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KPMG Audyt spółka z ograniczoną odpowiedzialnością sp.k.

ul. Inflancka 4A, 00-189 Warszawa, tel. +48 (22) 528 11 11, fax +48 (22) 528 10 09, Email kpmg@kpmg.pl, Internet www.kpmg.pl

This document is a free translation of the Polish original. Terminology current

in Anglo-Saxon countries has been used where practicable for the purposes

of this translation in order to aid understanding. The binding Polish original

should be referred to in matters of interpretation.

Independent Auditor's Report

To the General Shareholders’ Meeting and Supervisory

Board of TOYA S.A.

Report on the Audit of the Annual Consolidated Financial Statements

Opinion

We have audited the accompanying annual

consolidated financial statements of

TOYA S.A. Group (the “Group”), whose

parent entity is TOYA S.A. (the „Parent

Entity”), which comprise:

— the consolidated statement of financial

position as at 31 December 2020;

and, for the period from 1 January to 31

December 2020:

— the consolidated statement of profit or

loss and other comprehensive income;

— the consolidated statement of changes

in equity;

— the consolidated cash flow statement;

and

— accounting policy and other explanatory

notes;

(the “consolidated financial statements”).

In our opinion, the accompanying

consolidated financial statements of the

Group:

— give a true and fair view of the

consolidated financial position of the

Group as at 31 December 2020 and of

its consolidated financial performance

and its consolidated cash flows for the

financial year then ended in accordance

with International Financial Reporting

Standards, as adopted by the European

Union (“IFRS EU”) and the adopted

accounting policy;

— comply, in all material respects, with

regard to form and content, with

applicable laws and the provisions of

the Parent Entity's articles of

association.

Our audit opinion on the consolidated financial statements is consistent with our report to the

Audit Committee dated 7 April 2021.

Basis for Opinion

We conducted our audit in accordance with:

— International Standards on Auditing as

adopted by the National Council of

Statutory Auditors as National Standards

on Auditing (the “NSA”) by the resolution

no. 3430/52a/2019 dated 21 March 2019

and the resolution no. 1107/15a/2020

dated 8 September 2020; and

— the act on statutory auditors, audit firms

and public oversight dated 11 May 2017

(the “Act on statutory auditors”); and

— regulation (EU) No 537/2014 of the

European Parliament and of the Council of

16 April 2014 on specific requirements

regarding statutory audit of public-interest

entities and repealing Commission

Decision 2005/909/EC (the “EU

Regulation”); and

— other applicable laws.

Our responsibilities under those regulations

are further described in the Auditor’s

Responsibility 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 and Ethics

We are independent of the Group in

accordance with International Ethics Standards

Board for Accountants International Code of

Ethics for Professional Accountants (including

International Independence Standards)

(“IESBA Code”) as adopted by the resolution of

the National Council of Statutory Auditors,

together with the ethical requirements that are

relevant to our audit of the consolidated

financial statements in Poland and we have

fulfilled our other ethical responsibilities in

accordance with these requirements and the

IESBA Code. During our audit the key statutory

auditor and the audit firm remained

independent of the Group in accordance with

requirements of the Act on statutory auditors

and the EU Regulation.

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. They

are the most significant assessed risks of

material misstatements, including those due to

fraud. Key audit matters were addressed in the

context of our audit of the consolidated

financial statements as a whole, and in forming

our opinion thereon we have summarised our

response to those risks. We do not provide

a separate opinion on these matters. We have

determined the following key audit matters:

Revenue recognition

Revenue for the year 2020: PLN 542 112 thousand (for the year 2019: PLN 440 018 thousand)

Refer to disclosures in the consolidated financial statements: Note 3.22 „Revenue recognition”, Note

24 „Operating segments” and Note 25 „Sales revenue”.

Key audit matter

Our response

In the year ended 31 December 2020, the

Group’s sale of goods accounted for total

revenue in the consolidated financial

statements.

The revenue from sales is one of the key

indicator for the assessment of Group’s

performance, the Management bonus

system as well as is of analysts and

investors interest, that significantly increase

Our audit procedures in the area included,

among other things:

― assessing the Group’s revenue

recognition policy for compliance with

relevant provisions of the financial

reporting standards;

― evaluating design and implementation of

internal control regarding the time of

revenue recognition and segregation of

the risk of fraud through the recognition of

non-existent sale transactions in

consolidated financial statements.

Furthermore, part of the Group’s revenue

from sales require complex analysis in

identifying the time when performance

obligation is satisfied, therefore the

appropriate time of revenue recognition.

In the wake of the above factors, we

considered revenue recognition to be

associated with a significant risk of material

misstatement in the consolidated financial

statements. Therefore, the area required our

increased attention in the audit and as such

was determined to be a key audit matter.

duties implemented in the revenue

recognition process in order to mitigate

the risk of fraud in consolidated financial

statements;

― analysis of significant credit notes

issued after the balance sheet date in

terms of revenue recognition

correctness in audited financial year;

― based on selected sample confirmation

of sale transactions to a source

documentation such as: invoices and

transport documents or confirmation of

payment;

― assessing for reasonableness the

amount of remaining sales throughout

comparison of revenue recognized in

2020 with the amount of sales expected

by us, based on the cashflow analysis

adjusted among others by change in the

balance of receivables;

― analysis of selected sample Group’s

sale transactions on the turn-of-the-year

in terms of revenue recognition in

appropriate time throughout verification

of source documentation such as sale

invoices and transportation evidence

confirming delivery of goods.

― examining appropriateness and

completeness of revenue recognition-

related disclosures in the consolidated

financial statements regarding to

relevant information required by the

applicable financial reporting standards.

Other Matter

The consolidated financial statements of the

Group as at and for the year ended 31

December 2019 were audited by another

auditor who expressed an unqualified opinion

on those financial statements on 26 March

2020.

Responsibility of the Management Board and Supervisory Board of the Parent Entity for the

Consolidated Financial Statements

The Management Board of the Parent Entity is

responsible for the preparation of consolidated

financial statements that give a true and fair

view in accordance with International Financial

Reporting Standards, as adopted by the

European Union, the adopted accounting

policy, the applicable laws and the provisions

of the Parent Entity's articles of association

and for such internal control as the

Management Board of the Parent Entity

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 of the

Parent Entity 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 of the Parent Entity either intends to

liquidate the Group or to cease operations, or

has no realistic alternative but to do so.

According to the accounting act dated

29 September 1994 (the “Accounting Act”), the

Management Board and members of the

Supervisory Board of the Parent Entity are

required to ensure that the consolidated

financial statements are in compliance with the

requirements set forth in the Accounting Act.

Members of the Supervisory Board of the

Parent Entity are responsible for overseeing

the Group’s financial reporting process.

Auditor’s Responsibility 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 auditors’ 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 NSAs 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.

The scope of audit does not include assurance

on the future viability of the Group or on the

efficiency or effectiveness with which the

Management Board of the Parent Entity has

conducted or will conduct the affairs of the

Group.

As part of an audit in accordance with NSAs,

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 of the Parent Entity;

— conclude on the appropriateness of the

Management Board of the Parent Entity’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 auditors’

report on the audit of the consolidated

financial statements 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

auditors’ report on the audit of the

consolidated financial statements.

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 the Audit Committee of

the Parent Entity 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 provide the Audit Committee of the Parent

Entity with a statement that we have complied

with relevant ethical requirements regarding

independence, and 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 the Audit

Committee of the Parent Entity, we determine

those matters that were of most significance in

the audit of the consolidated financial

statements of the current reporting period and

are therefore the key audit matters. We

describe these matters in our auditors’ report

on the audit of the consolidated financial

statements 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.

Other Information

The other information comprise:

— the letter of the President of the

Management Board to the Shareholders;

— the selected financial data;

— the Directors’ Report on the operations of

TOYA S.A. Capital Group for the year

ended 31 December 2020 (the “Report on

activities”), including the corporate

governance statement, which is a separate

part of the Report on activities;

— the statement of the Management Board

regarding the preparation of the

consolidated financial statements and

Report on activities;

— the Management Board’s information

regarding the appointment of the audit

firm;

— the statement of the Supervisory Board

regarding the Audit Committee; and

— the Supervisory Board’s assessment of the

consolidated financial statements and the

Report on activities;

(together the “Other information”).

Responsibility of the Management Board and Supervisory Board

The Management Board of the Parent Entity is

responsible for the Other information in

accordance with applicable laws.

The Management Board and members of the

Supervisory Board of the Parent Entity are

required to ensure that the Report on activities,

including separate parts of the Report on

activities, is in compliance with the

requirements set forth in the Accounting Act.

Auditor’s Responsibility

Our opinion on the consolidated financial

statements does not cover the Other

information.

In connection with our audit of the consolidated

financial statements, our responsibility was to

read the Other information 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. If, based on the work we

have performed, we conclude that there is

a material misstatement in the Other

information, we are required to report that fact.

In accordance with the Act on statutory

auditors our responsibility was to report if the

Report on activities was prepared in

accordance with applicable laws and the

information given in the Report on activities is

consistent with the consolidated financial

statements.

Moreover, in accordance with the requirements

of the Act on statutory auditors our

responsibility was to report whether the Group

included in the statement on corporate

governance information required by the

applicable laws and regulations, and in relation

to specific information indicated in these laws

or regulations, to determine whether it

complies with the applicable laws and whether

it is consistent with the consolidated financial

statements.

Opinion on the Report on Activities

Based on the work undertaken in the course of

our audit of the consolidated financial

statements, in our opinion, the accompanying

Report on activities, in all material respects:

— has been prepared in accordance with

applicable laws, and

— is consistent with the consolidated financial

statements.

Opinion on the Statement on Corporate Governance

In our opinion, the corporate governance

statement, which is a separate part of the

Report on activities, includes the information

required by paragraph 70 subparagraph 6

point 5 of the Decree of the Ministry of Finance

dated 29 March 2018 on current and periodic

information provided by issuers of securities

and the conditions for recognition as equivalent

of information required by the laws of a non-

member state (the “decree”).

Furthermore, in our opinion, the information

identified in paragraph 70 subparagraph 6

point 5 letter c-f, h and letter i of the decree,

included in the corporate governance

statement, in all material respects:

— has been prepared in accordance with

applicable laws; and

— is consistent with the consolidated financial

statements.

Statement on Other Information

Furthermore, based on our knowledge about

the Group and its environment obtained in the

audit of the consolidated financial statements,

we have not identified material misstatements

in the Report on activities and the Other

information.

Report on Other Legal and Regulatory Requirements

Statement on Services Other than Audit of the Financial Statements

To the best of our knowledge and belief, we

did not provide prohibited non-audit services

referred to in Art. 5 paragraph 1 second

subparagraph of the EU Regulation and Art.

136 of the act on statutory auditors.

Appointment of the Audit Firm

We have been appointed for the first time to

audit the annual consolidated financial

statements of the Group by resolution of

Supervisory Board dated 10 December 2019.

Our period of total uninterrupted engagement

is 1 year.

Opinion on the compliance of the consolidated financial statements prepared in the single

electronic reporting format with the requirements of the regulations on technical standards on

the specification of a single electronic reporting format

As part of our audit of the consolidated

financial statements we were engaged to

perform a reasonable assurance engagement

in order to express an opinion on whether the

consolidated financial statements of the Group

as at 31 December 2020 and for the year then

ended prepared in the single electronic

reporting format included in the reporting

package named ‘toa-2020-12-31.zip’ (the

‘consolidated financial statements in the ESEF

format’) were tagged in accordance with the

requirements specified in the Commission

Delegated Regulation (EU) 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 and other Commission

Delegated Regulations (EU) with respect to

updates of the taxonomy laid down in the

regulatory technical standards for the single

electronic reporting format, hereinafter jointly

referred to as regulatory technical standards

on ESEF (the ‘ESEF RTS’) and meet the

technical conditions of a single electronic

reporting format which are specified in these

regulations.

Responsibility of the Management Board and Supervisory Board of the Parent Entity

The Management Board of the Parent Entity is

responsible for the preparation of consolidated

financial statements in the ESEF format in

accordance with the tagging requirements and

technical conditions of a single electronic

reporting format which are specified in the

ESEF RTS. Such responsibility includes the

selection and application of appropriate XBRL

tags using the taxonomy specified in the ESEF

RTS.

This responsibility of the Management Board

of the Parent Entity includes designing,

implementing and maintaining internal control

relevant to the preparation of the consolidated

financial statements in the ESEF format that is

free from material non-compliance with

requirements specified in ESEF RTS, whether

due to fraud or error.

The members of the Parent Entity’s

Supervisory Board are responsible for

overseeing the financial reporting process,

including the preparation of financial

statements in the format required by applicable

law.

Auditor’s Responsibility

Our objective is to issue an opinion about

whether the consolidated financial statements

in the ESEF format were tagged in accordance

with the requirements specified in the ESEF

RTS and meet the technical conditions of a

single electronic reporting format specified in

those regulations.

We conducted our engagement in accordance

with International Standard on Assurance

Engagements 3000 (revised), ‘Assurance

Engagements Other Than Audits or Reviews

of Historical Financial Information’ as adopted

by the National Council of Statutory Auditors

(‘NCSA’) by resolution no. 3436/52e/2019

dated 8 April 2019 as National Standard on

Assurance Engagement 3000 (revised)

(‘KSUA 3000 (Z)’). That standard requires that

the auditor plan and perform procedures to

obtain reasonable assurance about whether

the consolidated financial statements in the

ESEF format were prepared in accordance

with specified criteria.

Reasonable assurance is a high level of

assurance, but it is not guaranteed that the

assurance engagement conducted in

accordance with KSUA 3000 (Z) will always

detect material non-compliance with

requirements specified in the ESEF RTS.

The procedures selected depend on our

judgment, including the assessment of the

risks of material non-compliance with

requirements specified in the ESEF RTS,

whether due to fraud or error.

In making those risk assessments, the auditor

has considered internal controls relevant to the

preparation of the consolidated financial

statements in the ESEF format in accordance

with the specified criteria in order to design

procedures that are appropriate, which provide

the auditor with sufficient and appropriate

evidence under the circumstances. The

assessment of internal controls was not

performed for the purpose of expressing an

opinion thereof. The procedures performed by

the auditor also included assessing the

appropriateness of the subject matter and the

suitability of the criteria used under the

circumstances.

Our procedures included, in particular:

▪ obtaining an understanding of the

process of selection and application of

XBRL tags by the Parent Entity and

maintaining compliance with the ESEF

RTS, including an understanding of the

operation of internal control relevant to

this process,

▪ assessing compliance with the

technical conditions on the

specification of a single electronic

reporting format, including the use of

the XHTML format,

▪ agreeing the tagged information

included in the reporting package

containing the consolidated financial

statements in the ESEF format to the

consolidated financial statements of

the Group presented in human-

readable format,

▪ evaluating the completeness of

tagging of information in the

consolidated financial statements in

the ESEF format using XBRL tags,

▪ assessing whether the XBRL tags from

the taxonomy specified in the ESEF

RTS used by the Parent Entity were

properly applied and that taxonomy

extensions were used where the

relevant elements have not been

identified in the primary taxonomy

specified in the ESEF RTS, including

whether the applied taxonomy

extensions were correctly anchored in

the primary taxonomy specified in the

ESEF RTS.

The firm applies International Standard on

Quality Control 1 as adopted by National

Council of Statutory Auditors by resolution no

2040/37a/2018 dated 3 March 2018 (with

subsequent amendments) as national standard

on quality control and accordingly maintains 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 have complied with the independence and

other ethical requirements of the IESBA Code

which is founded on fundamental principles of

integrity, objectivity, professional competence

and due care, confidentiality and professional

behavior as well as other independence and

ethical requirements, applicable to this

assurance engagement in Poland.

Defining the criteria

The criteria for assessing compliance of the

consolidated financial statements in the ESEF

format are defined in the ESEF RTS.

Opinion

Our opinion has been formed on the basis of,

and is subject to, the matters outlined above.

We believe that the evidence we have

obtained is sufficient and appropriate to

provide a basis for our opinion on assurance

engagement.

In our opinion, the consolidated financial

statements in the ESEF format as at 31

December 2020 and for the year then ended

was prepared, in all material respects, in

accordance with the requirements of the ESEF

RTS.

On behalf of audit firm

KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k.

Registration No. 3546

Signed on the Polish original

Wojciech Drzymała

Key Statutory Auditor

Registration No. 90095

Limited Partner, Proxy

Wrocław, 8 April 2021