of Invalda, AB was increased till EUR 14.96 million after conversion of EUR 14.48 million bonds.
  • The share capital of Invalda, AB was increased by EUR 1.7 million till EUR 16.67 million after conversion of EUR 2.15 million and EUR 7.24 million convertible bonds.
  • On 6 August 2012 the share capital of Invalda, AB was decreased till EUR 15 million. The authorised capital of Invalda, AB decreased due to cancelling of own shares acquired by the company.
  • The amended Articles of Association of Invalda, AB were registered with the Register of Legal Entities on 31 May 2013. The Articles of Association were amended due to split-off of the company and stated a new name of the company – public joint-stock company Invalda LT as well as a reduced authorized capital due to the split-off procedure. The authorised capital of Invalda LT, AB was EUR 7.19 million.
  • The amended Articles of Association of Invalda LT, AB were registered with the Register of Legal Entities on 29 April 2014. The Articles of Association were amended due to split-off of the company. After the completion of the split-off of Invalda LT, the authorised capital was EUR 3.44 million and was divided into 11,865,993 ordinary registered shares.
  • The amended Articles of Association were registered with the Register of Legal Entities on 11 May 2015. According to amended Articles of Association the name of the company was changed into Invalda INVL, AB. The authorised capital was recounted into EUR and makes EUR 3,441,137.97. It is divided into 11,865,993 ordinary registered shares with nominal value EUR 0.29 each.

8.2. Structure of the authorized capital

Type of shares Number of
shares, units		 Total voting rights granted by
the issued shares, units		 Nominal
value,
EUR		 Total
nominal
value, EUR		 Portion of the
authorised capital, %
Ordinary
registered
shares		 11,865,993 11,563,533 0.29 3,441,137.97 100

Table 8.2.1. Structure of Invalda INVL, AB authorised capital as of 31 December 2016.

All shares are fully paid-up, and no restrictions apply on their transfer.

Invalda INVL group manages asset management company INVL Asset Management and financial brokerage company INVL Finasta. According to Lithuanian law, a natural or legal person (or persons acting in concert), indirectly willing to acquire or increase their shareholding in an asset management company (more than 20, 30 or 50 percent), have to obtain a decision from the Bank of Lithuania not to object this acquisition. This means that investors, willing to acquire more than 20 percent shareholding in Invalda INVL, AB, can do so only with a prior decision from the Bank of Lithuania.

Invalda INVL also owns asset management company INVL Asset Management in Latvia, therefore according Latvian Financial and Capital Market Commission restrictions under acquisition of the shareholding in Invalda INVL must be fulfilled as well.

8.3. Information about the Issuer's treasury shares

Since the beginning of 2017 until the release of the report, the company implemented own share acquisition process for one time.

Share purchase started on 4 May 2017. Share purchase ended on 18 May 2017. Max number of shares to be acquired (units): 120,000. The company acquired 23,076 units of own shares (0.19 percent), EUR 104,995.80 (without brokerage fee) were paid for the acquired shares. The price of one share was EUR 4.55. The authorised capital of Invalda INVL is EUR 3,441,137.97. It is divided into 11,865,993 ordinary registered shares with nominal value EUR 0.29 each. Taking into consideration the fact that the shares own by the company does not give the voting rights, the total amount of shares with voting rights in Invalda INVL, AB (ISIN LT0000102279) equals to 11,563,533 units.

9. The order of amendment of Issuer's Articles of Association

The Articles of Association of Invalda INVL, AB may be amended by resolution of the General Shareholders' Meeting, if the decision is passed by more than 2/3 of votes (except in cases provided for by the Law on Companies of the Republic of Lithuania).

Actual wording of the Articles of Association is dated as of 11 May 2015. The document is published on the company's website.

10. Shareholders

10.1. Information about shareholders of the company

The Shareholders of Invalda INVL, AB Alvydas Banys, LJB Investments, UAB, Irena Ona Mišeikienė, Indrė Mišeikytė, Darius Šulnis, Lucrum investicija, UAB, have signed the agreement on the implementation of a long-term corporate governance policy, so their votes are countable together.

Table 10.1.1. Shareholders who held title to more than 5% of Invalda INVL, AB authorised capital and/or votes as of 31 December 2017

Number of
Share of
shares held
the		 Share of the votes, %
Name of the shareholder
or company		 by the right
authorised
of ownership,
capital
units
held, %		 Share of votes
given by the
shares held by
the right of
ownership, %		 Indirectly held
votes, %		 Total (together
with the
persons acting
in concert), %
LJB Investments. UAB
code 300822575,
Juozapavičiaus str. 9A,
Vilnius		 3,515,855 29.63 30.40 61.88
Irena Ona Mišeikienė 3,369,435 28.40 29.14 63.14
Darius Šulnis 0 0.00 0.00 92.28 92.28
Lucrum Investicija, UAB
code 300806471. Gynėjų
str. 14, Vilnius		 2,401,442 20.24 20.76 71.52
Alvydas Banys 910,875 7.68 7.88 84.40
Indrė Mišeikytė 236,867 2.00 2.05 90.23

Fig. 10.1.1. Votes as of 31 December 2017

There are no shareholders entitled to special rights of control.

Invalda INVL, AB has no knowledge of any restriction on voting rights or mutual agreements between the shareholders that might result in the restriction of shares transfer and (or) voting rights. There are no agreements to which the Issuer is a party and which would come into effect of being amended or terminated in case of change in the Issuer's control in 2017. At the end of 2017 the total number of shareholders was 3,453.

Table 10.1.2. Distribution of shareholders according to investors groups, as of 31 December 2017.
---------------------------------------------------------------------------------------------------
Investors group Shareholders Share of votes given by the
shares held by the shareholders
number percent amount percent
Private persons 3,427 99.25 5,330,447 46.10
Legal persons 26 0.75 6,233,086 53.90
Total 3,453 100 11,563,533 100.00

Table 10.1.3. Distribution of shareholders according to countries, as of 31 December 2017.

Shareholders Share of votes given by the
shares held by the shareholders
number percent number percent
Lithuania 3,409 98.73 11,553,650 99.91
Other EU countries 26 0.75 4,580 0.04
Non-EU countries 18 0.52 5,303 0.05
Total 3,453 100 11,563,533 100.00

10.2. Rights and obligations carried by the shares

10.2.1. Rights of the shareholders

The Company's shareholders have the following property and non-property rights:

1) to receive a part of the Company's profit (dividend);

  • 2) to receive the company's funds when the authorised capital of the company is reduced with a view to paying out the company's funds to the shareholders;
  • 3) to receive a part of assets of the company in liquidation;
  • 4) to receive shares without payment if the authorised capital is increased out of the Company funds. except in cases provided by the laws of the Republic of Lithuania;
  • 5) to have the pre-emption right in acquiring shares or convertible debentures issued by the Company. except in cases when the General Shareholders' Meeting in the manner prescribed in the Law on Companies of the Republic of

Lithuania decides to withdraw the pre-emption right in acquiring the Company's newly issued shares or convertible debentures for all the shareholders;

  • 6) to lend to the company in the manner prescribed by law; however, when borrowing from its shareholders, the company may not pledge its assets to the shareholders. When the company borrows from a shareholder, the interest may not be higher than the average interest rate offered by commercial banks of the locality where the lender has his place of residence or business, which was in effect on the day of conclusion of the loan agreement. In such a case the company and shareholders shall be prohibited from negotiating a higher interest rate;
  • 7) other property rights provided by laws;
  • 8) to attend the General Shareholders' Meetings;
  • 9) to submit to the Company in advance the questions connected with the issues on the agenda of the General Meeting of Shareholders;
  • 10) to vote at the General Shareholders' Meetings according to voting rights carried by their shares;
  • 11) to receive information on the Company specified in the Law on Companies of the Republic of Lithuania;
  • 12) to appeal to the court for reparation of damage resulting from nonfeasance or malfeasance by the Company's manager and the Board members of their obligations prescribed by the Law on Companies of Republic of Lithuania and other laws of the Republic of Lithuania and the Company's Articles of Association as well as in other cases laid down by laws;
  • 13) other non-property rights established by laws and the Company's Articles of Association.

10.2.2. Obligations of the shareholders

The shareholders have no property obligations to the Company, except for the obligation to pay up, in the established manner, all the shares subscribed for at their issue price.

If the General Shareholders' Meeting takes a decision to cover the losses of the Company from additional contributions made by the shareholders, the shareholders who voted "for" shall be obligated to pay the contributions. The shareholders who did not attend the General Shareholders' Meeting or voted against such a resolution shall have the right to refrain from paying additional contributions.

The person who acquired all shares in the company or the holder of all shares in the company who transferred a part of his shares to another person must notify the company of the acquisition or transfer of shares within 5 days from the conclusion of the transaction. The notice shall indicate the number of acquired or transferred shares, the nominal share price and the particulars of the person who acquired or transferred the shares (the natural person's full name, personal number and address; the name, legal form it has taken, registration number, address of the registered office of the legal person.)

Contracts between the company and holder of all its share shall be executed in a simple written form unless the Civil Code prescribes the mandatory notarised form.

A shareholder shall repay the Company any dividend paid out in violation of the mandatory norms of the Law on Companies, if the Company proves that the shareholder knew or should have known thereof.

Each shareholder shall be entitled to authorise a natural or legal person to represent him when maintaining contacts with the Company and other persons.

11. Dividends

The General Shareholders' Meeting decides upon dividend payment and sets the amount of dividends. The company pays out the dividends within 1 month after the day of adoption of the resolution on profit distribution.

Persons have the right to receive dividends if they were shareholders of the company at the end of the tenth working day after the day of the General Shareholders' Meeting which issued the resolution to pay dividends. According to the Law on Personal Income Tax and the Law on Corporate Income Tax starting from 2014 15 % tax is applied to the dividends. The company is responsible for calculation, withdrawn and transfer (to the benefit of the State) of applicable taxes1 .

The company did not allocate dividends during the reporting period. Information about allocation of dividends since the establishment of the company is presented on the company's web page.

Table 11.1. Ratios related with shares.

2015 2016 2017
Net Asset Value per share, EUR 4.11 4.55 5.53
Price to book value (P/Bv) 0.83 0.85 0.96

1This information should not be treated as tax consultation.

12. Trading in Issuer's securities as well as securities of the group companies'

12.1. Trading in Issuer's securities

Table 12.1.1. Main characteristics of Invalda INVL, AB shares admitted to trading

Shares issued, units 11,865,993
Shares with voting rights, units 11,563,533
Nominal value 0.29 EUR
Total nominal value 3,441,317.97 EUR
ISIN code LT0000102279
Name IVL1L
Exchange Nasdaq Vilnius
List Baltic Secondary list
Baltic Main List (from 1 January 2008 until 20 July 2015)
Listing date 19 December 1995
Indrawn into indexes OMXBPI (OMX Baltic All Share Price Index)
B40PI (OMX Baltic Financials Price Index)
B8000PI (OMX Baltic Financials PI)
B8700PI (OMX Baltic Finl Svc PI)
B8000GI (OMX Baltic Financials GI)
B8700GI (OMX Baltic Finl Svc GI)

Company uses no services of liquidity providers.

Table 12.1.2. Trading in Invalda INVL, AB shares

2013 2014 2015 2016 2017
Share price, EUR
- open 1.97 3.38 3.10 3.46 3.86
- high 3.45 3.49 3.78 4.08 5.65
- low 1.96 2.76 2.95 3.26 3.79
- medium 2.54 1.91 3.40 3.77 4.65
- last 3.45 3.10 3.40 3.86 5.30
Turnover, units 2,210,184 83,287 51,038 48,837 46,514
Turnover, EUR 5,192,330 261,512 173,403 178,190 209,268
Traded volume, units 3,870 531 328 322 251
Reporting period Price, € Last trading date Total turnover
high low last units €
2013, 1st Q 2.34 1.96 2.31 28.03.2013 1,544,840 3,491,797
2013, 2nd Q 2.83 2.17 2.65 28.06.2013 390,915 911,640
2013, 3rd Q 2.95 2.40 2.83 30.09.2013 151,216 395,465
2013, 4th Q 3.45 2.52 3.45 30.12.2013 123,213 393,429
2014, 1st Q 3.49 2.93 3.14 31.03.2014 38,533 127,372
2014, 2nd Q 3.30 2.76 2.91 30.06.2014 17,650 52,319
2014, 3rd Q 3.27 2.80 2.85 30.09.2014 9,075 26,252
2014, 4th Q 3.21 2.95 3.10 30.12.2014 18,029 55,572
2015, 1st Q 3.15 2.95 3.10 30.03.2015 8,730 26,507
2015, 2nd Q 3.70 3.04 3.60 30.06.2015 20,746 71,633
2015, 3rd Q 3.78 3.30 3.50 30.09.2015 13,800 47,835
2015, 4th Q 3.64 3.40 3.40 30.12.2015 7,762 27,426
2016, 1st Q 3.60 3.26 3.43 31.03.2016 24,762 85,437
2016, 2nd Q 4.08 3.43 3.87 30.06.2016 11,848 45,092
2016, 3rd Q 4.07 3.80 4.07 30.09.2016 7,573 29,404
2016, 4th Q 4.07 3.80 3.86 30.12.2016 4,654 18,257
2017, 1st Q 4.30 3.79 4.30 31.03.2017 20,468 83,436
2017, 2nd Q 4.70 4.61 4.65 30.06.2017 10,995 48,449
2017, 3rd Q 5.34 4.35 5.34 29.09.2017 6,449 31,087
2017, 4th Q 5.64 5.15 5.30 29.12.2017 8,584 46,296

Table 12.1.3. Trading in the company's shares during the period of 2013–2017 (quarterly) on NASDAQ Vilnius:

Fig. 12.1.1. Turnover of Invalda INVL. AB shares and share price

Fig. 12.1.2. Changes of Invalda INVL shares and indexes

Last trading date Number of issued shares. units Last price. € Capitalisation. €
28.03.2013 46,621,932 2.31 107,696,663
28.06.2013 24,833,551 2.65 65,808,910
30.09.2013 24,833,551 2.83 70,278,949
30.12.2013 22,797,297 3.45 78,650,675
31.03.2014 22,797,297 3.14 71,583,513
30.06.2014 11,865,993 2.91 34,530,040
30.09.2014 11,865,993 2.85 33,818,080
30.09.2014 11,865,993 3.10 36,784,578
31.03.2015 11,865,993 3.10 36,784,578
30.06.2015 11,865,993 3.60 42,717,574
30.09.2015 11,865,993 3.50 41,530,975
30.09.2015 11,865,993 3.40 40,344,376
31.03.2016 11,865,993 3.43 40,700,356
30.06.2016 11,586,609 3.87 44,840,177
30.09.2016 11,586,609 4.07 47,157,499
30.12.2016 11,586,609 3.86 44,724,311
31.03.2017 11,586,609 4.30 49,822,419
30.06.2017 11,563,533 4.65 53,770,428
29.09.2017 11,563,533 5.34 61,749,266
29.12.2017 11,563,533 5.30 61,286,725

Table 12.1.4. Capitalisation

12.2. Trading in securities of the group companies'

Shares of subsidiary companies of Invalda INVL, forming the group, are not traded on stock exchanges. INVL Baltic Real Estate, INVL Technology and Siaulių Bankas, companies assigned to other investments, are listed on Nasdaq Vilnius stock exchange.

12.2.1. Information about trading in INVL Baltic Real Estate shares

Table 12.2.1.1. Main characteristics of INVL Baltic Real Estate shares admitted to trading

ISIN code LT0000127151
Name INR1L
Exchange, list Nasdaq Vilnius, Baltic Secondary list
Listing date 4 June 2014
Shares issued, units* 13,150,000
Nominal value, EUR* 1.45
Total nominal value, EUR 19,067,500

* Since 15 January 2018

Table 12.2.1.2. Trading in INVL Baltic Real Estate shares, EUR

2015 2016 2017
Share price, EUR
- open 0.300 0.399 0.388
- high 0.380 0.447 0.485
- low 0.200 0.380 0.375
- last 0.360 0.388 0.475
Turnover, units 54,827 491,425 1,200,986
Turnover, EUR 38,363.38 197,175.25 511,271.04
Traded volume, units 170 382 565

2015 the share price was adjusted due to the Reorganisation.

12.2.2. Information about trading in INVL Technology shares

Table 12.2.2.1. Main characteristics of INVL Technology shares admitted to trading

ISIN code LT0000128860
Name INC1L
Exchange, list Nasdaq Vilnius, Baltic Secondary list
Listing date 4 June 2014
Shares issued, units 12,175,321
Nominal value, EUR 0.29
Total nominal value, EUR 3,530,843.09

Table 12.2.2.2. Trading in INVL Baltic Real Estate shares, EUR

2015 2016 2017
Share price, EUR
- open 1.47 2.01 1.76
- high 2.24 2.07 1.76
- low 1.33 1.75 1.49
- last 2.01 1.76 1.49
Turnover, units 113,015 65,075 101,324
Turnover, EUR 224,169 110,836 162,698
Traded volume, units 419 307 364

2015 the share price was adjusted due to the Reorganisation.

12.2.3. Information about trading in Šiaulių Bankas shares

Table 12.2.3.1. Main characteristics of Šiaulių Bankas shares admitted to trading

ISIN code LT0000102253
Name SAB1L
Exchange, list Nasdaq Vilnius, Baltic Main list
Listing date 29 November 1994
Shares issued, units 452,986,172
Nominal value, EUR 0.29
Total nominal value, EUR 131,365,989.88

Table 12.2.3.2. Trading in Šiaulių Bankas shares, EUR

2015 2016 2017
Share price, EUR
- open 0.271 0.298 0.448
- high 0.323 0.469 0.627
- low 0.267 0.262 0.448
- last 0.298 0.449 0.589
Turnover, units 43,084,506 65,709,337 82,944,561
Turnover, EUR 12,698,428 23,120,252 44,524,471

Fig. 12.2.3.1. Šiaulių Bankas share price and turnover

III. ISSUER'S MANAGING BODIES

13. Structure. authorities. the procedure for appointment and replacement

General Shareholders' Meeting
The Board (3 members)
The president

The governing bodies of Invalda INVL, AB are: the General Shareholders' Meeting. sole governing body – the President. and a collegial governing body – the Board. The Supervisory Board is not formed.

13.1. General Shareholders' Meeting

13.1.1. Powers of the General Shareholders' Meeting

Persons who were shareholders of the Company at the close of the accounting day of the meeting (the 5th working day before the General Shareholders' Meeting) shall have the right to attend and vote at the General Shareholders' Meeting in person. unless otherwise provided for by laws. or may authorise other persons to vote for them as proxies or may conclude an agreement on the disposal of the voting right with third parties. The shareholder's right to attend the General Shareholders' Meeting shall also cover the right to speak and enquire.

The General Shareholders' Meeting may take decisions and shall be held valid if attended by the shareholders who hold the shares carrying not less than ½ of all votes. After the presence of a quorum has been established. the quorum shall be deemed to be present throughout the General Shareholders' Meeting. If a quorum is not present. the General Shareholders' Meeting shall be considered invalid and a repeat General Shareholders' Meeting must be convened, which shall be authorised to take decisions only on the issues on the agenda of the General Shareholders' Meeting that has not been held and to which the quorum requirement shall not apply.

An Annual General Shareholders' Meeting must be held every year at least within 4 months from the close of the financial year.

The General Shareholders' Meeting shall have the exclusive right to:

  • amend the Articles of Association of the Company. unless otherwise provided for by the Law on Companies of the Republic of Lithuania;
  • change registered office of the company;
  • elect members of the Board;
  • dismiss the Board or its members;
  • elect and dismiss the firm of auditors. set the conditions for auditor remuneration;
  • determine the class. number. nominal value and the minimum issue price of the shares issued by the Company;
  • take a decision regarding conversion of shares of one class into shares of another class. approve share conversion procedure;
  • take a decision to replace private limited liability company share certificates by shares;
  • approve the annual accounts and the report on company operations;
  • take a decision on profit/loss appropriation;
  • take a decision on the formation. use. reduction and liquidation of reserves;
  • to approve the set of interim financial statements for the purpose of making a decision on the allocation of dividends for a period shorter than the financial year;
  • decide on the allocation of dividends for a period shorter than the financial year;
  • take a decision on the issue of convertible debentures;
  • take a decision on withdrawal for all the shareholders the pre-emption right to acquire the Company's shares or convertible debentures of the specific issue;

  • take a decision to increase the authorised capital;

  • take a decision to reduce the authorised capital. except the cases provided for by the Law on Companies of the Republic of Lithuania;

  • take a decision for the Company to purchase its own shares;
  • take a decision to approve rules on giving stock options to employees and /or members of the bodies;
  • take a decision on the reorganisation or split-off of the Company and approve the terms of reorganisation or splitoff, except the cases provided for in the Law on Companies of the Republic of Lithuania;
  • take a decision on transformation of the Company;
  • take decisions on company restructuring in the cases provided for in the Law on Restructuring of Enterprises;
  • take a decision to liquidate the Company. cancel the liquidation of the Company. except the cases provided by the Law on Companies of the Republic of Lithuania;
  • elect and dismiss the liquidator of the Company. except the cases provided by the Law on Companies of the Republic of Lithuania.

The General Shareholders' Meeting may also decide on other matters assigned within the scope of its powers by the Articles of Association of the Company, unless these have been assigned under the Law on Companies of the Republic of Lithuania within the scope of powers of other organs of the Company and provided that. in their essence, these are not the functions of the governing bodies.

13.1.2. Convocation of the General Shareholders' Meeting of Invalda INVL, AB

The documents related to the agenda, draft resolutions on every item of agenda, documents what have to be submitted to the General Shareholders Meeting and other information related to realization of shareholders rights are available at the registered office of the Company during working hours or on company's website www.invaldainvl.com.

The shareholders are entitled: (i) to propose to supplement the agenda of the General Shareholders Meeting submitting draft resolution on every additional item of agenda or, than there is no need to make a decision - explanation of the shareholder (this right is granted to shareholders who hold shares carrying at least 1/20 of all the votes). Proposal to supplement the agenda is submitted in writing sending the proposal by registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company or by sending proposal to the Company by email [email protected]. The agenda is supplemented if the proposal is received no later than 14 before the General Shareholders Meeting; (ii) to propose draft resolutions on the issues already included or to be included in the agenda of the General Shareholders Meeting at any time prior to the date of the General Shareholders meeting (in writing sending the proposal by registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company or by sending proposal to the Company by email [email protected]) or in writing during the General Shareholders Meeting (this right is granted to shareholders who hold shares carrying at least 1/20 of all the votes); (iii) to submit questions to the Company related to the issues of agenda of the General Shareholders Meeting in advance but no later than 3 business days prior to the General Shareholders Meeting in writing sending the proposal by registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company or by sending proposal to the Company by email [email protected]. The company reserves the right to answer to those shareholders of the Company who can be identified and whose questions are not related to the company's confidential information or commercial secrets.

Shareholder participating at the General Shareholders Meeting and having the right to vote must submit documents confirming personal identity. Each shareholder may authorize either a natural or a legal person to participate and to vote on the shareholder's behalf at the General Shareholders Meeting. A power of attorney issued by a natural person must be certified by a notary. The representative has the same rights as his represented shareholder at the General Shareholders Meeting. The authorized persons must have documents confirming their personal identity and power of attorney approved in the manner specified by law which must be submitted to the Company no later than before the commencement of registration for the General Shareholders Meeting. A power of attorney issued in a foreign state must be translated into Lithuanian and legalised in the manner established by law. The Company does not establish special form of power of attorney.

Shareholder is entitled to issue power of attorney by means of electronic communications for legal or natural persons to participate and to vote on its behalf at the General Shareholders Meeting. No notarisation of such authorization is required.

The power of attorney issued through electronic communication means must be confirmed by the shareholder with a safe electronic signature developed by safe signature equipment and approved by a qualified certificate effective in the Republic of Lithuania. The shareholder shall inform the Company on the power of attorney issued through the means of electronic communication by e-mail [email protected] not later than on the last business day before the General Shareholders Meeting. The power of attorney and notification must be issued in writing and could be sent to the Company by communication means if the transmitted information is secured and the shareholder's identity can be identified.

The Company is not providing the possibility to attend and vote at the General Shareholders Meeting through electronic means of communication.

Shareholder or its representative may vote in writing by filling general voting bulletin, in such a case the requirement to deliver a personal identity document does not apply. The form of general voting bulletin is presented at the Company's webpage www.invaldainvl.com section For Investors.

If shareholder requests, the Company shall send the general voting bulletin to the requesting shareholder by registered mail or shall deliver it in person against signature no later than 10 days prior to the General Shareholders Meeting free of charge. The filled general voting bulletin must be signed by the shareholder or its authorized representative. Document confirming the right to vote must be added to the general voting bulletin if authorized person is voting. The filled general voting bulletin must be sent by the registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company no later than the day before of the General Shareholders Meeting

1 (one) Shareholders' Meeting of Invalda INVL, AB was held in 2017. Ordinary Shareholders' Meeting of Invalda INVL, AB was held on 28 April 2017. The shareholders got acquainted with the Consolidated Annual Report of Invalda INVL and the auditor's report on the financial statements of Invalda INVL. The shareholders approved financial statements of Invalda INVL, profit distribution, conditions for the purchase of own shares and the issue regarding the number of ordinary shares of Invalda INVL for which during the year 2017 employees shall be offered options contracts. The meeting also approved the new wording of the regulations of the audit committee, the remuneration for independent members of the audit committee and elected the following 2 independent members of the audit committee for a 4 years term of office: Dangutė Pranckėnienė and Tomas Bubinas. The General Meeting of Shareholders elected the following members to the Board of Invalda INVL for the new 4 (four) years term of office: Alvydas Banys, Indrė Mišeikytė and Darius Šulnis.

13.2. The Board

13.2.1. Powers of the Board

The Board shall continue in office for the 4-year period or until a new Board is elected and commences its activities, but not longer than until the date of the Annual General Shareholders' Meeting to be held during the final year of the term of office of the Board. If individual members of the Board are elected. they shall serve only until the expiry of the term of office of the current Board.

The Board or its members shall commence their activities after the close of the General Shareholders' Meeting which elected the Board or its members. Where the Articles of Association of the Company are amended due to the increase in the number of its members. newly elected members of the Board may commence their activities solely from the date of registration of the amended Articles of Association. The Board shall elect the chairman of the Board from among its members.

The General Shareholders' Meeting may dismiss from the office the entire Board or its individual members (as well as the Chairman of the Board) before the expiry of their term of office. A member of the Board may resign from his post before the expiry of his term of office, notifying the Board in writing at least 14 calendar days in advance.

The Board shall have all authorities provided for in the Articles of Association of the Company as well as those assigned to the Board by the laws. The activities of the Board shall be based on collegial consideration of issues and decision-making as well as shared responsibility to the General Shareholders' Meeting for the consequences of the decisions made. Striving for as big benefit for the Company and shareholders as possible and in order to ensure the integrity and transparency of the control system, the Board closely cooperates with the manager of the Company. The working procedure of the Board shall be laid down in the rules of procedure of the Board adopted by it.

The Board shall consider and approve:

  • the annual of the Company;
  • the semi-annual report of the Company;
  • the management structure of the Company and the positions of the employees;
  • the positions to which employees are recruited through competition;
  • regulations of branches and representative offices of the Company.

The Board shall elect and dismiss from office the manager of the Company. fix his salary and set other terms of the employment contract. approve his job description. provide incentives for and impose penalties against him.

The Board shall determine which information shall be considered to be the Company's commercial secret and confidential information. Any information which must be publicly available under the laws may not be considered to be the commercial secret and confidential information.

The Board shall take the following decisions:

  • for the Company to become an incorporator or a member of other legal entities;
  • to open branches and representative offices of the Company;
  • to invest. dispose of or lease the fixed assets which book value exceeds 1/20 of the authorised capital of the Company (calculated individually for every type of transaction), if the articles of association do not specify a different value;
  • to pledge or mortgage the fixed assets which book value exceeds 1/20 of the authorised capital of the Company (calculated for the total amount of transactions), if the articles of association do not specify a different value;
  • to offer surety or guarantee for the discharge of obligations of third parties for the amount which exceeds 1/20 of the authorised capital of the Company, if the articles of association do not specify a different value;
  • to acquire the fixed assets for the price which exceeds 1/20 of the authorised capital of the Company, if the articles of association do not specify a different value;
  • other decisions assigned to the scope of powers of the Board by the Law on Companies of the Republic of Lithuania. Articles of Association or the decisions of the General Shareholders' Meeting.

The Board shall analyse and evaluate the information submitted by the manager of the Company on:

  • the organisation of the activities of the Company;
  • the financial status of the Company;
  • the results of business activities. income and expenditure estimates. the stocktaking data and other accounting data of changes in the assets.

The Board shall analyse and assess a set of Company's and consolidated annual financial statements and draft of profit/loss appropriation and shall submit them to the General Shareholders' Meeting together with the annual report of the Company.

The Board shall consider and approve the company's business strategy, analyse and evaluate information about the company's business strategy, the following information is provided to the Annual General Meeting.

It shall be the duty of the Board to convene and organise the General Shareholders' Meetings in due time.

Members of the Board must keep commercial secrets of the Company and confidential information which they obtained while holding the office of members of the Board.

13.2.2. Procedure of work of the Board

The order of the formation of the Board of the company should ensure objective. impartial and fair representation of minority shareholders of the company: names and surnames of the candidates to become members of the Board of the company. information about their education. qualification. professional background. positions taken in supervisory and management Boards of other companies. owned block of shares in other companies. larger than 1/20. potential conflicts of interest. information on whether the candidates are applied to administrative sanctions or punishment for violations / crimes against the economy. business policy. property. property rights and property interests. or do they have no obligations neither functions which would threaten the safe and reliable operations of the company. or whether candidates meet the legal requirements made for the Managers. are disclosed not later than 10 days prior the General Shareholders' Meeting in which the election of the Members of the Board is intended. so that the shareholders would have sufficient time to make an informed voting decision

In order to maintain a proper balance in terms of the current qualifications possessed by its members, the desired composition of the Board of the company are determined with regard to the company's structure and activities and are periodically evaluated once a year.

Any Member of the Board of the company must confound company's property with its own property and do not use it or information which they received while holding position as the Members of the Board for personal benefit or for the benefit of third party on other way than the General Shareholders Meeting and the Board allows it.

Any Member of the Board of the company within 5 (five) days must inform the Manager or the Chairman of the company on any subsequent changes in provided information that have been submitted for shareholders prior to the election of the Member of the Board. Changes in provided information are disclosed in the company's annual report.

Each Member of the Board actively participates in the Meetings of Board and devotes sufficient time and attention to perform his duties as the Member of the Board. Regulation of the work of the Board of the company settles the statements that if the Member of the Board attended the Meetings of the Board less than 2/3 times in the financial year, such information must be disclosed to shareholders in the General Shareholders' Meeting.

29 meetings of the Board of the company have been held in 20176. Alvydas Banys, Indrė Mišeikytė and Darius Šulnis are Members of the Board of Invalda INVL. All members of the Board attended all meetings either in person or by distance.

13.3. The President

The manager of the Company (the President) shall be elected and dismissed from office by the Board which shall also fix his salary. approve his job description. provide incentives and impose penalties. An employment contract shall be concluded with the President. The President shall assume office after the election. unless otherwise provided for in the contract concluded with him. If the Board adopts a decision on his removal from office. the employment contract therewith shall be terminated.

In his activities. the President shall be guided by laws and other legal acts. the Articles of Association of the Company. decisions of the General Shareholders' Meeting and the Board. his job description. The President is accountable to the Board.

The President shall organise daily activities of the Company. hire and dismiss employees. conclude and terminate employment contracts therewith. provide incentives and impose penalties.

The President shall act on behalf of the Company and shall be entitled to enter into transactions at his own discretion. The President may conclude the transactions to invest. dispose of or lease the fixed assets for the book value which exceeds 1/20 of the authorised capital of the Company (calculated individually for every type of transaction). to pledge or mortgage the fixed assets for the book value which exceeds 1/20 of the authorised capital of the Company (calculated for the total amount of transactions). to offer surety or guarantee for the discharge of obligations of third parties for the amount which exceeds 1/20 of the authorised capital of the Company, to acquire the fixed assets for the price which exceeds 1/20 of the authorised capital of the Company. provided there is a decision of the Board to enter into these transactions.

The President shall be responsible for:

  • the organisation of activities and the implementation of objects of the company;
  • the drawing up of the annual financial statements and annual report;
  • drafting a decision on the issuance of dividends for a period shorter than the financial year, drawing up an interim financial report and preparing an interim report for the adoption of a decision on the allocation of dividends for a period shorter than the financial year. The interim report shall apply mutatis mutandis the provisions of the Law on Company Financial Accountability for the preparation and publication of the annual report.
  • Drafting rules on giving stock options;
  • the conclusion of the contract with the firm of auditors where the audit is mandatory or required under the Statutes of the company;
  • the submission of information and documents to the General Meeting. the Supervisory Board and the Board in cases laid down in this Law or at their request;
  • the submission of documents and particulars of the company to the administrator of the Register of Legal Persons;
  • the submission of the documents of a public limited liability company to the Bank of Lithuania and the Central Securities Depository;
  • the publication of information referred to in this Law in the daily indicated in the Statutes;
  • reporting to the shareholders and the board about the most important events that are relevant to the company's activities;
  • the submission of information to shareholders;
  • the fulfilment of other duties laid down in this Law and other laws and legal acts as well as in the Statutes and the staff regulations of the manager of the company.

The President must keep commercial secrets and confidential information of the Company which he learned while holding this office.

14. Information about members of the Board. CFO and the Audit Committee of the Company

The Board of Invalda INVL, AB was re-elected during the Extraordinary General Shareholders' Meeting on 28 April 2017. Mr. Banys was elected as the Chairman of the Board. Mr. Šulnis and Ms. Mišeikytė were elected as the Members of the Board. Mr. Šulnis was appointed as the President of the company on 22 May 2013.

Alvydas Banys – Chairman of the Board
Term of office From 2017 until 2021
Educational background and
qualifications		 Vilnius Gediminas Technical University. Faculty of Civil Engineering. Master in
Engineering and Economics.
Junior Scientific co-worker. Economic's Institute of Lithuania's Science Academy.
Work experience Since 1 July 2013 Invalda INVL, AB - Advisor
Since 2007 LJB Investments, UAB - Director
Since 2007 LLB Property, UAB - Director
1996 – 2006 Invalda, AB - Vice President
1996 – 2007 Nenuorama, UAB - President
Owned number of shares in
Invalda INVL, AB		 Personally: 910,875 units of shares. 7.68 % of authorised capital and 7.88 % votes;
together with controlled company LJB Investments: 4,426,730 units of shares. 37.31 %
of authorized capital and 38.28 % votes.
Total votes together with persons acting in concert - 92.28 %.
Participation in other
companies		 INVL Baltic Farmland, AB – Chairman of the Board
Litagra, UAB – Member of the Board
INVL Technology – Member of the Advisory Committee

Indre Mišeikytė – Member of the Board The term of office From 2017 until 2021 Educational background and qualifications Vilnius Gedimino Technical University. Faculty of Architecture. Master in Architecture. Work experience Since May 2012 Invalda INVL, AB - Advisor Since June 2013 Invalda Privatus Kapitalas, AB - Advisor Since 2002 Inreal Valdymas, UAB - Architect 2000 – 2002 Gildeta, UAB - Architect 1997 – 2000 Kremi, UAB - Architect 1996 – 2002 Invalda, AB - Architect 1996 – 1997 Gildeta, UAB - Architect 1994 – 1996 Vilniaus Baldai, AB - Architect

Owned number of shares in Personally: 236,867 units of shares. 2 % of authorised capital and 2.05 % votes.
Invalda INVL, AB Total votes together with persons acting in concert - 92.28 %.
Participation in other
companies		 Invalda Privatus Kapitalas, AB – Member of the Board
INVL Baltic Farmland, AB – Member of the Board
INVL Technology – Member of the Advisory Committee
Darius Šulnis – Member of the Board, the President
The term of office in the
Board		 From 2017 until 2021
Educational background and
qualifications		 Duke University (USA). Business Administration. Global Executive MBA.
Vilnius University. Faculty of Economics. Master in Accounting and Audit.
Financial broker's license (general) No. A109.
Work experience 2006 – 2011 Invalda. AB – President. 2011 – 2013 Invalda. AB – Advisor. Since May
2013 Invalda INVL, AB – President.
2015 – 2017 - CEO of INVL Asset Management, UAB.
2002 – 2006 Invalda Real Estate, UAB (current name Inreal Valdymas) – Director
1994 – 2002 FBC Finasta, AB – Director
Owned number of shares in
Invalda INVL, AB		 Personally: 0 units of shares. 0.00 %
of authorised capital and votes; together with
controlled company Lucrum Investicija: 2,401,442 units of shares. 20.24 % of authorised
capital, 22.81 % of votes.
Total votes together with persons acting in concert - 92.28 %.
Participation in other
companies		 INVL Asset Management, UAB – Chairman of the Board
Litagra, UAB – Member of the Board
Šiaulių Bankas AB – Member of the Supervisory Board
INVL Baltic Farmland, AB – Member of the Board
INVL Asset Management, IPAS (Latvia) - Member of the Supervisory Board (till 12
March 2018)
INVL atklātajs pensiju fonds, AS (Latvia) – Member of the Supervisory Board (till 12
March 2018)
Raimondas Rajeckas – CFO
Educational background and
qualifications		 Vilnius University, Faculty of Economics. Master in Accounting and Audit.
Work experience Since 2006 Invalda INVL, AB – CFO
2001 – 2006 Valmeda, AB – CFO
2000 – 2001 Galincius, AB – CFO
2000 – 2001 Invaldos Marketingas, UAB (current name Inreal Valdymas. UAB) – CFO
2000 – 2002 Gildeta, AB – Accountant
1998 – 2000 Invalda, AB – Accountant
Owned number of shares in
Invalda INVL, AB		 -
Participation in other
companies		 Aktyvo, UAB – Director
Aktyvus Valdymas, UAB – CEO
Iniciatyvos Fondas, VSI – CEO
MBGK, UAB – CEO
MGK Invest, UAB – CEO
RPNG, UAB – CEO
Regenus, UAB – CEO
Cedus Invest, UAB – CEO
Cedus, UAB – CEO
Consult Invalda - CEO
Imoniu Grupe Inservis, UAB – Member of the Board

15. Information about the Audit Committee of the company

The Audit Committee consists of 2 independent members. The members of the Audit Committee are elected and dismissed by the General Shareholders' Meeting of Invalda INVL, AB for a term not exceeding 4 years. The main functions of the Audit Committee should be the following:

  • provide recommendations to the Board of the company with selection. appointment. reappointment and removal of an external audit company as well as the terms and conditions of engagement with the audit company;
  • monitor the process of external audit;
  • monitor how the external auditor and audit company follow the principles of independence and objectivity;
  • observe the process of preparation of financial reports of the company;
  • monitor the efficiency of the internal control and risk management systems of the company. Once a year review the need of the internal audit function.
  • monitor the implementation of the audit firm's recommendations and comments imposed by the Board and the manager of the company.

The Member of the Audit Committee of the company may resign from his post before the expiry of term of office. notifying the Board of the company in writing at least 14 calendar days in advance. When the Board of the Company receives the notice of resignation and estimates all circumstances related to it. the Board may pass the decision either to convene the Extraordinary General Shareholders Meeting to elect the new member of the Audit Committee or to postpone the question upon the election of the new member of the Audit Committee until the nearest General Shareholders Meeting. In any case the new member is elected till the end of term of office of the operating Audit Committee.

Procedure of work of the audit committee

The Audit Committee is a collegial body. taking decisions during meetings. The Audit Committee may take decisions and its meeting should be considered valid. when both members of the Committee participate in it. The decision should be passed when both members of the Audit Committee vote for it. The Member of the Audit Committee may express his will – for or against the decision in question. the draft of which he is familiar with – by voting in advance in writing. Voting in writing should be considered equal to voting by telecommunication end devices. provided text protection is ensured and it is possible to identify the signature. The right of initiative of convoking the meetings of the Audit Committee is held by both Members of the Audit Committee. The other Member of the Audit Committee should be informed about the convoked meeting. questions that will be discussed there and the suggested drafts of decisions not later than 3 (three) business days in advance in writing (by e-mail or fax). The meetings of the Audit Committee should not be recorded. and the taken decisions should be signed by both Members of the committee. When both Audit Committee Members vote in writing. the decision should be written down and signed by the secretary of the Audit Committee who should be appointed by the Board of the Company. The decision should be written down and signed within 7 (seven) days from the day of the meeting of the Audit Committee.

The Audit Committee should have the right to invite the Manager of the Company. Member(s) of the Board. the chief financier. and employees responsible for finance. accounting and treasury issues as well as external auditors to its meetings. Members of the Audit Committee may receive remuneration for their work in the committee at the maximum hourly rate approved by the General Shareholders' Meeting

On 30 August 2013 the General Shareholders meeting elected new Committee members: Danute Kadanaitė, a lawyer at Legisperitus, UAB and Tomas Bubinas, a Chief Operating Officer at Biotechpharma, UAB (independent member). On 28 April 2017 the General Shareholders meeting removed the Audit Committee in corpore and elected new Committee members: Dangutė Pranckėnienė, partner and auditor of Moore Stephens Vilnius, UAB and Tomas Bubinas

Dangutė Pranckėnienė – Independent Member of the Audit Committee

The term of office Since 2017 till 2021
Educational background
and qualifications		 1995 - 1996 Vilnius Gediminas Technical University, Master of Business Administration.
1976 - 1981 Vilnius University, Master of Economics.
The International Coach Union (ICU), professional coacher name, license No. E-51.
Lithuanian Ministry of Finance, the auditor's name, license No. 000345.
Work experience since 1997 the Partner at Moore Stephens Vilnius, UAB
1996 - 1997 Audit Manager, Deloitte & Touche
1995 - 1996 Lecturer, Vilnius Gediminas Technical University
1982 - 1983 Lecturer, Vilnius University
Owned number of shares
in Invalda INVL, AB		 -
Tomas Bubinas – Independent Member of the Audit Committee
The term of office Since 2017 until 2021
Educational background and
qualifications		 2004 – 2005 Baltic Management Institute (BMI), Executive MBA
1997 – 2000 Association of Chartered Certified Accountants. ACCA. Fellow Member
1997 Lithuanian Sworn Registered Auditor
1988 – 1993 Vilnius University, Msc. in Economics
Work experience Since 2013 Chief Operating Officer of Biotechpharma, UAB.
2010 – 2012 Senior Director of TEVA Biopharmaceuticals (USA).
2004-2010 – TEVA Pharmaceuticals, Chief Financial Officer for the Baltic States.
2001-2004 – Sicor Biotech, Chief Financial Officer
1999 – 2001 Senior Manager of PricewaterhouseCoopers.
1994 – 1999 Senior Auditor, Manager of Coopers & Lybrand.
Owned number of shares in
Invalda INVL, AB		 -

16. Information on the amounts calculated by the Issuer. other assets transferred and guarantees granted to the Members of the Board, the president and CFO

The Members of the Board and the president who are directly elected by the General Shareholders' Meeting and have concluded employment contracts with the company as well as CFO of the company are entitled only to a fixed salary. The company does not have a policy concerning payment of a variable part of remuneration to the Board members or management.

During the year 2017 the Members of the Board did not receive dividends or bonuses from the company. There were no assets transferred. no guarantees granted, no bonuses paid and no special payouts made by the company to its managers. The Members of the Board and the president of the Company were not granted with bonuses by other companies of Invalda INVL, AB group.

Table 16.1. Information about calculated remuneration for Invalda INVL, AB managers for 2017

Calculated remuneration.
thousand EUR
2015 2016 2017
For members of the Board (according to employment contracts as employees of the
company)2		 215 214 211
For each member of the Board (average per month) 6 6 6
For members of administration (the President and CFO)2 136 132 132
For each member of administration (average per month) 6 5.5 5,5

During the year 2017, the total remuneration for the members of the Audit Committee of the Company amounted to EUR 580.

2 Company and Group companies calculated remuneration

V. OTHER INFORMATION

17. Agreements with intermediaries on public trading in securities

Invalda INVL, AB has signed agreements with these intermediaries:

  • Šiaulių Bankas, AB (Tilzes str. 149, Siauliai, Lithuania; tel. +370 41 595 607) the agreement on investment services, the agreement on management of securities accounting, the agreement on payment of dividends;
  • Luminor Bankas, AB (Konstitucijos av. 21A, Vilnius, Lithuania; tel. +370 5 239 3444) the agreement on financial instruments account management, implementation of orders and offering recommendations;
  • SEB Bankas, AB (Gedimino ave. 12, Vilnius, Lithuania; tel. +370 5 268 2370) the agreement on management of securities account;
  • Danske Bank A/S, Lithuania branch (Saltoniskiu str. 2, Vilnius, Lithuania; tel. +370 5 521 6666) the agreement on investment services;
  • FMI Orion Securities, UAB (A. Tumeno str. 4. (block B), Vilnius, Lithuania; tel. +370 5 231 3841) the agreement on investment services;
  • Bank Zachodni WBK S.A. (Rynek 9/11, 50-950 Wrocław, Poland; tel. +61 856 4445) the agreement of intermediation;
  • AB SEB Pank (Tornimae str. 2., 15010, Tallin, Estonia; tel. +372 6657 772) the agreement of intermediation.

18. Information on Issuer's branches and representative offices

Invalda INVL, AB has no branches or representative offices.

19. Risk management

19.1. A description of the principal risks and uncertainties

Business risks

Activities of Invalda INVL, AB are influenced by overall economic situation of countries of activity and investments. Invalda INVL, AB also depends on its main managers – their loss could have a negative effect on activities of the company and some of business opportunities could be lost.

The main activity of Invalda INVL group – asset management business. Significant part of companies' assets consists of II pillar assets in Lithuania and Latvia, wherefore the change in legal acts in the pension system could have a negative effect in this business area. We have chosen a regulated asset management business model, and therefore the increase in regulatory burden can increase our costs and negatively impact on profitability. Asset management business must also meet capital adequacy ratios, which may require additional contributions to asset management companies in case of loss.

Our returns may be substantially lower than the average returns historically realized by the private equity industry as a whole because historical results do not show the future performance.

Economic recessions and downturns can affect the companies and assets that we have invested in, both directly and through collective investment undertakings, and reduce their value, while negatively impacting our performance.

Invalda INVL may not be able to realize profits from investments into corporate shares or collective investment undertakings. The companies and collective investment undertakings we invest in may not create value or even destroy it, devaluing our investments.

Our ability to use our capital loss carry forwards may be subject to limitations. Changes in the law or regulations that govern us could have a material impact on our business. Change in taxes and change in regulation of sectors, which are dependent on governmental funding or are regulated by the government, could have negative consequences on our business.

Company's and group's results may fluctuate and may not be indicative of future performance.

The trading price of our stock may fluctuate substantially. The price of the stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond our control.

We are subject to market discount risk. Shares of Invalda INVL, AB can be traded below NAV.

We have not approved dividend payment policy and established a minimum dividend payment level; therefore, we cannot assure you of our ability to make distributions to our shareholders in the future.

Changes in interest rates may affect our cost of capital and net operating income and our ability to obtain additional financing.

Credit risk - a risk that purchases of products and services of direct portfolio companies or businesses that we have invested in through collective investment undertakings will not fulfil their obligations and this would make negative effect on profit. Failure to fulfil major part of liabilities in time would affect the usual activity of Issuer. would result into research of additional sources of financial support, which may not always be possible. The Issuer also bears the risk of funds holding in bank accounts as well as investing into short-term financial instruments.

Investment risk

Our investments may be illiquid; there is a risk that we may not exit out investment at the request of the issuer's management. We may exit our investments when the portfolio company has a liquidity event, such as a sale, recapitalisation or listing in the stock exchange, or when the collective investment undertakings we invest in are making payments to investors.

Our investments into corporate shares and collective investment undertakings are extremely risky and in the worst case the company could lose its entire investment.

When we are a minority equity investor in a portfolio company, we may not be in a position to control the entity and management of the company may make decisions that could decrease the value of our portfolio holdings.

19.2. Information about the extent of risk and its management in the Company

Information on the extent of risks and management of them is disclosed in the section 23 of explanatory notes of consolidated and company's financial statements in 2017.

19.3. The main indications about internal control and risk management systems related to the preparation of consolidated financial statements

The Audit Committee supervises preparation of the consolidated financial statements. systems of internal control and financial risk management and how the company follows legal acts that regulate preparation of consolidated financial statements.

Chief financial officer of the company is responsible for the preparation supervision and the final revision of the consolidated financial statements. Moreover, he constantly reviews International Financial Reporting Standards (IFRS) in order to implement in time IFRS changes, analyses company's and group's significant deals. ensures collecting information from the group's companies and timely and fair preparation of this information for the financial statements. CFO of the company periodically informs the Board about the preparation process of financial statements.

20. Issuer's and its group companies' non – financial results. Information related to social responsibility. environment and employees

20.1. Responsible business actions in the company

•Ethical business practice

The fundamental basis of ethical norms is the compliance with legal acts and all employees without any exception respect laws and strictly adhere to them. Employees shall avoid situations that may potentially raise any doubts concerning their abilities to act for the benefit of the company. or could lead to conflicts of interests. Also employees of the company undertake not to disclose any confidential information and shall refrain from insider trading in securities in their own name or on behalf of their members of family or other related persons.

•Information and transparency

The company shall make public all information about the objectives of the company and its activities, financial results, members of its bodies of management and shareholders, related party transactions, the management structure of the company. etc. To ensure that information reaches as many users as possible and provide timely access to such information all this information is uploaded on the website of the company. Such information is simultaneously disclosed to all persons. The company discloses the information that may potentially affect the price of securities issued thereby in its commentaries. interview or other ways only after such information is publicly announced through the information system of the stock exchange.

•Promotion of social initiative

Seeking to implement social initiative promotion programmes in 2007 Invalda INVL established a public enterprise Iniciatyvos Fondas.

The activities of Iniciatyvos Fondas involve the organisation of different programmes designed to enhance knowledge and awareness. The priorities defined for the activities of the foundation may differ from year to year while maintaining its key principle, rather than supporting individual projects, initiate and implement larger-scale integrated projects designed to encourage individual target groups to take independent initiatives and actively contribute to the growth of the Lithuanian economy and the development of a responsible and sustainable society.

Iniciatyvos Fondas organised and implemented the following programs:

designed to encourage its participants to independently address different social and environmental problems in specific locations;

  • designed to promote the feeling of responsibility among young people (schoolchildren) and city communities, teach them to take care of nature and protect environment;
  • collecting books from people and donating these book to various libraries;
  • designed to promote physical activity of young people (a collective exercise "I'll grow active 2011" has been recognised as Lithuanian record).
  • to encourage young people to read and desire to excel;
  • to encourage positive thinking

More information is provided on the web page of Iniciatyvos fondas www.iniciatyvosfondas.lt

•Ensuring the enforcement of key labour principles and employee social wellbeing

Invalda INVL seeks to operate as a company in which the rights, needs and contribution to the operations of the company of each employee are properly respected. In recruiting its employees, the company ensures that no employee is discriminated on the basis of his gender, sexual orientation, race, nationality, language, origin, citizenship or social status, marital or family status, age, beliefs or views, membership in political parties and public organisations.

The working hours and standards of recreation, conditions for the compensation for work and privileges, safety and health at work norms fully comply with the requirements stipulated in all relevant legislation.

•Impartial treatment of shareholders and shareholder rights

All shareholders of the company have equal rights to be informed of and participate in passing important decisions related to the activities of the company. The procedure for convening and organising general meetings of shareholders fully comply with the relevant provisions of legal acts and ensures equal rights and possibilities for all shareholders to participate in meetings. having familiarised themselves in advance with draft resolutions on the agenda of the meeting and other information necessary for passing decisions. and are entitled to pose questions to Members of the Board of Invalda INVL, AB.

20.2. Employees

Invalda INVL, AB strives to be a company where the rights. needs, and contribution to the company's activities of each employee are appreciated. Employees are one of the company's values; therefore, a lot of attention is paid to the people working in the company. their qualification and motivation. In building up our team, our target qualities are their creativity, professionalism, positive thinking, a desire to work hard and efficiently, and to strive for a continuous professional improvement.

The collective agreement is not signed in the company. Remuneration Committee is not formed in the company. All employment agreements with the employees of the company are concluded following requirements of the Labour Code of the Republic of Lithuania. Employees are employed and laid off following requirements of the Labour Code. There are no special employees' rights and duties described in the employment agreements. Employee's remuneration payment is set once a year considering performance evaluation and achieved results of the employee (annual goals for the employees are set in the beginning of the year. achievement of goals are important when considering the results of the employee).

Average number of employees in 2017 was 7 (in 2016 it was 8). All company's employees have higher university education.

Measuring units 2015 2016 2017
Total amount of employees as of the end of the period person 10 7 7
- managers person 4 4 4
- specialists person 6 3 3
Average monthly salary (calculated for) EUR 2,786 2,905 2,966
- managers EUR 4,525 4,377 4,555
- specialists EUR 1,662 1,458 847

Table 20.2.1. Number of employees and average monthly salary

Number of employees in Invalda INVL Group was 489 on 31 December 2017 (468 on 31 December 2016).

20.3. Information about agreements of the Company and the members of the Board, or the employees' agreements providing for compensation in case of the resignation or in case they are dismissed without a due reason or their employment is terminated in view of the change of the control of the Company.

There are no agreements of the company and the Members of the Board, or the employees' agreements providing for compensation in case of the resignation or in case they are dismissed without a due reason or their employment is terminated in view of the change of the control of the company.

21. Memberships in associations

Invalda INVL along with INVL Asset Management in Lithuania and Latvia is a full member of Invest Europe – the organisation that unites Europe's private equity and venture capital companies and investors.

Invalda INVL is also part of the Lithuanian Private Equity and Venture Capital Association, which brings together the participants of Lithuania's private equity and venture capital market. The organisation's main goal is, together with the competent Lithuanian institutions and partners, to take part in shaping and implementing a common policy for the PE/VC industry.

Invalda INVL together with its INVL Asset Management companies in Lithuania and Latvia, has joined the UN-supported Principles for Responsible Investment (PRI) in the middle of 2017. The PRI, founded in 2006, is a global network of over 1700 investors, aims to assess the investment implications of environmental, social and governance (ESG) factors. An economically efficient, sustainable global financial system is considered a necessity for long-term value creation. Investors who support the PRI voluntarily work to apply the principles in their investment activities.

Invalda INVL has joined the Investors' Association at the end of the reporting period. The main activities include the following areas: organization of meetings with business leaders and events on the financial markets of the members of the association, the minority investors' rights advocacy, development of centers of excellence, providing the scientific findings based on the recommendations of the Government and Parliament, drawing attention and warning about the opportunities and risks associated with investing.

Group company INVL Asset Management is a member of Lithuanian investment and pension funds (LIPFA) Association. LIPFA is an independent organisation that brings together the country's private investment management companies and branches of commercial banks engaged in investment activities. Members of the association actively participates in the activities of the association and contribute to the promotion of investment and the favourable environment for Lithuania.

Lithuanian Investment Managers Association (LIVA), one of whose founders is INVL Asset Management, aims to contribute to the development of investment, fund improvements in the legal environment and investor education.

INVL Asset Management is a member of Lithuanian financial markets institute. The activities of this organisation is focused on analysis of Lithuanian financial markets specific problems and research-based solutions delivery. The institute focuses on promotion of various business financing forms and public approach formation to the need for effective functioning of financial markets, the need for formation.

22. Information on harmful transactions in which the issuer is a party

There were no harmful transactions (those that are not in line with issuer's goals, not under usual market terms. harmful to the shareholders' or stakeholders' interests. etc.) made in the name of the issuer that had or potentially could have negative effects in the future on the issuer's activities or business results. There were also no transactions where a conflict of interest was present between issuer's management's. controlling shareholders' or other related parties' obligations to the issuer and their private interests.

23. Information on the related parties' transactions

During the reporting period, the largest share of the company and a group of transactions with related parties accounted for loans, computer services, rent and utility costs of purchases, land administration services and asset management services (only group). The detailed information on the related parties' transactions has been disclosed in the section 25 of the consolidated and Company's financial statements for 2017 explanatory notes.

24. Information about significant agreements to which the issuer is a party, which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder

In 2017 there were no concluded significant agreements of the company which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder.

25. Significant investments made during the reporting period

Information is provided in the section 3 of the consolidated and Company's financial statements for 2017 explanatory notes.

26. References to and additional explanations of the data presented in the financial statements and consolidated financial statements

All data is presented in consolidated and company's financial statements explanatory notes.

27. Information on audit company

The company have not approved criteria for selection of the audit company. Usually the big-four audit companies are attending the competition (Deloitte, KPMG. PricewaterhouseCoopers, Ernst and Young).

PricewaterhouseCoopers, UAB provided audit services on the company's and consolidated financial statements for 2017. In the Extraordinary Shareholders' Meeting of the company held 28 October 2015 the audit company PricewaterhouseCoopers, UAB was elected to provide audit services on annual financial statements of the company for the financial years 2015, 2016 and 2017 and the payment in amount of EUR 11,000 (plus VAT) for audit of annual financial statements of each calendar year was set. In case additional services are provided under the agreement on the audit services, additional remuneration is paid to the audit company. The additional remuneration will be determined according to hourly rates of PricewaterhouseCoopers, UAB employees.

Audit company PricewaterhouseCoopers, UAB
Address of the registered office J. Jasinskio str. 16B, LT-03163 Vilnius. Lithuania
Enterprise code 111473315
Telephone +370 5 239 2300
Fax +370 5 239 2301
E-mail [email protected]
Website www.pwc.com/lt

No internal audit is performed in the company.

Table 27.1. All the services granted to Invalda INVL and the its group by the auditor PricewaterhouseCoopers,

EUR thousand Group
2017		 Company
2017
Financial statement audit services under contracts (including audit services for
funds financial statements)		 50,250 11,000
Costs of collateral and other related services - -
Costs for tax advice issues 13,173 -
Costs for other services (including funds) 1,760 230
In total 65,183 11,230

28. Data on the publicly disclosed information

The information publicly disclosed of Invalda INVL, AB during 2017 is presented on the company's website www.invaldainvl.com

Date of
disclosure		 Brief description of disclosed information
14.02.2017 INVL Asset Management, a part of Invalda INVL, to offer informed investors the chance to invest in forests
27.02.2017 Invalda INVL informs that Litagra group intends to transfer trading business to Achema Group
07.04.2017 Convocation of the general shareholders meeting of Invalda INVL and draft resolutions
28.04.2017 Audited annual information of Invalda INVL for 2016
28.04.2017 Resolutions of the general shareholders meeting of Invalda INVL
02.05.2017 On purchase of own shares of Invalda INVL
02.05.2017 Chairman of the Board of Invalda INVL was elected
18.05.2017 Invalda INVL, AB will buy-back 0.19 % shares
19.05.2017 Invalda INVL signed employee stock option contracts
22.05.2017 Amount of voting rights in Invalda INVL, AB
30.05.2017 Unaudited results of Invalda INVL group for 3 months of 2017
17.08.2017 INVL Asset Management in Latvia, belonging to Invalda INVL, offers in the Latvian market passive
management 2nd pillar pension plan
31.08.2017 Unaudited interim information of Invalda INVL group for 6 months of 2017
07.09.2017 Laura Križinauskienė will be a new CEO of INVL Asset Management, a subsidiary of Invalda INVL
28.11.2017 Unaudited information of Invalda INVL group for 9 months of 2017
15.12.2017 Invalda INVL has received 9.4 million euros for a 37% shareholding in LP Group
21.12.2017 Cedus Invest, 100% controlled subsidiary of Invalda INVL, will invest into INVL Emerging Europe Bond
Subfund
21.12.2017 Invalda INVL intends to transfer part of shares in INVL Baltic Real Estate
28.12.2017 Invalda INVL investor's calendar for 2018

Table 27.1. Summary of publicly disclosed information

President Darius Šulnis

APPENDIX 1. INFORMATION ABOUT GROUP COMPANIES, THEIR CONTACT DETAILS

Company Registration information Type of activity Contact details
ASSET MANAGEMENT BUSINESS
INVL Asset Management,
UAB		 Code 126263073
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 21.07.2003		 Pension and
investment funds
management. portfolio
management
services, real estate
funds management		 Telephone +370 700 55959
E-mail [email protected]
www.invl.com
INVL Asset Management,
IPAS (Latvia)		 Code 40003605043
Address Smilšu iela 7-1. Riga
Legal form – private limited liability
company
Registration date 02.10.2002		 Pension and
investment funds
management, portfolio
management services		 Telephone +371 67 092
988
E-mail [email protected]
www.invl.com/lat/lv
AS INVL Atklātais pensiju
fonds (Latvia)		 Code 40003377918
Address Smilšu iela 7-1, Riga
Legal form – limited liability
company
Registration date 04-02-1998		 Pension funds Tel. +371)67 092 988
E-mail [email protected]
www.invl.com/lat/lv
INVL Farmland
Management		 Code 303788352
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 26.02.2016		 Administration of
agricultural land		 E-mail
[email protected]
m
INVL Finasta, FMĮ UAB Code 122570630
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 28.05.2015		 Brokerage services Telephone +370 5 211 12
94
E-mail
[email protected]
m
www.invl.com
Invalda INVLT
Investments, UAB		 Code 303252237
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 27.02.2014		 carries no activity Telephone +370 5 263
6129
OTHER INVESTMENTS
INVL Technology,
SUTPKIB		 Code 300893533
Address Gynėjų str. 14, Vilnius
Legal form – joint stock company
Registration date 27.06.2007		 Investments info
information
technology
businesses		 Telephone +370 5 279
0601
E-mail
[email protected]
www.invltechnology.lt
INVL Baltic Real Estate,
SUTNTIB		 Code 152105644
Address Gynėjų str. 14, Vilnius
Legal form – joint stock company
Registration date 28.01.1997		 Investments into
commercial real
estate. Rent of
commercial real
estate.		 Telephone + 370 5 279 06
01
E-mail [email protected]
www.invlbalticrealestate.co
m
Litagra, UAB Code 123496364
Address Savanoriu pr. 173. Vilnius;
Legal form – private limited liability
company
Registration date 30.01.1996		 investments into
agriculture companies		 Telephone +370 5 236
1600
Fax +370 5 236 1601
E-mail [email protected]
www.litagra.lt
Cedus Invest, UAB Code 302576631 investments into Telephone +370 5 263
Address Gynėjų str. 14, Vilnius agriculture companies 6129
Fax +370 5 279 0530
Legal form – private limited liability
company
Registration date 20.12.2010
Šiaulių bankas, AB Code 112025254 Commercial banking Telephone +370 41 595
Address Tilžės str.149, Šiauliai 607
Legal form – joint stock company Fax. +370 41 430 774
Registration date 04.02.1992 E-mail [email protected]
www.siauliubankas.lt
Inservis, UAB Code 126180446 facility management. Telephone +370 5 273
Address Juozapaviciaus str. 6.
Vilnius		 engineering systems
oversight and
incidents		 6607
E-mail [email protected]
Legal form – private limited liability
company		 management. multi
apartment house		 www.inservis.lt
Registration date 25.03.2003 management
Priemiestis, UAB Code 221487620 facility management.
engineering systems		 Telephone +370 5 267
0204
Address Stepono Batoro str. 41.
Vilnius		 oversight and Fax +370 5 267 2941
Legal form – private limited liability
company		 incidents
management, multi
apartment house		 E-mail [email protected]
www.priemiestis.lt
Registration date 09.07.1992 management
Jurita, UAB Code 220152850 Facility management. Telephone +370 5 248
Address Justiniskiu str. 62. Vilnius engineering systems
oversight and		 2088
Legal form – private limited liability
company		 incidents
management, multi		 E-mail [email protected]
www.jurita.lt
Registration date 28.12.1990 apartment house
management
Imoniu Grupe Inservis, Code 301673796 investing in building Telephone +370 5 263
UAB Address Gynėjų str. 14, Vilnius maintenance
companies		 6129
Fax +370 5 279 0530
Legal form – private limited liability
company
Registration date 07.04.2008
Informacinio verslo Code 123043773 Software tools for Telephone +370 5 236
paslaugų įmonė, AB Address Gedimino pr. 31, Vilnius computerized
processing of		 4808,
fax +370 5 262 3623
Legal form – joint stock company economic information E-mail [email protected]
Registration date 05.04.1995 www.ivpi.lt
"IPP integracijos projektai", Code 302890482 Carries no activity -
UAB Address Palangos str. 4, Vilnius
Legal form – private limited liability
company
Registration date 12.10.2012
SIA "Inservis" (Latvia) Code 40203041770 Facilities -
Address - Olaines nov., Olaines
pag., Stūnīši, "Lapegles", Latvia		 management
Legal form – private limited liability
company
Registration date 02.01.2017
Kelio Zenklai, UAB Code 185274242
Address Gelezinkelio str. 28.
Pilviskiai. Vilkaviskio r.
Legal form – private limited liability
company
Registration date 06.09.1994		 metal and wood
processing and
wholesale trade		 Telephone +370 342 67
756
Fax +370 342 67 644
E-mail [email protected]
www.keliozenklai.lt
Iniciatyvos Fondas, VsI Code 300657209
Address Gynėjų str. 14. Vilnius
Legal form – public institution
Registration date 08.03.2007		 organising of social
initiative programmes		 Telephone +370 5 263
6129
Fax +370 5 279 0530
E-mail
[email protected]
www.iniciatyvosfondas.lt
Aktyvo, UAB Code 301206846
Address Gynėjų str. 14, Vilnius;
Legal form – private limited liability
company
Registration date 31.10.2007		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
Aktyvus Valdymas, UAB Code 301673764
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 07.04.2008		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
MBGK, UAB Code 300083611
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 27.01.2005		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
MGK Invest, UAB Code 302531757
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 27.07.2010		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
Consult Invalda, UAB Code 302575814
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 20.12.2010		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
RPNG, UAB Code 302575892
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 20.12.2010		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
Regenus, UAB Code 302575821
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 20.12.2010		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530
Cedus, UAB Code 302656796
Address Gynėjų str. 14, Vilnius
Legal form – private limited liability
company
Registration date 18.08.2011		 carries no activity Telephone +370 5 263
6129
Fax +370 5 279 0530

APPENDIX 2. DISCLOSURE CONCERNING THE COMPLIANCE WITH THE GOVERNANCE CODE

Invalda INVL, AB following Article 22 paragraph 3 of the Law on Securities of the Republic of Lithuania and item 24.5 of the Listing Rules Nasdaq Vilnius, discloses its compliance with the Governance Code, approved by Nasdaq Vilnius for the companies listed on the regulated market. and its specific provisions.

PRINCIPLES/ RECOMMENDATIONS YES /
NO / NOT
APPLI		 COMMENTARY
CABLE

Principle I: Basic Provisions

The overriding objective of a Company should be to operate in common interests of all the shareholders by optimizing over time shareholder value.

1.1. A company should adopt and make public the
company's development strategy and objectives by
clearly declaring how the company intends to meet
the interests of its shareholders and optimize
shareholder value.		 Yes The Company constantly discloses information about
group's activities and objectives in notifications on
material events, annual information.
1.2. All management bodies of a company should
act
in
furtherance
of
the
declared
strategic
objectives
in
view
of
the
need
to
optimize
shareholder value.		 Yes The
Board's
and
the
President's
activities
are
concentrated on the fulfilment
of the Company's
strategic objectives taking count of the shareholders'
equity increase.
1.3. A company's supervisory and management
bodies should act in close co-operation in order to
attain maximum benefit for the company and its
shareholders.		 Yes The Supervisory Board is not formed. Nevertheless.
the Board and the President acts in close cooperation
seeking to obtain the maximum benefit for the
Company and its shareholders. The Board periodically
reviews and assesses Company's activity results. The
President may conclude the transactions referred to in
subparagraphs 3. 4. 5 and 6. paragraph 4. Article 34
of the Law on Companies of the Republic of Lithuania.
provided that there is a decision of the Board to enter
into these transactions.
1.4. A company's supervisory and management
bodies should ensure that the rights and interests of
persons other than the company's shareholders
(e.g. employees. creditors. suppliers. clients. local
community). participating in or connected with the
company's operation. are duly respected.		 Yes The Company respects all rights and interests of the
persons
participating
in
or
connected
with
the
Company's operation.

Principle II: The corporate governance framework

The corporate governance framework should ensure the strategic guidance of the Company. the effective oversight of the Company's management bodies. an appropriate balance and distribution of functions between the Company's bodies. protection of the shareholders' interests.

2.1. Besides obligatory bodies provided for in the
Law on Companies of the Republic of Lithuania – a
General Shareholders' Meeting and the Chief
Financial Officer. it is recommended that a company
should set up both a collegial supervisory body and
a collegial management body. The setting up of
collegial bodies for supervision and management
facilitates clear separation of management and
supervisory functions in the company. accountability
and control on the part of the Chief Executive
Officer. who. in its turn. facilitate a more efficient
and transparent management process.		 No Due to its size,
it is not expedient to form the
Supervisory
Board.
Therefore
the
only
collegial
management body -
the Board is formed in the
Company.
The
President
of
the
Company
is
accountable to the Board.
2.2. A collegial management body is responsible for
the strategic management of the company and
performs
other
key
functions
of
corporate
governance.
A
collegial
supervisory
body
is		 Yes The functions set forth in this recommendation are
performed by the collegial management body – the
Board.
responsible for the effective supervision of the
company's management bodies.
2.3. When a company chooses to form only one
collegial body. it is recommended that it should be a
supervisory body. i.e. the Supervisory Board. In
such a case. the Supervisory Board is responsible
for
the
effective
monitoring
of
the
functions
performed by the company's Chief Financial Officer.		 No Only one collegial body is formed in the Company -
the Board. It performs all essential management
functions and ensures accountability and control of the
President of the Company. The Supervisory Board is
not formed in the Company.
2.4. The collegial supervisory body to be elected by
the General Shareholders' Meeting should be set up
and should act in the manner defined in Principles
III and IV. Where a company should decide not to
set up a collegial supervisory body but rather a
collegial
management
body.
i.e.
the
Board.
Principles III and IV should apply to the Board as
long as that does not contradict the essence and
purpose of this body.		 Yes The provisions set forth in III and IV principles are
applied on the Board's formation and activity as long
as that does not contradict with the essence and
purpose of this body.
2.5. Company's
management
and
supervisory
bodies should comprise such number of Board
(executive
directors)
and
Supervisory
(non
executive
directors)
Board
members
that
no
individual or small group of individuals can dominate
decision-making on the part of these bodies.		 Yes There are 3 independent Board members in the
Company who do not have any other mutual interests
but only activity within the Board and who act seeking
benefit to the Company and its shareholders.
2.6. Non-executive directors or members of the
Supervisory Board should be appointed for specified
terms subject to individual re-election. at maximum
intervals provided for in the Lithuanian legislation
with a view to ensuring necessary development of
professional experience and sufficiently frequent
reconfirmation of their status. A possibility to remove
them should also be stipulated however this
procedure should not be easier than the removal
procedure for an executive director or a member of
the Management Board.		 No The Supervisory Board is not formed in the Company
and there are no non–executive directors either.
2.7. Chairman of the collegial body elected by the
General Shareholders' Meeting may be a person
whose current or past office constitutes no obstacle
to conduct independent and impartial supervision.
Where a company should decide not to set up a
Supervisory Board but rather the Board. it is
recommended that the chairman of the Board and
Chief Financial Officer of the company should be a
different person. Company's Chief Financial Officer
should not be immediately nominated as the
chairman of the collegial body elected by the
General Shareholders' Meeting. When a company
chooses to departure from these recommendations.
it should furnish information on the measures it has
taken to ensure impartiality of the supervision.		 Yes The Chairman of the Board is not the manager of the
Company. His current or past positions
have
no
obstacles to conduct independent and impartial
supervision.

Principle III: The order of the formation of a collegial body to be elected by a General Shareholders' Meeting.

The order of the formation a collegial body to be elected by a General Shareholders' Meeting should ensure representation of minority shareholders. accountability of this body to the shareholders and objective monitoring of the Company's operation and its management bodies.

3.1. The mechanism of the formation of a collegial
body to be elected by a General Shareholders'
Meeting (hereinafter in this Principle referred to as
the 'collegial body') should ensure objective and fair
monitoring of the company's management bodies as
well as representation of minority shareholders.		 Yes The
Board
operates
impartially,
objectively
and
represents the interests of all shareholders equally.
3.2. Names and surnames of the candidates to
become members of a collegial body. information		 Yes According to the Board's procedures and regulations
at least 10 days before the General Shareholders'
about their education. qualification. professional
background. positions taken and potential conflicts
of interest should be disclosed early enough before
the General Shareholders' Meeting so that the
shareholders would have sufficient time to make an
informed voting decision. All factors affecting the
candidate's independence. the sample list of which
is set out in Recommendation 3.7. should be also
disclosed. The collegial body should also be
informed on any subsequent changes in the
provided information. The collegial body should. on
yearly basis. collect data provided in this item on its
members and disclose this in the company's annual
report.		 Meeting. where it is planned to elect Board members
(member), the information about the candidates to the
Board will be fully disclosed to the shareholders with
the indication of the candidates' names, surnames,
their membership in supervisory and management
bodies
of
other
companies,
and
all
other
circumstances that can affect the independence of the
candidate as well as the data on their education,
qualifications,
professional
experience,
other
important information.
The Board members obligate to inform the Chairman
of the Board in case of the changes of the data. The
information of these changes shall be disclosed to the
shareholders in the Company's periodical reports.
Information about current members of the Board. their
educational background, qualification, professional
experience,
participation
in
other
companies
is
disclosed on Company's website.
3.3. Should a person be nominated for members of
a collegial body. such nomination should be
followed
by
the
disclosure
of
information
on
candidate's particular competences relevant to
his/her service on the collegial body. In order
shareholders and investors are able to ascertain
whether member's competence is further relevant.
the collegial body should. in its annual report.
disclose the information on its composition and
particular competences of individual members which
are relevant to their service on the collegial body.		 Yes Information about the composition of the Board,
members'
education,
work
experience
and
participation in other companies is disclosed in
Company's periodical reports and on website.
3.4. In order to maintain a proper balance in terms
of the current qualifications possessed by its
members. the desired composition of the collegial
body shall be determined
with regard to the
company's structure and activities. and have this
periodically evaluated. The collegial body should
ensure that it is composed of members who. as a
whole. have the required diversity of knowledge.
judgment and experience to complete their tasks
properly. The members of the Audit Committee.
collectively. should have a recent knowledge and
relevant
experience
in
the
fields
of
finance.
accounting and/or audit for the stock exchange
listed companies. At least one of the members of
the
Remuneration
Committee
should
have
knowledge of and experience in the field of
remuneration policy.		 Yes The composition of the Board is regularly assessed
with consideration to the nature of Company's activity
and structure. The Audit Committee members have
the
required
experience.
The
Remuneration
Committee is formed.
3.5. All new members of the collegial body should
be
offered
a
tailored
program
focused
on
introducing a member with his/her duties. corporate
organization and activities. The collegial body
should conduct an annual review to identify fields
where its members need to update their skills and
knowledge.		 No Presently. members of the Board do not perform the
assessment of their skills and knowledge.
3.6. In order to ensure that all material conflicts of
interest related with a member of the collegial body
are resolved properly. the collegial body should
comprise
a
sufficient
number
of
independent
members.		 No Independency of the elected Board members is not
assessed and the content of independent members'
sufficiency isn't set either.
3.7. A member of the collegial body should be
considered to be independent only if he is free of
any business. family or other relationship with the
company.
its
controlling
shareholder
or
the
management of either. that creates a conflict of		 No Members of the Board are elected by the General
Shareholders' Meeting. They are independent and, in
their actions, seek the benefit to the Company and its
shareholders.
however
fail
to
meet
the

interest such as to impair his judgment. Since all cases when member of the collegial body is likely to become dependent are impossible to list. moreover. relationships and circumstances associated with the determination of independence may vary amongst companies and the best practices of solving this problem are yet to evolve in the course of time. assessment of independence of a member of the collegial body should be based on the contents of the relationship and circumstances rather than their form. The key criteria for identifying whether a member of the collegial body can be considered to be independent are the following:

  • 1) he/she is not an executive director or member of the Board (if a collegial body elected by the General Shareholders' Meeting is the Supervisory Board) of the company or any associated company and has not been such during the last five years;
  • 2) he/she is not an employee of the company or some any company and has not been such during the last three years. except for cases when a member of the collegial body does not belong to the senior management and was elected to the collegial body as a representative of the employees;
  • 3) he/she is not receiving or has been not receiving significant additional remuneration from the company or associated company other than remuneration for the office in the collegial body. Such additional remuneration includes participation in share options or some other performance based pay systems; it does not include compensation payments for the previous office in the company (provided that such payment is no way related with later position) as per pension plans (inclusive of deferred compensations);
  • 4) he/she is not a controlling shareholder or representative of such shareholder (control as defined in the Council Directive 83/349/EEC Article 1 Part 1);
  • 5) he/she does not have and did not have any material business relations with the company or associated companies within the past year directly or as a partner. shareholder. director or superior employee of the subject having such relationship. A subject is considered to have business relations when it is a major supplier or service provider (inclusive of financial. legal. counselling and consulting services). major client or organization receiving significant payments from the company or its group;
  • 6) he/she is not and has not been. during the last three years. partner or employee of the current or former external audit company of the company or associated companies;
  • 7) he/she is not an executive director or member of the Board in some other company where executive director of the company or member of the Board (if a collegial body elected by the General Shareholders' Meeting is the Supervisory Board) is non-executive director or member of the Supervisory Board. he/she may not also have any other material relationships with executive directors of the company that

recommendation on independency.

arise from their participation in activities of other
companies or bodies;
8) he/she has not been in the position of a
member of the collegial body for over than 12
years;
9) he/she is not a close relative to an executive
director or member of the Board (if a collegial
body elected by the General Shareholders'
Meeting is the Supervisory Board) or to any
person listed in above items 1 to 8. Close
relative is considered to be a spouse (common
law spouse). children and parents.
3.8. The
determination
of
what
constitutes
independence is fundamentally an issue for the
collegial body itself to determine. The collegial body
may decide that. despite a particular member meets
all the criteria of independence laid down in this
Code. he cannot be considered independent due to
special personal or company-related circumstances.
3.9. Necessary
information
on
conclusions
the
collegial body has come to in its determination of
whether a particular member of the body should be
considered to be independent should be disclosed.
When a person is nominated to become a member
of the collegial body. the company should disclose
whether it considers the person to be independent.
When a particular member of the collegial body
does not meet one or more criteria of independence
set out in this Code. the company should disclose
its
reasons
for
nevertheless
considering
the
member
to
be
independent.
In
addition.
the
company should annually disclose which members
of the collegial body it considers to be independent.		 No No Board members' independency assessment and
announcement practice is applicable in the Company.
3.10. When one or more criteria of independence
set out in this Code has not been met throughout
the year. the company should disclose its reasons
for considering a particular member of the collegial
body to be independent. To ensure accuracy of the
information
disclosed
in
relation
with
the
independence of the members of the collegial body.
the company should require independent members
to
have
their
independence
periodically
re
confirmed.		 No No Board members' independency assessment and
announcement practice is applicable in the Company.
3.11. In order to remunerate members of a collegial
body for their work and participation in the meetings
of the collegial body. they may be remunerated from
the company's funds. The General Shareholders'
Meeting should approve the amount of such
remuneration.		 Not
applicable		 The Board members are not remunerated for their
work and participation in the meeting of the Board
from the Company's funds.

Principle IV: The duties and liabilities of a collegial body elected by the General Shareholders' Meeting

The corporate governance framework should ensure proper and effective functioning of the collegial body elected by the General Shareholders' Meeting. and the powers granted to the collegial body should ensure effective monitoring of the Company's management bodies and protection of interests of all the Company's shareholders.

4.2. Members of the collegial body should act in
good faith. with care and responsibility for the
benefit and in the interests of the company and its
shareholders with due regard to the interests of
employees
and
public
welfare.
Independent
members of the collegial body should (a) under all
circumstances
maintain
independence
of
their
analysis. decision-making and actions (b) do not
seek and accept any unjustified privileges that might
compromise their independence. and (c) clearly
express their objections should a member consider
that decision of the collegial body is against the
interests of the company. Should a collegial body
have passed decisions independent member has
serious doubts about. the member should make
adequate
conclusions.
Should
an
independent
member resign from his office, he should explain the
reasons in a letter addressed to the collegial body or
Audit Committee and. if necessary. respective
company-not-pertaining body (institution).		 Yes According to the information held with the Company,
all Board members act in good will with respect to the
Company,
are
guided
by
the
interests
of
the
Company,
not by the personal or third parties'
interests and seek to preserve their independency
while adopting the decisions.
4.3. Each member should devote sufficient time and
attention to perform his duties as a member of the
collegial body. Each member of the collegial body
should limit other professional obligations of his (in
particular any directorships held in other companies)
in such a manner they do not interfere with proper
performance of duties of a member of the collegial
body. In the event a member of the collegial body
should be present in less than a half of the meetings
of the collegial body throughout the financial year of
the company. shareholders of the company should
be notified.		 Yes The Board members perform their functions properly,
they actively participate in the Board meetings and
devote sufficient time for the performance of their
duties as Board members.
4.4. Where decisions of a collegial body may have a
different effect on the company's shareholders. the
collegial
body
should
treat
all
shareholders
impartially
and
fairly.
It
should
ensure
that
shareholders
are
properly
informed
on
the
company's affairs. strategies. risk management and
resolution of conflicts of interest. The company
should have a clearly established role of members
of the collegial body when communicating with and
committing to shareholders.		 Yes The Board treats all shareholders honestly and
impartially.
4.5. It is recommended that transactions (except
insignificant ones
due
to
their
low
value
or
concluded when carrying out routine operations in
the company under usual conditions). concluded
between
the
company
and
its
shareholders.
members of the supervisory or managing bodies or
other natural or legal persons that exert or may
exert influence on the company's management
should be subject to approval of the collegial body.
The
decision
concerning
approval
of
such
transactions should be deemed
adopted
only
provided the majority of the independent members
of the collegial body voted for such a decision.		 No There were no significant transactions between the
Company and its shareholders or management
bodies.
4.6. The collegial body should be independent in
passing decisions that are significant for the
company's
operations
and
strategy.
Taken
separately.
the
collegial
body
should
be
independent of the company's management bodies.
Members of the collegial body should act and pass
decisions without an outside influence from the
persons who have elected it. Companies should
ensure that the collegial body and its committees
are provided with sufficient administrative and		 Yes The Board is independent while adopting decisions
which are significant for the activity and strategy of the
Company.
financial
resources
to
discharge
their
duties.
including the right to obtain. in particular from
employees of the company. all the necessary
information or to seek independent legal. accounting
or any other advice on issues pertaining to the
competence
of
the
collegial
body
and
its
committees.
When
using
the
services
of
a
consultant with a view to obtaining information on
market standards for remuneration systems. the
remuneration committee should ensure that the
consultant concerned does not at the same time
advice the human resources department. executive
directors or collegial management organs of the
company concerned.
4.7. Activities of the collegial body should be
organized in a manner that independent members
of the collegial body could have major influence in
relevant areas where chances of occurrence of
conflicts of interest are very high. Such areas to be
considered
as
highly
relevant
are
issues
of
nomination of company's directors. determination of
directors' remuneration and control and assessment
of
the
company's
audit. Therefore
when
the
mentioned
issues
are
attributable
to
the
competence
of
the
collegial
body.
it
is
recommended
that
the
collegial
body
should
establish Nomination. Remuneration. and Audit
Committees. Companies should ensure that the
functions
attributable
to
the
Nomination.
Remuneration. and Audit Committees are carried
out. However they may decide to merge these
functions and set up less than three committees. In
such case a company should explain in detail
reasons behind the selection of alternative approach
and how the selected approach complies with the
objectives
set
forth
for
the
three
different
committees. Should the collegial body of the
company comprise small number of members. the
functions assigned to the three committees may be
performed by the collegial body itself. provided that
it meets composition requirements advocated for
the committees and that adequate information is
provided in this respect. In such case provisions of
this Code relating to the committees of the collegial
body (in particular with respect to their role.
operation. and transparency) should apply. where
relevant. to the collegial body as a whole.		 No Due to simplicity
of the Company's management
structure and small number of employees, it is not
expedient to form the Nomination and Remuneration
committees.
4.8. The key objective of the committees is to
increase efficiency of the activities of the collegial
body by ensuring that decisions are based on due
consideration. and to help organize its work with a
view to ensuring that the decisions it takes are free
of material conflicts of interest. Committees should
exercise independent judgment and integrity when
exercising its functions as well as present the
collegial body with recommendations concerning the
decisions of the collegial body. Nevertheless the
final decision shall be adopted by the collegial body.
The recommendation on creation of committees is
not
intended.
in
principle.
to
constrict
the
competence of the collegial body or to remove the
matters considered from the purview of the collegial
body itself. which remains fully responsible for the
decisions taken in its field of competence.
4.9. Committees established by the collegial body
should normally be composed of at least three

members. In companies with small number of members of the collegial body. they could exceptionally be composed of two members. Majority of the members of each committee should be constituted from independent members of the collegial body. In cases when the Company chooses not to set up a Supervisory Board. Remuneration and Audit Committees should be entirely comprised of non -executive directors. Chairmanship and membership of the committees should be decided with due regard to the need to ensure that committee membership is refreshed and that undue reliance is not placed on particular individuals.

4.10. Authority of each of the committees should be determined by the collegial body. Committees should perform their duties in line with authority delegated to them and inform the collegial body on their activities and performance on regular basis. Authority of every committee stipulating the role and rights and duties of the committee should be made public at least once a year (as part of the information disclosed by the company annually on its corporate governance structures and practices). Companies should also make public annually a statement by existing committees on their composition. number of meetings and attendance over the year. and their main activities. Audit Committee should confirm that it is satisfied with the independence of the audit process and describe briefly the actions it has taken to reach this conclusion.

4.11. In order to ensure independence and impartiality of the committees. members of the collegial body that are not members of the committee should commonly have a right to participate in the meetings of the committee only if invited by the committee. A committee may invite or demand participation in the meeting of particular officers or experts. Chairman of each of the committees should have a possibility to maintain direct communication with the shareholders. Events when such are to be performed should be specified in the regulations for committee activities.

4.12. Nomination Committee.

4.12.1. Key functions of the Nomination Committee should be the following:

1) identify and recommend. for the approval of the collegial body. candidates to fill Board vacancies. The Nomination Committee should evaluate the balance of skills. knowledge and experience on the management body. prepare a description of the roles and capabilities required to assume a particular office. and assess the time commitment expected. Nomination Committee can also consider candidates to members of the collegial body delegated by the shareholders of the company;

2) assess on regular basis the structure. size. composition and performance of the supervisory and management bodies. and make recommendations to the collegial body regarding the means of achieving necessary changes;

3) assess on regular basis the skills. knowledge and experience of individual directors and report on this to the collegial body;

4) properly consider issues related to succession planning;

5) review the policy of the management bodies for selection and appointment of senior management.

4.12.2. Nomination Committee should consider proposals by other parties. including management and shareholders. When dealing with issues related to executive directors or members of the Board (if a collegial body elected by the General Shareholders' Meeting is the Supervisory Board) and senior management. Chief Financial Officer of the company should be consulted by. and entitled to submit proposals to the Nomination Committee.

4.13. Remuneration Committee.

4.13.1. Key functions of the Remuneration Committee should be the following:

1) make proposals. for the approval of the collegial body. on the remuneration policy for members of management bodies and executive directors. Such policy should address all forms of compensation. including the fixed remuneration. performance based remuneration schemes. pension arrangements. and termination payments. Proposals considering performance -based remuneration schemes should be accompanied with recommendations on the related objectives and evaluation criteria. with a view to properly aligning the pay of executive director and members of the management bodies with the long -term interests of the shareholders and the objectives set by the collegial body;

2) make proposals to the collegial body on the individual remuneration for executive directors and member of management bodies in order their remunerations are consistent with company's remuneration policy and the evaluation of the performance of these persons concerned. In doing so. the Committee should be properly informed on the total compensation obtained by executive directors and members of the management bodies from the affiliated companies;

3) ensure that remuneration of individual executive directors or members of management body is proportionate to the remuneration of other executive directors or members of management body and other staff members of the company;

4) periodically review the remuneration policy for executive directors or members of management body. including the policy regarding share -based remuneration. and its implementation;

5) make proposals to the collegial body on suitable forms of contracts for executive directors and members of the management bodies;

6) assist the collegial body in overseeing how the company complies with applicable provisions regarding the remuneration -related information disclosure (in particular the remuneration policy applied and individual remuneration of directors);

7) make general recommendations to the executive directors and members of the management bodies on the level and structure of remuneration for senior management (as defined by the collegial body) with

regard to the respective information provided by the
executive
directors
and
members
of
the
management bodies.
4.13.2. With respect to stock options and other
share-based incentives which may be granted to
directors
or
other
employees.
the
Committee
should:
1) consider general policy regarding the granting of
the above mentioned schemes. in particular stock
options. and make any related proposals to the
collegial body;
2) examine the related information that is given in
the
company's
annual
report
and
documents
intended
for
the
use
during
the
General
Shareholders' Meeting;
3) make proposals to the collegial body regarding
the choice between granting options to subscribe
shares or granting options to purchase shares.
specifying the reasons for its choice as well as the
consequences that this choice has.
4.13.3. Upon resolution of the issues attributable to
the competence of the Remuneration Committee.
the Committee should at least address the chairman
of the collegial body and/or Chief Financial Officer of
the company for their opinion on the remuneration
of other executive directors or members of the
management bodies.
4.13.4. The Remuneration Committee should report
on the exercise of its functions to the shareholders
and be present at the Annual General Shareholders'
Meeting for this purpose.
4.14. Audit Committee.		 Yes The members of the Audit Committee are elected by
4.14.1. Key functions of the Audit Committee should
be the following:		 the
General
Shareholders'
Meeting.
The
main
functions of the Audit Committee should be the
1) observe the integrity of the financial information
provided by the company. in particular by reviewing
the relevance and consistency of the accounting
methods used by the company and its group
(including the criteria for the consolidation of the
accounts of companies in the group);		 following:
-
provide
recommendations
with
selection,
appointment,
reappointment
and
removal
of
an
external Audit Company as well as the terms and
conditions of engagement with the Audit Company;
- monitor the process of external audit;
2) at least once a year review the systems of
internal control and risk management to ensure that		 - monitor how the external auditor and Audit Company
follow the principles of independence and objectivity;
the key risks (inclusive of the risks in relation with
compliance with existing laws and regulations) are		 -
observe the process of preparation of financial
reports of the Company;
properly identified. managed and reflected in the
information provided;
3) ensure the efficiency of the internal audit function.		 - monitor the efficiency of the internal control and risk
management systems of the Company. Once a year
among other things. by making recommendations
on the selection. appointment. reappointment and
removal of the head of the internal audit department
and on the budget of the department. and by
monitoring the responsiveness of the management		 review the need of the internal audit function;
monitor the implementation of the audit firm's
recommendations and comments imposed by the
Board and the manager of the company.
to its findings and recommendations. Should there
be no internal audit authority in the company. the
need for one should be reviewed at least annually;		 In conducting of the mentioned above functions, the
Audit committee supervises the process of preparation
4) make recommendations to the collegial body
related with selection. appointment. reappointment		 of annual accounts and gives recommendations to the
Board on provision of the annual accounts for the
approval of the shareholders.
and removal of the external auditor (to be done by
the General Shareholders' Meeting) and with the
terms and conditions of his engagement. The
Committee should investigate situations that lead to
a resignation of the audit company or auditor and
make recommendations on required actions in such		 Furthermore.
the
Audit
committee
analyses
the
independence
and other criteria
of the potential
auditors and gives the necessary conclusions to the
management.
Each year the Audit committee prepares activity report

situations;

5) monitor independence and impartiality of the external auditor. in particular by reviewing the audit company's compliance with applicable guidance relating to the rotation of audit partners. the level of fees paid by the company. and similar issues. In order to prevent occurrence of material conflicts of interest. the Committee. based on the auditor's disclosed inter alia data on all remunerations paid by the company to the auditor and network. should at all times monitor nature and extent of the nonaudit services. Having regard to the principals and guidelines established in the May 16. 2002 Commission Recommendation 2002/590/EC. the Committee should determine and apply a formal policy establishing types of non-audit services that are (a) excluded. (b) permissible only after review by the Committee. and (c) permissible without referral to the Committee;

6) review efficiency of the external audit process and responsiveness of management to recommendations made in the external auditor's management letter.

4.14.2. All members of the Committee should be furnished with complete information on particulars of accounting. financial and other operations of the company. Company's management should inform the Audit Committee of the methods used to account for significant and unusual transactions where the accounting treatment may be open to different approaches. In such case a special consideration should be given to company's operations in offshore centers and/or activities carried out through special purpose vehicles (organizations) and justification of such operations.

4.14.3. The Audit Committee should decide whether participation of the chairman of the collegial body. Chief Financial Officer (or superior employees in charge of finances. treasury and accounting). or internal and external auditors in the meetings of the Committee is required (if required. when). The Committee should be entitled. when needed. to meet with any relevant person without executive directors and members of the management bodies present.

4.14.4. Internal and external auditors should be secured with not only effective working relationship with management. but also with free access to the collegial body. For this purpose the Audit Committee should act as the principal contact person for the internal and external auditors.

4.14.5. The Audit Committee should be informed of the internal auditor's work program. and should be furnished with internal audit's reports or periodic summaries. The Audit Committee should also be informed of the work program of the external auditor and should be furnished with report disclosing all relationships between the independent auditor and the company and its group. The Committee should be timely furnished information on all issues arising from the audit.

4.14.6. The Audit Committee should examine whether the company is following applicable provisions regarding the possibility for employees to report alleged significant irregularities in the company. by way of complaints or through on the main conclusions regarding Company's activity.

anonymous
submissions
(normally
to
an
independent member of the collegial body). and
should ensure that there is a procedure established
for proportionate and independent investigation of
these issues and for appropriate follow-up action.
4.14.7. The Audit Committee should report on its
activities to the collegial body at least once in every
six months. at the time the yearly and half-yearly
statements are approved.
4.15. Every year the collegial body should conduct
the assessment of its activities. The assessment
should
include
evaluation
of
collegial
body's
structure. work organization and ability to act as a
group. evaluation of each of the collegial body
member's and Committee's competence and work
efficiency and assessment whether the collegial
body has achieved its objectives. The collegial body
should. at least once a year. make public (as part of
the information the company annually discloses on
its management structures and practices) respective
information on its internal organization and working
procedures. and specify what material changes
were made as a result of the assessment of the
collegial body of its own activities.		 Yes Once a year the Board conducts its performance
evaluation.
The management Board of Invalda AB agree that the
Board work was organized well. The members of the
Board of the Company take an active part in the
meetings of the Board and devote sufficient time and
attention to the duties of the member of the
Management Board.29 Board meetings were held in
2017.
Board
members
attended
all
meetings
personally or remotely.
The members of the Board are provided with all
information by e-mail in advance. When analyzing the
submitted
material
and
making
decisions,
the
members of the board act independently (from each
other, from positions held in other companies and
from other persons).
The Board is satisfied by its members ability to work in
a team in order to meet the general interest of the
group and contributing to the overall result. The Board
of Invalda INVL has decided to transfer up to 22% of
the group company INVL Baltic Real Estate shares in
order to increase the liquidity of its shares.
The Board believes that its members are well
informed about the relevant financial, economic, social
and other changes that may affect the company and
the interests of shareholders and stakeholders
and
seek to use this information effectively and apply
advanced solutions in their activities. In May 2017 the
Board endorsed Invalda INVL's accession to the
United Nations Principles for Responsible Investment;
and in December the company's membership in the
Investors' Association was approved.
In 2017, the Board analysed the information available,
discussed and made decisions on all essential issues
related to the activities of Invalda INVL AB and the
companies invested. In addition, the board has
focused on identifying key priorities and development
directions of the group and setting strategic goals for
the group. The Board is satisfied by the perception
and ability of its members to create a vision for the
future and make it a long-term goal.

Principle V: The working procedure of the Company's collegial bodies.

The working procedure of supervisory and management bodies established in the Company should ensure efficient operation of these bodies and decision-making and encourage active co-operation between the Company's bodies.

5.1. The company's supervisory and management bodies (hereinafter in this Principle the concept 'collegial bodies' covers both the collegial bodies of supervision and the collegial bodies of management) should be chaired by chairpersons of these bodies. The chairperson of a collegial body is responsible for proper convocation of the collegial body meetings. The chairperson should ensure that information about the meeting being convened and Yes The activity of the Board is chaired by the chairman who is also responsible for convocation of the meetings as well as preparation of the agenda. Frequency of the meetings and questions of the agenda depend on the particular events or projects or they are related with ordinary functions of the Board prescribed by legal acts.

its agenda are communicated to all members of the
body. The chairperson of a collegial body should
ensure appropriate conducting of the meetings of
the collegial body. The chairperson should ensure
order and working atmosphere during the meeting.
5.2. It
is
recommended
that
meetings
of
the
company's collegial bodies should be carried out
according to the schedule approved in advance at
certain intervals of time. Each company is free to
decide how often to convene meetings of the
collegial bodies. but it is recommended that these
meetings should be convened at such intervals.
which would guarantee an interrupted resolution of
the
essential
corporate
governance
issues.
Meetings of the company's Supervisory Board
should be convened at least once in a quarter. and
the company's Board should meet at least once a
month3		 Yes According to the Board's procedures and regulations.
the Board meetings are held at least once per quarter.
5.3. Members of a collegial body should be notified
about the meeting being convened in advance in
order to allow sufficient time for proper preparation
for the issues on the agenda of the meeting and to
ensure
fruitful
discussion
and
adoption
of
appropriate decisions. Alongside with the notice
about
the
meeting
being
convened.
all
the
documents relevant to the issues on the agenda of
the meeting should be submitted to the members of
the collegial body. The agenda of the meeting
should not be changed or supplemented during the
meeting. unless all members of the collegial body
are present or certain issues of great importance to
the company require immediate resolution.		 Yes The Board meetings are being convened by the
Chairman. The Chairman of the Board informs each
Member of the Board about the meeting by phone or
by email.
5.4. In
order
to
co-ordinate
operation
of
the
company's collegial bodies and ensure effective
decision-making
process.
chairpersons
of
the
company's collegial bodies of supervision and
management should closely co-operate by co
coordinating dates of the meetings. their agendas
and resolving other issues of corporate governance.
Members of the company's Board should be free to
attend meetings of the company's Supervisory
Board. especially where issues concerning removal
of the Board members. their liability or remuneration
are discussed.		 No The Company cannot implement this recommendation
since only the Board is formed.

Principle VI: The equitable treatment of shareholders and shareholder rights.

The corporate governance framework should ensure the equitable treatment of all shareholders. including minority and foreign shareholders. The corporate governance framework should protect the rights of the shareholders.

6.1. It is recommended that the company's capital
should consist only of the shares that grant the
same rights to voting. ownership. dividend and other
rights to all their holders.		 Yes Shares which compose the authorised capital of the
Company grant equal rights to all shareholders.
6.2. It is recommended that investors should have
access to the information concerning the rights
attached to the shares of the new issue or those
issued earlier in advance. i.e. before they purchase
shares.		 Yes The Company informs shareholders about the rights
of newly issued shares.
6.3. Transactions that are important to the company Yes Shareholders
of
the
Company
have
equal

3 The frequency of meetings of the collegial body provided for in the recommendation must be applied in those cases when both additional collegial bodies are formed at the company, the board and the supervisory board. In the event only one additional collegial body is formed in the company, the frequency of its meetings may be as established for the supervisory board, i.e. at least once in a quarter.

and its shareholders. such as transfer. investment.
and pledge of the company's assets or any other
type of encumbrance should be subject to approval
of
the
General
Shareholders'
Meeting.
All
shareholders
should
be
furnished
with
equal
opportunity to familiarize with and participate in the
decision-making process when significant corporate
issues. including approval of transactions referred to
above. are discussed.		 opportunities to get familiarised and participate in
adopting
decisions
important
to
the
Company.
Approval of the General Shareholders' Meeting is also
necessary in cases stipulated in Chapter V of the Law
on Companies of the Republic of Lithuania. No other
cases when the approval of the General Shareholders'
Meeting should be obtained are foreseen. since it
would impair Company's business considering the
nature of the Company's activity.
6.4. Procedures of convening and conducting a
General Shareholders' Meeting should ensure equal
opportunities for the shareholders to effectively
participate at the meetings and should not prejudice
the rights and interests of the shareholders. The
venue. date. and time of the shareholders' meeting
should
not
hinder
wide
attendance
of
the
shareholders. Prior to the shareholders' meeting.
the
Company's
supervisory
and
management
bodies should enable the shareholders to lodge
questions on issues on the agenda of the General
Share-holders' Meeting and receive answers to
them.		 Yes The procedures of convening and conducting of the
General Shareholders' Meeting comply with the
provisions of legal acts and provide the shareholders
with equal opportunities to participate in the meetings
get familiarised with the draft resolutions and materials
necessary for adopting the decision in advance. also
give questions to the Board members.
6.5. If is possible. in order to ensure shareholders
living abroad the right to access to the information. it
is recommended that documents on the course of
the General Shareholders' Meeting. should be
placed on the publicly accessible website of the
company not only in Lithuanian language. but in
English and /or other foreign languages in advance.
It is recommended that the minutes of the General
Shareholders' Meeting after signing them and/or
adopted resolutions should be also placed on the
publicly
accessible
website
of
the
company.
Seeking to ensure the right of foreigners to
familiarize with the information. whenever feasible.
documents referred to in this recommendation
should be published in Lithuanian. English and/or
other foreign languages. Documents referred to in
this recommendation may be published on the
publicly accessible website of the company to the
extent that publishing of these documents is not
detrimental to the company or the company's
commercial secrets are not revealed.		 Yes The
documents
prepared
for
the
General
Shareholders' Meeting are published in Lithuanian
and English on the Company's website. The decisions
of General Shareholders' Meetings for the last 9 years
are also published on Company's website.
6.6. Shareholders should be furnished with the
opportunity to vote in the General Shareholders'
Meeting in person and in absentia. Shareholders
should not be prevented from voting in writing in
advance by completing the general voting ballot.		 Yes The Company's shareholders are furnished with the
opportunity to participate in the General Shareholders'
Meeting both personally and via an attorney. if such a
person has a proper authorisation or if an agreement
on the transfer of voting rights was concluded in the
manner set forth in the legal acts. The Company
provides the shareholders with conditions to vote by
completing the general voting ballot.
6.7. With a view to increasing the shareholders'
opportunities to participate effectively at General
Shareholders'
Meetings.
the
companies
are
recommended
to
expand
use
of
modern
technologies
by
allowing
the
shareholders
to
participate and vote in General Shareholders'
Meetings via electronic means of communication. In
such cases security of transmitted information and a
possibility to identify the identity of the participating
and voting person should be guaranteed. Moreover.
companies could furnish its shareholders. especially
shareholders living abroad. with the opportunity to
watch shareholder meetings by means of modern
technologies.		 No Shareholders
can
vote
via
an
attorney
or
by
completing the general voting ballot but for the
meantime shareholders cannot participate and vote in
General Shareholders' Meetings via electronic means
of communication.

Principle VII: The avoidance of conflicts of interest and their disclosure

The corporate governance framework should encourage members of the corporate bodies to avoid conflicts of interest and assure transparent and effective mechanism of disclosure of conflicts of interest regarding members of the corporate bodies.

7.1. Any member of the company's supervisory and
management body should avoid a situation. in which
his/her personal interests are in conflict or may be in
conflict with the company's interests. In case such a
situation did occur. a member of the company's
supervisory and management body should. within
reasonable time. inform other members of the same
collegial body or the company's body that has
elected him/her. or to the company's shareholders
about a situation of a conflict of interest. indicate the
nature of the conflict and value. where possible.		 Yes The
Board
members
recommendations.		 fully comply with these
7.2. Any member of the company's supervisory and
management body may not mix the company's
assets. the use of which has not been mutually
agreed upon. with his/her personal assets or use
them or the information which he/she learns by
virtue of his/her position as a member of a corporate
body for his/her personal benefit or for the benefit of
any third person without a prior agreement of the
General
Shareholders'
Meeting
or
any
other
corporate body authorised by the meeting.
7.3. Any member of the company's supervisory and
management body may conclude a transaction with
the company. a member of a corporate body of
which
he/she
is.
Such a
transaction
(except
insignificant ones
due
to
their
low
value
or
concluded when carrying out routine operations in
the company under usual conditions) must be
immediately
reported
in
writing
or
orally.
by
recording this in the minutes of the meeting. to other
members of the same corporate body or to the
corporate body that has elected him/her or to the
company's shareholders. Transactions specified in
this
recommendation
are
also
subject
to
recommendation 4.5.
7.4. Any member of the company's supervisory and
management body should abstain from voting when
decisions concerning transactions or other issues of
personal or business interest are voted on.

Principle VIII: Company's remuneration policy

Remuneration policy and procedure for approval. revision and disclosure of directors' remuneration established in the Company should prevent potential conflicts of interest and abuse in determining remuneration of directors. in addition it should ensure publicity and transparency both of Company's remuneration policy and remuneration of directors.

8.1. A Company should make a public statement of
the company's remuneration policy (hereinafter the
remuneration statement) which should be clear and
easily understandable. This remuneration statement
should be published as a part of the company's
annual statement as well as posted on the
company's website.		 No The Company does not prepare a remuneration policy
since the majority of VIII principle items are not
relevant for the present structure of the Company.
Information about the benefits and loans for the
members of the management bodies is provided in the
periodical reports. financial statements.
8.2. Remuneration statement should mainly focus
on directors' remuneration policy for the following
year and. if appropriate. the subsequent years. The
statement
should
contain
a
summary
of
the
implementation of the remuneration policy in the
previous financial year. Special attention should be

given to any significant changes in company's remuneration policy as compared to the previous financial year.

8.3. Remuneration statement should leastwise include the following information:

1) explanation of the relative importance of the variable and non -variable components of directors' remuneration;

2) sufficient information on performance criteria that entitles directors to share options. shares or variable components of remuneration;

3) an explanation how the choice of performance criteria contributes to the long -term interests of the company;

4) an explanation of the methods. applied in order to determine whether performance criteria have been fulfilled;

5) sufficient information on deferment periods with regard to variable components of remuneration;

6) sufficient information on the linkage between the remuneration and performance;

7) the main parameters and rationale for any annual bonus scheme and any other non -cash benefits;

8) sufficient information on the policy regarding termination payments;

9) sufficient information with regard to vesting periods for share -based remuneration. as referred to in point 8.13 of this Code;

10) sufficient information on the policy regarding retention of shares after vesting. as referred to in point 8.15 of this Code;

11) sufficient information on the composition of peer groups of companies the remuneration policy of which has been examined in relation to the establishment of the remuneration policy of the company concerned;

12) a description of the main characteristics of supplementary pension or early retirement schemes for directors;

13) remuneration statement should not include commercially sensitive information.

8.4. Remuneration statement should also summarize and explain company's policy regarding the terms of the contracts executed with executive directors and members of the management bodies. It should include. inter alia. information on the duration of contracts with executive directors and members of the management bodies. the applicable notice periods and details of provisions for termination payments linked to early termination under contracts for executive directors and members of the management bodies.

8.5. Remuneration statement should also contain detailed information on the entire amount of remuneration. inclusive of other benefits. that was paid to individual directors over the relevant financial year. This document should list at least the information set out in items 8.5.1 to 8.5.4 for each person who has served as a director of the company at any time during the relevant financial

year.

8.5.1. The following remuneration and/or emoluments -related information should be disclosed:

  • the total amount of remuneration paid or due to the director for services performed during the relevant financial year. inclusive of. where relevant. attendance fees fixed by the Annual General Shareholders' Meeting;

  • the remuneration and advantages received from any undertaking belonging to the same group;

  • the remuneration paid in the form of profit sharing and/or bonus payments and the reasons why such bonus payments and/or profit sharing were granted;

  • if permissible by the law. any significant additional remuneration paid to directors for special services outside the scope of the usual functions of a director;

  • compensation receivable or paid to each former executive director or member of the management body as a result of his resignation from the office during the previous financial year;

  • total estimated value of non -cash benefits considered as remuneration. other than the items covered in the above points.

8.5.2. As regards shares and/or rights to acquire share options and/or all other share -incentive schemes. the following information should be disclosed:

  • the number of share options offered or shares granted by the company during the relevant financial year and their conditions of application;

  • the number of shares options exercised during the relevant financial year and. for each of them. the number of shares involved and the exercise price or the value of the interest in the share incentive scheme at the end of the financial year;

  • the number of share options unexercised at the end of the financial year; their exercise price. the exercise date and the main conditions for the exercise of the rights;

  • all changes in the terms and conditions of existing share options occurring during the financial year.

8.5.3. The following supplementary pension schemes -related information should be disclosed:

  • when the pension scheme is a defined -benefit scheme. changes in the directors' accrued benefits under that scheme during the relevant financial year;

  • when the pension scheme is defined -contribution scheme. detailed information on contributions paid or payable by the company in respect of that director during the relevant financial year.

8.5.4. The statement should also state amounts that the company or any subsidiary company or entity included in the consolidated annual financial report of the company has paid to each person who has served as a director in the company at any time during the relevant financial year in the form of loans. advance payments or guarantees. including the amount outstanding and the interest rate.

8.6. Where the remuneration policy includes

variable components of remuneration. companies should set limits on the variable component(s). The non -variable component of remuneration should be sufficient to allow the company to withhold variable components of remuneration when performance criteria are not met.

8.7. Award of variable components of remuneration should be subject to predetermined and measurable performance criteria.

8.8. Where a variable component of remuneration is awarded. a major part of the variable component should be deferred for a minimum period of time. The part of the variable component subject to deferment should be determined in relation to the relative weight of the variable component compared to the non -variable component of remuneration.

8.9. Contractual arrangements with executive or managing directors should include provisions that permit the company to reclaim variable components of remuneration that were awarded on the basis of data which subsequently proved to be manifestly misstated.

8.10. Termination payments should not exceed a fixed amount or fixed number of years of annual remuneration. which should. in general. not be higher than two years of the non -variable component of remuneration or the equivalent thereof.

8.11. Termination payments should not be paid if the termination is due to inadequate performance.

8.12. The information on preparatory and decision making processes. during which a policy of remuneration of directors is being established. should also be disclosed. Information should include data. if applicable. on authorities and composition of the remuneration committee. names and surnames of external consultants whose services have been used in determination of the remuneration policy as well as the role of Annual General Shareholders' Meeting.

8.13. Shares should not vest for at least three years after their award.

8.14. Share options or any other right to acquire shares or to be remunerated on the basis of share price movements should not be exercisable for at least three years after their award. Vesting of shares and the right to exercise share options or any other right to acquire shares or to be remunerated on the basis of share price movements. should be subject to predetermined and measurable performance criteria.

8.15. After vesting. directors should retain a number of shares. until the end of their mandate. subject to the need to finance any costs related to acquisition of the shares. The number of shares to be retained should be fixed. for example. twice the value of total annual remuneration (the non -variable plus the variable components).

8.16. Remuneration of non -executive or supervisory directors should not include share options.

8.17.
Shareholders.
in
particular
institutional
shareholders. should be encouraged to attend
General Shareholders' Meetings where appropriate
and make considered use of their votes regarding
directors' remuneration.
8.18. Without prejudice to the role and organization
of the relevant bodies responsible for setting
directors' remunerations. the remuneration policy or
any other significant change in remuneration policy
should be included into the agenda of the Annual
General
Shareholders'
Meeting.
Remuneration
statement should be put for voting in Annual
General Shareholders' Meeting. The vote may be
either mandatory or advisory.
8.19. Schemes
anticipating
remuneration
of
directors in shares. share options or any other right
to purchase shares or be remunerated on the basis
of share price movements should be subject to the
prior approval of Annual General Shareholders'
Meeting by way of a resolution prior to their
adoption. The approval of scheme should be related
with the scheme itself and not to the grant of such
share-based
benefits
under
that
scheme
to
individual
directors.
All
significant
changes
in
scheme provisions should also be subject to
shareholders' approval prior to their adoption; the
approval decision should be made in Annual
General Shareholders' Meeting. In such case
shareholders should be notified on all terms of
suggested changes and get an explanation on the
impact of the suggested changes.
8.20. The following issues should be subject to
approval by the Annual General Shareholders'
Meeting:
1) grant of share-based schemes. including share
options. to directors;
2) determination of maximum number of shares and
main conditions of share granting;
3) the term within which options can be exercised;
4) the conditions for any subsequent change in the
exercise of the options. if permissible by law;
5) all other long-term incentive schemes for which
directors are eligible and which are not available to
other employees of the company under similar
terms.
Annual
General
Shareholders'
Meeting
should also set the deadline within which the body
responsible for remuneration of directors may award
compensations listed in this article to individual
directors.
8.21. Should national law or company's Articles of
Association
allow.
any
discounted
option
arrangement under which any rights are granted to
subscribe the shares at a price lower than the
market value of the share prevailing on the day of
the price determination. or the average of the
market values over a number of days preceding the
date when the exercise price is determined. should
also be subject to the shareholders' approval.
8.22. Provisions of Articles 8.19 and 8.20 should not
be applicable to schemes allowing for participation		 Yes Annual General Shareholders meeting of Invalda
INVL, which took place on 29 April 2016, approved
employees'
stock option policy and instructed the
Board to ensure its proper implementation.
The General Shareholders meeting held on 28 April
2017 passed a decision regarding the number of
ordinary registered shares of the company
which
would result in stock option contracts for employees in
2017 and a share price. On 19 May 2017 it was
announced about signed employee stock option
contracts.
under similar conditions to company's employees or
employees of any subsidiary company whose
employees are eligible to participate in the scheme
and which has been approved in the Annual
General Shareholders' Meeting.
8.23. Prior to the Annual General Shareholders'
Meeting that is intended to consider decision
stipulated in Article 8.8. the shareholders must be
provided an opportunity to familiarize with draft
resolution and project-related notice (the documents
should be posted on the company's website). The
notice should contain the full text of the share-based
remuneration schemes or a description of their key
terms. as well as full names of the participants in the
schemes. Notice should also specify the relationship
of the schemes and the overall remuneration policy
of the directors. Draft resolution must have a clear
reference to the scheme itself or to the summary of
its key terms. Shareholders must also be presented
with information on how the company intends to
provide
for
the
shares
required
to
meet
its
obligations under incentive schemes. It should be
clearly stated whether the company intends to buy
shares in the market. hold the shares in reserve or
issue new ones. There should also be a summary
on scheme-related expenses the company will
suffer due to the anticipated application of the
scheme. All information given in this article must be
posted on the company's website.

Principle IX: The role of stakeholders in corporate governance

The corporate governance framework should recognize the rights of stakeholders as established by law and encourage active co-operation between companies and stakeholders in creating the Company value. jobs and financial sustainability. For the purposes of this Principle. the concept "stakeholders" includes investors. employees. creditors. suppliers. clients. local community and other persons having certain interest in the Company concerned.

9.1. The corporate governance framework should
assure that the rights of stakeholders that are
protected by law are respected.		 Yes The Company respects the rights of interest holders
and allows the interest holders to participate in the
management of the Company in the manner set forth
9.2. The corporate governance framework should
create conditions for the stakeholders to participate
in corporate governance in the manner prescribed
by law. Examples of mechanisms of stakeholder
participation
in
corporate
governance
include:
employee participation in adoption of certain key
decisions
for
the
company;
consulting
the
employees on corporate governance and
other
important issues; employee participation in the
company's share capital; creditor involvement in
governance in the context of the company's
insolvency. etc.		 by the laws. The detailed information about planned
events has been constantly disclosed in line with
requirements of legal acts; therefore. the investors
(shareholders)
have
enough
opportunities
to
familiarize with necessary information as well as vote
on
decisions.
More
detailed
explanation
about
disclosure procedure is provided below in the part 10.
9.3. Where stakeholders participate in the corporate
governance process. they should have access to
relevant information.

Principle X: Information disclosure and transparency

The corporate governance framework should ensure that timely and accurate disclosure is made on all material information regarding the Company. including the financial situation. performance and governance of the Company.

10.1. The company should disclose information on:
1)
the financial and operating results of the
company;
2)
company objectives;
3)
persons holding by the right of ownership or in		 Yes Information set forth in this recommendation is
disclosed in the notifications on material event.
periodical reports. This information is also published
on Company's website.
control of a block of shares in the company;
4)
members of the company's supervisory and
management bodies. Chief Financial Officer of the
company and their remuneration;
5)
material foreseeable risk factors;
6)
transactions between the company and
connected persons. as well as transactions
concluded outside the course of the company's
regular operations;
7)
material issues regarding employees and other
stakeholders;
8)
governance structures and strategy.
This
list
should
be
deemed
as
a
minimum
recommendation.
while
the
companies
are
encouraged not to limit themselves to disclosure of
the information specified in this list.
10.2. It is recommended to the company. which is
the parent of other companies. that consolidated
results of the whole group to which the Company
belongs should be disclosed when information
specified in item 1 of Recommendation 10.1 is
under disclosure.
10.3. It is recommended that information on the
professional
background.
qualifications
of
the
members of supervisory and management bodies.
Chief Financial Officer of the company should be
disclosed as well as potential conflicts of interest
that may have an effect on their decisions when
information specified in item 4 of Recommendation
10.1
about
the
members
of
the
company's
supervisory and management bodies is under
disclosure. It is also recommended that information
about the amount of remuneration received from the
company and other income should be disclosed with
regard to members of the company's supervisory
and management bodies and Chief Financial Officer
as per Principle VIII.
10.4. It is recommended that information about the
links between the company and its stakeholders.
including employees. creditors. suppliers. local
community. as well as the company's policy with
regard to human resources. employee participation
schemes in the company's share capital. etc. should
be disclosed when information specified in item 7 of
Recommendation 10.1 is under disclosure.
10.5. Information should be disclosed in such a way
that
neither
shareholders
nor
investors
are
discriminated with regard to the manner or scope of
access
to
information.
Information
should
be
disclosed to all simultaneously. It is recommended
that notices about material events should be
announced before or after a trading session on the
NASDAQ OMX Vilnius. so that all the company's
shareholders and investors should have equal
access to
the information and make informed
investing decisions.		 Yes The company discloses information via Nasdaq news
distribution service so that the public in Lithuania and
other EU countries should have equal access to the
information. The information is disclosed in Lithuanian
and English.
The company publishes its information prior to or after
the trade sessions on the Nasdaq
Vilnius. The
company does not disclose information that may have
an effect on the price of shares in the commentaries.
interview or other ways as long as such information is
publicly announced via Nasdaq
news distribution
service.
10.6. Channels for disseminating information should
provide for fair. timely and cost-efficient access to
relevant information by users. It is recommended
that information technologies should be employed
for wider dissemination of information. for instance.
by placing the information on the company's
website. It is recommended that information should
be published and placed on the company's website
not only in Lithuanian. but also in English. and.
whenever
possible
and
necessary.
in
other
languages as well.		 Yes The information is disclosed in Lithuanian and English
simultaneously via Nasdaq news distribution service.
It is also published on company's website.
10.7. It is recommended that the company's annual
reports and other periodical accounts prepared by
the company should be placed on the company's
website. It is recommended that the company
should announce information about material events
and changes in the price of the company's shares
on the Stock Exchange on the company's website
too.		 Yes The company publishes all information indicated in
this recommendation on its website.

Principle XI: The selection of the Company's auditor

The mechanism of the selection of the Company's auditor should ensure independence of the firm of auditor's conclusion and opinion.

11.1. An annual audit of the company's financial
reports and interim reports should be conducted by
an independent firm of auditors in order to provide
an external and objective opinion on the company's
financial statements.		 Yes The annual Company's and consolidated financial
statements
and
consolidated
annual
report
are
conducted by the independent audit company. The
interim financial statements are not conducted by the
audit company.
11.2. It
is
recommended
that
the
company's
Supervisory Board and. where it is not set up. the
company's Board should propose a candidate firm
of auditors to the General Shareholders' Meeting.		 Yes The candidate audit company is suggested to the
General Shareholders' Meeting by the Board.
11.3. It is recommended that the company should
disclose to its shareholders the level of fees paid to
the firm of auditors for non-audit services rendered
to the company. This information should be also
known to the company's Supervisory Board and.
where it is not formed. the company's Board upon
their consideration which firm of auditors to propose
for the General Shareholders' Meeting.		 Not
applicable		 The remuneration of the services granted to an audit
company other than the audit services is disclosed in
the consolidated report of 2017 Clause 27. The audit
company provides non-audit services only with the
approval of the Audit Committee.

APPENDIX 3. COMPANY'S MANAGEMENT REPORT

(Prepared in accordance with the Law of the Republic of Lithuania on Financial Reporting by Undertakings (IX-575) in force from 29 November 2017 and applicable to the annual reports of entities covering periods beginning on or after 1 January 2017)

1.Reference to the applicable corporate governance code and the place of its publication, and (or) reference to the all necessary published information regarding management practices of the entity

The Company discloses the information regarding the compliance with the applicable Corporate Governance Code in Appendix 2 of the consolidated report of 2017. The Company publishes its annual reports on it's website.

2.In case of derogation from the provisions of the applicable corporate governance code and (or) when the provisions are not complied with, such provisions and the reasons thereof shall be indicated

The Company discloses such information in sections "Yes/No/Irrelevant" and "Commentary" of Appendix 2 of the consolidated report of 2017 "Information regarding the compliance with Corporate Governance Code.

3.Information regarding the level of risk and risk management – management of risks related to the financial reporting, risk mitigation measures, and internal control systems implemented at the entity shall be described

The Company provides information regarding the level of risk, risk management, and implemented internal control systems, as well as the measures, in Clause 19.3. of the consolidated report of 2017.

4.Information regarding significant directly or indirectly managed holdings

The Company provides information regarding the significant directly or indirectly managed holdings in Note 1 of the financial statements of 2017.

5. Information regarding the shareholders who have special rights of control and the description of such right

There are no shareholders having special rights of control in the Company.

6.Information regarding all current restrictions on voting rights (such as the restrictions on voting rights of persons having a certain percentage or number of the votes, the deadlines by which voting rights may be exercised or systems, according to which the property rights granted by the securities are to be separated from the holder of those securities)

No restrictions on voting rights are applied in the Company.

7.information regarding the rules governing the appointment and dismissal of board members, as well as the amendment of the company's articles of association

The Board members of the Company act in accordance with the Law on Companies of the Republic of Lithuania, Articles of Association of the Company, Rules of Procedure of the Board, as well as other applicable legislation. The Board members of the Company always act for the benefit of the Company and its shareholders.

The procedure for changing the Articles of Association of INVL Baltic Farmland is no different from stated in the Law on Companies of the Republic of Lithuania.

8.Information regarding the powers of the board members

The Board members of the Company act in accordance with the Law on Companies of the Republic of Lithuania, Articles of Association of the Company, Rules of Procedure of the Board, as well as other applicable legislation, and have no special powers. The Board members of the Company always act for the benefit of the Company and its shareholders. More information is disclosed in the Appendix 2 of the consolidated report of 2017.

9.Information regarding the competence of the General Shareholders Meeting, the rights of shareholders and implementation thereof, if such information is not established in the applicable legislation

The company provides information regarding the competence of the General Shareholders Meeting, the rights of shareholders, and implementation thereof, as well as the procedure for convening such meetings, in Clause 13.1.1. of the consolidated annual report of 2017.

10.Information regarding the composition of the management, supervisory bodies, and the committees thereof, as well as the fields of activity of the aforesaid bodies and the manager of the company

The Company provides information about Members of the Board of the Company as well as the manager of the Company, in Clause 14. of the consolidated report of 2017.

11.Description of diversity policy applicable in appointing the manager of the company, management, and supervisory bodies, related to the aspects such as age, gender, education, professional experience; objectives of such policy, methods of implementation thereof, and results of the reference period. if the diversity policy is not applied, the reasons thereof shall be indicated

The Company organizes its activities in a way that employees, despite of their duties and the need to upgrade their qualifications, are secure about equal working conditions, opportunities to develop competence, etc. Equally, the same benefits are granted regardless of the gender, race, nationality, language, origin, social status, believes or convictions, age, sexual orientation, disability, ethnicity, religion, marital status, intention of having children's or membership of the political party or association. More information is disclosed in the Appendix 2 of the consolidated report of 2017.

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