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The report of the reorganisation advisor on the fulfilment of the reorganisation plan

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?Harju County Court approved 19 June 2020 reorganisation plan of AS Baltika.
Restructuring advisor needs to submit every 6-month report to court and all
creditors impacted. We will publish hereby information in the report,
including financial numbers regarding 10 months, to all investors. We will draw
your attention to the fact that data and numbers in the report refer to AS
Baltika on a stand-alone basis and Group consolidated numbers are only in case
if accordingly referred.

Flavio Perini

Member of Management Board, CEO

[email protected]  (mailto:[email protected])



THE REPORT OF THE REORGANISATION ADVISOR ON THE FULFILMENT OF THE REORGANISATION
PLAN

Harju County Court confirmed with 19.06.2020 ruling for civil case 2-20-4688 the
reorganisation plan of AS Baltika (hereafter Baltika).

In accordance with § 50 of the Reorganisation Act, the reorganisation advisor of
Baltika  hereby presents  to the  court and  creditors the  first written report
regarding the fulfilment of the reorganisation plan.

To verify the fulfilment of the reorganisation plan and evaluating the financial
situation, the reorganisation advisor has used the unaudited accounts of Baltika
as at 31.10.2020.

Fulfilment of the reorganisation plan

The  claims  of  30 creditors  in  the  total amount of 12 206 649.74 euros were
transformed  based on  the reorganisation  plan. Claims  were transformed in two
groups.

During  the reporting period Baltika did not have to repay any principal claims.
Such obligation starts from June 2021 for Group I and end of 2021 for Group II.

Based  on the reorganisation plan  Baltika had to pay  interest on the claims in
Group I. Baltika has fulfilled this obligation.

The financial impact of transforming the claims under the reorganisation plan is
EUR 5 045 198 in total and it is accounted under other operating income.

Baltika's financial situation

Baltika's   financial   situation   has   been  positively  influenced  by  both
transformation  of the creditors' claims and also several substantive changes in
Baltika´s  operations,  as  a  result  of  which  compared to the state prior to
reorganisation, the  gross profit of Baltika from the sale of goods has improved
and  various operating expenses have reduced (incl rent expenses that fall under
several operating expenses, payroll).

The  below  table  contains  the  prognosis  of  2020 profit  and loss statement
presented  in the reorganisation plan of  Baltika, the figures of 10 months from
the  prognosis (until 31.10.2020) and  the actual profit  and loss statement for
ten months that includes the effect from reorganisation measures.

+--------------------+---------------------+-----------------+-----------------+
|                    |12 months       2020 |10 months    till|10 months    till|
|                    |prognosis          in|31.10.2020       |31.10.2020 actual|
|Thousand euros      |reorganisation plan  |prognosis        |result           |
+--------------------+---------------------+-----------------+-----------------+
|Revenue             |12 300               |11 311           |11 057           |
+--------------------+---------------------+-----------------+-----------------+
|Total revenue       |12 300               |11 311           |11 057           |
+--------------------+---------------------+-----------------+-----------------+
|Cost of goods sold  |11 302               |10 217           |8 053            |
+--------------------+---------------------+-----------------+-----------------+
|Gross profit        |998                  |1 095            |3 004            |
+--------------------+---------------------+-----------------+-----------------+
|Gross profit margin |8.1%                 |9.7%             |27.1%            |
+--------------------+---------------------+-----------------+-----------------+
|Various    operating|                     |                 |                 |
|expenses            |2 844                |2 373            |1 601            |
+--------------------+---------------------+-----------------+-----------------+
|Payroll             |3 533                |2 950            |2 202            |
+--------------------+---------------------+-----------------+-----------------+
|Depreciation,       |                     |                 |                 |
|amortisation     and|                     |                 |                 |
|impairment          |137                  |116              |65               |
+--------------------+---------------------+-----------------+-----------------+
|Other      operating|                     |                 |                 |
|expense  (-) /income|                     |                 |                 |
|(+)                 |3 895                |3 895            |4 106            |
+--------------------+---------------------+-----------------+-----------------+
|Operating  income (-|                     |                 |                 |
|loss)               |-1 622               |-449             |3 242            |
+--------------------+---------------------+-----------------+-----------------+

Comparison  shows that operating  profit of Baltika  in reporting period was far
better than prognosis used when compiling the reorganisation plan.

The  discounts given  by suppliers  for goods  already purchased i.e., the goods
that  were already in the  warehouse had the biggest  impact on the reduction of
costs  of goods sold and increase in  gross profit compared to the prognosis. At
the  same time, it has to be considered  that revenue of Baltika, which also has
impact  on gross profit, is derived from sales to subsidiaries. It is a practice
within  Baltika Group to adjust intragroup prices in the end of calendar year in
line  with transfer pricing policy. Therefore, the level of gross profit for the
2020 financial year will become clear in January 2021.

The  gross  profit  margin  that  is  important  for  Baltika  as a group is the
consolidated  gross profit  margin that  also improved  during the  period under
observation,  being  51.0% in  III  quarter  2020, 49.2% in  II quarter 2020 and
45.9% in III quarter 2019.

The decrease in payroll was caused by the faster decrease in number of employees
than  expected (many of which  terminated their contract in  their own will) and
smaller  redundancy expense  than prognosed.  The number  of Baltika's employees
reduced from 112 as at the end of March to 58 as at 31.10.2020.

Reduction   of   various   operating   expenses   and   payroll   has  permanent
characteristics  and  will  have  an  impact  also in the coming periods. Moving
Baltika's  offices to smaller premises, that better meet the new requirements of
Baltika  and that have rental costs that are significantly lower compared to the
previous space, has aided in saving on operating costs. The reduction in payroll
is  due to the decision to continue with  only one brand from second half of the
year 2021. As the development of a new collection takes place much earlier, then
discontinuing  several brands has allowed to  reduce the number of staff already
during year 2020.  Described methods are in compliance with the measures devised
in the reorganisation plan.

Baltika's shareholders' equity is EUR 2 410 thousand as at 31.10.2020.

Baltika´s  liquidity and solvency  improved significantly as  a result of a loan
from  KJK  BLTK  Holding  OÜ  on  02.09.2020 in  the amount of EUR2 550 000 (stock
exchange            announcement            about            the            loan
https://cns.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=952973&mes
sageId=1200710).  Additional  financing  and  improved  cashflow  from operating
activities during the period under observation has allowed Baltika to fulfil all
obligations  arising after the  initiation of reorganisation  proceedings. As at
31.10.2020 Baltika  basically has no overdue  payables (as at 31.10.2020 Baltika
had 3 971 euros worth overdue liabilities which were received late and which all
were  paid by 10.11.2020. Baltika  has also payable  in the amount of 3 978 GBP,
that  is not on the balance sheet as Baltika disagrees regarding the payable and
therefore has not paid it).

Based  on the  above, the  reorganisation advisor  is of  the opinion  that as a
result   of   confirming   of  the  reorganisation  plan  and  implementing  the
reorganisation  measures  Baltika´s  financial  situation  has already improved.
Baltika  has followed  in its  operations the  reorganisation plan, due to which
fulfilling  the reorganisation plan,  including paying the  creditors' claims in
the period set out in reorganisation plan is still realistic.

The  reorganisation  advisor  confirms,  that  he  has  forwarded this report in
addition  to  the  court  also  to  all  the  creditors  that  are  impacted  by
reorganisation.

Tallinn, 17.12.2020.a.

Artur Suits
Reorganisation advisor of Aktsiaselts Baltika




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