Annual Report 2021

NORDIC FIBREBOARD AS

Annual report 2021 (Translation of the Estonian original)

Beginning of the financial year: 1.01.2021 End of the financial year: 31.12.2021 Business name: Nordic Fibreboard AS Registry code: 11421437 Address: Rääma 31, Pärnu 80044, Estonia Phone: +372 44 78 323 E-mail: [email protected] Homepage: www.nordicfibreboard.com Auditor: AS PricewaterhouseCoopers Main activity: Production and wholesales of fibreboards

INTRODUCTION 3
MANAGEMENT REPORT 4
CORPORATE GOVERNANCE RECOMMENDATIONS REPORT 14
REMUNERATION REPORT 16
MANAGEMENT BOARD'S CONFIRMATIONS 19
CONSOLIDATED FINANCIAL STATEMENTS 20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 20
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 21
CONSOLIDATED STATEMENT OF CASH FLOWS 22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24
NOTE 1 GENERAL INFORMATION 24
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 25
NOTE 3 FINANCIAL RISK MANAGEMENT 40
NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 45
NOTE 5 RECEIVABLES AND PREPAYMENTS 47
NOTE 6 INVENTORIES 47
NOTE 7 INVESTMENT PROPERTY 47
NOTE 8 PROPERTY PLANT EQUIPMENT, RIGHT-OF-USE ASSETS & INTANGIBLE ASSETS 49
NOTE 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 50
NOTE 10 BORROWINGS AND FINANCIAL LEASE 51
NOTE 11 PAYABLES AND REPAYMENTS 53
NOTE 12 PROVISIONS 53
NOTE 13 EQUITY 54
NOTE 14 EARNINGS PER SHARE 55
NOTE 15 COST OF GOODS SOLD 55
NOTE 16 DISTRIBUTION COSTS 56
NOTE 17 ADMINISTRATIVE AND GENERAL EXPENSES 56
NOTE 18 LABOUR EXPENSES 56
NOTE 19 OTHER OPERATING INCOME 56
NOTE 20 OTHER OPERATING EXPENSES 56
NOTE 21 FINANCIAL INCOME AND EXPENSES 57
NOTE 22 OPERATING SEGMENTS 57
NOTE 23 RELATED PARTIES 58
NOTE 24 CONTINGENT LIABILITIES 59
NOTE 25 EVENTS AFTER BALANCE SHEET DATE 60
NOTE 26 SUPPLEMENTARY DISCLOSURES ON THE GROUP'S PARENT 61
INDEPENDENT AUDITOR'S REPORT 64
PROPOSAL FOR PROFIT ALLOCATION 72
SIGNATURES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD TO THE 2021 ANNUAL REPORT 73
REVENUE OF THE PARENT COMPANY BY EMTAK CLASSIFICATORS 74

INTRODUCTION

THE GROUP IN BRIEF

Nordic Fibreboard AS main activity is production and sale of building materials. Nordic Fibreboard AS is a holding company with subsidiaries Nordic Fibreboard Ltd OÜ, Pärnu Riverside Development OÜ (was established by the demerger of subsidiary in 2019) and Skano Furniture OÜ, herewith in turn Nordic Fibreboard Ltd OÜ owns a subsidiary Suomen Tuulileijona OY.

The Group, as of 31.12.2021, therefore consists of the following companies, all 100% owned:

Subsidiary	Location	Activity
Nordic Fibreboard Ltd OÜ	Estonia	Production and sales
Suomen Tuulileijona OY	Finland	Marketing
Pärnu Riverside Development OÜ	Estonia	Rental and property development
Skano Furniture OÜ	Estonia	Retail (operations ended)

Nordic Fibreboard Ltd OÜ produces and distributes softboard products for use in many different applications, the main categories being within construction (insulation, soundproofing, and interior finishing panels for walls and ceilings) and industry (packaging, door cores, expansion joint filler, pin and notice boards, acoustic reduction, cake boards, firelighters). Suomen Tuulileijona OY is the marketing company of Nordic's fibreboard products in Finland.

Pärnu Riverside Development OÜ owns and manages real estate located at Suur-Jõe street in Pärnu, the Company provides rental service to local companies.

Skano Furniture OÜ is a retail company, whose activity was the sale of home furnishing furniture. The company finished its activities on 31.01.2020, when it closed the last two furniture showrooms. Skano Furniture OÜ subsidiary Skano LT UAB was liquidated on 17.03.2021 and Skano Furniture OÜ is in liquidation.

The principal markets of the company are the Nordic, Russia and Baltic region. Nordic Fibreboard's customers and partners are well recognized parties within their field of expertise, and value long-term relations with Nordic Fibreboard.

From 5 June 1997, Nordic Fibreboard AS (with previous names Viisnurk AS and Skano Group AS) was listed on the Tallinn Stock Exchange. The company was established as a result by the demerger of AS Trigon Property Development (with previous name Viisnurk AS) listed on 19 September 2007. The shares of the spin-off manufacturing company were relisted in the Main List of the Tallinn Stock Exchange pursuant to the resolution of the Listing Committee of the Tallinn Stock Exchange on 20 September 2007 and trading in the shares of Nordic Fibreboard AS was launched on 25 September 2007. In September 2013, a restructuring process of Nordic Fibreboard AS was conducted, where current fibreboard and furniture factory divisions were transferred to newly established subsidiaries Nordic Fibreboard Ltd OÜ (with previous name Skano Fibreboard OÜ) and Skano Furniture Factory OÜ. In September 2019, the furniture manufacturing company was sold out of the Group and the main activity of the Group remained the production of fibreboard in Nordic Fibreboard Ltd OÜ. On 2nd of April 2018 Nordic Fibreboard shares trading was moved on Tallinn Stock Exchange from primary list to secondary list.

Translation of the company's consolidated financial statements in pdf-format without European Single Electronic Format (ESEF) markups. The original document is submitted in machine-readable .xhtml format to the Tallinn Stock Exchange and digitally signed (Link: https://nasdaqbaltic.com/statistics/en/instrument/EE3100092503/reports)

MANAGEMENT REPORT

OVERVIEW OF OPERATING RESULTS

REVENUE AND OPERATING RESULTS

Consolidated net sales for 2021 were € 10.10 million (2020: € 10.27 million). Fibreboard sales for year 2021 were € 9.84 million, a 2% decrease from year 2020 sales of € 10.00 million. Main reason for such decline was due to the closure of the Püssi fibreboard factory in March 2020 triggered by the COVID-19 pandemic, as a result of which production volume decreased.

The sales revenue in 2021 from real estate management was € 254 thousand (2020: € 212 thousand), the increase in sales revenue was due to the addition of tenant to the production facilities. There was no sales from the furniture retail in 2021, as the company ceased its active economic activity already on 31.01.2020. In 2020 the sales revenue was € 56 thousand, which was received from the closing down sales of warehouses.

The consolidated EBITDA of Nordic Fibreboard AS for 2021 was € 1 555 thousand (2020: € 540 thousand). The main reasons for the improvement in EBITDA were the increase in the gross margin and lower other operating expenses on fibreboard. Nordic fibreboard AS gross margin in 2021 was 33%, which was 6% higher than in the previous year (2020: gross margin 27%). Gross margin improvement was due to higher capacity utilisation caused by focusing on fewer product thicknesses, which allowed for longer production runs for each produced thickness, which let to improved production profitability. In addition, other operating expenses in 2020 included one-off expenses, such as the closure costs of the Püssi fibreboard factory in the amount of € 187 thousand and the demolition costs the old unused office building in the area of Rääma Street 31 in Pärnu in the amount of € 38 thousand.

The consolidated net profit of Nordic Fibreboard AS for 2021 was € 1.20 million (2020: € 1.07 million), of which € 265 thousand was the profit from the revaluation of shares of the real estate company Trigon Property Development AS (TPD) listed on the Tallinn Stock Exchange (2020: profit on revaluation of TPD shares € 53 thousand).

	€ thousand		% of net sales
	2021	2020	2021	2020
Fibreboards production and sales	9,842	10,001	97%	97%
Real Estate Management	254	212	3%	2%
Furniture retail	0	56	0%	1%
Group transactions	(0)	(0)	(0%)	(0%)
TOTAL	10,096	10,269	100%	100%

GROUP'S REVENUE BY ACTIVITY

GROUP'S REVENUE BY REGIONS

	€ thousand		% of net sales
	2021	2020	2021	2020
European Union	8,479	8,594	84%	84%
Russia	1,356	1,240	13%	12%
Asia	147	189	2%	2%
Africa	46	96	0%	1%
Other	55	85	1%	1%
Middle East	13	65	0%	0%
TOTAL	10,096	10,269	100%	100%

THE GROUP'S PROFIT/LOSS BY SEGMENTS

€ thousand	2021	2020
EBITDA by business units:
Fibreboards production and sales	1,555	597
Real Estate Management	15	0
Group transactions	(13)	(58)
TOTAL EBITDA	1 557	540
Depreciation	(498)	(558)
TOTAL OPERATING PROFIT/ LOSS	1,059	(19)
Net financial costs	143	1,092
NET PROFIT/ LOSS	1,202	1,074

STATEMENT OF FINANCIAL POSITION AND CASH FLOW STATEMENT

As of 31.12.2021 the total assets of Nordic Fibreboard AS were € 8.1 million (31.12.2020: € 7.7 million). The liabilities of the company as of 31.12.2021 were € 4.2 million (31.12.2020: € 5.0 million), of which the Group has payables of € 0.4 million as at 31.12.2021 (31.12.2020: € 1.1 million) and borrowings of € 3.2 million as at 31.12.2021 (31.12.2020: also € 3.2 million).

Receivables and prepayments amounted to € 0.9 million as at 31.12.2021 (31.12.2020: € 0.8 million). Inventories were € 0.4 million as of 31.12.2021 (31.12.2020: € 0.5 million). Fixed assets were € 6.7 million as of 31.12.2021 (€ 6.3 million as of 31.12.2020).

During 2021 twelve months, the Group's cash flows from operating activities totalled € 730 thousand (2020 twelve months: € 150 thousand). Investment activities resulted in cash outflows in amount of € 587 thousand during 2021 twelve months, which was mainly due to improvements in production machinery (2020 twelve months: outflow € 56 thousand). Financing activities also resulted in cash outflows of € 112 thousand during twelve months 2021 (2020 twelve months: cash outflow € 75 thousand). Net cash effect during 2021 twelve months cash inflow of € 31 thousand, which compares to 2020 twelve months cash inflows of € 19 thousand.

PERFORMANCE OF BUSINESS UNITS

NORDIC FIBREBOARD LTD

Nordic Fibreboard Ltd OÜ sales for 2021 were € 9.84 million, which is 2% decrease from year 2020 sales of € 10.00 million. Products were sold to customers in 19 countries during the year 2021. The main reason for the decline was the closure of the Püssi fibreboard factory in March 2020 due to the COVID-19 pandemic. Sales to our customers within the construction sector in our main Northern European markets have been stable, accounting for 76% of total sales revenue. Sales in European Union remained at same level, decreasing by only 1% from € 8.33 million to € 8.23 million, while sales in Russia increased by 9% compared to the previous year. Finland, our largest market accounted for 27% of total fibreboard sales in 2021 year, Denmark 24%, and Estonia is our third largest market, with sales revenue accounting for 16% of total sales revenue in 2021.

The EBITDA of Nordic Fibreboard Ltd OÜ was € 1,555 thousand in 2021 (2020: € 597 thousand). The main reasons for the improvement in EBITDA in 2021 were the increase in gross margin and lower overheads. The improvement in the gross margin was facilitated by the restructuring of production, which helped to improve the capacity of our Pärnu factory. In addition, in 2021 the company did not have any substantial one-off extraordinary expenses as in 2020.

THE SALES OF NORDIC FIBREBOARD LTD BY REGION

	€ thousand		% of net sales
	2021	2020	2021	2020
European Union	8,225	8,327	84%	83%
Russia	1,356	1,240	14%	12%
Asia	147	189	1%	2%
Africa	46	95	0%	1%
Other	55	85	1%	1%
Middle East	13	65	0%	1%
Total	9,842	10,001	100%	100%

Nordic Fibreboard Ltd.'s products are divided into the following product groups: construction boards, interior finishing panels, door cores, packaging and for use in display boards.

PÄRNU RIVERSIDE DEVELOPMENT: REAL ESTATE MANAGEMENT

Rental income, including the resale of utilities, was € 254 thousand in 2021 (2020 € 212 thousand). The sales revenue increased by 20% compared to the previous year, which was due to the leasing of the production premises of Suur-Jõe 48. All sales revenue for 2021 and 2020 are within Estonia. The company's expenses consist of operating expenses and expenses related to the ongoing detail plan project.

The company recorded EBITDA and net profit of € 15 thousand for 2021 (2020 € 0 thousand).

SKANO FURNITURE: RETAIL SALES

Skano Furniture finished its activities on 31.01.2020, when it closed the last two furniture showrooms, thus the retail sale of furniture did not have any sales revenue in 2021. The sales revenue in 2020 was € 56 thousand, which was received from the closing down sales of warehouses. We are in the process of liquidating Skano Furniture OÜ.

FORECAST AND DEVELOPMENT

BUSINESS ENVIRONMENT 2021

Demand during year 2021 was strong, reflecting the increased focus on building and improving properties, as a result of limited consumer options for recreation spending caused by the effects of the pandemic. It appears at this stage that the pandemic is nearing an end, however it is impossible to predict if new mutations of the virus will appear and thus force new restrictions on society.

NORDIC FIBREBOARD LTD

Demand for fibreboards continue to be strong, reflecting the growth in the building material market, as well as the growing awareness of the green credentials of soft density fibreboards, as produced by Nordic Fibreboard Ltd.

Management is working on preparing the Pärnu based factory's boiler house to meet the new emission requirements coming into force in 01.01.2025.

Preparations is also being undertaken in upgrading the company's second factory, located in Püssi, so that the factory's technical capabilities is adequate for possible restarting of the factory. The factory's main energy source is gas, and the current high gas prices is currently making it untenable to consider restarting this factory in the near future.

PÄRNU RIVERSIDE DEVELOPMENT

We will continue to manage and develop the property on Suur-Jõe Street 48, Pärnu.

ELECTION AND POWERS OF MANAGEMENT BODIES AND PERSONNEL

THE GENERAL MEETING OF SHAREHOLDERS

The General Meeting is the highest directing body of the Company. Annual General Meeting shall be called within six months after the end of the financial year at the latest at the company's registered place of business. An extraordinary General Meeting shall be called if it is required by law.

The General Meeting of Nordic Fibreboard AS for 2022 will be held on 13 June 2022 in the Company's head office in Pärnu.

SUPERVISORY BOARD

The Supervisory Board plans the Company's (i.e. Nordic Fibreboard group) activities, organises its management, supervises the activities of the Management Board and adopts resolutions in matters provided by law or the Articles of Association. According to the Articles of Association, the Supervisory Board consists of between three and seven members. Members of the Supervisory Board are elected by the General Meeting for a term of five years. The Supervisory Board of Nordic Fibreboard AS has three members. As at the balance sheet date, the Supervisory Board was comprised of the chairman of the Supervisory Board Joakim Johan Helenius and members of the Supervisory Board Trond Bernhard Brekke and Sakari Wallin.

INFORMATION ABOUT MEMBERS OF THE SUPERVISORY BOARD

Joakim Johan Helenius (re-elected into office until 18.09.2022), member of the Supervisory Board since 1999. Joakim Johan Helenius was born in 27.11.1957 in Finland and he obtained a degree from Cambridge University in England. He is also member of the Supervisory Board of AS Trigon Property Development, member of the Management Board of the Company's majority shareholder Pärnu Holdings OÜ, Chairman of the Management Board of AS Trigon Capital. Joakim Johan Helenius owns 20 000 Nordic Fibreboard shares.

Trond Bernhard Brekke (elected into office until 18.09.2022), member of the Supervisory Board since 2017. Trond Bernhard Brekke was born in 26.06.1951 in Norway and he obtained bachelor's degree from University de Grenoble in France and University of Denver in Colorado. Trond Bernhard Brekke holds Managing Director's position in Bernhd. Brekke AS. Trond Bernhard Brekke is a Chairman and member of board in several companies. Since 1999 Trond Bernhard Brekke is an Honorary Consul of Estonia. Trond Bernhard Brekke does not own any shares in Nordic Fibreboard AS.

Sakari Wallin (elected into office until 15.11.2023), member of the Supervisory Board since 2018. Sakari Wallin was born in 03.05.1954 in Finland and he obtained bachelor's degree in Engineering from Polytechnik Turku. Sakari Wallin holds Managing Director's position in Finnish Fibreboard LTD. Sakari Wallin is Chairman of the Board of Finnish Fibreboard (UK) Ltd and Managing director of Finnish Fibreboard Filial Sverige. Sakari Wallin does not own any shares in Nordic Fibreboard AS.

MANAGEMENT BOARD

The powers of the Management Board of the Company are provided in the Commercial Code and are limited as established in the Company' Articles of Association. The members of the Management Board have no powers to issue shares. Members of the Management Board are appointed by the Company's Supervisory Board for three years. Members of the Management Board are appointed and recalled by simple majority voting of the Supervisory Board.

There are no agreements between Nordic Fibreboard AS and members of the Management Board as provided in Chapter 19 of the Securities Market Act. In accordance with the Articles of Association, the Management Board consists of up to seven members. As at the end of the financial year and at the approval of this annual report, the Management Board of Nordic Fibreboard AS has one member, Torfinn Losvik.

PERSONNEL

In 2021, the average number of employees in the Group was 92 (2020: the average number of employees was 106). At the end of the financial year, the Group employed 91 employees of which 70 workers and 21 specialists and executives (2020: number of employees was 97, of which 74 workers and 23 specialists and executives). The average age of the Group's employees was 52 years (2020: 50).

In 2021, employee wages and salaries with all applicable taxes totalled € 2.0 million (2020: already € 2.0 million). In 2021, payments made to management and supervisory board members of all group companies including all subsidiaries with relevant taxes were € 245 thousand (€ 217 thousand in 2020).

The Group is an important employer in Pärnu and therefore has positive social impact on local employment.

AUDIT COMMITTEE

The Audit Committee is a body advising the Supervisory Board in the area of accounting, auditing control, risk management, internal control and internal auditing, performance of supervision and budgeting and the legality of the activities of the Supervisory Board. Audit Committee has two members and as at balance sheet date includes Rando Tomingas and Kristi Aarmaa.

ELECTION OF THE AUDITOR

In 2021, the Management Board, in cooperation with the Audit Committee, organised a tender for the appointment of an auditor. As a result of the tender, AS PricewaterhouseCoopers was chosen and appointed the company's auditor at the annual general meeting of shareholders held on 21 June 2021. A one-year contract was entered with AS PricewaterhouseCoopers for the audit of the financial years 2021.

During 2021, the auditor of the Company has provided to the Group a limited assurance engagement in respect of packaging report, that is permissible in accordance with the Auditors Activities Act of the Republic of Estonia.

OTHER INFORMATION

The Group's Management Board publishes the annual report once a year and interim reports during the financial year. The information provided in reports is based on the reporting of financial indicators of intra-Group units that are monitored regularly. Reports are supplemented on a continuous basis in a process during which indicators influencing the achievement of agreed objectives are analysed. Shareholders are presented an annual report signed by the members of the Management Board and the Supervisory Board for consideration.

FINANCIAL RATIOS

€ thousand
Income statement	2021	2020
Revenue	10,096	10,269
EBITDA	1,557	540
EBITDA margin	15%	5%
Operating profit	1,059	(19)
Operating margin	10%	(0%)
Net profit	1,202	1,074
Net margin	12%	10%

Statement of financial position	31.12.2021	31.12.2020
Total assets	8,063	7,650
Return on assets	15%	14%
Equity	3,850	2,648
Return on equity	31%	41%
Debt-to-equity ratio	52%	65%

Share	31.12.2021	31.12.2020
Last Price*	1.95	0.45
Earnings per share	0.27	0.24
Price-earnings ratio	7.30	1.89
Book value of a share	0.86	0.59
Market to book ratio	2.28	0.76
Market capitalization, € thousand	8,773	2,025
Number of shares, piece	4,499,061	4,499,061

EBITDA = Earnings before interest, taxes, depreciation and amortization EBITDA margin = EBITDA / Revenue Operating margin = Operating profit / Revenue Net margin = Net profit / Revenue Return on assets = Net profit / Total assets Return on equity = Net profit / Equity Debt-to-equity ratio = Liabilities / Total assets Earnings per share = Net profit / Total shares Price-earnings ratio = Last price / Earnings per share Book value of a share = Equity / Total shares Market to book ratio = Last price / Book value of a share Market capitalization = Last price * Total number of shares \*http://www.nasdaqbaltic.com/

Nordic Fibreboard AS has one type of shares and the Company's Statute have no provisions on restriction of sales of the Company's shares. The Company does not have shares that grant specific control rights and the Company has no information about agreements on restricting the voting rights of shareholders. The Company and shareholders have not entered into agreements between themselves that would restrict sale of shares.

VALUE OF SHARE

€	2021	2020	2019	2018	2017
Opening price €	0.45	0.41	0.36	0.62	0.46
Highest price €	2.42	0.51	0.58	0.66	0.69
Lowest price €	0.43	0.30	0.35	0.30	0.43
Last Price	1.95	0.45	0.41	0.36	0.62
Turnover, thousand shares	1,477	524	175	291	319
Turnover, thousand €	2,042	208	75	140	170
Market cap, mllion	8.77	2.02	1.84	1.61	2.77

The following graph show the movements of Nordic Fibreboard AS price and turnovers for the years 2017 to 2021.

SHAREHOLDERS

SHARE CAPITAL BY THE NUMBER OF SHARES AS OF 31.12.2021:

	Number of shareholders	% from shareholders	Number of shares	% from share capital
1 – 99	507	48%	11,373	0%
100 – 999	352	34%	106,239	2%
1 000 - 9 999	162	15%	469,098	10%
10 000 - 99 999	25	2%	714,276	16%
100 000 - 999 999	1	0%	605,300	13%
1 000 000 - 9 999 999	1	0%	2,592,775	58%
TOTAL	1,048	100%	4,499,061	100%

SHARE CAPITAL GEOGRAPHICALLY AS OF 31.12.2021:

	Number of shareholders	% from shareholders	Number of shares	% from share capital
Estonia	1,016	97%	4,259,265	95%
Finland	12	1%	39,054	1%
Lithuania	5	0%	38,709	1%
Germany	4	0%	47,097	1%
Latvia	4	0%	91,739	2%
Other	7	1%	23,197	1%
TOTAL	1,048	100%	4,499,061	100%

SHARE CAPITAL BY THE TYPE OF THE OWNERS AS OF 31.12.2020:

	Number of shareholders	% from shareholders	Number of shares	% from share capital
Private individuals	970	93%	939,012	21%
Institutional investors	78	7%	3,560,049	79%
TOTAL	1,048	100%	4,499,061	100%

LIST OF THE SHAREHOLDERS WITH THE OWNERSHIP MORE THAN 1% AS OF 31.12.2021:

Shareholder	Number of shares	Shareholding %
Pärnu Holdings OÜ	2,592,775	58%
Gamma Holding Investment OÜ	605,300	13%
REGO PURIN	80,806	2%
Madis Talgre	87,000	2%
Olegs Radcenko	60,096	1%
TOIVO KULDMÄE	49,231	1%
STETIND OÜ	44,206	1%
Hille Kallas	37,000	1%
TRIANGEL KAPITAL OÜ	36,762	1%
OÜ EKOTEK EESTI	35,000	1%
SIIM TALMAR	28,000	1%
Markus Vardja	25,471	1%

Direct ownership of the members of the Management and Supervisory Boards as at 31.12.2021:

Joakim Johan Helenius 20,000 shares, i.e. 0.4%
Trond Bernhard Brekke does not hold any shares
Torfinn Losvik does not hold any shares
Sakari Wallin does not hold any shares

Both Joakim Johan Helenius and Torfinn Losvik have indirect ownership through parent company Pärnu Holdings OÜ. Indirectly Torfinn Losvik owns shares through Stetind OÜ in the amount of 44,206 shares (2020: 44,206 shares).

DIVIDEND POLICY

As a rule, payment of dividends is decided annually and depends on the Group's performance and possible investment needs. The method of payment of the didvidend shall be determined by a resolution of the general meeting. Dividends or advancesare distributed proportionally among the shareholders, according to the list of shareholders, which is fixed on the 10th trading day after the general meeting where the decision was made to distribute the profit or make advances.

RISKS

INTEREST RATE RISK

Nordic Fibreboard AS's interest rate risk relates to changes in EURIBOR (Euro Interbank Offered Rate) since our loans are linked to EURIBOR. At 31.12.2021 six months' EURIBOR rate was (0.546) % and at 31.12.2020 six months' EURIBOR rate was (0.526) %. As EURIBOR is negative and the negative interest in the loan agreement is equal to zero, the continued negative rate of EURIBOR does not have interest expense reducing effect. As the borrowing have a maturity of up to 5 years, management is of the opinion that the floating interest rate will not bear significant impact to Group's cash flows.

The dates for fixing interest rates on the basis of changes in EURIBOR are the 30th day of every six months for its bank loans.

The interest rate risk also depends on the overall economic situation in Estonia and in the eurozone. Nordic Fibreboard AS has a cash flow risk arising from the interest rate risk because its loans have a floating interest rate. Management believes that the cash flow risk is not significant, therefore no hedging instruments are used.

FOREIGN CURRENCY EXCHANGE RISK

The foreign exchange risk is the risk that the company may have significant loss because of fluctuating foreign exchange rates. Nordic Fibreboard has no operations outside of the euro zone and most of our export-import contracts to customers outside of the eurozone are nominated in €. The production has been sold and raw materials for production has mainly been purchased in €.

RISK OF THE ECONOMIC ENVIRONMENT

The risk of the economic environment for the fibreboard division depends on general developments in the construction and industrial segments. Over the past year, the risk of a possible deterioration in the economic environment has been exacerbated by the COVID-19 pandemic. Europe is still in the throes of a coronavirus pandemic, the impact of the pandemic on the economy is multi-layered and its duration is quite difficult to assess.

FAIR VALUE

The management estimates that the fair values of cash, accounts receivables and payables, short-term loans and borrowings do not materially differ from their carrying amounts. The fair values of long-term loans do not materially differ from their carrying amounts because their interest rates correspond to the interest rate risks prevailing on the market.

LIQUIDITY RISK

The liquidity risk is a potential loss arising from the existence of limited or insufficient financial resources that are necessary for performing the obligations related to the activities of the Group. The Management Board continuously monitors cash flow movements, using the existence and sufficiency

of the Group's financial resources for performing the assumed obligations and financing the strategic objectives of the Group.

GROUP STRUCTURE

SHARES OF SUBSIDIARIES

Domicile		Number of shares (pcs) 31.12.2021	Ownership % 31.12.2021	Number of shares (pcs) 31.12.2020	Ownership % 31.12.2020
Nordic Fibreboard Ltd OÜ	Estonia	1	100	1	100
Skano Furniture OÜ	Estonia	1	100	1	100
Pärnu Riverside Development OÜ	Estonia	1	100	1	100
OÜ Isotex*	Estonia	-	-	1	100
Suomen Tuulileijona OY	Finland	1	100	1	100
UAB Skano LT*	Lithuania	-	-	100	100

* Liquidated in 2021.

Nordic Fibreboard AS is a holding company of subsidiaries Nordic Fibreboard Ltd OÜ, Pärnu Riverside Development OÜ (since 2019, established by the demerger of subsidiary) and Skano Furniture OÜ. Nordic Fibreboard Ltd OÜ manufactures and distributes wood fibreboards for the construction sector (wind barrier, insulation, sound protection), interior panels for ceiling and walls, as well as various industrial applications for use in packaging, door cores, pin boards, and expansion joint fillers. Nordic Fibreboard Ltd OÜ owns a subsidiary Suomen Tuulielijona OY, a subsidiary previously engaged in distribution of fibreboard in Finland. Skano Furniture OÜ owned the retail furniture shop subsidiary Skano LT UAB, which was liquidated in March 2021.

Pärnu Riverside Development OÜ owns and manages the property located at Suur-Jõe 48 in Pärnu. Until September 2021, Nordic Fibreboard AS owned a subsidiary, Isotex OÜ, which never had any economic activity and was therefore liquidated.

CORPORATE GOVERNANCE RECOMMENDATIONS REPORT

The Corporate Governance Recommendations is a set of guidelines and recommended rules to be carried out primarily by entities whose shares have been admitted to trading on a regulated market in Estonia. From 1 January 2006, the listed entities are required to follow the principle "Comply or Explain".

The Corporate Governance Recommendations lay down the principles of calling and conducting general meetings of shareholders, composition, activities and responsibilities of Supervisory and Management Boards, disclosures and financial reporting.

As the principles outlined in the Corporate Governance Recommendations are recommended, the Company does not have to comply with all of them but needs to explain in the Corporate Governance Recommendations Report why these requirements are not complied with.

In its business, Nordic Fibreboard AS adheres to prevailing laws and legislative provisions. As a public entity, Nordic Fibreboard AS also follows the requirements of the Tallinn Stock Exchange and the principles of equal treatment of shareholders and investors. Pursuant to this, the Company follows most of the guidelines set out in the Recommendations. Below are arguments for noncompliance of the Recommendations that the Company does not comply with.

Clause 1.3.2 Members of the Management Board, the Chairman of the Supervisory Board and if possible, all members of the Supervisory Board and at least one of the auditors shall participate in the General Meeting.

The General Meeting of Shareholders held on 21th of June 2021 was attended by the Members of the Management Board of Nordic Fibreboard AS. Neither Members of the Supervisory Board nor the auditor were present at the meeting. The auditor was not present at the meeting, because the Management Board did not consider the auditor's participation necessary, as there were not any issues on the agenda that might have needed the auditor's comments. The auditor has expressed his opinion in the auditor's report, stating that the consolidated financial statements of the Group give a true and fair view, in all material respects of the financial position of the Group as at 31.12.2020 and the financial results and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. At the same time the agreement with the auditors was in force that in case the shareholders have questions to the auditors, the auditors were ready to answer all questions immediately by phone during the General Annual meeting. In accordance with good practice, shareholders had the opportunity to ask questions to the members of the Management Board during the meeting.

Clause 1.3.3 The Issuer shall make participation in the General Meeting possible by means of communication equipment (Internet) if the technical equipment is available and where doing so is not too cost prohibitive to the Issuer.

At General Meeting the Issuer did not make monitoring and participation by communication equipment's possible, because no technical equipment was available.

Clause 2.2.1 The Management Board shall have more than one (1) member and the Chairman shall be elected from among the members of the Management Board. The Management Board or Supervisory Board shall establish an area of responsibility for each member of the Management Board. The Chairman of the Supervisory Board shall conclude a contract of service with each member of the Management Board for discharge of their functions.

The Management Board of the Issuer has one member only, who is the Chairman of the Management Board. The Subsidiaries Nordic Fibreboard Ltd OÜ have five member of the Management Board and Suomen Tuulielijona OY have three members in Management Boards. Contracts of service have been concluded with the member of the Management Board which also regulate the areas of responsibility.

Clause 2.2.7 Basic wages, performance pay, termination benefits, other payable benefits and bonus schemes of a member of the Management Board as well as their essential features (incl. features based on comparison, incentives and risk) shall be published in a clear and unambiguous form on the website of the Issuer and in the Corporate Governance Recommendations Report. Information published shall be deemed clear and unambiguous if it directly expresses the amount of expense to the Issuer or the amount of foreseeable expense as at the day of disclosure.

The Issuer has disclosed the remuneration policy and remuneration of a member of the Management Board in the Remuneration Report, which is a part of the 2021 annual report of Nordic Fibreboard AS.

Clause 3.1.3 Upon the establishment of committees by the Supervisory Board, the Issuer shall publish their existence, duties, membership and position in the organisation on its website. Upon a change in the committee's structure, the Issuer shall publish the content of such changes and the period during which the procedures are in effect.

During 2021, the Supervisory Board of the Issuer has not established any committees.

Clause 3.2.5 The amount of remuneration of a member of the Supervisory Board appointed at the meeting and the procedure for his payment shall be published in the Corporate Governance

Recommendations Report, outlining separately basic and additional remuneration (incl. termination and other payable benefits).

The Issuer does not pay any remuneration to the members of the Supervisory Board.

Clause 5.2 The Issuer shall publish the disclosure dates of information subject to disclosure throughout the year at the beginning of the financial year in a separate notice, called a financial calendar.

The Issuer did not disclose a separate notice but information subject to disclosure was made public no later than at the dates set out in the law.

Clause 5.6 The Issuer shall disclose the dates and places of meetings with analysts and presentations and press conferences organized for analysts, investors or institutional investors on its website.

According to the rules and regulations of the Tallinn Stock Exchange, the Group shall disclose all relevant information through the stock exchange. The Issuer does not regularly organise press conferences and meetings, therefore, the schedule of meetings cannot be disclosed. At the meetings with investors, only previously disclosed information shall be supplied.

Clause 6.2.1 Together with a notice calling the General Meeting, the Supervisory Board shall make information on an auditor's candidate available to shareholders. If it is desired to appoint an auditor who has audited the Issuer's reports for the previous financial year, the Supervisory Board shall pass judgement on his work.

The auditor shall be paid a fee according to the concluded contract. According to the contract, the amount of the fee shall be confidential. However, the Issuer believes that the disclosure of the fee does not affect the reliability of the audit. As the Supervisory Board wants to continue cooperation with the auditor, it is a proof that the Supervisory Board is satisfied with the current auditor.

The activities of the Issuer comply with the requirements of the Corporate Governance Recommendations in all other aspects.

REMUNERATION REPORT

This remuneration report has been prepared in accordance with the Estonian Securities Market Act and provides an overview of the remuneration paid to the Head of AS Nordic Fibreboard according to the remuneration principles for the 2021 financial year. In 2021, the Executive Board of the AS Nordic Fibreboard had one member.

In the context of the Estonian Securities Market Act, the Head of Nordic Fibreboard is Member of the Management Board Torfinn Losvik, whose duties and remuneration are further specified in the employment contract concluded with him, in which the Chairman of the Supervisory Board represented the Group. In accordance with the contracts of the member of the management board, the Management Board Member has been awarded a monthly basic remuneration and, upon termination of the contract, the severance pay prescribed on the initiative of the Supervisory Board in the amount of up to three months' remuneration, the performance pay is not prescribed for the Member of the Management Board.

Remuneration of Torfinn Losvik, Member of the Executive Board:

thousand €	2017	2018	2019	2020	2021
Total remuneration	73	73	56	72	72
Incl. basic remuneration	73	73	56	72	72
Incl. performance pay	0	0	0	0	0

Under the terms of the contract of the Member of the Management, Torfinn Losvik has been paid monthly basic remuneration of € 6 thousand and annual remuneration of € 72 thousand in total in 2021.

Until 31.12.2020, Torfinn Losvik had a share option agreement for a total of 300,000 share options, such share option agreement was signed 11 October 2017. Strike price was higher (€ 0.506) compared to the market price (€ 0.45 as of 31.12.2020) and the option agreement was not used, thus the option reserve was released and accounted in retained earnings.

Annual change in the remuneration of Torfinn Losvik, member of the Executive Board, performance of the Group, and average remuneration of full-time employees of the Group:

	2017	2018	2019	2020	2021
Net profit growth	87,9%	(602,1%)	(56,9%)	176,8%	11,9%
Increase in manager reuneration	-*	0,0%	(23,7%)	28,9%	0,0%
Increase in the average remuneration of	7,1%	8,7%	23,1%	(6,0%)	9,0%
full-time employees

* The term of office of Board Member Torfinn Losvik started on 02.01.2017, therefore the increase in the remunerationof the management board member in 2017 is not comparable to the previous year.

COMPATIBILITY OF REMUNERATION WITH THE REMUNERATION PRINCIPLES

The basic remuneration of a manager is determined on the basic remuneration would be sufficiently motivating for the manager to act in the best interests of Nordic Fibreboard, fairly and in accordance with the law, and to refrain from acting in the personal or other interests.

ENVIRONMENTAL POLICY

According to the Environmental Pollution Prevention and Control Act, both the Pärnu and Püssi factories have environmental permits of indefinite duration for special water use and air pollution. Adherence to the requirements of the permits ensures that production activity has a minimal impact on the environment, the requirements set out in the environmental permit ensure the protection of water and air in an environmentally generated waste in an environmentally sound manner. As of 01.01.2020, the amended Waste Act is in force, on basis of which § 73 (2) a waste permit is required for the generation of waste only upon extraction or enrichment of mineral resources. Consequently, Nordic Fibreboard is not obliged to have a waste permit for waste generation.

To meet the requirements of the Packaging Act, in 2005 the Company entered into a contract with the Estonian Recovery Organisation (ERO). Under the contract, all responsibilities of Nordic Fibreboard AS related to packaging collection, recovery and related reporting were transferred to ERO. The contract ensures that all end consumers may return the packaging free of charge to containers bearing the Green Point sign.

The Forest Stewardship Council (FSC) is an international non-profit independent organisation the goal of which is foster environmentally friendly forest management. By possessing the FSC certificate we support such forest management goals that will preserve biodiversity, productivity and natural processes of forests. Upon implementation of the FSC policy, Nordic Fibreboard AS precludes the use of such timber that has been felled illegally; that comes from genetically modified trees, that comes from regions where traditional or civil rights are violated and timber which is not certified in old growth forests with high conservation value. The soft fibre factories hold the FSC certificate since 14 January 2011. From 27th of November 2018 Nordic Fibreboard Ltd OÜ has been assessed and certified as meeting the requirements of PEFC standard. The Certificate is valid from 27th of November 2018 to 26th of November 2023.

WATER USAGE AND WASTEWATER DISCHARGE

thousands of m³	2021	2020	Change %
Water usage:	100.1	118.7	(16%)
groundwater (own bore wells)	27.8	52.1	(47%)
surface water	72.3	66.7	8%
Water discharge:	77.8	90.7	(14%)
conditionally clean wastewater	11.5	10.9	6%
wastewater	66.3	79.9	(17%)
Water loss	22.2	28.0	(21%)

€ thousand	2021	2020	Change %
Water usage:	4,5	7.1	(37%)
groundwater (own bore wells)	2.4	5.1	(53%)
surface water	2.1	2.0	7%
Water discharge:	132.7	149.6	(11%)
wastewater	132.7	149.6	(11%)
Total expenses	137.2	156.7	(12%)

MAIN POLLUTANTS

tons	2021	2020	Change %
Volatile organic components	7.2	6.5	10%
Organic dust	44.9	34.7	29%
Total	52.1	41.3	26%

WASTE HANDLING

€thousand	2021	2020	Change %
Handling of hazardous waste	0,2	0.0	100%
Handling of non-hazardous waste	28.4	33.2	(15%)
Total expenses	28.6	33.2	(14%)

€thousand	2021	2020	Change %
Sales of metal waste	3.9	1.3	204%
Total conditionl income	3.9	1.3	204%

MANAGEMENT BOARD'S CONFIRMATIONS

The Management Board has prepared the management report and the consolidated financial statements of Nordic Fibreboard AS for the financial year ended 31 December 2021.

The Management Board confirms that the management report, corporate governance report and remuneration report on pages 4-18 provides a true and fair view of the business operations, financial results and financial condition of the parent company and the entities included in consolidation as a whole and confirms their correctness and completeness.

The Management Board confirms that according to their best knowledge the consolidated financial report on pages 20-63 presents a fair view of the assets, liabilities, financial position and profit or loss of the issuer and the entities involved in the consolidation as a whole according to the International Financial Reporting Standards as they are adopted by the European Union and contains a description of the main risks and doubts.

/signed digitally/

Torfinn Losvik

Chairman of the Management Board ............................................

Pärnu, April 18, 2022

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

€ thousand	31.12.2021	31.12.2020
Cash and cash equivalents	57	26
Receivables and prepayments (Note 5)	902	794
Inventories (Note 6)	390	544
Total current assets	1,349	1,364

Investment property (Note 7)	1,152	1,134
Financial assets at fair value through profit or loss (Note 9)	644	451
Property, plant and equipment (Note 8)	4,915	4,695
Intangible assets (Note 8)	3	6
Total non-current assets	6,714	6,286
TOTAL ASSETS	8,063	7,650

Borrowings (Notes 10)	146	756
Payables and prepayments (Notes 11)	829	1,574
Short-term provisions (Note 12)	19	18
Total current liabilities	994	2,348
Long-term borrowings (Notes 10)	3,074	2,493
Long-term provisions (Note 12)	145	161
Total non-current liabilities	3,219	2,654
Total liabilities	4,213	5,002
Share capital (at nominal value) (Note 13)	450	450
Retained earnings (loss)	3,400	2,198
Total equity	3,850	2,648

TOTAL LIABILITIES AND EQUITY	8,063	7,650

*The notes to the financial statements presented on pages 24 to 63 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

€ thousand	2021	2020

Revenue (Note 22)	10,096	10,269
Cost of goods sold (Note 15)	7,294	8,099
Gross profit	2,802	2,170
Distribution costs (Note 16)	1,168	1,283
Administrative expenses (Note 17)	565	605
Other operating income (Note 19)	5	42
Other operating expenses (Note 20)	15	342
Operating profit (loss)	1,059	(19)
Finance income (Note 21)	265	1,291
Finance costs (Note 21)	122	199
LOSS BEFORE INCOME TAX	1,202	1,074
NET PROFIT FOR THE FINANCIAL YEAR	1,202	1,074

Basic earnings per share (€) (Note 14)	0.27	0.24
Diluted earnings per share (€) (Note 14)	0.27	0.24

*The notes to the financial statements presented on pages 24 to 63 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

€ thousand	2021	2020
Cash flows from operating activities
Operating profit (loss)	1,059	(19)
Adjustments:
Depreciation charge (Note 8)	497	560
Profit/loss from revalution of real estate investment (Note 7)	0	(5)
Profit/loss from sale of non-current asset (Note19)	(2)	(28)
Profit/loss on non-current asset write-off (Note 20)	0	2
Profit/loss from revaluation financial assets (Notes 21)	0	(53)
Non-monetary transactions: reserve for share option	0	32
Change in trade and other receivables (Note 5)	(108)	600
Change in inventories (Note 6)	154	350
Change in trade and other payables (Note 11)	(745)	(1,091)
Cash generated from operations	855	348
Interest payments (Note 21)	(118)	(192)
Net other financial income and expense (Note 21)	(7)	(6)
Net cash generated from operating activities	730	150
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (Note 8)	(643)	(78)
Disposal of property, plant and equipment and intangible assets	2	29
Purchase of real estate investment (Note 7)	(18)	(7)
Payout from share capital reduction (Note 9)	72	0
Net cash used in investing activities	(587)	(56)
Cash flows from financing activities
Loans received (Note 10)	1,200	1,200
Repayment of loans received (Note 10)	(1,266)	(853)
Loans received from related parties (Note 10)	503	549
Repayment of loans received from related parties (Note 10)	(503)	(569)
Repayment of principal element of lease liabilities (Note 10)	(46)	(62)
Change in overdraft (Note 10)	0	(340)
Net cash (used in)/from financing activities	(112)	(75)
NET CHANGE IN CASH	31	19
OPENING BALANCE OF CASH	26	7
CLOSING BALANCE OF CASH	57	26

*The notes to the financial statements presented on pages 24 to 63 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

€ thousand	Share capital	Share premium	Statutory reserve capital	Other reserves	Retained earnings	Total

Balance at 31.12.2019	2,699	364	288	84	(1,894)	1,542
Share options 2020	0	0	0	(84)	116	32
Other changes	0	(364)	(288)	0	652	0
Change in share capital	(2,250)	0	0	0	2,250	0
Net profit for 2020	0	0	0	0	1,074	1,074
Total comprehensive income for 2020	0	0	0	0	1,074	1,074
Balance at 31.12.2020	450	0	0	0	2,198	2,648

Net profit for 2021	0	0	0	0	1,202	1,202
Total comprehensive income for 2021	0	0	0	0	1,202	1,202
Balance at 31.12.2021	450	0	0	0	3,400	3,850

* More detailed information about share capital and changes in equity is disclosed in Note 13.

*The notes to the financial statements presented on pages 24 to 63 are an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 GENERAL INFORMATION

General information about Nordic Fibreboard AS (hereinafter the Company) (with previous names Viisnurk AS and Skano Group AS):

Name of reporting entity or other means of identification	AS Nordic Fibreboard
Explanation of change in name of reporting entity or other means of identification from end of preceding reporting period	Until 07.12.2020, the legal address was Suur-Jõe 48, 80042 Pärnu, Republic of Estonia
Domicile of entity	Rääma 31, 80044 Pärnu, Republic of Estonia
Legal form of entity	Public Limited Company
Country of incorporation	Republic of Estonia
Address of entity's registered office	Rääma 31, 80044 Pärnu, Republic of Estonia
Principal place of business	Republic of Estonia
Description of nature of entity's operations and principal activities	Production and wholesales of fibreboards
Name of parent entity	OÜ Pärnu Holdings
Name of ultimate parent of group	OÜ Pärnu Holdings

The consolidated financial statements prepared for the financial year ended 31 December 2021 include the financial information of the Company and its 100% subsidiaries (together referred to as the Group):

	Nordic Fibreboard Ltd OÜ	Skano Furniture OÜ	Pärnu Riverside Development OÜ	Suomen Tuulileijona OY
Domicile	(Estonia)	(Estonia)	(Estonia)	(Finland)
Share %	100	100	100	100

Nordic Fibreboard AS was established on 19 September 2007 in the demerger of the former Skano Group AS, currently AS Trigon Property Development, as a result of which the manufacturing units, i.e. the building materials division and furniture division were spun off and transferred to the new entity.

The Group's shares were listed in the Main List of the Nasdaq Tallinn until 2nd of April 2018, when the shares were moved from the Main List to the Secondary List. The Group`s largest shareholder is Pärnu Holdings OÜ (owning 57.63%), and its largest owners as of 31 December 2021 are OÜ Stetind (49.75%) and Joakim Johan Helenius (49.75%), as of 31 December 2020 the largest owners were OÜ Stetind (46.99%) and Joakim Johan Helenius (46.44%).

In addition to the production and sale of softboard, the Group also handles real estate management to a small extent.

The Management Board of Nordic Fibreboard AS authorised these consolidated financial statements for issue on 18 April, 2022. Pursuant to the Commercial Code of the Republic of Estonia, the financial statements are subject to approval by the Supervisory Board of Nordic Fibreboard AS and the General Meeting of Shareholders. Shareholders have the right not to approve the annual report prepared and approved by the Management Board, and request preparation of a new annual report.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless stated otherwise.

A. BASIS OF PREPARATION

The 2021 consolidated financial statements of Nordic Fibreboard AS have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union (IFRS).

The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of the financial statements in accordance with IFRS requires management to make assumptions and pass judgements, which affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and related assumptions are based on the historical experience and several other factors that are believed to be relevant and that are based on circumstances which help define principles for the evaluation of assets and liabilities and which are not directly available from other sources. Actual results may not coincide with these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognised prospectively after the period in which a change in the estimate occurred. Note 4 includes those areas which require more complicated estimates and where accounting estimates and assumptions have a material impact on the information recognised in the financial statements.

CHANGES IN ACCOUNTING POLICIES

a) Adoption of New or Revised Standards and Interpretations

The following new or revised standards and interpretations became effective for the Group from 1 January 2021:

Covid-19-Related Rent Concessions – Amendments to IFRS 16 (effective for annual periods beginning on or after 1 June 2020).

The amendments provided lessees (but not lessors) with relief in the form of an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as a variable lease payment. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met:

the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
any reduction in lease payments affects only payments due on or before 30 June 2021;
and there is no substantive change to other terms and conditions of the lease.

If a lessee chooses to apply the practical expedient to a lease, it would apply the practical expedient consistently to all lease contracts with similar characteristics and in similar circumstances. The amendment is to be applied retrospectively in accordance with IAS 8, but lessees are not required to restate prior period figures or to provide the disclosure under paragraph 28(f) of IAS 8.

The Group assesses that there is no material impact of application of the amendments to its financial statements.

There are no other new or revised standards or interpretations that are effective for the first time for the financial year beginning on or after 1 January 2021 that would be expected to have a material impact to the Group.

b) New accounting pronouncements

Certain new or revised standards and interpretations have been issued that are mandatory for the Group's annual periods beginning on or after 1 January 2022, and which the Group has not early adopted.

Covid-19-Related Rent Concessions – Amendments to IFRS 16 (effective for annual periods beginning on or after 1 April 2021).

In May 2020 an amendment to IFRS 16 was issued that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments due on or before 30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the practical expedient from 30 June 2021 to 30 June 2022.

The Group assesses that there is no material impact of application of the amendments to its financial statements.

Classification of liabilities as current or non-current – Amendments to IAS 1 (effective for annual periods beginning on or after 1 January 2023; not yet adopted by the EU).

These narrow scope amendments clarify that liabilities are classified as either current or noncurrent, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management's expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. 'Settlement' is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity's own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument.

The Company expects that there will not be a material impact on the Group's financial position, performance nor cash flows.

Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (Effective for annual periods beginning on or after 1 January 2022; not yet adopted by the EU).

The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items, together with the costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended use. The amendment to IAS 16 also clarifies that an entity is 'testing whether the asset is functioning properly' when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intended

by management and subject to depreciation before it has achieved the level of operating performance expected by management.

The amendment to IAS 37 clarifies the meaning of 'costs to fulfil a contract'. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract.

IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3 referred to the 2001 Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3 was added for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without this new exception, an entity would have recognised some liabilities in a business combination that it would not recognise under IAS 37. Therefore, immediately after the acquisition, the entity would have had to derecognise such liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date.

The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test.

Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.

IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure its assets and liabilities at the carrying amounts that would be included in its parent's consolidated financial statements, based on the parent's date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences using the amounts reported by the parent, based on the parent's date of transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption.

The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis.

The Group does not expect the amendments to have a material impact on its financial statements when initially applied.

Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (effective for annual periods beginning on or after 1 January 2023; not yet adopted by the EU).

IAS 1 was amended to require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendment provided the definition of material accounting policy information. The amendment also clarified that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to understand other material information in the financial statements. The amendment provided illustrative examples of accounting policy information that is likely to be considered material to the

entity's financial statements. Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not obscure material accounting policy information. To support this amendment, IFRS Practice Statement 2, 'Making Materiality Judgements' was also amended to provide guidance on how to apply the concept of materiality to accounting policy disclosures.

The Group does not expect the amendments to have a material impact on its financial statements when initially applied.

Amendments to IAS 8: Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023; not yet adopted by the EU).

The amendment to IAS 8 clarified how companies should distinguish changes in accounting policies from changes in accounting estimates.

The Group does not expect the amendments to have a material impact on its financial statements when initially applied.

The other new and revised standards are interpretations that are not yet effective are not expected to have a material impact on the Group.

B. COMPARABILITY

The financial statements have been prepared in accordance with the consistency and comparability principles, the nature of the changes in methods and their effect is explained in the respective notes. When the presentation of items in the financial statements or their classification method has been amended, then also the comparative information of previous periods has been restated.

C. FOREIGN CURRENCY TRANSACTIONS, FINANCIAL LIABILITIES AND ASSETS DENOMINATED IN A FOREIGN CURRENCY

(A) FUNCTIONAL AND PRESENTATION CURRENCY

Items included in the consolidated financial statements of each of the Group's entities are measured using the currency of their primary economic environment (the functional currency). The consolidated financial statements are presented in euros (€), which is the functional currency of the parent and the presentation currency of the Group.

The consolidated financial statements are presented in thousands of euros (€), which is in compliance with the requirements of the Nasdaq Tallinn.

(B) FOREIGN CURRENCY TRANSACTIONS, ASSETS AND LIABILITIES DENOMINATED IN A FOREIGN CURRENCY

Foreign currency transactions have been translated into the functional currency using the official exchange rate of the European Central Bank prevailing at the transaction day. Exchange rate differences between the cash transfer date and the transaction date, the currency translation differences are recognised in the consolidated income statement. Monetary assets and liabilities denominated in a foreign currency are translated using the official euro exchange rate of the European Central Bank applicable at the end of the reporting period. Any translation gains and losses are recognised in the consolidated income statement. Gains and losses on translation of payables and cash and cash equivalents are recognised as finance income and costs in the consolidated income statement; other gains and losses from exchange rate changes are recognised as other operating income or operating expenses.

(C) CONSOLIDATION OF FOREIGN ENTITIES

The functional currency of the Group`s foreign subsidiaries does not differ from the presentation currency of the Group.

(D) PRINCIPLES OF CONSOLIDATION AND ACCOUNTING FOR SUBSIDIARIES

All subsidiaries have been consolidated in the Group's financial statements. Subsidiaries are all entities over which the Group has control. 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. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary or business unit is the fair values of the assets transferred, the liabilities incurred, 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 measured initially at their fair values at the acquisition date. On an acquisition-byacquisition basis, the Group recognizes any non-controlling interest in the acquirer either at fair value or at the non-controlling interest's proportionate share of the acquirer's net assets.

Goodwill is initially recognised as the amount by which the consideration transferred, and the value of non-controlled interests exceeds the fair value of identifiable assets and transferred liabilities. If this amount is lower than the fair value of net assets of the acquired subsidiary, the difference is recognised in the income statement.

In the consolidated financial statements, the financial statements of the subsidiaries under the control of the Parent company (except for the subsidiaries acquired for resale) are combined on a line-by-line basis. Intercompany balances, transactions and unrealised gains on transactions between Group companies are eliminated; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset. The Group and all of its subsidiaries use uniform accounting policies consistent with the Group's policies. Where necessary, the accounting policies of the subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

Revenues and expenses of the subsidiaries acquired within the financial year are consolidated into the Group's statement of profit or loss and other comprehensive income starting from the date of acquisition to the end of the financial year. Result of operations of subsidiaries disposed of during the year are consolidated into Group's statement of profit or loss and other comprehensive income from the beginning of the financial year until the date of disposal.

Pursuant to the Accounting Act of the Republic of Estonia, information of the unconsolidated financial statements (primary statements) of the consolidating entity (parent company) shall be disclosed in the notes to the consolidated financial statements. In preparing the primary financial statements of the parent company, the same accounting policies have been used as in preparing the consolidated financial statements. The accounting policy for accounting subsidiaries has been amended in the separate primary financial statements disclosed as supplementary information in the Annual Report in conjunction with IAS 27 "Separate Financial Statements".

In the parent separate primary financial statements, disclosed in these consolidated financial statements (see Note 26 Supplementary disclosures on the Group`s parent), the investments into the shares of subsidiaries are accounted for at cost less any impairment recognised.

(E) FINANCIAL ASSETS

Classification

The Group classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value (either through OCI or through profit or loss);
those to be measured at amortised cost.

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Group's business model for managing the asset and the cash flow characteristics of the asset.

All Group's debt instruments are classified in amortised cost measurement category.

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income/(expenses). Foreign exchange gains and losses and impairment losses are presented as separate line items in the statement of profit or loss.

As at 1 January 2021 and 31 December 2021, the following financial assets of the Group were classified in this category:

o trade receivables;
o cash and cash equivalents.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group's management has made an irrevocable election to present in OCI the fair value gains and losses on equity investments that are not held for trading, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognised in other income/(expenses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Impairment

The Group assesses on a forward-looking basis the expected credit losses ("ECL") associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.

For trade receivables without a significant financing component the Group applies a simplified approach permitted by IFRS 9 and measures the allowance for impairment losses at expected lifetime credit losses from initial recognition of the receivables. The Group uses a provision matrix in which allowance for impairment losses is calculated for trade receivables falling into different ageing or overdue periods.

(F) CASH AND CASH EQUIVALENTS

For the purposes of the statement of financial position and the cash flow statement, cash and cash equivalents comprise cash on hand, bank account balances (except for overdraft) and term deposits with maturities of three months or less. Cash and cash equivalents are carried at the adjusted acquisition cost.

(G) TRADE RECEIVABLES

Trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest method, less a provision for impairment.

Impairment of receivables is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Evidence of potential impairment includes the bankruptcy or major financial difficulties of the debtor and non-adherence to payment dates. The impairment of the receivables that are individually significant (i.e. need for a writedown) is assessed individually for each customer, based on the present value of expected future collectible amounts. Receivables that are not individually significant or for which no objective evidence of impairment exists, are collectively assessed for impairment using previous years' experience on uncollectible receivables. The amount of loss of the impaired receivables is the difference between the carrying amounts of receivables and the present value of expected future cash flows discounted at the original effective interest rate. The carrying amount of receivables is reduced by the amount of doubtful receivables and the impairment loss is recognised in profit or loss within Other operating expenses. If a receivable is deemed irrecoverable, the receivable and its impairment loss are taken off the financial position statement. The collection of the receivables that have previously been written down is accounted for as a reversal of the allowance for doubtful receivables.

(H) INVENTORIES

Inventories are stated at the lower of acquisition cost and net realisable value. Inventories are initially recognised at acquisition cost which consists of purchase costs, direct and indirect production costs and other costs incurred in bringing the inventories to their current condition and location.

In addition to the purchase price, purchase costs also include custom duties, other non-refundable taxes and directly attributable transport, less discounts and subsidies. The production costs of inventories include costs directly related to the units of production (such as direct raw materials and materials and packing material costs, unavoidable storage costs related to work in progress, direct labour costs), and also fixed and variable production overheads that are allocated to the cost of products on the basis of normal production capacities.

The weighted average cost method is used for the evaluation of inventories at the Group.

The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The amount of the inventory write-down is recognised in the income statement line Cost of goods sold.

(I) INVESTMENT PROPERTY

Real estate properties (land, buildings) that the Group owns or leases to earn lease income or for capital appreciation, and that are not used for the Group's operating activities, are classified as investment property.

Real estate properties consist of land owned by the Group that is not used by the Group for its own economic activities (plots of Suur-Jõe 48 and Rääma 31).

Investment property is initially measured at its cost, including related transaction costs. Investment properties are subsequently carried at fair value, which based on yearly market price set by an independent valuer or market, based in the prices of recent transactions for similar items (adjusting for estimates for differences) or using the discounted cash flow method. Changes in fair value are recognized in the income statement in line item "Other operating income". Investment property carried at fair value is not deprecated.

Subsequent costs are included in the carrying amount of the investment property when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the period in which they are incurred.

Real estate that is being constructed or developed for future use as investment property is recognized as investment property.

(J) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are non-current assets used in the operating activities of the Group with a useful life of over one year and with a cost of 1000 euro. An item of property, plant and equipment is initially recognised at its cost which consists of the purchase price (including customs duties and other non-refundable taxes) and other expenditures directly related to the acquisition that are necessary for bringing the asset to its operating condition and location. Borrowing costs related to the acquisition of non-current assets, the completion of which occurs over a longer period of time, are included in the cost of non-current assets. The cost of a self-constructed asset is determined using the same principles as for an acquired asset.

Costs of reconstruction and improvements are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the asset can be measured reliably. All other repair and maintenance costs are charged to the income statement during the period in which they are incurred.

Property, plant and equipment are subsequently carried at cost less accumulated depreciation and any impairment losses (see accounting policy L). The difference between the acquisition cost and the residual value of an asset is depreciated over the useful life of the asset. Each part of an item with a cost that is significant in relation to the total cost of the item and with a useful life different from other significant parts of that same item is depreciated separately based on its useful life.

Depreciation is calculated based on useful lives of items of property, plant and equipment, using the straight-line method. The annual depreciation rates applied to individual assets by groups of property, plant and equipment are as follows (per cent):

buildings and facilities 2 15
machinery and equipment 10 50

motor vehicles 10 40
other fixtures and fittings 20 50
information technology equipment 30 50
land is not depreciated

Depreciation of an asset begins when the asset is available for use for the purpose intended by management and is ceased when the residual value exceeds the carrying amount, when the asset is permanently withdrawn from use or upon its reclassification as held for sale. At each balance sheet date, the appropriateness of the depreciation rates, the depreciation method and the residual values are reviewed.

Where an asset's carrying amount exceeds its estimated recoverable amount (higher of an asset's fair value less costs to sell and its value in use), it is written down immediately to its recoverable amount (see the accounting policy in Section L).

Items of property, plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Gains or losses arising from the disposal of items of property, plant and equipment are included either within other operating income or other operating expenses in the income statement.

Items of property, plant and equipment that are expected to be sold within the next 12 months and for which the management has commenced active sales activities, and which are offered for sale at their fair value for a realistic price are reclassified as assets held for sale.

(K) INTANGIBLE ASSETS

Intangible assets are recognised in the financial statements only if the following terms have been satisfied:

the asset is controlled by the Group;
it is probable that the Group will benefit from the use of the asset in the future;
acquisition cost of the asset can be reliably measured.

Intangible assets are amortised by using the straight-line method during the estimated useful life.

Intangible assets are tested for impairment if there are circumstances indicating such a possibility, similarly with the evaluation of impairment of property, plant and equipment.

Expenses related to current maintenance of computer software are recognised as cost at the time they are incurred. Purchased computer software that is not an inseparable part of specific hardware is recognised as intangible asset. Intangible assets with finite useful lives are amortised over their useful lives (2.5-5 years) using the straight-line method. The Group has no intangible assets with indefinite useful lives.

(L) IMPAIRMENT OF NON-FINANCIAL ASSETS

Assets that are subject to depreciation and amortisation, and assets with unlimited useful lives (land) are reviewed for any indication of impairment. Whenever such indication exists, the recoverable amount of the asset is estimated and compared with the carrying amount. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. If the fair value of an asset less sales expenses cannot be determined, the recoverable amount of the asset is its market value. The value in use of assets is determined as the current value of estimated cash flows generated in the future. Impairment of assets is estimated if following possible circumstances exist:

market value of similar assets has decreased;
general economic environment and the market situation has deteriorated which makes it probable that revenue generated from assets will decrease;

interest rates of market have increased;
physical condition of assets has suddenly deteriorated;
income received from assets are lower than planned;
results of some areas of activity are worse than expected;
activities of certain money-earning units are planned to be terminated.

An impairment test is also carried out if the Group identifies other circumstances indicating loss of value of assets.

For impairment, the recoverable amount is evaluated either for a single asset item or for the smallest possible group of assets for which cash flow can be identified (cash generating unit). A cash generating unit is the smallest separately group of identifiable assets the cash flow generated can be forecast for significant part regardless of cash flow generated from the rest of assets. The impairment loss is expensed immediately in the income statement.

At the end of every reporting period it is assessed whether there are circumstances indicating that the impairment loss of assets recognised in previous years no longer exists or it has decreased. If any such circumstance exists, the recoverable amount of the asset is re-evaluated. In accordance with the results of the test, the impairment can be reversed in part or in full. Earlier loss is reversed only to the degree where the carrying amount does not exceed the carrying amount of such assets considering normal amortization of earlier years.

(M) LEASES

Lessees are 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;
(b) depreciation of lease assets separately from interest on lease liabilities in the income statement.

The Group leases various machinery and equipment used in economic activities. Rental contracts are typically made for fixed periods of up to 5 years but as a rule, include extension and termination options. Lease terms are negotiated on an individual basis and may contain a wide range of different terms and conditions.

The Group recognises as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use.

Lease liabilities were recognised as present value of lease payments. The right-of use assets were measured at the amount equal to the lease liability, as no adjustments to right of use assets were necessary. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life or the lease term on a straight-line basis.

Lease liabilities include the net present value of the following lease payments:

fixed payments, less any lease incentives receivable,
variable lease payment that are based on some kind an index (for example inflation, Euribor),
amounts expected to be payable by the lessee under residual value guarantees,
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option.

The lease payments are discounted using the interest rate implicit in the lease, if it is readily determinable, or the Group's incremental borrowing rate. The alternative interest rate is the rate of interest that a lessee would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

Short-term leases are leases with a lease term of 12 months or less. Low value assets comprise ITequipment and small items of office furniture. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The management reviews the assessment if a significant event or a significant change in circumstances occurs which affects the probability of using options and that is within the control of the management. Alternatively, the extension period of the contract has changed (for example, Group has exercised an option, which initially was considered reasonably uncertain or has not exercised an option, which was initially considered reasonably certain).

According to the contracts, Group has not granted any residual value guarantees in the end of the contracts.

The lease payments are discounted at the alternative interest rate range 2.19-2.49%.

(N) FINANCIAL LIABILITIES

Financial liabilities (trade payables, borrowings, accrued expenses and other short and long-term borrowings) are initially recognised at their fair value and subsequently measured at amortised cost using the effective interest rate method. Upon the initial recognition of such financial liabilities which are not accounted for at fair value through profit or loss, the transactions costs directly attributable to the acquisition are deducted from their fair value.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are charged to period financial expenses.

The amortised cost of current financial liabilities generally equals their nominal value; therefore, current financial liabilities are carried in the statement of financial position in their redemption value. For determining the amortised cost of non-current financial liabilities, they are initially recognised at the fair value of the consideration received (less any transaction costs), calculating interest expense on the liability in subsequent periods using the effective interest rate method.

A financial liability is classified as current when it is due to be settled within 12 months after the balance sheet date or the Group does not have an unconditional right to defer settlement of the liability for more than 12 months after the balance sheet date. Borrowings due to be settled within 12 months after the balance sheet date that are refinanced as long-term after the balance sheet date but before the financial statements are authorised for issue, are recognised as current liabilities. Borrowings that the lender has the right to recall at the balance sheet date because of a breach of contractual terms are also recognised as current liabilities.

(O) PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognised in the statement of financial position when the Group has a present legal or contractual obligation which has arisen as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of the liability can be reliably estimated.

The provisions are recognised based on management's (or independent experts') estimates regarding the amount and timing of the expected outflows. Risks and uncertainties are taken into consideration when measuring provisions; the provisions for which the effect of the time value of money is significant are discounted. The increase of the provision due to the passage of time is recognised as an interest expense.

Other commitments that in certain circumstances may become obligations, but it is not probable that an outflow of resources will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability are disclosed in the notes to the financial statements as contingent liabilities.

Provision for long-term disability compensations

Under law, the Group is obliged to pay compensation to employees for permanent injuries incurred during their employment at the Group. The level of the benefit depends on the extent of disability, the average monthly salary of the employee prior to injury, and the changes in pension payments by the state. The level of the benefit does not depend on the length of service. For the Group, the obligation to pay benefits arises at the time when the degree of the employee's incapacity for work is determined.

Disability compensation is recognised in the statement of financial position in its discounted present value. In measuring the liability, management has used demographic assumptions (such as mortality), and financial assumptions (e.g. the discount rate and future benefit levels).

The rate used to discount the obligation is determined by reference to market yields at the balance sheet date on high quality corporate bonds, the currency and term of which are consistent with the currency and estimated term of the obligation.

(P) LIABILITIES TO EMPLOYEES

Short-term labour expenses

Payables to employees contain the contractual right arising from employment contracts and performance-based pay which is calculated on the basis of Group's financial results and meeting of objectives set for the employees. Performance-based pay is included in period expenses and as a liability if it is paid out in the next financial year.

Pursuant to employment contracts and current legislation, payables to employees also include an accrued holiday pay liability as at the balance sheet date. This liability also includes accrued social and unemployment taxes calculated on it.

Disability compensation (see accounting policy O).

(Q) TAXATION

Corporate income tax

Corporate income tax in Estonia:

According to the current legislation, the annual profit earned by entities is not taxed in Estonia. Corporate income tax is paid on dividends, fringe benefits, gifts, donations, costs of entertaining guests, non-business-related disbursements and adjustments of the transfer price. From 1 January 2015, the tax rate on the net dividends paid out of retained earnings is 20/80. The corporate income tax arising from the payment of dividends is recognised as a liability and an income tax expense in the period in which dividends are declared, regardless of the period for which the dividends are paid or the actual payment date. An income tax liability is due on the 10th day of the month following the payment of dividends.

From 2019, tax rate of 14/86 can be applied to dividend payments. The more beneficial tax rate can be used for dividend payments in the amount of up to the average dividend payment during the three preceding years that were taxed with the tax rate of 20/80. When calculating the average dividend payment of three preceding years, 2018 will be the first year to be considered.

Due to the nature of the taxation system, the companies registered in Estonia do not have any differences between the tax bases of assets and their carrying amounts and hence, no deferred income

tax assets and liabilities arise. However, according to the decision of the IFRS Interpretation Committee in June 2020, the parent is required to recognize an income tax liability on the profits on the subsidiary unless profits are not planned to be distributed to parent company in the foreseeable future. As the Group does not plan to take dividends from the Nordic Fibreboard Ltd OÜ profits of 2021 due to large losses in previous years, no deferred tax liability has been recognized for the profits of the subsidiary in the Group's consolidated financial statements. The maximum income tax liability which would accompany the distribution of the Group's retained earnings is disclosed in the notes to the financial statements.

Corporate income tax in other countries:

According to local income tax legislation, the profits of entities in Finland and Lithuania are adjusted for the permanent and temporary differences provided by law. Pursuant to tax legislation, temporary differences arise between the carrying amounts and tax bases of assets and liabilities; therefore, deferred income tax liabilities and assets arise.

	2021	2020	2019
Lithuania	15%	15%	15%
Finland	20%	20%	20%

In Lithuania, corporate profits are subject to income tax. The corporate income tax rate is 15% in Lithuania on taxable income. Taxable income is calculated by adjusting profit before tax for permanent and temporary differences as permitted by local tax laws.

For Lithuanian subsidiaries, the deferred income tax assets and liabilities are determined for all temporary differences between the tax bases of assets and liabilities and their carrying amounts on the balance sheet date. Deferred corporate income tax is calculated on the basis of tax rates applicable on the balance sheet date and current legislation, expected to prevail when the deferred tax assets are settled. Deferred tax assets are recognised in the balance sheet only when it is probable that future taxable profit will be available against which the deductions can be made.

In Finland, corporate profits are subject to income tax, the corporate income tax rate is 20%. Corporate income tax is paid in the form of advance payments, which are determined by a separate decision of the Finnish tax authorities on the basis of the taxable operating profit for the entrie financial year preceding the financial year.

As at 31.12.2021 and 31.12.2020, the subsidiaries did not have any deferred tax assets and liabilities. The management of the Group estimates that the realisation of the income tax asset is not reliably assessable, thus it is not recorded in the financial statements.

(R) REVENUE

Revenue is income arising in the course of the Group's ordinary activities. Revenue is measured in the amount of transaction price. Transaction price is the amount of consideration to which the Group expects to be entitled in exchange of transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a good or service to a customer.

Sale of goods – wholesale

The Group manufactures and sells fibreboard products in the wholesale market. Sales are recognised when control of the products has transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in

accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

Fibreboard products are often sold with retrospective volume discounts based on aggregate sales over a 12 months period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected volume discounts payable the wholesaler in relation to sales made until the end of the reporting period.

No element of financing is deemed present as the sales are made with a credit term of 45-90 days, which is consistent with market practice.

A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

If the Company provides any additional services to the customer after control over the goods has passed, revenue from such services is considered to be a separate performance obligation and is recognised over the time of the service rendering.

Sale of goods – retail

Until the end of January 2020, the Group operated a chain of retail stores selling furniture products and accessories. Revenue from the sale of goods was recognised when the Group sold the product to the customer, ie delivery in store.

Payment of the transaction price was due immediately when the customer bought and took the product.

Under the Group's standard contract terms, customers had the right of return within 14 days. At the point of sale, a refund liability and a corresponding adjustment to revenue were recognised for those products expected to be returned. At the same time, the Group has a right to recover the product when customers exercise their right of return so consequently recognises a right to returned goods asset and a corresponding adjustment to cost of sales. The Group used its accumulated historical experience to estimate the number of returns on a portfolio level using the expected value method. Because the number of products returned had steady for years, it was highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.

If the Group provides any additional services to the customer after control over the goods has passed, revenue from such services was considered to be a separate performance obligation and was recognised over the time of the service rendering.

Financing component

Group does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. Consequently, the Group does not adjust any of the transaction prices for the time value of money.

(S) CASH FLOW STATEMENT

The cash flow statement is prepared using the indirect method. Cash flows from operating activities are determined by adjusting the net profit for the financial year through elimination of the effect of non-monetary transactions, changes in the balances of assets and liabilities related to operating activities and revenue and expenses related to investing or financing activities. Cash flows from investing or financing activities are recognised under the direct method.

(T) STATUTORY RESERVE CAPITAL

Statutory reserve capital is formed from annual net profit allocations as well as other provisions which are entered in reserve capital pursuant to legislation or articles of association. The amount of reserve capital is stipulated in the articles of association and it cannot be less than 1/10 of share capital. Each financial year, at least 1/20 of net profit shall be entered in the reserve capital. When reserve capital reaches the level required by the articles of association, the allocations to reserve capital from the net profit may be terminated.

Based on the decision of the General Meeting of Shareholders, the statutory legal reserve may be used to cover a loss, or to increase share capital. Payments shall not be made to shareholders from the statutory legal reserve.

(U) EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit for the financial year attributable to the equity holders of the parent by the period's weighted average number of outstanding ordinary shares. Diluted earnings per share are calculated by dividing the net profit for the financial year attributable to the equity holders of the parent by the weighted average number of outstanding ordinary shares, adjusted for the effect of dilutive potential ordinary shares.

(V) EVENTS AFTER THE BALANCE SHEET DATE

Significant circumstances that have an adjusting effect on the evaluation of assets and liabilities and that became evident between the balance sheet date and the date of approving the financial statements (April 18, 2021) but that are related to the reporting period or prior periods, have been recorded in the financial statements. Non-adjusting events and the events that have a significant impact on the results of the next financial year have been disclosed in the notes to the financial statements.

(W) FACTORING

Factoring is the transfer (sale) of receivables, whereby depending on the type of the factoring contract the buyer has the right to resell the transferred receivable within time agreed (factoring with recourse) or there is no right for resale and all the risks and gain associated with the receivable are transferred from seller to purchaser (factoring without recourse). If the seller of the receivable retains the repurchase obligation, the transaction is recognised as a financing transaction (i.e. as a loan with the receivable as a collateral) and not as a sale. The receivable is not considered as sold as a result of factoring, but it remains in the financial statement position until the receivable is collected, or the recourse right has expired. The related liability is recorded similarly to other borrowings. If there is no repurchase obligation and the control over the receivable and the related risks and gain of the ownership are transferred to the buyer, the transaction is recognised as a sale of the receivable. The related expense is recognised as a finance cost (similarly to interest expense) or as an impairment loss of receivables, depending on whether the purpose of the transaction was to manage the cash flows or to manage credit risk.

(X) SHARE-BASED PAYMENTS

Until 31 December 2020 Nordic Fibreboard AS operated a share-based compensation plan, under which the company receives services from group employees as consideration for equity instruments (options) of Nordic Fibreboard AS. The fair value of the services received in exchange for the grant of the options is recognised during the share-based compensation program as staff expense and as an increase in the equity (other reserves). The total amount to be expensed is determined by the fair value at the time of issuing the options. The fair value of the options granted:

including any market performance conditions influencing the share price (e.g. Nordic Fibreboard AS share price);
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 period).

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the vesting conditions (other than market conditions). It recognises the impact of the revision to original estimates, if any, in the statement of profit or loss, with a corresponding adjustment to equity. When the options are exercised, the Group issues new shares.

The grant by Nordic Fibreboard AS of options over its equity instruments to the Management Board members of subsidiary undertakings in the Group is treated as a capital contribution in the statement of changes in equity. 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 in the parent entity accounts. According to the contractual conditions of the share options there are no social security tax charges when exercising the options after the 3-year period.

As of 31.12.2021, Nordic Fibreboard AS has no valid option programs.

(Y) SEGMENT REPORTING

Operating segments have been determined and information about operating segments has been disclosed in a manner consistent with preparation of reporting for making management decisions and analysing the results. Segment reporting is in compliance with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Management Board of Nordic Fibreboard AS.

Segment results, assets and liabilities include items which are directly related to the segment or can be allocated to it on a reasonable basis.

NOTE 3 FINANCIAL RISK MANAGEMENT

3.1 FINANCIAL RISKS

The operations of the Group expose it to several financial risks: credit risk, liquidity risk and market risk (which involves foreign currency exchange risk and interest rate risk of cash flows). The general risk management programme of the Group focuses on unpredictability of the financial market and attempts to minimise any possible negative effects on the financial activities of the Group. The Group's financial instruments include cash for funding operating activities and receivables from debtors and payables to creditors arising in operating activities as well as loans. Management defines risk as a potential deviation from the expected results. The Group's risk management is based on the requirements of the Tallinn Stock Exchange, Financial Supervision Authority and other regulatory bodies as well as compliance with Corporate Governance Recommendations and the Group's internal regulations. Financial assets of the Group in the categories of "Cash and cash equivalents" and "Receivables" and all financial liabilities in the category of "Other financial liabilities" are carried at amortised cost.

The Group has also financial assets in the category financial assets at fair value through profit or loss, carried at fair value through profit or loss statement.

Nordic Fibreboard AS Annual Report (audited) 2021

€ thousand	31.12.2021	31.12.2020
Financial assets
Cash and cash equivalents	57	26

Recievables (Note 5)	730	686
incl. trade receivables	729	677
incl. other receivables	1	9
Financial assets at fair value through profit or loss (Note 9)	644	451
Total financial assets	1,431	1,163

Financial liabilities
Borrowings (Note 10)	3 134	3,200
Financial lease (Note 10)	86	49
Payables (Note 11)	391	1,146
incl. trade payables	367	1,110
incl. other payables	24	36
Total financial liabilities	3 611	4,395

(A) CREDIT RISK

Nordic Fibreboard AS's credit risk is the risk of the inability of its business partners to meet their contractual obligations. The Group's credit risk arises from cash and cash equivalents, deposits in banks and financial institutions as well as receivables exposed to risk.

Cash and cash equivalents

The Group approves banks and financial institutions with the credit rating of "A" as its long-term collaboration partners, however, for short period banks without a credit rating are also approved.

€ thousand	31.12.2021	31.12.2020
Credit rating "Aa3"	30	26
Credit rating "Baa2"	27	0
Total	57	26

The credit rating is derived from the website of Moody's Investor Service.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial as at 31 December 2020 and 31 December 2021.

Receivables

Pursuant to the Group's credit policy, no security is required from wholesale customers to ensure collection of receivables, but focus is laid on monitoring collection, balances of accounts receivable and compliance with payment terms on a continuous basis. In riskier markets, complete or partial prepayment, credit limits and shorter payment terms are applied.

As a rule, sales to retail customers occur in cash, using prepayments or bank credit cards, therefore there is no credit risk related to sale to retail customers except for risk related to banks and financial institutions that the Group has approved as its business partners.

As at the balance sheet date, the Group was not aware of any major risks related to accounts receivable, which had been deemed as uncollectible, see Notes 5 and 20. The Group monitors the financial position of its current and potential partners and their ability to meet the obligations they have assumed.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles

of sales over a period of 36 month before 31 December 2021 or 1 January 2021 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.

On that basis described above, the loss allowance as at 31 December 2021 and 31 December 2020 was determined immaterial.

Key customers and their share

Key customers are defined as those to whom the sales amount to more than 5% of the Group's revenue. The Group has five external customers whose revenue exceeds the previously pointed condition. Receivable balances from key customers based on overdue days:

thousand €	31.12.2021	31.12.2020
Not due	428	374
Overdue:
Up to 90 days	33	7
TOTAL	461	381

See also Note 5 for additional information regarding receivables.

As of 28.02.2022 there were no receivables outstanding from key customers and receivablesthat were outstanding as of 31.12.2021.

Non-key customer related doubtful receivables amounted to € 1 thousand for 2021, € 1 thousand for 2020 (see also Note 5 and Note 20).

(B) LIQUIDITY RISK

Liquidity risk is a potential loss arising from limited or insufficient monetary funds necessary for the meeting of obligations arising from the Group's operations. Management constantly monitors cash flow forecasts, evaluating the existence and availability of the Group's monetary resources to meet the obligations assumed and to fund the Group's strategic goals.

Analysis of financial liabilities by maturity as at 31.12.2021:

	Balance at		Undiscounted cash flows
thousand €	31.12.2021	Up to 3	4-12	2-5 years	5-6 years	Total
		months	months
Borrowings (Note 10)	3,220	60	174	3,441	0	3,674
Trade payables (Note 11)	367	367	0	0	0	367
Other payables (Note 11)	24	24	0	0	0	24
TOTAL	3,611	451	174	3,441	0	4,065

Analysis of financial liabilities by maturity as at 31.12.2020:

	Balance at	Undiscounted cash flows
thousand €	31.12.2020	Up to 3 months	4-12 months	2-5 years	5-6 years	Total
Borrowings and lease liabilities (Note 10)	3,249	90	707	1,180	1,732	3,709
Trade payables (Note 11)	1,110	1,110	0	0	0	1,110
Other payables (Note 11)	36	36	0	0	0	36
TOTAL	4,395	1,236	707	1,180	1,732	4,855

Interest rates on borrowings are set out in Note 10.

For determining cash flows for interest bearing borrowings which are based on floating interest rate, the spot interest rate in effect at the balance sheet date has been used.

As of 31.12.2021, the Group had a valid overdraft agreement (as of 31 December 2020, the Group did not have a valid overdraft agreement) and there were no valid factoring contracts as of 31.12.2021 and 31.12.2020.

The Group's working capital position was positive by 355 thousand euros as at the year end 31 December 2021 (negative by 984 thousand as at 31 December 2020). The Group liquidated its negative working capital in Q2 2021 when Nordic Fibreboard AS and its subsidiary Nordic Fibreboard Ltd entered into loan agreements with Coop Bank for the full refinancing of Swedbank AS Group loan as a result, it was possible to refinance the short-term portion of borrowings to a longer repayment schedule and strengthen the liquidity position of the Group. During 2021, the Group liquidated all overdue debts to suppliers and as of 31.12.2021, the Group has no overdue debts.

(C) MARKET RISK

Interest rate risk of cash flows

The interest rate risk of the Group's cash flows is mainly related to long-term debt obligations with a floating interest rate.

The Group is exposed to cash flow risk affected by interest rate changes, because the loan has a variable interest rate – the sensitivity analysis for fluctuation in interest rates is presented below. The management estimates that the cash flow risk related to changes in interest rates is not material, therefore financial instruments are not used to hedge risks.

The interest rate risk of Nordic Fibreboard AS depends mainly on possible changes in EURIBOR (Euro Interbank Offered Rate), because the Group's loans are tied to 6-month EURIBOR. As at 31.12.2021, 6 month EURIBOR was (0.546) (31.12.2020: 6-month was (0.526)). As EURIBOR is negative and the negative interest in the loan agreement is equal to zero, the continued negative rate of EURIBOR does not have interest expense reducing effect. As the borrowing have a maturity of up to 6 years, management is of the opinion that the floating interest rate will not bear significant impact to Group's cash flows.

The dates for fixing interest rates on the basis of changes in EURIBOR are the 30th day of every month. Six month's EURIBOR is fixed every six months.

As at 31.12.2021, the total carrying amount of the long-term loan was € 3.03 million and as at 31.12.2020 € 2.48 million. The residual value of the long-term lease obligation as of 31.12.2021 was € 0.04 million (as of 31.12.2020 € 0.01 million).

The deposits of the Group's cash and cash equivalents have fixed interest rates. In the course of loan refinancing, a fixed interest rate loan of € 2.0 million has been received from the Rural Development Foundation (RDF) at the end of 2020.

As of 31.12.2021 Nordic Fibreboard had a valid fixed interest overdraft agreement with a limit of € 200 thousand, which as of 31.12.2021 was unused. As of 31.12.2020 Nordic Fibreboard did not have an overdraft facility.

Foreign currency exchange risk

Foreign currency exchange risk is the risk that the Group may incur a significant loss because of fluctuations in foreign currency exchange rates. Group's foreign currency rate exchange risk from export-import transactions is very low because most of the contracts have been concluded in Euro. In the financial year, the Group had no transactions in currencies not directly or indirectly tied to the

Euro. All Group companies whose assets and liabilities are located outside Estonia are exposed to changes in the local currency exchange rates, the base currency being EURO.

As the effect of currency risk is marginal, the Group has not acquired any derivative financial instruments to manage the currency risk.

As the Group had no transactions and balances in foreign currencies in 2021 and was marginal in 2020, no currency position and sensitivity analyses have been prepared as of the balance sheet date.

Price risk

The group's exposure to equity securities price risk arises from investments held by the group and classified in the balance sheet as financial assets at fair value through profit or loss. The Group owns Trigon Property Development shares. The shares are publicly traded, with rather small volumes and therefore poor liquidity. The share price has had an average volatility over last 3 years (2019-2021) of 566%. The table below shows potential impact on post tax profit with assumptions of 10%, 25%, 50%, 75% of sensitivity.

thousand €	Fair Value as at 31.12.2021	Impact on after tax-profit (2021)	Fair Value as at 31.12.2020	Impact on after tax-profit (2020)
TPD shares
-current value (Note 9)	644		451
Impact:
- change by 10%		64		45
- change by 25%		161		113
- change by 50%		322		225
- change by 75%		483		338

3.2 CAPITAL MANAGEMENT

In capital risk management, the Group's main goal is to ensure the Group's sustainability of operations to generate returns to its shareholders and benefits to other stakeholders, thereby maintaining the optimal capital structure to lower the cost of capital. To preserve or improve the capital structure, the Group can regulate the dividends payable to shareholders, reimburse the paid in capital, issue new shares or sell assets to lower its liabilities. The management monitors capital based on the debt to capital ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated financial position statement) less cash and cash equivalents. Total capital is calculated as the sum of equity as shown in the consolidated financial position statement and net debt.

In April 2021 Nordic Fibreboard AS and its subsidiary Nordic Fibreboard Ltd OÜ entered into loan agreements with Coop Bank for the full refinancing of Swedbank AS Group loan as a result, it was possible to refinance the short-term portion of borrowings to a longer repayment schedule.

thousand €	31.12.2021	31.12.2020
Borrowings and lease liabilities (Note 10)	3,220	3,249
Cash and cash equivalents	57	26
Net debt	3,163	3,223
Total equity (Note 13)	3,850	2,648
Total capital	7,014	5,871
Debt to capital ratio	45%	55%

As at 31.12.2021 and 31.12.2020 the Group's equity was in compliance with the requirements of the Commercial Code.

3.3. FAIR VALUE

The Group divides financial instruments into three levels depending on their revaluation:

Level 1: Financial instruments that are valued using unadjusted price from the stock Exchange or some other active regulated market.
Level 2: Financial instruments that are evaluated by assessment methods based on monitored inputs. This level includes, for instance, financial instruments that are assessed by using prices of similar instruments in an active regulated market or financial instruments that are reassessed by using the price on the regulated market, which have low market liquidity.
Level 3: The valuation of financial assets and liabilities that are accounted as amortised cost is made on level 3.

Trade receivable, trade payable and short-term loans are recorded at amortised cost and since trade receivable, trade payable and short-term loans are short-term, management estimates that their carrying amounts are close to their fair values.

The fair values of long-term loans and borrowings do not significantly differ from their carrying value because the floating interest rates of loans correspond to fluctuation of the interest rates prevailing in the market. The risk margin of loans is dependent on ratio of total debt and EBITDA; therefore, the performance of the company's operations is reflected also in the risk margin.

Taking the previous information into account, the management estimates that the fair values of longterm liabilities do not materially differ from their carrying amounts. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

For financial assets at fair value through profit or loss, (ie Trigon Property Development shares) are carried in the balance sheet at fair value based on the price valid on the Nasdaq Tallinn.

NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of the financial statements in conformity with International Financial Reporting Standards requires management to make accounting estimates. Management also needs to pass judgement regarding the choice of accounting policies and their application.

Management judgements and estimates are reviewed on an ongoing basis and they are based on historical experience and other factors such as forecasts of future events which are considered reasonable under current circumstances.

The areas which require more significant or complex management decisions and estimates, and which have a major effect on the financial statements, include valuation of receivables and inventories (Notes 5, 6), and estimation of recoverable value and residual value of property, plant and equipment (Note 8) and valuation of the fair value of investment property (Note 7), and the provisions for long-term disability benefits (Note 12).

VALUATION OF RECEIVABLES

Trade receivables are short-term receivables from customers, generated in the Group's ordinary course of business. Trade receivables are carried at amortised cost (i.e. original invoice amount less any repayments and any impairment losses, if necessary). In valuating receivables, the Management bases its estimations on its best knowledge, considering historical experience, general background information and possible assumptions and conditions of future events. In identifying the amount of receivable written down the overdue status is considered. See additional information in Notes 3 and 5.

VALUATION OF INVENTORIES

Management measures inventories using its best judgement, historical experience, general background information and assumptions and conditions of future expected events. In determining the recoverable amount of inventories, the sales potential and potential net realisable value of finished goods is considered; in assessing the recoverable amount of raw materials and materials, their potential use in producing finished goods and earning income is estimated. In assessing work-inprogress, its stage of completion which can be measured reliably is used as the basis. In assessing the cost of raw materials which are not precisely measurable, management uses estimates based on historical experience. See additional information in Note 6.

IMPAIRMENT TESTING OF NON-CURRENT ASSETS

If there exist any indications that an asset may be impaired, the Group estimates the recoverable amount (higher of the asset's fair value (less costs to sell) and its value in use) of the asset (see also the accounting policy in Section 2 L).

If the cash flows used in the asset value test are uncertain, external experts are used to estimate the value of the fixed assets. The need for external experts became apparent when the Püssi factory was assessed together with the assets included in the plant as of 31.12.2020. The Püssi factory was closed in March 2020 and therefore the projected cash flows of the Püssi factory would have been too vague for a recoverable amount test. The valuation reports of Püssi factory include valuation for land and building and machinery and equipment. Land and building valuation is based on comparable transaction method. Machinery and equipment valuation takes into account several inputs such as age and location of the production line, cost of the new line and replacement cost. According to the management, this expert assessment is valid as of 31.12.2021 and therefore no impairment indicators exist.

Pärnu factory is generating strong EBITDA for the Group and therefore no impairment indicators exist at the balance sheet date

FAIR VALUE OF INVESTMENT PROPERTY

Management determined the fair value of investment properties using valuation results from independent experts. More specifically, information on the fair value measurement of investment properties is disclosed in Note 7.

USEFUL LIVES AND RESIDUAL VALUES OF PROPERTY, PLANT AND EQUIPMENT

Management determined the useful lives of buildings and equipment based on production volumes, historical experience in the area and future outlook. The residual values are determined based on historical experience in the area and outlook. When assessing the sensitivity of profits to depreciation and amortisation, management assumed that by changing the deprecation rates by 25%, the Group's profit in 2021 would change by € 124 thousand (2020: € 140 thousand).

ESTIMATION OF PROVISIONS FOR LONG-TERM DISABILITY BENEFITS

Calculation of the amount of compensation depends on several assumptions, the most significant of which are assumptions regarding the expected remaining lives of employees receiving the benefits, and assumptions about the discount rate. Management has used the statistical data publicly available at the Statistical Office of Estonia regarding the expectations of the remaining period of payments. The discount rate is determined based on the Baltic bond list of high-quality corporate bond rate and the discount rate was 3.5% in 2021 and 2020. The change in the discount rate by one percentage point will change the liabilities balance by € 8 thousand in 2021 and € 9 thousand in 2020. See also Note 2 and Note 12.

NOTE 5 RECEIVABLES AND PREPAYMENTS

€ thousand	31.12.2021	31.12.2020
Trade receivables	729	677
Prepaid taxes	151	92
Prepaid services	21	16
Other receivables	1	9
TOTAL	902	794

Impairment losses of receivables and their reversal are included in the income statement lines Other operating income and Other operating expenses, see also Notes 19 and 20.

ANALYSIS OF TRADE RECEIVABLES BY AGING:

thousand €	31.12.2021	31.12.2020
Not past due	678	650
incl receivables from customers who also have receivables past due	95	75
incl receivables from customers who have no receivables past due	583	575

Past due but not impaired	51	27
Overdue up to 90 days	51	20
Overdue more than 90 days	0	7
TOTAL	729	677

There were no trade receivables outstanding as of 31.12.2021 by 28.02.2022.

Other current receivables were not overdue as at 31.12.2021 (no overdues also 31.12.2020). The receivables and prepayments are pledged as part of the commercial pledge (Note 10).

NOTE 6 INVENTORIES

€ thousand	31.12.2021	31.12.2020
Raw materials and other materials	303	181
Work-in-progress	41	91
Finished goods	32	264
Goods in transit	11	0
Prepayments to suppliers	43	48
Write-off reserve for inventories	(40)	(41)
TOTAL	390	544

In the year 2021, finished and work-in-progress goods were written off at acquisition cost of € 1 thousand (2020: also € 1 thousand), no write-off of raw materials was performed in 2021 (2020: raw material was written-off in the amount of € 8 thousand). The inventory write-down reserve decreased by € 1 thousand during 2021 (in 2020 decreased by € 59 thousand due to the termination of the retail sale of furniture).

Inventory are pledged as part of the commercial pledge (Note 10).

NOTE 7 INVESTMENT PROPERTY

The investment properties consist of the real estate owned by Pärnu Riverside OÜ in Pärnu, Suur-Jõe street 48 and the part of the real estate owned by Nordic Fibreboard Ltd OÜ, Rääma street 31.

	thousand €
Carrying amount 31.12.2019	1,121

Capitalized cost	8
Fair value revaluation	5

Carrying amount 31.12.2020	1,134

Capitalized cost	18

Carrying amount 31.12.2021	1,152

Capitalized cost of investment property in the amount € 18 thousand during 2021 are related to expenses of Suur-Jõe 48, Pärnu detail plan (2020: € 8 thousand, as well as expenses related to the detailed plan of Suur-Jõe 48).

Investment property is measured at fair value. The Company obtained a valuation of its Pärnu Riverside Development's property from an independent expert valuation company, which resulted in an increase in the value of the property from its past method of using cost based valuation. The revaluation of the registered immovable (no. 1409705) at Suur-Jõe street 48, Pärnu to fair value was based on an expert valuation carried out by an independent valuer in May 2019, based on the discounted cash flow method. According to the management, the fair value presented in the valuation report of the independent appraiser was also representative as of the balance sheet date of 31.12.2021 and 31.12.2020.

At the end of 2020, a new expert appraisal was performed on the registered immovable (no. 1409605) at Rääma Street 31 property using a comparison method by an independent valuer, and on the 31.12.2020, the Rääma Street 31 investment property was recognized in the balance sheet at the new fair value. In selecting the valuating method, the valuer has assumed that there have been recent free market transactions and similar market situations in competing regions for similar assets, which was a sufficient basis for using the comparison method. According to the management, the fair value presented in the valuation report of the independent appraiser was also representative as of the balance sheet date of 31.12.2021.

FAIR VALUE OF INVESTMENT PROPERTY:

	thousand €
31.12.2019
Share of registered immovable property at Suur-Jõe 48, Pärnu	951
Share of registered immovable property at Rääma Street 31, Pärnu	170
31.12.2020
Share of registered immovable property at Suur-Jõe 48, Pärnu	959
Share of registered immovable property at Rääma Street 31, Pärnu	175
31.12.2021
Share of registered immovable property at Suur-Jõe 48, Pärnu	977
Share of registered immovable property at Rääma Street 31, Pärnu	175

The amount of expenses related to the management of investments properties with reinvoiced utility expenses during the 2021 were € 218 thousand and € 216 thousand in 2020. Rental income from investment properties, including utilities, for 2021 was € 254 thousand and € 212 thousand in 2020.

Investment properties are encumbered with mortgages (Note 10).

NOTE 8 PROPERTY PLANT EQUIPMENT, RIGHT-OF-USE ASSETS & INTANGIBLE ASSETS

PROPERTY PLANT EQUIPMENT AND RIGHT-OF-USE ASSETS

thousand €	Land	Buildings and facilities	Machinery and equipment	Other fixtures	Construc tion-in progress	Right-of use asset	TOTAL
Cost at 31.12.2019	191	2,573	10,773	95	70	267	13,969
Accumulated depreciation at 31.12.2019	0	(1,649)	(6,938)	(91)	0	(79)	(8,757)
Carrying amount at 31.12.2019	191	924	3,835	4	70	188	5,212

Additions	0	0	33	0	77	0	110
Reclassification	0	0	116	0	(116)	0	0
Disposals and write-offs (Note 19)	0	(32)	(176)	(6)	0	(137)	(351)
Accumulated depreciation of fixed assets written off	0	31	175	6	0	60	271
Depreciation (Notes 15;17)	0	(83)	(401)	(2)	0	(62)	(548)

Cost at 31.12.2020	191	2,541	10,747	89	31	130	13,728
Accumulated depreciation at 31.12.2020	0	(1,701)	(7,165)	(87)	0	(81)	(9,034)
Carrying amount at 31.12.2020	191	840	3,582	3	31	49	4,694

Additions	0	0	48	0	580	104	732
Reclassification	0	15	123	0	(138)	0	0
Disposals and write-offs (Note 19)	0	0	(72)	0	0	(120)	(192)
Accumulated depreciation of fixed assets written off	0	0	72	0	0	100	172
Depreciation (Notes 15;17)	0	(78)	(365)	(1)	0	(47)	(491)

Cost at 31.12.2021	191	2,556	10,845	89	473	114	14,268
Accumulated depreciation at 31.12.2021	0	(1,779)	(7,459)	(88)	0	(28)	(9,353)
Carrying amount at 31.12.2021	191	777	3,387	1	473	86	4,915

In 2021, depreciated and not in use machinery and equipment were written off at measured cost of € 72 thousand and accumulated depreciation of machinery and equipment was written off in the amount of € 72 thousand. Rental lease with a measured cost of € 97 thousand were terminated prematurely, therefore their measured cost of € 97 thousand and accumulated depreciation of € 77 thousand were written off. Two rental leases were terminated, in connection with which, in addition to the above, the right-of-use was written off at a measured cost of € 23 thousand and their accumulated depreciation of € 23 thousand were written off.

In 2021, other fixtures was sold, which generated a profit of € 2 thousand. In 2020, the apartments registered as property, plant and equipment in Püssi were sold, of which a profit of € 27.6 thousand was made.

As at 31.12.2021, the cost of fully depreciated property, plant and equipment still in use amounted to € 5.12 million and as at 31.12.2020, the respective amount was € 4.46 million.

Construction-in-progress

As at 31.12.2021 the construction-in-progress included investment in production technology in the amount of € 473 thousand, (31.12.2020: € 31 thousand). During 2021, investments in production technology amounted to € 580 thousand and € 138 thousand was reclassified to the group of machinery and equipment in the total amount of € 123 thousand and to the group of buildings and facilities in the total amount of € 15 thousand.

INTANGIBLE ASSETS

thousand €	Computer software

Cost at 31.12.2019	87
Accumulated amortisation at 31.12.2019	(69)
Carrying amount 31.12.2019	18

Additions 2020	0
Disposals and write-offs (Note 19)	(10)
Accumulated depreciation of fixed assets written off	10
Amortisation charge (Notes 15; 17)	(12)

Cost at 31.12.2020	77
Accumulated amortisation at 31.12.2020	(71)
Carrying amount 31.12.2020	6

Additions 2021	2
Disposals and write-offs (Note 19)	(66)
Accumulated depreciation of fixed assets written off	66
Amortisation charge (Notes 15; 17)	(5)

Cost at 31.12.2021	13
Accumulated amortisation at 31.12.2021	(10)
Carrying amount 31.12.2021	3

In 2021, depreciated and not in use intangible assets were written off at measured cost of € 66 thousand and accumulated depreciation of intangible assets was written off in the amount of € 66 thousand.

Tangible and and intangible fixed assets include both movable assets that are pledged and form part of a commercial pledge, as well as real estate used in the Group`s economic activities that is encumbered with mortgages (Note 10).

NOTE 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

thousand €	31.12.2021	Change 2021	31.12.2020
Non-current assets
Listed securities - Equity securities - cost at	338	(72)	410
Revaluation	306	265	40
Fair value as at	644	193	451

In June 2021, Trigon Property Development AS decided to reduce the share capital by reducing the book value of the shares by making equity payments to shareholders of € 0.089 per share, as a result of which the acquisition cost of financial assets decreased by € 72 thousand. The disbursement of equity was received on 13.12.2021.

Financial assets at fair value through profit or loss (Trigon Property Development AS shares) have been revaluated to reflect fair value based on last price at 31.2.2021 and 31.12.2020 and as shown on Nasdaq Tallinn.

NOTE 10 BORROWINGS AND FINANCIAL LEASE

INFORMATION REGARDING BORROWINGS AS AT:

thousand €	Interest rate	31.12.2021	31.12.2020
Current borrowings
Current portion of long-term loan (Swedbank)	6 month EURIBOR+5%	0	717
Current portion of long-term loan (Coop Bank)	6 month EURIBOR+4.5%	100	0
Current portion of long-term lease liabilities	6 month EURIBOR+2.49%	46	39
Total		146	756

Non-current borrowings
Non-current portion of long-term loan (Swedbank)	6 month EURIBOR+5%	0	483
Non-current portion of long-term loan (Coop Pank)	6 month EURIBOR+4.5%	1,034	0
Non-current portion of long-term loan (RDF)	Until 30.12.2022 2%, later 4%	2,000	2,000
Non-current portion of long-term lease liabilities	6 month EURIBOR+2.49%	40	10
Total		3,074	2,493

Total borrowings		3,220	3,249

INFORMATION REGARDING MOVEMENT OF BORROWINGS (TABLE SHOWING CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES):

Changes in liabilities arising from financing activities thousand €	31.12.2020	Cash flows	Non monetary settlements	Interest accrued	Interest paid	Reclassi fication	31.12.2021
Current portion of long-term loan (Swedbank)	717	(717)	0	26	(26)	0	0
Current portion of long-term loan (Coop Bank)	0	(66)	0	49	(49)	166	100
Current portion of long-term lease liabilities	39	(46)	(12)	2	(2)	65	46
Bank overdrafts (Coop Pank)	0	0	0	1	(1)	0	0

Non-current portion of long term loan (Swedbank)	483	(483)	0	0	0	0	0
Non-current portion of long term loan (Coop Pank)	0	1,200	0	0	0	(166)	1,034
Non-current portion of long term loan (RDF)	2,000	0	0	40	(40)	0	2,000
Non-current portion of long term lease liabilities	10	0	95	0	0	(65)	40
Total liabilities from financing activities	3,249	(112)	83	118	(118)	0	3,220

Nordic Fibreboard AS Annual Report (audited) 2021

Changes in liabilities arising from financing activities thousand €	31.12.2019	Cash flows	Non monetary settleme nts	Interest accrued	Interest paid	Reclassi fication	31.12.2020
Current portion of long-term loan (Swedbank)	4,090	(853)	(2,000)	173	(173)	(520)	717
Current portion of long-term lease liability	97	(62)	(33)	3	(3)	37	39
Short term loan from related parties	20	(20)	0	1	(0)	0	0
Bank overdrafts	340	(340)	0	16	(16)	0	0
Non-current loans (Swedbank)	0	1 200	0	0	0	(717)	483
Non-current loans (RDF)	0	0	2,000	0	0	0	2,000
Non-current lease liability	92	0	(45)	0	0	(37)	10

Total liabilities from financing activities	4,639	(75)	(78)	192	(192)	(1,237)	3,249

In the second quarter of 2021, Nordic Fibreboard AS and its subsidiary Nordic Fibreboard Ltd entered into loan agreements with Coop Bank for the full refinancing of Swedbank AS Group loan. The loan provided by Coop Bank AS has a duration of 5 years with 10 year amortisation schedule, and carry an interest rate of 4.5% per annum. There is also a one-year overdraft agreement with Coop Bank AS entered into in the second quarter of 2021 with a limit of € 200 thousand. The interest rate on the overdraft is 4% per annum.

In 2021, repayments of lease obligations in the amount of € 46 thousand and interest on lease obligations of € 2 thousand were made.

In 2021 Nordic Fibreboard OÜ Ltd received short-term loan from related party Stetind OÜ and Trigon Capital AS in totaling € 503 thousand, of which € 303 thousand were received at an interest rate of 5% per annum and € 200 thousand at an interest rate of 4% per annum. The received loans were repaid to both Stetind OÜ and Trigon Capital AS in full in 2021, together with interest. As at 31.12.2021, the short-term loan from related parties were € 0, see also Note 23.

thousand €
In the statement of cash flows:
Increase of lease liability	104
Decrease of liability	(21)
Lease liability repayments	(46)
Loan received from Coop Bank	1 200
Loans repayments to Swedbank	(1 200)
Loans repayment to Coop Bank	(66)
Loans received from related parties	503
Repayment of loans received from related parties	(503)
Total	(29)
In the statement of financial position
Borrowings as at 31.12.2020	3 249
Borrowings as at 31.12.2021	3 220
Change	(29)

Undiscounted future cash flows of loan payments are provided in section (B) of Clause 3.1 of Note 3. The borrowings of the Group have been secured as follows:

commercial pledge in the total amount of € 2.0 million;
mortgages amount of € 2.6 million.
Rular Development Foundation (RDF) guaranteed Coop Bank loan in the amount of 80% of the outstanding loan amount to Coop Bank AS.

Information regarding financial risks arising from borrowings is disclosed in Note 3. Information regarding the carrying amounts of assets pledged as collateral for bank loans is disclosed in Notes 5, 6, 7 and 8.

NOTE 11 PAYABLES AND REPAYMENTS

thousand €	31.12.2021	31.12.2020
Trade payables (Note 3)	367	1,110
Payables to employees	149	138
incl. accrued holiday pay reserve	46	33
Tax liabilities	137	128
incl. social security and unemployment insurance	87	82
personal income tax	40	35
contribution to mandatory funded pension	2	3
value added tax	0	0
other taxes	8	8
Prepayments received	152	162
Other payables (Note 3)	24	36
TOTAL	829	1,574

NOTE 12 PROVISIONS

thousand €
Balance at 31.12.2019	199
incl. current portion of provision	20
incl. non-current portion of provision	179
Movements 2020:
Use of provision	(24)
Interest cost (Note 21)	3
Balance at 31.12.2020	179
incl. current portion of provision	18
incl. non-current portion of provision	161
Movements 2021:
Use of provision	(25)
Interest cost (Note 21)	7
Increase of reserve	3
Balance at 31.12.2021	164
incl. current portion of provision	19
incl. non-current portion of provision	145
	53

Provisions are made in relation to the compensations for loss of working capacity of former employees after work accidents. The total amount of the provision has been estimated considering the number of persons receiving the compensation, extent of their disability, their former level of salary, level of pension payments and estimations of the remaining period of payments. As of 31.12.2021 the provisions for former employees was increased by € 3 thousand due to the extension of the accounting period of one beneficiary.

NOTE 13 EQUITY

	Nominal value	Number of shares	Share capital
	€	pcs	thousand €
Balance at 31.12.2021	0.10	4,499,061	450
Balance at 31.12.2020	0.10	4,499,061	450

As of 31.12.2021 the share capital of Nordic Fibreboard AS totalled 449,906.10 euros which consisted of 4,449,061 no par value registered shares with a book value of 0.10 euros per share. Each ordinary share grants its owner one vote in the General Meeting of Shareholders and the right to receive dividends. The minimum share capital outlined in the Articles of Association is 250,000 euros and the maximum share capital is 1,000,000 euros. No dividends were paid to shareholders during 2021 and 2020.

As at 31.12.2021 the Group had 1,048 shareholders (31.12.2020: 485 shareholders) of which with more than 5% ownership interest were:

Pärnu Holdings OÜ with 2,592,775 shares or 57.63% (31.12.2020: 2,682,192 shares or 59.62%)
Gamma Holding Investment OÜ with 605,300 shares or 13.45% (31.12.2019: 374,968 shares or 8.06%.

The number of Nordic Fibreboard AS shares owned by the members of the Management Board and Supervisory Board of Nordic Fibreboard AS as of 31.12.2021 was as follows:

Joakim Johan Helenius 20,000 shares (31.12.2020: 20,000 shares)
Trond Brekke 0 shares (31.12.2020: 0 shares)
Sakari Wallin 0 shares (31.12.2020: 0 shares)
Torfinn Losvik 0 shares (31.12.2020: 0 shares)

Both Joakim Johan Helenius and Torfinn Losvik have indirect ownership through parent company Pärnu Holdings OÜ. Torfinn Losvik owns shares through Stetind OÜ in the amount of 44,206 shares (2020: 44,206 shares).

Until 31.12.2020, Torfinn Losvik had a share option agreement for a total of 300,000 share options, such share option agreement was signed 11 October 2017. Strike price was higher (€ 0.506) compared to the market price (€ 0.45 as of 31.12.2020) and the options were not exercised, thus the option reserve was released and accounted in retained earnings.

The agreement provided:

Torfinn Losvik shall be entitled to use the issued option starting from the 37th (thirty-seventh) calendar month after issue of the option. He shall lose the right to use the share option if he leaves from the management board of Nordic Fibreboard AS upon own initiative prior to the thirty-seventh calendar month after the issue of the option or if his board member contract is terminated upon the initiative of the supervisory board within 12 months after the issue of the option. He shall have the right to use the share option to the extent of 1/3 if his board member contract is terminated within 13-24 months after the issue of the option and to the extent of 2/3 if his or her board member contract is terminated within 25-36 months after the issue of the option.

Torfinn Losvik shall not have the right to transfer the share options issued thereto.
Up to 300 000 (three hundred thousand) shares of Nordic Fibreboard AS shall be emitted to fulfil the conditions of the share option.
The price of one share option is 0.506 EUR (calculated as the average closing price of the Nordic Fibreboard shares for the last 60 trading days before the announcement of given AGM on 12.04.2017).
The final term of the share programme is 31.12.2020. The specific schedule of the share programme and the procedure for sale shall be determined by the supervisory board.
The pre-emptive right of shareholders to subscribe to new shares emitted to fulfil the conditions of the share option shall be precluded.

NOTE 14 EARNINGS PER SHARE

Diluted earnings (loss) per share is calculated based on the net profit (loss) and the number of shares plus contingent shares corresponding with the Group`s option program started from 2017. Nordic Fibreboard share price on average has been lower than the exercise price of options granted to Torfinn Losvik. The share options was valid until 31.12.2020 with strike price of € 0.506. Since the strike price was higher compared to the market price the option agreement was not used, thus the option reserve was released and accounted in retained earnings.

The share of Nordic Fibreboard AS has been listed on Nasdaq Tallinn starting from 25.09.2007.

	31.12.2021	31.12.2020
Net profit (-loss) (in thousands of euros)	1,202	1,074
Weighted average number of shares (th pc)	4,499	4,499
Basic earnings per share (in euros)	0.27	0.24
Weighted average number of shares used for calculating the diluted earnings per shares (units)	4,499	4,499
Diluted earnings per share (in euros)	0.27	0.24
Book value of share (in euros)	0.86	0.59
Price/earnings ratio (P/E)	7.30	1.89
Last price of the share of Nordic Fibreboard AS on Nasdaq Tallinn at 31.12.2021 and 31.12.2020 (in euros).	1.95	0.45
Weighted average number of shares used as the denominator (units)
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share (th pc)	4,499	4,499
Adjustments for calculation of diluted earnings per share:
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share (th pc)	4,499	4,499

NOTE 15 COST OF GOODS SOLD

thousand €	2021	2020
Raw materials and main materials	2,483	2 689
Electricity, heat and water	2,329	2 705
Labour expenses (Note 18)	1,532	1 600
Depreciation (Note 8)	497	557
Purchased goods	0	68
Change in balances of finished goods and work in progress	269	257
Other expenses	184	223
TOTAL	7,294	8 099
		55

NOTE 16 DISTRIBUTION COSTS
thousand €	2021	2020
Transportation expenses	837	921
Labour expenses (Note 18)	199	192
Commission fees	107	146
Marketing expense	1	3
Other expenses	24	21
TOTAL	1,168	1,283

NOTE 17 ADMINISTRATIVE AND GENERAL EXPENSES

thousand €	2021	2020
Labour expenses (Note 18)	220	248
Purchased services	266	285
Office supplies	13	10
Depreciation (Note 8)	1	1
Other expenses	65	60
TOTAL	565	605

NOTE 18 LABOUR EXPENSES

thousand €	2021	2020
Wages and salaries (Note 15,16,17,23)	1,465	1,553
Social security and unemployment insurance (Note 15,16,17,23)	473	490
Accrued holiday pay provision (Note 15,16,17,23)	13	(2)
Fringe benefits paid to employees (Note 15,16,17,23)	19	18
TOTAL	1,970	2,059

NOTE 19 OTHER OPERATING INCOME
thousand €	2021	2020
Compensation from insurance	0	5
Profit from sale of fixed assets (Note 8)	2	28
Other operating income	3	9
TOTAL	5	42

NOTE 20 OTHER OPERATING EXPENSES

thousand €	2021	2020
Reclamations	1	19
Commission	8	3
Membership fees	1	3
Doubtful receivables (Note 5)	0	12
Penalties paid	5	72
Loss from sales of fixed assets	0	2
Other costs	0	231*
TOTAL	15	342

*main items on other operating expenses in the 2020 the closure cost of the Püssi factory of € 187 thousand and a one-time cost of € 38 thousand for the demolition of the building that was not used.

NOTE 21 FINANCIAL INCOME AND EXPENSES

thousand €	2021	2020
Financial income:
Received interest	0	1
Revaluation of TPD shares	265	53
Loans and overdrafts refinancing	0	1,237
Total financial income	265	1,291

Financial cost:
Interest expenses	122	194
including interest expenses related to provisions (Note 12)	7	3
Other finance cost	0	5
Total financial cost	122	199

NOTE 22 OPERATING SEGMENTS

Operating segments have been determined based on the reports reviewed by the Management Board that are used to make strategic decision. The Management Board considers the current business based on the types of products and services as follows:

Fibreboard manufacturing and sale (Nordic Fibreboard Ltd OÜ and Suomen Tuulileijona Oy) manufacture general construction boards based on soft wood fibre boards and interior finishing boards in the Pärnu factory and wholesale of those boards.
Real Estate Management (Pärnu Riverside Development OÜ) real estate management and development on Suur-Jõe 48, Pärnu.
Furniture retail sale (Skano Furniture OÜ) -retail sales of furniture in Estonia, as it ceased active operations in the first quarter of 2020, this segment is no longer significant and is not significant in 2021 treated separately.

The Management Board assesses the performance of operating segments based on operating profit and EBITDA as a primary measure. As a secondary measure, the Management Board also reviews net revenue.

All amounts provided to the Management Board are measured in a manner consistent with that of the financial statements.

2021 thousand €	Fibreboard manufacturing and wholesale	Real Estate Management	Group's general expenses and eliminations	SEGMENTS TOTAL
Revenue from external customers	9,842	254	0	10,096
Operating profit/-loss	1,057	15	(13)	1,059
Amortisation/ depreciation (Notes 8)*	496	0	1	497
Segment assets	7,209	994	(140)	8,063
Non-current assets of the segment (Notes 7; 8; 9)	5,736	977	1	6,714
Segment liabilities	4,049	14	150	4,213
Additions to non-current assets (Note 8)*	734	18	0	752
Interest expenses (Note 19)	117	0	5	122
				57

SEGMENT INFORMATION FOR OPERATING SEGMENTS 2021:

2020 thousand €	Fibreboard manu facturing and wholesale	Rental Estate Management	Furniture retail sale	Group's general expenses and eliminations	SEGMENTS TOTAL
Revenue from external customers	10,001	212	56	0	10,269
Operating profit	39	0	(40)	(18)	(19)
Depreciation (Notes 8)*	558	0	0	1	558
Segment assets	6,751	1,011	11	(122)	7,650
Non-current assets of the segment (Notes 7; 8; 9)	5,325	959	0	1	6,286
Segment liabilities	4,795	45	483	(322)	5,002
Additions to non-current assets (Note 8)*	110	8	0	0	118
Interest expenses	178	0	0	17	194

SEGMENT INFORMATION FOR OPERATING SEGMENTS 2020:

* Property, plant and equipment of the segment

Eliminations includes unrealized profits on inter-segment transactions.

BUSINESS SEGMENT SALES BY THE GEOGRAPHICAL LOCATION OF CUSTOMERS:

thousand €	2021			2020
	Fibreboard manufactu ring and wholesale	Real Estate Manage ment	Furniture retail sale	SEGMENTS TOTAL	Fibreboard manufactu ring and wholesale	Real Estate Manage ment	Furniture retail sale	SEGMENTS TOTAL
European Union	8,225	254	0	8,478	8,327	212	56	8,594
Russia	1,356	0	0	1,356	1,240	0	0	1,240
Asia	147	0	0	147	189	0	0	189
Africa	46	0	0	46	96	0	0	96
Middle East	13	0	0	13	65	0	0	65
Other	55	0	0	55	85	0	0	85
TOTAL	9,842	254	0	10,096	10,001	212	56	10,269

Revenue is generated from sales of own production and goods purchased for resale. Majority of the Group's assets, 100% both in 2021 and 2020, are located in Estonia.

NOTE 23 RELATED PARTIES

The following parties are considered to be related parties:

Parent company Pärnu Holdings OÜ and owners of the parent company;
Other entities in the same consolidation group;
Members of the Management, the Management Board and the Supervisory Board of Nordic Fibreboard AS and their close relatives;
Entities under the control of the members of the Management Board and Supervisory Board;
Individuals with significant ownership unless these individuals lack the opportunity to exert significant influence over the business decisions of the Group.

As of 31 December 2021, the largest shareholder of Pärnu Holdings OÜ and the entities with significant influence over the Group are: Joakim Johan Helenius (50%) and Stetind OÜ (50%), as of 31 December 2020 Joakim Johan Helenius (46%) and Stetind OÜ (47%). The owner of Stetind OÜ is Torfinn Losvik.

Benefits (incl. tax expenses) include payments of parent and subsidiary company Management Board and Supervisory Board fees paid within the period and resignation compensations for previous Management Board and Supervisory Board members:

thousand €	2021	2020
Membership fees (Note 18)	184	163
Social tax	61	54
Total	245	217

The member of the Management Board of Nordic Fibreboard AS will receive severance pay to three months' remuneration according to the contract. No payments were made to members of Supervisory Board.

In 2021 short term benefits in the amount of € 184 thousand were paid to members of the Management Board of all consolidated group companies (2020: € 163 thousand). No short-term benefits for Supervisory Board members neither during 2021 nor 2020. Pursuant to the contracts concluded, as at 31.12.2021, the members of the Management Board are entitled upon termination of management board member agreements by the initiative of Supervisory Board to receive severance pay amounting to three-month remuneration.

Nordic Fibreboard AS has sold goods and purchased mainly consultation services from related parties. Transactions with related parties are based on market terms.

thousand €	2021	2020
Goods Sold	0	9
Purchased services	17	20
Total	17	29

Balances with related parties as of 31.12.2021 were € 1 thousand and 31.12.2020 were € 17 thousand from purchased services. In 2021 Nordic Fibreboard OÜ Ltd received short-term loan from related party Stetind OÜ and Trigon Capital AS in totaling € 503 thousand, of which € 303 thousand were received at an interest rate of 5% per annum and € 200 thousand at an interest rate of 4% per annum. The received loans were repaid to both Stetind OÜ and Trigon Capital AS in full in 2021, together with interest. The balance of the short-term loan liability to the related parties were € 0 as at 31.12.2021as well as 31.12.2020. See also Note 10.

thousand €	31.12.2021	31.12.2020
Purchased services	1	17
Short-term loan interest	0	1
Total	1	18

NOTE 24 CONTINGENT LIABILITIES

The tax authorities may at any time inspect the books and records within 5 years subsequent to the reported tax year, and upon establishing errors, may impose additional tax assessments and penalties. The Group's management is not aware of any circumstances which may give rise to a potential material liability in this respect.

CONTINGENT INCOME TAX LIABILITY

Due to the nature of the taxation system, the companies registered in Estonia do not have any differences between the tax bases of assets and their carrying amounts and hence, no deferred income tax assets and liabilities arise. However, according to the decision of the IFRS Interpretation Committee in June 2020, the parent is required to recognize an income tax liability on the profits on the subsidiary unless profits are not planned to be distributed to parent company in the foreseeable future. As the

Group does not plan to take dividends from the Nordic Fibreboard Ltd OÜ profits of 2021 due to large losses in previous years, no deferred tax liability has been recognized for the profits of the subsidiary in the Group's consolidated financial statements. As the share capital of the parent company was reduced in 2020 under a simplified procedure, no dividends will be paid until the end of 2022 pursuant to § 363 of the Commercial Code.

The maximum potential icome tax liability of Nordic Fibreboard AS would be € 567 thousand. The maximum potential income tax liability is calculated under the assumption that the distributable net dividends and the amount of the income tax expense on dividends cannot exceed the distributable retained earnings as at the balance sheet date.

NOTE 25 EVENTS AFTER BALANCE SHEET DATE

After the balance sheet date on 06.01.2022 the own share buy-back program of Nordic Fibreboard AS was approved by Extraordinary General Meeting Shareholders. The sole purpose of the buy-back program of own shares is the reduction of the share capital of Nordic Fibreboard AS and a right to buy back maximum of 449 906 own shares. The repurchase of shares will take place the time period from 15 January 2022 until 5 January 2027, the minimum share buy-back price is € 0.50 per share and the maximum price is € 3.00 per share.

At the time of publishing the report, no repurchases of shares have been made between Nordic Fibreboard AS or its related parties.

The start of the war in Ukraine on 24 February has caused some disruption to Nordic Fibreboard Ltd's sales to Russia and Ukraine. In total, sales to these two markets accounted for 14% of our total fibreboard sales in 2021. After the outbreak of the war, the normal sales volume to these two markets have declined. Due to the strong demand for our fibreboards in 2021, and which have continued to be the case at the start of year 2022, we can not at this stage see any problems in reallocating the capacity from the Russian and Ukrainian customers to other customers. However, the uncertainty created by the war, and its potential for further substantial disruption to the European, and global economy, can not be overlooked.

In March 2022, Coop Bank lowered its margin on the loan granted to Nordic Fibreboard from being 4.5% to becoming 3.5% as of 22 March 2022.

NOTE 26 SUPPLEMENTARY DISCLOSURES ON THE GROUP'S PARENT

The financial information on the parent is included in the separate primary financial statements (pages 62 to 64), the disclosure of which in the notes to the consolidated financial statements is required by the Estonian Accounting Act. The separate financial statements of the parent have been prepared using the same accounting policies as for the consolidated financial statements, except for measurement of investment in subsidiaries, which are stated at cost (less any impairment losses).

STATEMENT OF FINANCIAL POSITION OF THE PARENT COMPANY

€ thousand	31.12.2021	31.12.2020
Receivables and prepayments	0	6
Total current assets	0	6

Shares in subsidiaries	1,158	1,161
Intangible assets	1	1
Total non-current assets	1,159	1,162

TOTAL ASSETS	1,159	1,168

Payables and prepayments	153	113
Short-term provisions	16	15
Total current liabilities	169	128

Long-term provisions	123	136
Total non-current liabilities	123	136
Total liabilities	292	264

Share capital (at nominal value)	450	450
Retained earnings (loss)	417	454
Total equity	867	904

TOTAL LIABILITIES AND EQUITY	1,159	1,168

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF THE PARENT COMPANY

€ thousand	2021	2020
Revenue	3	3
Includes sales to subsidiares	3	3
Gross profit	3	3

Administrative expenses	25	20
Other operating income	3	0
Other operating expenses	14	23
Operating loss	(33)	(40)

Finance income	1	315
Finance costs	5	17
PROFIT/LOSS BEFORE INCOME TAX	(37)	258

NET PROFIT/LOSS FOR THE FINANCIAL YEAR	(37)	258
TOTAL COMPREHENSIVE PROFIT/LOSS FOR THE FINANCIAL YEAR	(37)	258

CASH FLOW STATEMENT OF THE PARENT COMPANY

€ thousand	2021	2020
Cash flows from operating activities
Operating profit (loss)	(33)	(40)
Adjustments:
Depreciation charge	1	0
Loss on write-off in subsidiary loan	14	22
Change in trade and other receivables	(5)	(20)
Change in trade and other payables	(8)	81
Cash generated from operations	31	43
Net other financial income and expense	(5)	(3)
Net cash generated from operating activities	(36)	40
Cash flows from investing activities
Interest received	1	0
Disposal of property, plant and equipment and intangible assets	3	0
Loans to related parties	(28)	(37)
Repayment of loans by related parties	24	5
Net cash used in investing activities	0	(32)
Cash flows from financing activities
Loan repayment	0	(4)
Loans from related parties	104	93
Repayments of loans received from related parties	(68)	(17)
Interest payments	0	(14)
Change in overdraft	0	(66)
Net cash (used in)/from financing activities	36	(8)
NET CHANGE IN CASH	0	0
OPENING BALANCE OF CASH	0	0
CLOSING BALANCE OF CASH	0	0
		62

€ thousand	Share capital	Share premium	Statutory reserve capital	Other reserves	Retained earnings	Total
Adjusted unconsolidated equity at 31.12.2019	2,699	364	288	84	(1,894)	1,542
Share options 2020	0	0	0	(84)	0	(84)
Other changes	0	(364)	(288)	0	652	0
Change in share capital	(2,249)	0	0	0	2,249	0
Net profit for 2020	0	0	0	0	258	258
Other comprehensive income for 2020	0	0	0	0	0	0
Total comprehensive income for 2020	0	0	0	0	258	258
Balance at 31.12.2020	450	0	0	0	454	904
Carrying amount of investment under control and significant influence	0	0	0	0	(1 161)	(1 161)
Value of investment under control and significant influence under equity method	0	0	0	0	2,905	2,905
Adjusted unconsolidated equity at 31.12.2020	450	0	0	0	2,198	2,648
Net loss for 2021	0	0	0	0	(36)	(36)
Other comprehensive income for 2021	0	0	0	0	0	0
Total comprehensive loss for 2021	0	0	0	0	(36)	(36)
Balance at 31.12.2021	450	0	0	0	416	867
Carrying amount of investment under control and significant influence	0	0	0	0	(1,158)	(1,158)
Value of investment under control and significant influence under equity method	0	0	0	0	4,141	4,141
Adjusted unconsolidated equity at 31.12.2021	450	0	0	0	3,400	3,850

STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANY

Adjusted unconsolidated equity is the maximum amount that can be distributed to shareholders according to Estonian legislation.

Independent auditor's report

To the Shareholders of Nordic Fibreboard AS

Report on the audit of the consolidated financial statements

Our opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Nordic Fibreboard AS (the "Company") and its subsidiaries (together – the "Group") as at 31 December 2021, and the Group´s consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Our opinion is consistent with our additional report to the Audit Committee dated 18 April 2022.

What we have audited

The Group's consolidated financial statements comprise:

the consolidated statement of financial position as at 31 December 2021;
the consolidated statement of profit or loss and other comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended;
the consolidated statement of changes in equity for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the consolidated financial statements section of our report".

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

Independence

We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

To the best of our knowledge and belief, we declare that non-audit service that we have provided to the Company's subsidiary is in accordance with the applicable law and regulations in the Republic of Estonia and that we have not provided non-audit services that are prohibited under § 591 of the Auditors Activities Act of the Republic of Estonia.

The non-audit service that we have provided to the Company's subsidiary in the period from 1 January 2021 to 31 December 2021 is disclosed in the management report.

This version of our report is a translation from the original, which was prepared in Estonian. 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 of our report takes precedence over this translation.

This independent auditor's report (translation of the Estonian original) should only be used with the original document submitted in machine-readable .xhtml format that is submitted to the Tallinn Stock Exchange (Link: https://nasdaqbaltic.com/statistics/et/instrument/EE3100092503/reports).

Our audit approach

Overview

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Management Board made subjective judgments; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall Group audit materiality	The overall Group audit materiality is EUR 101 thousand
How we determined it	Overall Group materiality represents approximately 1% of the Group's consolidated revenue
Rationale for the materiality benchmark applied	We have applied this benchmark, as in our view total revenue is a key performance indicator that determines the Group's value and is monitored by management, investors and other stakeholders.

Translation note:

Key audit matters

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

matter

We assessed the consistency of the application of the revenue recognition policy by performing following procedures:
We updated our understanding of the revenue accounting policy and evaluated it against the requirements of IFRS.
We updated our understanding of the revenue process and controls and observed key management controls related to recognition and measurement of revenue.
We assessed the opportunity or incentive for management override of controls and tested certain journal entries impacting revenue, which were selected using professional judgement.
We reconciled, on a sample basis, confirmations from customers regarding revenue transactions and outstanding receivables with underlying accounting data.
We reconciled a sample of revenue transactions with receipts of payments and underlying invoices.

How we tailored our Group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group consists of a number of entities that are further disclosed in Note 1 of financial statements. Based on the size and risk characteristics, we performed a full scope audit of the financial information for Nordic Fibreboard AS and Nordic Fibreboard Ltd OÜ.

In addition, specific audit procedures, including analytical procedures, were performed in respect of the other subsidiaries. At the Group level, we audited the consolidation process and performed procedures to assess that the audits of the Group entities and of specified account balances covered all material items in the Group's consolidated financial statements.

Reporting on other information including the Management report

The Management Board is responsible for the other information. The other information comprises Introduction, Management Report, Corporate Governance Recommendations Report, Remuneration report, Management Board`s confirmations and Revenue of the parent company by EMTAK classificators (but does not include the consolidated financial statements and our auditor's report thereon).

Our opinion on the consolidated financial statements does not cover the other information, including the Management report.

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

With respect to the Management report, we also performed the procedures required by the Auditors Activities Act. Those procedures include considering whether the Management report is consistent, in all material respects, with the consolidated financial statements and is prepared in accordance with the requirements of the Accounting Act.

In accordance with the Securities Market Act with respect to the Remuneration Report, our responsibility is to consider whether the Remuneration Report includes the information in accordance with the requirements of Article 1353 (3) of the Securities Market Act.

Based on the work undertaken in the course of our audit, in our opinion:

the information given in the Management report for the financial year for which the financial statements are prepared is consistent, in all material respects, with the consolidated financial statements; and
the Management report has been prepared in accordance with the requirements of the Accounting Act;
the Remuneration Report has been prepared in accordance with Article 1353 (3) of the Securities Market Act.

In addition, in light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Management report and other information that we obtained prior to the date of this auditor's report. We have nothing to report in this regard.

Translation note:

Responsibilities of the Management Board and those charged with governance for the consolidated financial statements

The Management Board is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditor's responsibilities for the audit of the consolidated financial statements

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

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

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

● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

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

Report on other legal and regulatory requirements

Report on the compliance of the presentation of consolidated financial statements with the requirements of the European Single Electronic Format ("ESEF")

We have been engaged based our agreement by the Management Board of the Company to conduct a reasonable assurance engagement for the verification of compliance with the applicable requirements of the presentation of the consolidated financial statements of Nordic Fibreboard AS for the year ended 31 December 2021 (the "Presentation of the Consolidated Financial Statements").

Description of a subject matter and applicable criteria

The Presentation of the Consolidated Financial Statements has been applied by the Management Board of the Company to comply with the requirements of art. 3 and 4 of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (the "ESEF Regulation"). The applicable requirements regarding the Presentation of the Consolidated Financial Statements are contained in the ESEF Regulation.

The requirements described in the preceding sentence determine the basis for application of the Presentation of the Consolidated Financial Statements and, in our view, constitute appropriate criteria to form a reasonable assurance conclusion.

Responsibility of the Management Board and those charged with governance

The Management Board of the Company is responsible for the Presentation of the Consolidated Financial Statements that complies with the requirements of the ESEF Regulation.

This responsibility includes the selection and application of appropriate markups in iXBRL using ESEF taxonomy and designing, implementing and maintaining internal controls relevant for the preparation of the Presentation of the Consolidated Financial Statements which is free from material noncompliance with the requirements of the ESEF Regulation.

Those charged with governance are responsible for overseeing the consolidated financial reporting process, which should also be understood as the preparation of financial statements in accordance with the format resulting from the ESEF Regulation.

Our responsibility

Our responsibility was to express a reasonable assurance conclusion whether the Presentation of the Consolidated Financial Statements complies, in all material respects, with the ESEF Regulation.

We conducted our engagement in accordance with the International Standard on Assurance Engagements (Estonia) 3000 (revised) "Assurance Engagements other than Audits and Reviews of Historical Financial Information" (ISAE (EE) 3000 (revised). This standard requires that we comply with ethical requirements, plan and perform procedures to obtain reasonable assurance whether the Presentation of the Consolidated Financial Statements complies, in all material aspects, with the applicable requirements.

Reasonable assurance is a high level of assurance, but it does not guarantee that the service performed in accordance with ISAE (EE) 3000 (revised) will always detect the existing material misstatement (significant non-compliance with the requirements).

Quality control requirements

We apply the provisions of the International Standard on Quality Control (Estonia) 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

We comply with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Summary of the work performed

Our planned and performed procedures were aimed at obtaining reasonable assurance that the Presentation of the Consolidated Financial Statements complies, in all material aspects, with the applicable requirements and such compliance is free from material errors or omissions. Our procedures included in particular:

obtaining an understanding of the internal control system and processes relevant to the application of the Electronic Reporting Format of the Consolidated Financial Statements, including the preparation of the XHTML format and marking up the consolidated financial statements;
verification whether the XHTML format was applied properly;
evaluating the completeness of marking up the consolidated financial statements using the iXBRL markup language according to the requirements of the implementation of electronic format as described in the ESEF Regulation;

evaluating the appropriateness of the Group's' use of XBRL markups selected from the ESEF taxonomy and the creation of extension markups where no suitable element in the ESEF taxonomy has been identified; and
evaluating the appropriateness of anchoring of the extension elements to the ESEF taxonomy.

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

Conclusion

In our opinion, based on the procedures performed, the Presentation of the Consolidated Financial Statements complies, in all material respects, with the ESEF Regulation.

Appointment and period of our audit engagement

We were first appointed as auditors of Nordic Fibreboard AS, as a public interest entity, for the financial year ended 31 December 2007. Our appointment has been renewed by tenders and shareholder resolutions in the intermediate years, representing the total period of our uninterrupted engagement appointment for Nordic Fibreboard AS, as a public interest entity, of 15 years. In accordance with the Auditors Activities Act of the Republic of Estonia and the Regulation (EU) No 537/2014, our appointment as the auditor of Nordic Fibreboard AS can be extended for up to the financial year ending 31 December 2026.

AS PricewaterhouseCoopers

/signed/ /signed/

Eva Jansen-Diener Peep Kivistik Certified auditor in charge, auditor's certificate no.501 Auditor's certificate no.732

18 April 2022 Tallinn, Estonia

PROPOSAL FOR PROFIT ALLOCATION

The Management Board of AS Nordic Fibreboard proposes to the General Meeting of shareholders to distribute the profit of thefinancial year 2021 as follows:

	thousand €
Retained earning at 31.12.2020	2 198
Net profit in 2021	1 202
Distribution:
Provision for statutory reserve capital	45
To retained earnings	1 157
Retained earnings after provisions	3 355

Torfinn Losvik

Chairman of the Management Board

________________________

SIGNATURES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD TO THE 2021 ANNUAL REPORT

The Management Board has prepared the Company's Annual Report for 2021. The Annual Report (pages 1 to 73) consists of the management report, remuneration report, financial statements, auditor's report and proposal for profit allocation. The Supervisory Board has reviewed the Annual Report prepared by the Management Board and approved it for presentation at the General Meeting of Shareholders

Joakim Johan Helenius ______


Trond Bernhard Brekke ______


Sakari Wallin ______

REVENUE OF THE PARENT COMPANY BY EMTAK CLASSIFICATORS

€ thousand	2021	2020

96099 Other services	3	3

AI Terminal

Nordic Fibreboard

2229_10-k_2022-04-19_75d1fdf1-4948-4389-bc00-b539c15af8ec.pdf

Annual Report 2021

NORDIC FIBREBOARD AS

INTRODUCTION

THE GROUP IN BRIEF

MANAGEMENT REPORT

OVERVIEW OF OPERATING RESULTS

REVENUE AND OPERATING RESULTS

GROUP'S REVENUE BY ACTIVITY

GROUP'S REVENUE BY REGIONS

THE GROUP'S PROFIT/LOSS BY SEGMENTS

STATEMENT OF FINANCIAL POSITION AND CASH FLOW STATEMENT

PERFORMANCE OF BUSINESS UNITS

NORDIC FIBREBOARD LTD

THE SALES OF NORDIC FIBREBOARD LTD BY REGION

PÄRNU RIVERSIDE DEVELOPMENT: REAL ESTATE MANAGEMENT

SKANO FURNITURE: RETAIL SALES

FORECAST AND DEVELOPMENT

BUSINESS ENVIRONMENT 2021

NORDIC FIBREBOARD LTD

PÄRNU RIVERSIDE DEVELOPMENT

ELECTION AND POWERS OF MANAGEMENT BODIES AND PERSONNEL

THE GENERAL MEETING OF SHAREHOLDERS

SUPERVISORY BOARD

INFORMATION ABOUT MEMBERS OF THE SUPERVISORY BOARD

MANAGEMENT BOARD

PERSONNEL

AUDIT COMMITTEE

ELECTION OF THE AUDITOR

OTHER INFORMATION

FINANCIAL RATIOS

SHARE

SHARE

VALUE OF SHARE

SHAREHOLDERS

SHARE CAPITAL BY THE NUMBER OF SHARES AS OF 31.12.2021:

SHARE CAPITAL GEOGRAPHICALLY AS OF 31.12.2021:

SHARE CAPITAL BY THE TYPE OF THE OWNERS AS OF 31.12.2020:

LIST OF THE SHAREHOLDERS WITH THE OWNERSHIP MORE THAN 1% AS OF 31.12.2021:

DIVIDEND POLICY

RISKS

INTEREST RATE RISK

FOREIGN CURRENCY EXCHANGE RISK

RISK OF THE ECONOMIC ENVIRONMENT

FAIR VALUE

LIQUIDITY RISK

GROUP STRUCTURE

SHARES OF SUBSIDIARIES

CORPORATE GOVERNANCE RECOMMENDATIONS REPORT

REMUNERATION REPORT

COMPATIBILITY OF REMUNERATION WITH THE REMUNERATION PRINCIPLES

ENVIRONMENTAL POLICY

WATER USAGE AND WASTEWATER DISCHARGE

MAIN POLLUTANTS

WASTE HANDLING

MANAGEMENT BOARD'S CONFIRMATIONS

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 GENERAL INFORMATION

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PREPARATION

CHANGES IN ACCOUNTING POLICIES

a) Adoption of New or Revised Standards and Interpretations

b) New accounting pronouncements

B. COMPARABILITY

C. FOREIGN CURRENCY TRANSACTIONS, FINANCIAL LIABILITIES AND ASSETS DENOMINATED IN A FOREIGN CURRENCY

(A) FUNCTIONAL AND PRESENTATION CURRENCY

(C) CONSOLIDATION OF FOREIGN ENTITIES

(D) PRINCIPLES OF CONSOLIDATION AND ACCOUNTING FOR SUBSIDIARIES

(E) FINANCIAL ASSETS

Classification

Recognition and derecognition

Measurement

Debt instruments