| AUGA group, AB (further – Company) received Decision No. 241-104 (further – Ruling) of the Supervision Service of the Bank of Lithuania dated 2017 June 5, which obliges the Company to publish the following notification about the Ruling: 1. The Ruling was issued to the Company warning of violation of Article 22 of the Law on Securities of the Republic of Lithuania (the law’s wording applicable until 2015 December 4). Based on the evaluation by the Supervision Service of the Bank of Lithuania: (a) the 9 month interim financial statements of the Company for 2015 do not comply with the requirements of IAS 40 “Investment Property” and IFRS 13 “Fair Value Measurement”, (b) the Company failed to properly substantiate the fair value of the Group’s investment property totaling EUR 17.917 million as of 2015 September 30; therefore, it is not possible to indicate the precise impact on the Company’s financial standing and financial results. However, if the fair value of the Company’s investment property as of 2015 September 30, which was not properly substantiated by the Company, was defined differently than as indicated by the Company, the value of the Group’s investment property would be different from the value stated in the financial statements as of 2015 September 30. Accordingly, the net financial results and (or) Net Equity would be affected. 2. Based on this Ruling, the Supervision Service of the Bank of Lithuania obligates the Company to retrospectively make corrective adjustments according to the requirements of IAS 40 “Investment Property” and IFRS 13 “Fair Value Measurement” when preparing its interim Financial Statements for the first 6 months of 2017: value of investments must be properly identified and justified according to the definition of fair value specified in the mentioned standards. In the case that the value of investment property as of 2015 September 30 is defined as being different than specified in the interim Financial Statements for the first 9 months of 2015, the Company must retrospectively correct its Financial Statements no later than October 2. 3. Specify the date on which the Financial Statements shall be retrospectively revised, assessed and announced publicly. Company position The Company is making public this material event in accordance with the instructions, legal requirements and deadlines issued by the Supervision Service of the Bank of Lithuania, but, at this moment, cannot specify the date, as required by the Ruling, on which the Financial Statements shall be corrected retrospectively, evaluated and made public, because the Ruling provides contradictory instructions and it is not currently possible to state when, how and whether they can be met: (i) regarding the requirement to retrospectively correct the Financial Statements for the first 6 months of 2017: these financial reports have not yet been prepared, as the accounting reporting period has not yet concluded. The requirement to adjust the reports to include investment property, of which a significant amount has subsequently been transferred to third parties - for this reason it is no longer possible or should be accounted in the Company’s Financial Statements; (ii) In the Company's understanding, the Ruling was based on the average price of all real estate transactions in the State Registry Centre database focused on agricultural land that meets a certain range of sample values, periods and plot sizes, disregarding all the differences in valuated and comparable object characteristics that are required of the Company. The Company, having opted to select comparative evaluation data for its lots, as much as was possible, took into account the different characteristics of valuated and comparable objects and their impact on the valued lots and their values. (iii) In the opinion of the Company, it believes that it correctly valued and reflected the Company’s investment property in its interim Financial Statements for the first 9 months of 2015; this could, presumably, be confirmed by the fact that at the end of 2015, the major portion of the afore-mentioned investment property was transferred to the investment fund “Fixed Yield Investment Fund” for a price essentially in line with the values disclosed in the Company’s Financial Statements for the first 9 months of 2015 (at the end of 2016, the investment units of this fund were sold to third parties, as a result of which these assets are not represented in the Financial Statements for 2017). The Company is currently analyzing the arguments and requirements as stated in the Ruling, and evaluating if, how, and when it would be possible to satisfy them, in what manner and in which extent an additional property evaluation is possible according to the aspects named in Ruling. The Company, if necessary, shall provide a separate announcement about the decisions it shall take. | |
