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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 Separate Financial Statements

Opinion

We have audited the accompanying annual

separate financial statements of TOYA S.A.

(the “Entity”), which comprise:

— the statement of financial position as at

31 December 2020;

and, for the period from 1 January to 31

December 2020:

— the statement of profit or loss and other

comprehensive income;

— the statement of changes in equity;

— the cash flow statement;

and

— accounting policy and other explanatory

notes;

(the “separate financial statements”).

In our opinion, the accompanying separate

financial statements of the Entity:

— give a true and fair view of the

unconsolidated financial position of the

Entity as at 31 December 2020 and of

its unconsolidated financial

performance and its unconsolidated

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 Entity's articles of association;

— have been prepared, in all material

respects, on the basis of properly

maintained accounting records in

accordance with chapter 2 of the

accounting act dated

29 September 1994 (the “Accounting

Act”).

Our audit opinion on the separate 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 separate

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 Entity 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 separate 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

Entity 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 separate

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 separate 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 442 263 thousand (for the year 2019: PLN 356 783 thousand)

Refer to disclosures in the separate financial statements: Note 2.21 „Revenue recognition”, Note 25

„Operating segments” and Note 26 „Sales revenue”.

Key audit matter

Our response

In the year ended 31 December 2020, the

Company’s sale of goods accounted for total

revenue in the financial statements.

The revenue from sales is one of the key

indicator for the assessment of Company’s

performance, the Management bonus

system as well as is of analysts and

investors interest, that significantly increase

the risk of fraud through the recognition of

Our audit procedures in the area included,

among other things:

― assessing the Company’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

non-existent sale transactions in separate

financial statements.

In the wake of the above factors, we

considered revenue recognition to be

associated with a significant risk of material

misstatement in the separate 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 separate financial

statements;

― analysis of significant credit notes

issued after the balance sheet date in

terms of revenue recognition

correctness in audited financial year;

― obtaining confirmation of selected

unpaid sale invoices as at 31 December

2020 issued to third parties and

regarding to related parties –

confirmation of all outstanding balances

as at 31 December 2020;

― assessing for reasonableness the

amount of sales throughout comparison

of Company’s 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;

― examining appropriateness and

completeness of revenue recognition-

related disclosures in the financial

statements regarding to relevant

information required by the applicable

financial reporting standards.

Other Matter

The separate financial statements of the Entity

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 Entity for the Separate

Financial Statements

The Management Board of the Entity is

responsible for the preparation, on the basis of

properly maintained accounting records, of

separate 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 Entity's articles of association and for

such internal control as the Management

Board of the Entity determines is necessary to

enable the preparation of separate financial

statements that are free from material

misstatement, whether due to fraud or error.

In preparing the separate financial statements,

the Management Board of the Entity is

responsible for assessing the Entity'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 Entity either intends to liquidate the Entity

or to cease operations, or has no realistic

alternative but to do so.

According to the Accounting Act, the

Management Board and members of the

Supervisory Board of the Entity are required to

ensure that the separate financial statements

are in compliance with the requirements set

forth in the Accounting Act. Members of the

Supervisory Board of the Entity are responsible

for overseeing the Entity’s financial reporting

process.

Auditor’s Responsibility for the Audit of the Separate Financial Statements

Our objectives are to obtain reasonable

assurance about whether the separate

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 separate

financial statements.

The scope of audit does not include assurance

on the future viability of the Entity or on the

efficiency or effectiveness with which the

Management Board of the Entity has

conducted or will conduct the affairs of the

Entity.

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 separate 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 Entity'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 Entity;

— conclude on the appropriateness of the

Management Board of the 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 Entity’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

separate financial statements to the

related disclosures in the separate

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

separate financial statements. However,

future events or conditions may cause the

Entity to cease to continue as a going

concern;

— evaluate the overall presentation, structure

and content of the separate financial

statements, including the disclosures, and

whether the separate financial statements

represent the underlying transactions and

events in a manner that achieves fair

presentation.

We communicate with the Audit Committee of

the 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 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 Entity, we determine those

matters that were of most significance in the

audit of the separate 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 separate 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. 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 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

financial statements and the Report on

activities;

(together the “Other information”).

Responsibility of the Management Board and Supervisory Board

The Management Board of the Entity is

responsible for the Other information in

accordance with applicable laws.

The Management Board and members of the

Supervisory Board of the 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 separate financial

statements does not cover the Other

information.

In connection with our audit of the separate

financial statements, our responsibility was to

read the Other information and, in doing so,

consider whether the Other information is

materially inconsistent with the separate

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 separate financial

statements.

Moreover, in accordance with the requirements

of the Act on statutory auditors our

responsibility was to report whether the Entity

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 separate financial

statements.

Opinion on the Report on Activities

Based on the work undertaken in the course of

our audit of the separate 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 separate 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 separate financial

statements.

Statement on Other Information

Furthermore, based on our knowledge about

the Entity and its environment obtained in the

audit of the separate 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 separate financial statements

of the Entity by resolution of Supervisory Board

dated 10 December 2019. Our period of total

uninterrupted engagement is 1 year.

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