Agrowill Group Ab
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AGROWILL GROUP AB Independent Auditor's Report, Consolidated Annual Report and Consolidated and Stand Alone Financial Statements for the Year Ended 31 December 2011 AGROWILL GROUP AB Company code 126264360, Smolensko str. 10, LT-03201 Vilnius TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT 3 - 5 CONSOLIDATED ANNUAL REPORT 6 - 19 FINANCIAL STATEMENTS: BALANCE SHEET 20 INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE 21 INCOME STATEMENT OF CHANGES IN EQUITY 22-23 STATEMENT OF CASH FLOWS 24 EXPLANATORY NOTES 25 - 67 ANNEX TO THE ANNUAL REPORT 68 - 87 2 pwc Our report has been prepared in Lithuanian and English languages. In all matters of interpretation of information, views or opinions, the Lithuanian language version of our report takes precedence over the English language version. Independent Auditor's Report To the shareholders of Agrowill Group AB Report on the financial statements We have audited the accompanying stand alone and consolidated financial statements (together 'the Financial statements') of Agrowill Group AB (`the Company') and its subsidiaries (collectively 'the Group') set out on pages 20-67 which comprise the stand alone and consolidated balance sheet as of 31 December 2011 and the stand alone and consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these Financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these Financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. PricewaterhouseCoopers UAB, J. Jasinskio 16B, LT-o1112 Vilnius, Lithuania T: +370 (5) 239 2300, F: +37o (5) 239 2301, E-mail: [email protected], vvww.pwc.com/It PricewaterhouseCoopers UAB, company code 111473315, VAT payer's code LT114733113, registered office at J. Jasinskio 165, LT•01112 Vilnius, is a private company registered with the Legal Entities' Register of the Republic of Lithuania. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. pwc Basis for Qualified Opinion — Material Misstatement — stand alone financial statements As discussed in Note 4, as of 31 December 2011 the Company tested investments in and receivables from those subsidiaries that had impairment indications. As a result of those tests, management decided that no additional impairment losses should be recorded in the year ended 31 December 2011. In our opinion, the management used too optimistic profitability forecasts for certain subsidiaries. Based on our audit evidence, using more prudent profitability forecasts, cost of investment in and receivables from Agrowill Vérigkes ZUB, Agrowill Kairenai ZUB, Agrowill Jurbarkai ZUB and AWG Investment 1 UAB as of 31 December 2011 should be decreased by LTL 1,10o thousand, LTL 900 thousand, LTL 2,000 thousand and LTL 8,1oo thousand, respectively, and net profit of the Company for the year then ended should be decreased by the aggregate of LTL 12,100 thousand. In 2011 the Company discovered the following error: in the year ended 31 December 2010 the Company did not calculate any of interest income amounting to LTL 2,524 thousand from the loan granted to Zemes vystymo fondas 20 UAB. The error was corrected prospectively and the above mentioned amount was recorded as interest income in the year ended 31 December 2011. In our opinion, this is a material error and should be corrected retrospectively. Therefore, the Company's net profit for the year ended 31 December 2010 should be increased and net profit for the year ended 31 December 2011 should be reduced by LTL 2,145 thousand, representing the interest income referred to above reduced by income tax effect. Basis for Qualified Opinion — Material Misstatement — consolidated financial statements As discussed in Note 4, as of 31 December 2011 the Group tested goodwill for impairment. As a result of those tests, management decided that goodwill in the amount of LTL 1,818 thousand related to acquisition of Graduva UAB is not impaired as of 31 December 2011. In our opinion, the management used too optimistic profitability forecasts in their tests. Based on our audit evidence, using more prudent profitability forecasts, above mentioned goodwill should be written off. Consequently, the Group's net profit for the year ended 31 December 2011 should be decreased by LTL 1,818 thousand. As disclosed in Note 26, during the year ended 31 December 2011 the Group increased the holding in the subsidiary Gustoniai ZUB's share capital from 63% to 75% for nil consideration. Non-controlling interest was adjusted by LTL 711 thousand, and gain on acquisition of subsidiaries in the same amount was recognized in the Group's income statement. Based on IAS 27 Consolidated and separate financial statements, changes in a parent's ownership interest in a subsidiary that do not result in a change of control are accounted for as equity transactions. Therefore, the Group's net profit for the year ended 31 December 2011 should be decreased by LTL 711 thousand. During the year ended 31 December 2011 the Group has fair valued certain equity investments and has recorded a gain of LTL 3,776 thousand in the Group's income statement. The above mentioned equity investments do not have a quoted market price and the management has determined their fair values using valuation techniques. These equity instruments should be classified as available-for-sale financial assets, and in case fair value is reliably measurable, the changes in fair value should be recognized in other comprehensive income, and not in income statement. However, in our opinion, fair values of the above mentioned equity investments cannot be reliably measured, and therefore these investments should be measured at cost. Consequently, the carrying amount of financial assets as of 31 December 2011 and the Group's net profit for the year then ended should be decreased by LTL 3,776 thousand. pwc Qualified Opinion In our opinion, except for the effect of the matters referred to in the Basis for Qualified Opinion — Material Misstatement sections, the accompanying Financial statements give a true and fair view of the financial position of the Company and the Group as of 31 December 2011, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Emphasis of Matter We draw attention to Note 2.1 in the Financial statements which discloses the Group's and the Company's assumptions about its ability to continue as a going concern. The going concern assumption is dependent on the successful implementation of the Restructuring plans as well as the Group's and the Company's possibilities to operate at a profit in the future. These conditions, along with other matters as set forth in Note 2.1, indicate the existence of a material uncertainty which may cast significant doubt about the Group's and the Company's ability to continue as a going concern. Our opinion is not qualified in respect of this matter. Report on other legal and regulatory requirements Furthermore, we have read the consolidated Annual Report for the year ended 31 December 2011 set out on pages 6-19, including its Annex set out on pages 68-87, and have not noted any material inconsistencies between the financial information included in it and the audited Financial statements for the year ended 31 December 2011. On behalf of PricewaterhouseCoopers UAB v Christopher C. Butler Jurgita Krikgeiii Director Auditor's Certific e No.00 Vilnius, Republic of Lithuania 3o April 2012 AGROWILL GROUP AB Company code 126264360, Smolensko st. 10, LT-03201 Vilnius CONSOLIDATED ANNUAL REPORT FOR THE YEAR 2011 AGROWILL GROUP AB AND THE SUBSIDIARIES