Regarding the Results of Investigation Completed by the Supervision Service of the Bank of Lithuania

Apranga APB (hereinafter – the Company) hereby informs that the Supervision Service of the Bank of Lithuania (hereinafter – the SSBL) has completed an investigation on the compliance of the Company's accounting and financial statements for 2018 with international accounting standards; and on the compliance of the Annual Report and Social Responsibility Report with the legislation (hereinafter – the investigation).

By the Decision of the Director of the Supervision Service of the Bank of Lithuania issued on 3 February 2020 No. 241-20 it was decided not to apply any enforcement measures to the Company.

However, the SSBL's investigation has revealed some infringements which were recommended to be publicly disclosed:

1. Annual financial statements of the Company for the year 2018 do not comply with the requirements of paragraphs 50 and 51 of IAS 16 “Property, plant and equipment” and paragraphs 97 and 104 of IAS 38 “Intangible assets” because the useful life of non-current tangible and non-current intangible assets, that is fully depreciated and amortized but still in use, was set shorter than its utility;

2. Annual financial statements of the Company for the year 2018 do not comply with the requirements of paragraphs 55 and B21 of IFRS 15 “Revenue from Contracts with Customers” because the Company did not recognize refund asset and refund liability relating to the returns after the reporting period of sold goods to the customers; all income from the sale of goods were accounted without assessing the probability that some of goods may be returned after the end of the reporting period.

Although the useful life of non-current tangible and non-current intangible assets, that is fully depreciated and amortized but still in use, was set shorter than its utility, the exact extent to which the Company's and the Group's costs have been increased in the prior period and the value of assets has been impaired cannot be determined. The Company did not consider that there was any significant influence. Already in 2019 the Company considered the irregularities that emerged during the investigation that was in progress and implemented the requirements of the IAS 16 and 38 in its financial statements for 2019. The Company intends to continue to comply consistently with the requirements of these standards.

The Company believes that although it did not comply with paragraphs 55 and B21 of IFRS 15 “Revenue from Contracts with Customers”, this did not have a material effect on the statements of comprehensive income or financial status. The company had been already decided to comply with the above-mentioned paragraphs of IFRS 15 before the commencement of the investigation. Requirements will be implemented in financial statements for 2019.

The Company has taken measures and will implement other SSBL recommendations for proper disclosure of the information in its annual report for 2019.

The SSBL also recommended disclosing that the current composition of the Management Board (without independent members) cannot ensure proper implementation of the provisions of the Law on Companies of the Republic of Lithuania (hereinafter - the LC) related to transactions with related party. As recommended by the SSBL, the Company will put its best effort to ensure compliance with the LC requirement as soon as it is reasonably possible, without waiting for the end of the term of the current Management Board.

Rimantas Perveneckas

Apranga Group General Director