AD Plastik d.d.

Annual Report (ESEF) • Apr 22, 2022

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1 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT 2121 20 Copyright © AD Plastik d.d. 2021 All rights reserved. Texts, parts of texts and graphic images are protected by copyrights. Use of this data is possible only with prior consent of the company AD Plastik d.d. Publisher: AD Plastik d.d. Matoševa 8, 2121 Solin For publisher: Finance Department Josip Divić, Finance Director Editor: Lori Vitaljić Graphic design: In visio d.o.o. Edition: 100 IMPRESSUM INTEGRATED ANNUAL REPORT 2121 20 INTEGRATED ANNUAL REPORT 4 BUSINESS N INTRODUCTIO N Mission, vision, key values 20 Production sites 22 Overview of markets 23 and customers Tehnologies 24 Key products 26 Corporate governance 28 Research and development 46 Production and sales 48 Quality 52 Supplier chain 54 Information technologies 56 and security ADPL Share 58 Financial results 2021 64 Risks and opportunities 74 Business Plan for 2022 84 A brief overview in numbers 6 About AD Plastik Group 9 Letter from the President 10 of the Management Board Automotive industry 12 About the Integrated 14 Report 2021 highlights 16 INTEGRATED ANNUAL REPORT 5 T Y REP O RT S U S TAINABILI T NC IAL A NN U AL FINA N   S TATEMENT  Material topics and 87 boundaries Ethics and integrity 90 Stakeholders 92 Employees 94 Community 114 Economy 118 Environment 122 GRI Content Index 149 ESG Indicators Index 155 Opinion by the Commission 160 of the Managing Committee of the HR BCSD Consolidated Financial 164 Statements of AD Plastik Group Financial Statements 238 of the company AD Plastik d.d. A b r i e f o verview i n n umbers 6 A brief overview in numbers of AD Plastik Group 5 COUNTRIES 8 PRODUCTION SITES 2,544 EMPLOYEES 11.1% EBITDA MARGIN 2.9% NET PROFIT MARGIN EUR 152 million NEW DEALS SEALED INTEGRATED ANNUAL REPORT 7 * All data in the report is as of December 31, 2021 HRK 1,126.2 million OPERATING REVENUE HRK 125.3 million EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) HRK 32.7 million NET PROFIT compared to 2020 compared to 2020 -7.6 % -24.5 % -30.3 % INTEGRATED ANNUAL REPORT 9 AD Plastik Group is a leading company for the development and production of car interior and exterior components in Croatia and one of the leading ones in Eastern Europe. Its business is based on more than thirty-fi ve year long tradi- tion, exceptional expertise and dedicated work of its employees. Passion and knowledge are in- corporated into the development and realization of each product and process, and focusing on customer needs, quality, reliability and compet- itiveness are the fundamental premises of suc- cessful long-term survival in a challenging and specifi c automotive market. AD Plastik Group is a multinational company that cooperates with the world’s most famous car manufacturers, from the early stages of devel- opment to the fi nal product. New materials and technologies, digitalization, robotization, safety and quality, are the trends of the automotive in- dustry to which it successfully adapts every day. The company’s operational activities extend to more than twenty countries on fi ve continents. The company develops and encourages a culture of knowledge and experience exchange in a very dynamic, international and multicultural environ- ment, thus improving the quality standards of its products, services and modes of operation. Cor- porate social responsibility is one of the most important components of company’s develop- ment policy, and its corporate culture is based on sustainability, encouraging cooperation and recognizing excellence. About AD Plastik Group Creating diff erent mobility habits of end-users directs the automotive industry towards more automated and autonomous driving, electrifi - cation and vehicle connectivity with other sys- tems. Through the necessary weight reduction of vehicles of the future, the share of plastic components will undoubtedly increase as well as the new opportunities for growth and develop- ment of AD Plastik Group. 10 Letter from the President of the Management Board INTEGRATED ANNUAL REPORT We present you the business results of the AD Plastik Group in 2021, very challenging and de- manding, and according to many, one of the most diffi cult years in the history of the auto- motive industry. Although the beginning of the year showed positive signs and pointed to mar- ket recovery, the global crisis of the lack of sem- iconductors signifi cantly aff ected the sales of new cars. Due to the lack of components, car manufacturers failed to meet the market needs and deliver the required quantities, and disrup- tions in production processes were reflected in the entire supply chain. In rather diffi cult circumstances, we generated the Group’s operating revenue of HRK 1,126.2 mil- lion, which was by 7.6 percent lower than a year earlier. EBITDA amounted to HRK 125.3 million and was lower by 24.5 percent, while net profi t decreased by 30.3 percent and amounted to HRK 32.7 million. The biggest challenges in the past period have been the adaptations to frequent and uncertain changes in our customers’ operational plans, but despite this we have maintained our position and reputation as a reliable and quality suppli- er. We have adapted to constant changes and at no point were deliveries to customers compro- mised. In addition to disruptions in the supply chain, last year was marked by a signifi cant in- crease in the prices of materials, raw materials, transport and energy sources. By open price cal- culation and alignment with most of our custom- ers, the impact on business has been reduced. INTEGRATED ANNUAL REPORT 11 but also to give added value to the communi- ty in which we operate. Therefore, sustainable business is integrated into all segments of our work, and it is our daily mission to constantly im- prove and develop it. Our eff orts and progress have been recognized by various stakeholders and the professional public in the past period. We are particularly pleased with the awards we received in a very demanding year, namely the HRIO award in the category of large companies and the Golden Key for the best exporter to Slo- venia. In addition to the market challenges that have been continued in 2022, during the preparation of this report we have been facing another unex- pected situation. The Russian-Ukrainian crisis is a new challenge for the global economy and our business. Given the uncertainties, we are aware of another very diffi cult and challenging peri- od ahead. We are primarily focused on preserv- ing fi nancial stability and business sustainability, and reducing negative impacts on business. At the same time, new deals are being sealed in the European market, contracted projects are being realized and development activities are being continued. There is no room for relaxation, but the auto- motive industry should be considered in a long- term perspective. AD Plastik Group is a stable company that has shown its resilience many times and I believe it will be the same now. I am sure that together we will successfully withstand this rather diffi cult crisis too. We are ready for new challenges, and confi dent of the survival and long-term development of our company. Marinko Došen President of the Management Board Unlike production, sales and project activities have been proceeding unhindered, so in 2021 new deals worth more than EUR 150 million were selaed. Among them are also several very impor- tant development projects, which have further strengthened our position as a development supplier. We have been working intensively on sales and development activities and the realiza- tion of 37 active development projects. Develop- ment activities of all car manufacturers are in full swing and the entire industry is actively prepar- ing for the end of the crisis. At the same time, we direct the research ac- tivities towards our strategic goals of improv- ing processes, products and materials. We have been working intensively on this, aware of the permanent changes and transformations that will be necessary for the further development of the business. Circumstances in the market have accelerated organizational processes, and we have paid special attention also to sustainable business and the improvement of all our internal processes related to CSR. Some of our sites have been certifi ed for the fi rst time according to the information security system for the automotive industry which is a prerequisite for the exchange and work with confi dential intellectual property of customers. The health and safety of our employees have al- ways been the ultimate priorities of our com- pany, and in pandemic extra attention has been paid to them. In addition to the ongoing meas- ures and activities that were undertaken in order to protect health, last year we also became hold- ers of the certifi cate “Health Friendly Company”. We have thus further confi rmed the importance of the health of our employees and a healthy business environment in our business. Our unquestionable choice, but also a duty, is to conduct business and live in harmony with our environment. It is the only right path and way to preserve the planet for future generations, M a r i n ko D ošen t of the Management Bo ar a d 12 Automotive industry The automotive industry is among the largest and most influential ones in the world, employ- ing, directly or indirectly, 12.7 million Europeans. Its turnover in the European Union accounts for more than eight percent of total GDP, and 11.5 percent of production workers belong namely to that sector. After decades of production that exceeded mar- ket demand, it has faced a completely diff erent situation in the past period and one of its big- gest crises in recent history. The global econom- ic crisis caused by the pandemic, and primarily the lack of semiconductors, has forced car man- ufacturers to reduce their capacities and stop production processes. At the same time, the automotive industry has been facing one of the greatest transforma- tions since its inception. The overall end-us- er experience, from the buying process to the driving experience, is currently undergo- ing a digital metamorphosis. New technologies have been changing modern business and car manufacturers have to keep up with current technological trends. And not only them, but every company related to the automotive indus- try has to invest in innovation to stay competi- tive and meet customer expectations. The auto- motive sector is at the forefront of this and its annual contribution to innovation is the largest in the European Union, with EUR 58.8 billion in- vested in research and development. This is a confi rmation of the industry’s focus on a more sustainable, high-quality and secure future. Driven by the climate change we are all witness- ing, sustainable technologies and alternative propulsion vehicles are increasingly taking over the market. Thus, after a hundred years of dom- ination of powertrains, internal combustion en- gines got a serious competition. The growth of sales of electric vehicles is evident, which is con- tributed also by signifi cant incentives of individ- ual countries, and by 2030 a signifi cant increase in their market share is expected. Digital trans- formation is a long and demanding process and it will take time to complete it, but it is already INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT 13 certain that the process will be dominated by two strong trends - sustainability and connec- tivity. The individual needs of end users push the boundaries of personalization of the vehicle it- self, whose performance is becoming better and safer. Vehicles are becoming lighter to reduce environmental impact, and safety and comfort have no alternative. There is a lot of pressure to fi nd sustainable solutions and materials, so de- velopment teams have been working intensive- ly on research into environmentally friendly and lightweight materials and those obtained by re- cycling. One thing is for sure – the share of polymer components in cars will surely grow, and better quality and more environmentally friendly solu- tions are the responsibility of the entire chain within the automotive industry. In line with new trends, the emergence of IT companies in the automotive world is becoming more frequent, as well as the merger of large manufacturers and suppliers on a global level. The reason for this is the unique goal and desire to meet the market and customers’ requirements in a higher quality manner. More complex customer requirements also require more complex solutions and compo- nents, so investing in new knowledge and tech- nologies has been a necessity for survival for many years. A strong strategic determinant of further development and growth of AD Plastik Group, while taking care of the sustainability of business operations in all its segments, is the de- velopment and production of value-added com- ponents. Existing knowledge, experience and technologies enable the company’s unhindered competition in the global and very demanding automotive market, to the satisfaction of all its stakeholders. >8% EU GDP 14 INTEGRATED ANNUAL REPORT About the Integrated Report All information on the business operations of the AD Plastik Group, from fi nancial and sustain- able points of views, can be found in the fi fth In- tegrated Annual Report of the AD Plastik Group for 2021. It contains business and sustainability reports as well as annual fi nancial statements as of December 31, 2021. In order to provide all stakeholders with a better understanding of the company’s business and the industry in which it operates, the intercon- nection of information and a concise overview of the company’s value creation, the Integrat- ed Report presents fi nancial and non-fi nancial indicators in detail and transparently. In addi- tion to fi nancial results, all interested public will learn more about social and environmental top- ics signifi cant to the company, their impact on activities and results. The risks related to busi- ness and sustainability risks and sustainabili- ty risks, as well as the way in which the Group is managed, are presented in detail. The CSR is one of the basic determinants by which the compa- ny is guided in the development of its strategy, policies, plans and activities. Continuous devel- opment and improvement of corporate culture and raising quality standards in all business seg- ments are the standard business model of the company. The company considers the feedback of stake- holders to be important and with their help it improves its non-fi nancial reporting year after year, presenting information in the clearest and simplest possible way. The company seeks to improve its methodologies and provide a com- prehensive insight into achievements and goals in various business segments. With its success- ful results, the AD Plastik Group generates add- ed value to society, the environment and the economy, and this is one of its key premises for success. Conducting business in harmony with its environment has been the company’s long- term mission, and the rise of awareness about social responsibility topics at all levels is becom- ing more pronounced. In the reporting period, the company continued to face the pandemic and all the consequences it brought to business, 15 INTEGRATED ANNUAL REPORT but also to society as a whole. Through under- standing and constant adaptations, AD Plastik Group has once again proven to act responsibly and conscientiously towards all its stakeholders. The automotive industry in 2021 was facing one of the biggest crisis, aff ecting all suppliers with- in the chain. But despite rather modest fi nancial business results, the company took care of all its stakeholders. The complete focus and quick reactions of the management, as well as the knowledge and com- mitment of each employee, have enabled the company to maintain and strengthen its status of a reliable and quality partner. The development of the epidemiological situation was monitored in all markets and all necessary preventive activities and protection measures were taken accordingly. The Crisis Management Committee has actively continued its work throughout the year, and the safety and preservation of health of employees continued to be the priority. At the same time, special care was taken about the sustainabili- ty of the business, given that due to the lack of semiconductors, some car manufacturers were forced to temporarily stop their production pro- cesses. In order to mitigate potential risks, vari- ous scenarios have been developed and actions have been taken in line with the development of the situation, taking into account cost rationali- zation. Production processes were carried out in accordance with customer orders, and despite uncertainties and last-minute changes, all deliv- eries to customers were arriving on time. Events and changes in logistical flows aggravated by the pandemic, as well as those in the supply chain, were additionally monitored on a daily basis. De- spite an extremely demanding and challenging year, communication with key stakeholders was regular and with no interruptions. The care for employees, customers, suppliers and sharehold- ers has not been neglected at any time, and im- provements have been continuously worked on. The results are not in line with expectations at the beginning of the year, but the company has adapted to the new circumstances, preserved fi nancial stability and continued its socially re- sponsible mission in all business segments. 16 INTEGRATED ANNUAL REPORT 16 HRIO AWARD IN THE CATEGORY OF LARGE COMPANIES 2021 highlights AD Plastik is the winner of the HRIO award in the category of large companies awarded by the Croatian Business Council for Sustainable Devel- opment (HR BCSD) and the Croatian Chamber of Economy. The award was accepted by the Pres- ident of the Management Board Marinko Došen, who said on that occasion: „Sustainable business nowadays is the responsibility of every compa- ny, regardless of business operations, size or ge- ographic affi liation. It is our duty to live in har- mony with our environment and preserve this planet for future generations. We are happy that our eff orts and progress have been recognized by the professional public and although sustain- able business is an integral part of our corporate culture, we are aware that we are at the very be- ginning. That is an ongoing process that has to be woven into all segments of business. It is the only way to succeed and survive in the modern market. Each award is a pleasure for us and a con- fi rmation of successful work, but above all it is an additional obligation and motivation for an even better future.“ The former CSR Index has been upgraded and changed its name to the Croatian Sustainability Index - HRIO, complying with the latest European directives and standards, global ratings and Sustainable Development Goals. In 2021, AD Plastik Group sealed new deals in a total value of EUR 151.7 million, of which EUR 71.8 million was sealed for the Russian market and EUR 79.9 million for the European market. In Russia, the largest share of new deals was sealed with Renault-Nissan-AvtoVAZ Alliance, namely EUR 63.5 million, and the estimated dura- tion of their projects is from fi ve to eight years. New deals with the Volkswagen Group worth a total of EUR 8.3 million were also sealed for this NEW DEALS market, making this car manufacturer increas- ingly important in the AD Plastik Group’s cus- tomer portfolio. In the past year, all new deals in the European market were sealed with Stellantis, one of the largest automotive groups in the world in terms of the number of cars produced, that was formed by the merger of the FCA and PSA Group. The estimated project duration for diff erent vehicle models is from seven to ten years. 17 INTEGRATED ANNUAL REPORT T h e mos t importan t events in 2021 HEALTH FRIENDLY COMPANY AD Plastik has become a holder of the “Health Friendly Company” certifi cate awarded by the Ministry of Health and the Croatian Institute of Public Health within the National Programme “Healthy Living“. Dinka Nakić, Head of the De- partment for Coordination of Activities for the Promotion and Preservation of Lifelong Health presented the certifi cate to the Executive Direc- tor of Human Resources and Business Organiza- tion of AD Plastik Group, Mira Pavić. “The safety and health of employees have always been the highest priority of our company, and this was es- pecially evident during the pandemic. We focus our internal activities on promoting a healthy 17 THE BEST EXPORTER TO SLOVENIA AD Plastik received the Golden Key award in the category The Best Exporter to Slovenia in 2020, and was nominated in two other catego- ries, namely in the category The Best Exporter to Romania and in the category The Most Inno- vative Exporter. As part of the sixteenth Con- vention of Croatian Exporters, the awards cere- mony was held, at which the award was received on behalf of AD Plastik by the Finance Director Josip Divić. “It is a great pleasure and honor for me to receive this award, especially because it is awarded for our results in quite diffi cult times. This award is the result of teamwork and that is why I thank fi rst and foremost all the employees of our company for their dedication and con- tribution in these challenging circumstances. I would also like to thank our long-term partner, the company Revoz, which recognizes our val- ues, quality and reliability. Although we are wit- nessing numerous challenges in the market, we are optimistic about the years ahead.” business environment and adopting healthy habits as it is an added value for our employees, but also for the company as a whole. Satisfi ed and happy employees are our ultimate goal,” said Mira Pavić. The assessment of the working envi- ronment within companies is carried out by the Croatian Institute of Public Health in seven key areas, and the label “Health Friendly Company” is held by the companies that recognize healthy values and care about improving the health of their employees. The certifi cate is awarded for two years, and before its renewal, the condition in the company is re-evaluated. INTEGRATED ANNUAL REPORT 18 76 70.66 550 ESG score 2020 points HRI HRVATSKI INDEKS ODRZIVOSTI all production sites IATF 16949 ISO 14001 INTEGRATED ANNUAL REPORT B us i ness 19 Mission, vision, key values 20 Production sites 22 Overview of markets 23 and customers Tehnologies 24 Key products 26 Corporate governance 28 Research and development 46 Production and sales 48 Quality 52 Supplier chain 54 Information technologies 56 and security ADPL Share 58 Financial results 2021 64 Risks and opportunities 74 Business Plan for 2022 84 KEY VALUES RELIABILITY The relationship with all its stakeholders is founded on trust, open and honest com- munication. Building long-term partnerships with all stakehold- ers is based on mutual respect. QUALITY Developing and maintaining the highest standards of qual- ity and safety in every segment of business are at the heart of business success and stake- holders’ satisfaction. INNOVATIVENESS With its ideas, creativity and technologies, it continually ma- kes progress in order to keep up with world trends. In this way it contributes to the improve- ment and development of the company, thus confi rming its position in the global market. RESPONSIBILITY Responsibility is a prerequisite for the company’s development, growth and results. It is demon- strated every day through ap- proach towards each individu- al, work, partners, stakeholders and actions aimed at the socie- ty, nature and the community in which the company operates. RESPECT Employees are the greatest val- ue and they hold the key role in the company’s business. They are being treated fairly and with respect regardless of their job position and location of work. They are encouraged to take initiative, make decisions and govern with quality. TOGETHERNESS Mutual collaboration at all lev- els based on trust, making clear and swift decisions and taking responsibility is encouraged. Exchange of ideas and knowl- edge, multiculturalism, mutual respect and solidarity are the key ideas of developing togeth- erness. ADP VISION To be the market leader in the development and production of automotive components in Eastern Europe and to expand business into new markets. ADP MISSION By introducing innovative solutions and constant improvements in the development and quality of products, the company con- tributes to the success of its customers. It achieves its goals as an ethical, responsible and attractive employer. It conducts busi- ness in harmony with the environment to the satisfaction of all its stakeholders, and shareholders recognize the company as a relia- ble partner in which it is preferable to invest long-term. Mission, vision, key values 20 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT 21 COMPANY HISTORY 2018 production site in Tiszaújváros, Hungary '18 - '17 ‘16 - ‘14 ‘12 - ‘09 ‘07 - ‘02 ‘95 - ‘94 ‘92 - ‘52 2017 new robotized interiors painting line in Zagreb 2016 exiting FADP, JV company in Luga, Russia 2014 new robotized painting line in Zagreb 2012 production sites in Mladenovac, Serbia and Kaluga, Russia 2009 production site in Luga, Russia – JV company FADP with Faurecia 2007 Faurecia bought Simoldes Plasticos’s share in Euro APS 2002 production site in Romania – JV company Euro APS with Simoldes Plasticos 1995 production sites in Zagreb and Vintai, Russia 1994 offi cial name change to AD Plastik 1992 continued operations under the name Autodijelovi 1952 establishment of Jugoplastika – original predecessor 22 INTEGRATED ANNUAL REPORT AD Plastik, Zagreb II, Croatia AD Plastik, Zagreb I, Croatia AD Plastik d.d. – company’s headquarters Solin, Croatia AD Plastik Tisza Kft. Tiszaújváros, Hungary JV - Euro Auto Plastic Systems S.R.L. Mioveni, Romania ADP d.o.o. Mladenovac, Republic of Serbia ZAO AD Plastik Kaluga Kaluga, Russian Federation AO AD Plastik Togliatti Vintai, Samara, Russian Federation Production sites 1 3 2 7 6 8 5 4 1 5 2 6 3 7 4 8 23 INTEGRATED ANNUAL REPORT Overview of markets and customers EUROPE Czech Republic France Germany Hungary Italy Poland Romania ASIA SOUTH AMERICA NORTH AMERICA AFRICA China India South Korea Taiwan Turkey Uzbekistan Argentina Brazil Venezuela Mexico Morocco Russia Serbia Slovakia Slovenia Spain UK INTEGRATED ANNUAL REPORT SERBIA Mladenovac HUNGARY Tiszaújváros 24 Technologies In addition to key technologies – injection moulding, painting, extrusion and blow moulding, AD Plastik Group is continuous- ly engaged in the development and improvement of its pro- duction processes. Market trends are monitored, new opportunities are explored and technological improve- ments are introduced. Digiti- zation, robotics, new materials INJECTION MOULDING PAINTING EXTRUSION BLOW MOULDING CROATIA Solin Zagreb I Zagreb II CROATIA Zagreb I CROATIA Solin RUSSIA Kaluga Vintai RUSSIA Vintai SERBIA Mladenovac HUNGARY Tiszaújváros and technologies, product safety and quality are not just trends, but basic guidelines for the survival and development of the automotive industry. Recently, special attention has been paid to assembly process- es and their improvement, be- cause these fi nal operations of almost all represented tech- nologies are becoming more demanding and sophisticated. Assembly, ultrasonic and vibra- tion welding, automatic gluing, laser fi nishing and automatic product control are the added value of the company’s produc- tion processes. Thermoforming is a technology in the Group’s portfolio that is represented in factories in Rus- sia and Serbia. 25 26 INTEGRATED ANNUAL REPORT Key products FRONT AND REAR BUMPERS FRONT GRILLE AIR DUCTS FENDER PROTECTORS, ROCKER CLADDINGS, MUDGUARDS SPOILERS LICENSE PLATE LIGHT HOLDERS PAINTED EXTERIOR COMPONENTS (ENGINE COVERS, FENDERS) UNDERBODY COVERS AND BATTERY COVERS WHEEL ARCH HOUSING DEFLECTORS, COOLING FAN MOTOR BRACKETS GLASS AND BODY SEALS EXTERIOR COMPONENTS 27 INTEGRATED ANNUAL REPORT INTERIOR COMPONENTS DOOR PANELS CENTRAL CONSOLE TRUNK SIDE TRIMS INSTRUMENT PANEL AND RELATED PARTS GRAB HANDLES ROOF CONSOLE GLASS RUN CHANNELS SPEAKER BRACKETS BLOW-MOULDED AIR DUCTS AIR EXTRACTORS SMALL INJECTION-MOULDED COMPONENTS INTEGRATED ANNUAL REPORT 28 Corporate governance CORPORATE MATRIX AO AD Plastik Togliatti Vintai, Samara, Russian Federation ZAO AD Plastik Kaluga Kaluga, Russian Federation ADP d.o.o. Mladenovac, Republic of Serbia AD Plastik Tisza Kft. Tiszaújváros, Hungary AD Plastik d.o.o. Novo Mesto, Slovenia Euro Auto Plastic Systems S.R.L. Mioveni, Romania AD PLASTIK d.d. Solin, CROATIA 29 INTEGRATED ANNUAL REPORT Governance EU Taxonomy Regulation, that focuses on two environmental objectives this year. Given the ongoing pandemic, during 2021 activ- ities related to maintaining the health and safe- ty of employees continued to be very inten- sive. Some members of the Committee are also members of the Crisis Management Commit- tee, in charge of monitoring the pandemic sit- uation and implementing the necessary meas- ures within the company. This created additional synergy in the work of the Committee and the Crisis Management Committee. Due to uncertain circumstances, the timely exchange of informa- tion at that time was crucial for making the best decisions. Regarding the corporate part, com- pliance with the Corporate Governance Code of the Zagreb Stock Exchange was continued, as announced, which we report in more detail in the Corporate Governance Code Statement and the Compliance Questionnaire. This year, in addition to the challenges of the health crisis itself, has consequently brought also new business challenges that have seriously aff ected the global business of the entire auto- motive industry. Nevertheless, quality manage- ment, commitment, teamwork, mutual support and collegiality are a positive advantage in con- duction of business in the turbulent 2021. In accordance with the company’s strategy and development plans, its mission and vision, eth- ics, social responsibility and sustainability are mandatory prerequisites for long-term growth and successful survival of AD Plastik Group in the global market. Aware of its responsibility and impact on society, contributing to the goals of sustainable development is an integral element of company management in all its segments. By the decision of the Management Board, the Corporate Social Responsibility Committee of the AD Plastik Group was established in 2016, which consists of senior management of the most important business areas in terms of sus- tainability. The Committee is directly responsible to the President of the Management Board, who also approves the company’s Integrated Annu- al Report, together with other members of the Management Board. In 2021, the composition of the Committee was expanded in order to strengthen its operational work with the aim of more quality implementa- tion of additional activities in the ESG area. This ensured a better flow of information and more effi cient implementation of planned activities, as well as a greater contribution of employees to the common goals of sustainability. Through surveys, internal newsletters and informal con- versations ideas and suggestions are exchanged, united into one whole, and the Committee de- fi nes and proposes objectives to the Man- agement Board for the upcoming period. The Committee is also in charge of monitoring the regulatory framework based on which reporting is done for the fi rst time, in accordance with the 30 INTEGRATED ANNUAL REPORT Governance structure The corporate governance structure is based on a dualist sys- tem consisting of the Management Board and the Supervisory Board, which, together with the General Assembly and the Au- dit Committee, make the four key functions of the company. SUPERVISORY BOARD COMMITTEES MANAGEMENT BOARD GENERAL SHAREHOLDERS ASSEMBLY INTEGRATED ANNUAL REPORT 31 Corporate governance GENERAL ASSEMBLY In the reporting period, two General Assembly meetings were held, extraordinary meeting on March 16, 2021 and regular one on July 15, 2021. At the extraordinary meeting, a unanimous de- cision was made on dividend payment from 2019 retained earnings, while at the regular meeting, where, in accordance with the Company Act and the Charter, all draft decisions were confi rmed. The General Assembly was informed on the An- nual report on the state of AD Plastik Group for 2020 and the report of the Supervisory Board on SUPERVISORY BOARD In the dualistic model of corporate governance, the Supervisory Board assumes the function of control, supervision and monitoring of business operations, ie a supervisory, but also a strategic role. The supervisory actions of the Board con- sist of a series of activities and mechanisms that protect the interests of shareholders, and the Charter defi nes the types of tasks that can be performed only with its prior consent. The Su- pervisory Board participates in strategic activi- ties primarily by authorizing proposed strategic decisions, evaluating previous strategic decisions as well as advising and supporting the Manage- ment Board in achieving a common vision. The Supervisory Board has seven members, four of whom are elected by the General Assembly, one is appointed by the Workers’ Council, and two are appointed by a shareholder - Joint Stock Company Holding Avtokomponenty, St. Peters- burg, Russia. All members are elected for a term of four years and can be re-elected. In the past year, fi ve meetings of the Supervisory Board were held in accordance with the 202 Events Calendar. The meeting held in January was ex- traordinary, and the other four meetings were regular quarterly meetings. All members of the Supervisory Board participated in decision-mak- ing at the meetings, either physically or by cor- respondence, as provided for in the Rules of Pro- cedure of the Supervisory Board. In the reporting period, the Profi le of the Su- pervisory Board was adopted, containing key guidelines on the structure and composition of this body, which with its diversity in profession- al knowledge, education, skills, professional and practical experience of individual members en- sures adequate supervision of the company’s business operations. In this regard, the business model and strategy of AD Plastik Group, the type, scope and com- plexity of the business it performs as well as the markets in which it operates were taken into ac- count. the conducted supervision of business manage- ment of the Group. Decisions on appropriation of profi t, dividend payment, granting clearance to the members of the Management Board and the Supervisory Board, appointment of the Au- ditor, approval of the Remuneration Report of Management and Supervisory Board Members for 2020, as well as decisions on remuneration of Supervisory Board members and approval of Re- muneration Policy for Management Board mem- bers were adopted. INTEGRATED ANNUAL REPORT SERGEY DMITRIEVICH BODRUNOV, President term of offi ce from July 20, 2020 to July 20, 2024 appointed by the shareholder AO Holding Avtokomponenty IVICA TOLIĆ, Vice President term of offi ce from August 24, 2020 to August 24, 2024 appointed by the General Assembly 40,88 ADPL shares IGOR ANATOLYEVICH SOLOMATIN, member term of offi ce from July 24, 2019 to July 24, 2023 appointed by the General Assembly ALINA VIKTOROVNA KORETSKAYA, member term of offi ce from July 20, 2020 to July 20, 2024 appointed by the shareholder AO Holding Avtokomponenty ANDJELKA ČULO, member term of offi ce from May 14, 2020 to May 14, 2024 appointed by the Workers’ Council IVKA BOGDAN, member term of offi ce from January 31, 2019 to January 31, 2023 appointed by the General Assembly 20,00 ADPL shares BOŽE PLAZIBAT, member term of offi ce from January 31, 2019 to January 31, 2023 appointed by the General Assembly In 2021, there were no changes in the composition of the Supervisory Board. 32 MEMBERS OF THE SUPERVISORY BOARD 33 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT In accordance with the Company’s Charter, the Supervisory Board operates in its full composi- tion of seven members (three female members and four male members), elected or appointed in accordance with the Act, internal acts and Di- versity Policy, which is assessed as the optimal number for eff ective performance of its duties. Members of the Supervisory Board have high moral standards, diff erent knowledge, skills and professional and practical experience required to properly perform their tasks, while meeting also the special requirement that at least one member of the Supervisory Board is an expert in accounting and/or audit of fi nancial statements. Most members also have international experi- ence, which is of particular importance given that AD Plastik Group operates in the interna- tional market. In the described way, the neces- sary balance was established in the composition of the Supervisory Board not only in terms of skills, experience and competencies, but also in terms of age and gender. The appropriate lev- el of representation of women is maintained (over 40 percent in the current composition), which meets the goals and guidelines set out in the Profi le of the Supervisory Board, which was adopted at the meeting held on December 16, 2021. During 2021, the Supervisory Board and its com- mittees regularly held its meetings with the par- ticipation of all members who function well, have a balanced composition and the necessary ex- pertise, in line with the company’s business re- quirements, performing their roles and respon- sibilities in an appropriate and effi cient manner. Consequently, the Supervisory Board assesses that all its individual members and members of its committees are competent to perform tasks EVALUATION REPORT OF THE SUPERVISORY BOARD that fall within the competence of the Supervi- sory Board and its committees according to the law, and that each member in 2021 signifi cantly contributed to their work. The Supervisory Board also assesses that the joint work and cooperation of all members of the Supervisory Board and its committees in 2021 was satisfactory and that the performance of the Supervisory Board and its committees was overall successful. The Executive Director of Le- gal Aff airs, who also performs duties of the com- pany’s secretary, provided adequate support in an effi cient and timely manner in the prepara- tion of the meetings of the Supervisory Board and its committees. The Supervisory Board sup- ports the company’s commitment to pay signif- icant attention to the aspect of diversity and, in addition to the much-needed expertise and ex- perience of candidates, will take into account also the said aspect in future proposals for elec- tion and appointment to the Supervisory Board. The Management Board and the Superviso- ry Board work closely together for the benefi t of the company. During 2021, the Management Board regularly submitted to the Supervisory Board reports prescribed by law and kept it in- formed of all important business events, busi- ness flow, revenue and expenses, all deviations of business events from the original plans and the general state of the company’s aff airs. Con- sequently, the Supervisory Board assesses that its relationship with the Management Board in 2021 was correct. This Evaluation report of the Supervisory Board and its committees was discussed and approved at the meeting of the Supervisory Board held on March 10, 2022, and no external evaluators were engaged in the evaluation process. INTEGRATED ANNUAL REPORT 34 In 2021, three Audit Committee meetings were held, namely on May 27, Sept 2 and Dec 6. All Audit Committee members attended decision-making at all meetings, physically or by correspondence. The reports on the implementation of the An- nual Internal Audit Plan for 2020, the implemen- tation of the Non-Audit Services Policy for 2020, the conducted supervision of the statutory audit of the consolidated and non-consolidated annu- al fi nancial statements for 2020, draft decision on appropriation of profi t and dividend payment, appointment of auditors for 2021 and adoption of Annual Internal Audit Plan were discussed and decided upon at the meetings and on that basis it issued recommendations to the Supervisory Board for their adoption. In 2021, the Audit Committee appointed a new Director of Internal Audit, and Ivica Tolić was re-elected Committee President. AUDIT COMMITTEE is responsible for monitor- ing fi nancial reporting accounting policy accu- racy and consistency, making recommendations regarding external auditor’s engagement, re- viewing the eff ectiveness of the external audi- tor, and indirectly the acting of the Management Board and the Supervisory Board according to its recommendations. President: Ivica Tolić The Supervisory Board committees are its ad- visory and subsidiary bodies. They prepare and make recommendations to the Supervisory Board, thus enabling it to deal with complex is- sues more effi ciently and eff ectively. The company meets the requirement of Article 104 of the Zagreb Stock Exchange Rules, pursuant to which at least one member of the Audit Committee must be independent. SUPERVISORY BOARD COMMITTEES AUDIT COMMITTEE, FOUR MEMBERS REMUNERATION COMMITTEE, THREE MEMBERS APPOINTMENT COMMITTEE, THREE MEMBERS Members: Bože Plazibat Alina Viktorovna Koreckaja Igor Anatoljevič Solomatin 35 REMUNERATION COMMITTEE proposes to the Supervisory Board a Management Board remu- neration policy, awards for Supervisory Board members to be decided by the General Assem- bly, and appropriate form and content of con- tracts with the Management Board members. President: Ana Luketin In 2021, four meetings were held and all Commit- tee members attended decision-making, phys- ically or by correspondence. Decisions were made on the draft decision on awarding the members of the Management Board on the ba- sis of successful work in 2019, the draft decision on rewarding Management Board President and a member for successful work in 2020, draft Re- muneration Report of Management and Super- visory Board Members for 2020, Remuneration Policy for Management Board members, annexes to managerial contracts with Management Board President and members and a draft decision on amendments to the Rules of Procedure of the Remuneration Committee. Ana Luketin was re-elected Remuneration Committee President. APPOINTMENT COMMITTEE nominates can- didates to the Management and Supervisory Boards and assesses the quality of said Boards’ work. When nominating members, the Committee meets the objectives set out in the Diversity Policy regarding the election of these bodies’ members. President: Ivica Tolić Three meetings were held in 2021 and all com- mittee members attended the decision-mak- ing process, physically or by correspondence. The candidates’ nomination to the Supervisory Board committees was decided upon, and Ivica Tolić was re-elected Committee President. STATEMENT ON THE REMUNERATION POLICY FOR SUPERVISORY BOARD MEMBERS The General Assembly adopted a new De- cision on the remuneration of Supervisory Board members in 2021. The decision is based on the principle of en- suring quality and professional members, in order to achieve the company’s mission and long-term strategy, and for the benefi t of all its stakeholders. It ensures the transparency of the Supervisory Board members’ remu- neration, and during its adoption various ex- ternal and internal elements, economic con- ditions, employee remuneration and best practices were considered. Supervisory Board Members are entitled to remuneration for participation in its work and Supervisory Board committees, and to ensure independence and avoid conflicts of interest, their remuneration does not de- pend on the company’s results, but is deter- mined in a fi xed amount. It depends on the function of each member in the Supervisory Board. Remuneration is paid quarterly, and members who are also committees’ members are paid addition- al remuneration for work in the committee after their meetings are held. The decision was published on the company’s website and contains all the information in more detail. Members: Igor Anatoljevič Solomatin Ivica Tolić Members: Nenad Škomrlj Igor Anatoljevič Solomatin 36 INTEGRATED ANNUAL REPORT MANAGEMENT BOARD The Management Board is the leading body of the company that conducts its entire business on its own responsibility. It is responsible for quality business risk management, and at its regular meetings it checks the economic, envi- ronmental and social impacts of the company. The Management Board is responsible for repre- senting the company, preparing fi nancial state- ments and submitting them to the Supervisory Board for approval, along with the decisions on the appropriation of profi t, regular submission of business reports to the Supervisory Board and General Assembly, preparation and conven- ing a regular annual meeting of the General As- sembly and for defi ning corporate functions and their tasks. The Supervisory Board estimates and evalu- ates the performance of the Management Board based on KPI, building and maintaining a positive company’s image in all relevant publics. The Man- agement Board made a self-assessment of its work as a whole and of each individual member for 2021. In accordance with the Charter of the company, the Management Board may be com- prised of 3 to 8 members and currently it has 3 members. In 2021, Višnja Bijelić, a Management Board member, resigned for personal reasons. Term of offi ce of the Management Board’s mem- bers lasts up to 5 years with the possibility of re-election without limiting the number of terms. Each member represents the company inde- pendently and individually and they are elected in accordance with their expertise and the neces- sary experience. Beside the basic expertise cri- teria, the company implements the Succession Plan in accordance with the Diversity Policy of the Management and Supervisory Boards mem- bers, published on the company’s website. The Supervisory Board has set a target share of female Management Board members of at least 25 percent, that shall be achieved within 5 years. Progress according to the realization plan will be reported annually. During selection, can- didates who have experience and knowledge in the industry, aware of the company’s size and the tasks set by the mission and vision, are pre- ferred. The selection of candidates for the high- est management bodies is guided by the profi le guidelines pursued by the Management and Su- pervisory Boards, and personal qualities, exper- tise and integrity are extremely important. The Management Board adopted the new Rules of Procedure in 2021, which were also approved by the Supervisory Board. 37 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT He graduated from the Faculty of Mechanical Engineering and Naval Architecture in Zagreb, orientation Engines and Motor Vehicles and he began his business career as a Construction En- gineer at the Department of Research & Devel- opment at the company Končar EVA in Zagreb. In June 1999, he joined the AD Plastik team as a Construction Engineer at the Department of Construction. His career within the company ad- vanced quickly, thus shortly upon arrival he be- came a Project Manager, then Director of Con- struction, Director of Development, Assistant to the Member of the Management Board for Com- merce and Development, and after that Mem- ber of the Management Board for Commerce and Development. During that period he spent signifi cant time in Russia developing the market and launching newly formed companies. From July 2012 to February 2015 he was President of the Management Board of AD Plastik Group, af- ter which he has been performing the duties of a Member of the Management Board. Born in Rijeka, where he graduated from the Fac- ulty of Engineering and obtained the title of mag. ing. mech. He completed an MBA at the Zagreb School of Business, orientation Petroleum and during career, he has attended additional semi- nars and professional courses in the country and abroad. He began his career at the Croatian pet- rochemical industry as an intern, and from 1997 to 2004 he performed multiple managerial and executive functions, including the Management Board President of DINA. As the Director of the investment company Coca-Cola Bottling Energy, he managed the construction of several energy projects in Hungary. He was the CEO and Man- agement Board Member of Trast, one of the lead- ing logistics companies in Croatia, after which as the Management Board President he managed the project for the operative restructuring of Mirna, Rovinj. He joined the Group in 2012 as a CEO of AD Plastik Togliatti in Russia and he was appointed Management Board President in 2015. He is specialized in change management and cri- sis management. Member of the Management Board since November 9, 2011 current term of offi ce from July 21, 2020 to July 21, 2025 23,203 ADPL shares MLADEN PEROŠ Member of the Management Board for Sales and Projects President of the Management Board since February 6, 2015 current term of offi ce from July 21, 2020 to July 21, 2025 21,009 ADPL shares MARINKO DOŠEN President of the Management Board 38 He graduated from the Faculty of Chemical Engi- neering and Technology in Zagreb, and over the years he has attended a series of educations re- lated to the business management system. He gained his fi rst work experience after his stud- ies exactly at AD Plastik as a Production Technol- ogist, and two years later he became a Head of Quality at the Zagreb production site. For thir- teen years, he had worked as a Lead Auditor of business management systems at Lloyd’s Reg- ister EMEA and he had been a Lead Assessor for quality, environment, energy, occupational safety and health as well as information security management systems in more than 200 compa- nies. He was actively involved in the introduction and verifi cation of the EU ETS system for green- house gas emissions trading in Croatia. Ivan is an authorized internationally registered lecturer for business management, business risks man- agement, energy and quality management sys- tems. From the beginning of 2020, he has been contributing to the development of production, logistics and quality of AD Plastik Group with his knowledge, experience and skills, and seven months later he became a Member of the Man- agement Board. Member of the Management Board since July 21, 2020 current term of offi ce from July 21, 2020 to July 21, 2025 515 ADPL shares Members of the Management Board may not be on the Supervisory Boards or the Management Boards of other companies, which operate in the same line of work as the Company, without the consent of the Super- visory Board. They also must not make decisions based on personal inter- ests or the interests of persons related to them, and they must not par- ticipate in decisions in relation to which they have a conflict of interest. In the event of the existence or potential existence of a conflict of interest related to decision-making in a particular case, the members of the Man- agement Board are obliged to inform other members of the Management Board and the President of the Supervisory Board about that. In the said notice, the member of the Management Board must state all relevant facts about the nature of his/her relationship with the other contracting party and his/her assessment of the existence of a conflict of interest. In order to avoid conflicts of interest, managerial contracts contain provisions on the prohibition of competition during and after the termination of em- ployment in the company, as well as the obligation to keep trade secrets. IVAN ČUPIĆ Member of the Management Board for Production, Logistics and Quality INTEGRATED ANNUAL REPORT 39 INTEGRATED ANNUAL REPORT The company has adopted a new Remuneration Policy for Management Board members in 2021. Based on the propos- al of the Remuneration Com- mittee, all members of the Su- pervisory Board participated in its adoption. The Supervisory Board submitted the said policy to the General Assembly for ap- proval, which approved it and it was made public. This policy has established a system of remu- neration of Management Board members, by setting transpar- ent rules and procedures for determining the remuneration, which harmonizes the interests of Management Board mem- bers with long-term interests of the company and the suc- cessful and ethical implemen- tation of business strategy and its development. The policy has established an appropriate bal- ance between the variable and fi xed remuneration of the Man- agement Board members re- quired to promote transpar- ent and effi cient management. Accordingly, the ma- nagerial contracts defi ne the rights and obligations on the basis of per- forming the function of a Man- agement Board member, as fol- lows: STATEMENT ON THE REMUNERATION POLICY FOR MEMBERS OF THE MANAGEMENT BOARD • monthly salary • the annual bonus (award) can be paid in accordance with the achieved result in the business year, depending on the degree of achievement of certain key business indicators deter- mined by individual manage- rial contracts. Decision on bo- nus payment is made by the Supervisory Board, having in mind the degree and scope of achieving the objectives. The bonus is paid in company shares or cash. • life insurance policy • right to use a company car 24 hours a day • severance payment in the event of the termination of term of offi ce, unless the member was repealed prior to the expiry of term of of- fi ce due to his/her fault or re- signed himself/herself Pursuant to the law, data on re- muneration of members of the Management Board and the Su- pervisory Board are published as part of the Remuneration Report previously approved by the General Assembly. INTEGRATED ANNUAL REPORT 40 Each corporate function has a clearly defi ned management level that directly reports to the highest management body. Improving the collective knowledge on all relevant topics related to the com- pany’s business operations and its sustainable development is an integral part of regular business. Management conducts regular consultations with individual stakeholders and is obliged to report CORPORATE FUNCTIONS PRODUCTION SALES RESEARCH & DEVELOPMENT PURCHASING FINANCE HUMAN RESOURCES LOGISTICS QUALITY SYSTEM OCCUPATIONAL SAFETY AND GENERAL AFFAIRS IT SAFETY INTERNAL AUDIT CONTROLLING ACCOUNTING LEGAL AFFAIRS BUSINESS ORGANIZATION regularly to the Management Board about that. In case of need or upon request of individ- ual stakeholders, consultations with the Management Board are organized occasionally. INTEGRATED ANNUAL REPORT Corporate function s 41 AO AD Plastik Togliatti, Russian Federation ALEXANDR VLADIMIROVICH LEBED Managing Director SUPERVISORY BOARD Matko Serdarević - president Denis Miletić Branko Durdov Leo Bočkaj Josip Divić ZAO AD Plastik Kaluga, Russian Federation NINO KAĆANSKI Managing Director SUPERVISORY BOARD Denis Miletić - president Branko Durdov Matko Serdarević Leo Bočkaj Krešimir Jurun AD Plastik Tisza kft., Republic of Hungary TAMÁS GYŐR Managing Director SUPERVISORY BOARD Zlatko Bogadi - president Danijel Kovač Josip Divić ADP d.o.o. Republic of Serbia ANDRIJA KALAJŽIĆ Managing Director SUPERVISORY BOARD Mladen Peroš - president Denis Miletić Ana Luketin OTHER REPRESENTATIVES Katia Zelić Josip Divić AD Plastik d.o.o., Republic of Slovenia MLADEN SOPČIĆ Managing Director MANAGEMENT OF SUBSIDIARIES 42 MANAGEMENT LEO BOČKAJ Assistant to the Management Board in charge of Research and Development MATKO SERDAREVIĆ Assistant to the Management Board in charge of Purchasing, IT, Occupational Safety and General Aff airs KATIJA KLEPO Business Development Advisor IVANA FILIPOVIĆ Executive Director of Quality ANA LUKETIN Executive Director of Legal Aff airs MIRA PAVIĆ Executive Director of Human Resources and Corporate Architecture EDO BACCI Technical Director of the Production site Solin MARIO BARUNICA Manufacturing Director of the Production site Zagreb STIPAN BODROŽIĆ Products Development Director ZLATKO BOGADI Director of the Production site Zagreb MARKO CAMBJ Director of Projects TOMISLAV ČEPIĆ Manufacturing Director of the Production site Zagreb BRANKO DURDOV Production Operations Advisor INTEGRATED ANNUAL REPORT 43 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT JOSIP DIVIĆ Finance Director TONĆI DUGEČ Quality Director MATE GOJSALIĆ Process Development Director TAMÁS GYŐR Managing Director of AD Plastik Tisza MIRANDA JERKOVIĆ Director of Internal Audit KREŠIMIR JURUN Director of Controlling and Accounting NINO KAĆANSKI Managing Director of AD Plastik Kaluga ANDRIJA KALAJŽIĆ Managing Director of ADP, Mladenovac JADRANKA KONTA Director of Occupational Safety and General Aff airs ALEXANDR VLADIMIROVICH LEBED Managing Director of AD Plastik Togliatti IGOR LONČAR Technical Director of the Production site Zagreb DENIS MILETIĆ Director of Logistics ANTICA PERKOVIĆ Director of Strategic Purchasing of Materials JOSIP SUZAN Tools Development Director LIDIJA ŠKARICA Director of Strategic Purchasing of Investments and Services TONI ŠTAMBUK Sales Director for EU and other markets MARIJANA TOPIĆ-DOMIĆ Sales Technical Support Director JOSIP VULIĆ Director of the Production site Solin 44 INTEGRATED ANNUAL REPORT 1 In the reporting peri- od, the company applied the Corporate Govern- ance Code (hereinafter: the Code) published on the offi cial website of the Zagreb Stock Exchange (www.zse.hr). 2 The company operates in accordance with good corporate governance practice and for the most part according to the recommendations of the Code. Explanations for deviations from individu- al recommendations and additional adjustments can be found in the An- nual Compliance Ques- tionnaire of the Corpo- rate Governance Code approved by the Super- visory Board, which is published on the website of the Zagreb Stock Ex- change and the company together with the Inte- grated Annual Report. 3 Internal control is per- formed by Controlling Department and Internal Audit Service, Controlling Department informs the Management Board on conducted control while Internal Audit Service informs the Audit Com- mittee and Management Board. Internal Audit Service is an independent function that provides support to management in meeting the company’s objectives through a systematic and professionally based ap- proach to supervision and assessing the eff ective- ness of risk management, control and corporate governance. The conclusions and rec- ommendations of Internal Audit Service are aimed at enabling management to improve the process- es, proactively respond to risks or reduce them to an acceptable level. 4 Ten signifi cant indirect and direct shareholders are listed on page 62 of this report. The company has no holders of secu- rities with special con- trol rights, nor holders of securities with limi- tations on voting rights of a certain percentage or number of votes. The company has no specifi c rules on appointment and revocation of appoint- ment of Management Board members, nor spe- cifi c rules on authority of Management Board mem- bers. The Company Char- ter prescribes that two members of the Supervi- sory Board are appointed by the shareholder, Joint Stock Company Holding Avtokomponenty from St. Petersburg, Russia. On July 20, 2017, the Gen- eral Assembly gave au- thorisation to the Man- agement Board to acquire own shares on behalf of the company for the peri- od of fi ve years. On December 31, 2021, the company owned 50,353 own shares. 5 Shareholders exercise their rights via General Assembly which is com- petent for making de- cisions on the follow- ing issues: electing and removal from offi ce of Supervisory Board mem- bers, appropriation of profi t, granting clearance to Management Board members, appointing auditors, amending the Charter, increasing or re- ducing share capital and on other issues under its responsibility as reg- ulated by the law. Activ- ities of the General As- sembly are regulated by the Companies Act and the Rules of Procedure of the General Assembly CORPORATE GOVERNANCE CODE STATEMENT 45 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT published on the compa- ny’s website (www.adplas- tik.hr). 6 Data on members of the Management Board and Supervisory Board is list- ed on pages 32, 37 and 38 of this report. In accord- ance with the Companies Act and the Company Charter, the Management Board makes decisions at the meetings of the Man- agement Board. In 2021, 51 meetings of the Management Board were held, which is in line with good corporate practic- es. In accordance with the Act and the Rules of Procedure of the Super- visory Board, the compa- ny has three committees whose activities assist the work of the Supervi- sory Board by preparing decisions that shall later be taken by the Supervi- sory Board, and supervis- ing their implementation. The Committees are as follows: Audit Committee, Remuneration Commit- tee and the Appointment Committee. 7 The diversity policy of AD Plastik Group ap- plied on the company management bodies is aimed to establish nec- essary standards ensur- ing the diversity of the Management and Super- visory Boards members. Accordingly, their struc- ture should be reflected in skills and experience, professional competen- cies, but also in aspects of age, gender, education and other diversities that contribute to diff erent views, higher-quality and better decision-making. The average age of the members of the Super- visory Board is 50 years, and their age range is di- verse and ranges from 32 to 70. Their composition is also diverse by gen- der, so the Supervisory Board consists of three female members and four male members. In the re- porting period the Man- agement Board of the company consists of the President of the Man- agement Board and two members. Balance has been established accord- ing to the criteria of skills, experience and compe- tencies, as can be seen from the CV of the mem- bers of the Management Board. reporting period the Management Board of the company consists Marinko Došen president of the Management Board Mladen Peroš member of the Management Board Ivan Čupić member of the Management Board of the President of the Management Board and two members. Balance has been established ac- cording to the criteria of skills, experience and competencies, as can be seen from the CV of the members of the Manage- ment Board. Mana ge men t 46 INTEGRATED ANNUAL REPORT Vehicle weight reduction, greater comfort and safety of the vehicles, adaptability, sustainability and effi ciency are undeniable goals of the auto- motive industry. It is a matter of survival with- in the industry, and AD Plastik Group contrib- utes to these goals namely by constant research of materials and development of technologies. Partnerships with customers and suppliers have signifi cantly contributed to the smooth running of development activities over the past period. Despite the delays in production, development activities are in their full swing and in 2021 nu- merous development projects were realized in AD Plastik Group. Research activities are focused on the strategic goals of improving processes, products and materials, which are constantly be- ing worked on. Digitization, the rapid develop- ment and representation of new technologies, as well as the personalization of vehicles are chal- lenges that the automotive industry has been facing for some time. The pandemic has further Research and development accelerated transformations within the industry to keep pace with market demands. This includes also the entry of new players on the scene – IT companies that are changing the automotive in- dustry. By reducing the vehicle weight, in addi- tion to increased quality and safety, greenhouse gas emissions are being reduced, which is what the whole world is striving for. Due to their prop- erties, polymeric materials are the basis for the production of most components of the vehicle interior and exterior. Therefore, the AD Plastik Group has a bright future ahead of it, and exist- ing knowledge and competencies as well as per- sistent teamwork will play a key role in sealing new deals. According to the needs of the mar- kets and customers, the business and focus on the selection and development of materials and technologies that meet high quality standards within the industry and strict criteria for sus- tainable development and environmental pro- tection are being redefi ned. 47 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT In the past year, AD Plastik Group sealed deals on several very important development pro- jects, thus strengthening its position as a devel- opment partner and fi rst-tier supplier. Deals on these projects have been sealed for some of the strategically important products, such as front and rear bumpers, spoilers, external protective and decorative trims, and antenna mounting brackets. The choice of materials is the most important segment of product development, so in addition to the strict mechanical and appearance char- acteristics, it is necessary to meet also the in- creasingly demanding sustainability conditions. Through close cooperation with development centers and laboratories of the world’s leading manufacturers of materials and the selection of recycled materials whenever possible, AD Plastik Group actively participates in creating a sustain- able economy. In addition to recycled materials produced in industrial production, materials ob- tained from the fi bers of used PET packaging are also partially used. During the reporting period, AD Plastik Group sealed a deal for the fi rst time on the develop- ment of the front and rear bumper modules for one of the key customers in the European mar- ket. This is a very demanding project in terms of development, the fi nal form of which is con- fi rmed after a series of complex digital simula- tions. Its specifi city is in the fact that for the fi rst time the materials, which will be installed in the body of the bumper, in addition to containing a certain percentage of recycled components, also have a special visual aspect. In cooperation with material manufacturers, a new polypropyl- ene material was developed for the needs of this project. The customer is thus provided with the conditions for proto-production and laboratory testing at the company’s production sites. With its engineering and production solutions, AD Plastik Group has successfully met customer requirements in the production of its fi rst spoil- er. Hence the continuation of development and production of this component for other custom- ers is a logical sequence. In 2021, the deal on development and production of spoiler for a new vehicle was sealed, and the development phase was successfully complet- ed during the year. By knowing the mechani- cal requirements and joining technologies, such as vibration and US welding and K gluing, the company has proven that it can completely inde- pendently off er complete conceptual and pro- duction solutions for complex assemblies. Deals on new projects for the development of decorative door trims, fenders and anten- na assemblies have been sealed, so in order to strengthen competencies, cooperation with leading manufacturers of materials has been es- tablished. Thus, better solutions were off ered to the customer already in the initial phase, follow- ing the trends of reducing vehicle weight and re- cycling materials. The vehicle weight reduction is reflected directly on each of its components. Thanks to a diff erent design, application of environmentally friendly materials and reduction of product weight, new deals have been sealed also for the development and production of static seals in the Russian market. SUSTAINABILITY IN DEVELOPMENT 48 INTEGRATED ANNUAL REPORT MAIN PROJECTS Production and sales In the past year the automotive industry faced one of the greatest crises in its history. Due to the lack of semiconductors in the global market, the automotive industry has faced signifi cant challenges. New vehicle models are using more and more semiconductor circuits, and during the pandemic, the demand for various electronic de- vices increased signifi cantly, disrupting steady flows and orders. The semiconductor crisis has reduced production volumes, and some car manufacturers have been forced to temporari- ly stop their production processes as well. These circumstances signifi cantly complicated busi- ness, but AD Plastik Group nevertheless The past year has been extremely demanding for the entire automotive industry, and especial- ly for project management in such an uncertain period. Despite various limitations, the project teams of the AD Plastik Group have continued to successfully communicate and cooperate with customers, toolmakers and industrializa- tion sites, helping each other in everyday pro- ject tasks and challenges. During 2021, a total of 67 projects were active, of which 380 tools, 134 devices, 47 Poka Yoke and 299 control gauges maintained its market position, reputation and trust of its customers. It has been following the operational plans of its customers and adapting to the changes, while deliveries were not jeop- ardized at any time. Sales and project activi- ties were carried out without major delays, so in 2021, deals worth more than EUR 150 million were sealed. The company produces components for seven vehicles among the ten best-selling in Eu- rope and for seventeen vehicles from the list of twenty-fi ve best-selling in the Russian market. New deals and intensive development activities confi rm that the automotive industry is prepar- ing for the end of the crisis. that were developed, monitored, transferred to production sites and successfully released into stable serial production. 26 products and process development projects were successfully closed at all AD Plastik Group production sites, primar- ily thanks to the exceptionally good cooperation of project teams with production sites industrial- ization teams. Time schedules of active projects were not extended during the year, on the con- trary, regarding some of them activities were in- tensifi ed so that new vehicle models are ready 49 INTEGRATED ANNUAL REPORT immediately after the crisis. In the past period, risk management has been one of the most im- portant components of project management, and most of the risks have been successfully identifi ed and analyzed, and timely undertaken activities have reduced their impact on business. During 2021, 19 new projects were opened for var- ious production sites of the Group, which con- fi rms the company’s stability as a development and production supplier of the automotive indus- try. Among them, four new projects stand out: • Bumpers and components for Russian vehicle - project in which AD Plastik Group is a develop- ment supplier of products and processes • Vehicle grilles for a new customer in the Rus- sian market • Spoiler for a new vehicle model - AD Plastik Group is a development supplier of demanding painted products with additional assembly • Door trims and side trims for a new vehicle model THE SHARE OF TECHNOLOGIES IN PROJECTS OVERVIEW OF REVENUE BY TECHNOLOGIES Other technologies 2% Other technologies 10% Extrusion 7% Extrusion 9% Blow moulding 7% Blow moulding 5% Painting 14% Painting 7% Injection moulding 70% Injection moulding 69% INTEGRATED ANNUAL REPORT 50 THE CUSTOMER LIST  - CURRENTLY IN PRODUCTION A total of 9.7 million new vehicles were regis- tered in the European Union in 2021, represent- ing a 2.4 percent decline in new car sales com- pared to the year before. Looking at four key markets in the European Union, only the German market recorded a decline, namely by 10.1 per- cent. As it is the largest European market, this decline aff ected the overall sales result in the EU. In contrast, Italy recorded the largest increase of 5.5 percent, followed by Spain with a growth of one percent and France with a modest growth of 0.5 percent. The Volkswagen Group still has the largest market share of 25.1 percent in the reporting period and recorded a decline in sales of 4.8 percent. Stellantis with a share of 21.9 per- cent recorded a decline of 2.1 percent, while the Renault Group recorded a 10.2 percent decline in sales and has a 10.6 percent market share. Ac- cording to ACEA forecasts, if stabilization in the supply of semiconductors is achieved, the num- ber of newly registered cars is expected to in- crease by 7.9 percent in 2022. EUROPEAN UNION AND SERBIA Technologies: injection moulding, assembly Technologies: injection moulding, blow moulding, painting Technologies: injection moulding Technologies: injection moulding, extrusion, assembly Technologies: injection moulding, thermoforming Euro APS, JV Romania Technologies: injection moulding, painting Technologies: injection moulding, UV welding Technologies: injection moulding (+hot stamping), painting, thermoforming Technologies: injection moulding, painting, blow moulding, extrusion 51 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT 51 Vehicle sales in this market increased by 4.3 per- cent compared to 2020, so that a total of 1.7 mil- lion new vehicles were registered. Almost half of the vehicles sold in Russia are SUVs, while the share of electric vehicles is still negligible, so only 1,001 electric vehicles were registered last year. The decline in sales in the second half of the year reflected the expected negative eff ect of the lack of semiconductors, but despite this, AEB AMC forecasts for 2022 were positive. The new geopolitical circumstances will certainly aff ect these forecasts, and at the time of writing this report it is not possible to predict to what extent. The most important customer of the AD Plas- tik Group, Renault-Nissan-Mitsubishi Alliance, still has a leading position in the market with a share of 33.8 percent, and in the reporting peri- od recorded a decline in sales of 3.2 percent. The Volkswagen Group has an increasingly signifi - cant share in the company’s customer portfolio in Russia. Its market share is 11.9 percent, and in 2021 it recorded a 8.2 percent decline. RUSSIA THE CUSTOMER LIST 2021 - CURRENTLY IN PRODUCTION Technologies: injection moulding, thermoforming, extrusion, blow moulding Technologies: injection moulding Technologies: injection moulding Technologies: injection moulding Technologies: injection moulding Technologies: injection moulding, thermoforming, extrusion Technologies: injection moulding Technologies: injection moulding, gas injection moulding, thermoforming 52 INTEGRATED ANNUAL REPORT Quality AD Plastik Group meets the high quality stand- ards of the automotive industry, permanently respecting and meeting all legal regulations and other requirements, with the primary goal of meeting the expectations of its custom- ers and their lasting satisfaction. By monitor- ing new technologies, materials and trends, their application and continuous investment in research and development, a high level of Traceability of input and auxiliary materials, semi-fi nished products and fi nished products is ensured at all stages of the product life cy- cle. Proper labeling, in accordance with the re- quirements of the automotive industry, allows to The health and safety of end customers are top priorities already at the product design stage and during all production processes. Identifying and minimizing all potential risks of the product, including risks arising from harmful materials or potentially risky functional features, ensures the safety of the product and its end users. A systematic approach and continuous educa- tion of employees and suppliers ensure qual- ity and safe products throughout their entire life cycle. All products of the AD Plastik Group LABELLING OF PRODUCTS AND SERVICES CUSTOMER HEALTH AND SAFETY are assessed for their impact on health, envi- ronment and safety from the stage of product development. Serially implemented process of radar beam permeability control through the product ensures complete control and correct- ness of each delivered product. No cases of non-compliance with regulations related to the impact of products on the health and safety of customers were recorded in the reporting period. product quality is achieved. By continuous- ly raising awareness and educating employ- ees about the importance of quality, through an integrated and comprehensive approach, a high level of responsibility of the entire or- ganization at all levels has been established. Despite diffi cult business conditions, custom- er satisfaction was maintained at a high level during the reporting period. track the origin of materials, production history and specifi cations of the fi nished product all the way to the end user. In order to be as effi cient as possible, the traceability system is continuously improved by implementing new digital systems. INTEGRATED ANNUAL REPORT 53 According to international standards a certifi ca- tion for AD Plastik Group is carried out by the certifi cation company Bureau Veritas Certifi ca- tion (BVC) almost at all production sites except at the AD Plastik Tisza site where the certifi ca- tion is carried out by Det Norske Veritas (DNV). In the reporting period recertifi cation and su- pervision audits were successfully conducted at all production sites of the AD Plastik Group. CERTIFICATES Glossary: IATF 16949 - Automotive Quality Management System ISO 14001 – Environmental Management System ISO 45001 – Occupational Health and Safety Management System ISO 50001 – Energy Management System ISO 27001 – Information Security Management System TISAX® - Information security system for the automotive industry IATF 16949 valid until: ISO 14001 valid until: ISO 45001 valid until: ISO 50001 valid until: ISO 27001 valid until: TISAX ® SOLIN CROATIA June 6, 2024 July 1, 2022 September 21, 2023 November 27, 2022 January 3, 2022 November 25, 2024 ZAGREB CROATIA June 15, 2024 July 1, 2022 September 21, 2023 November 27, 2022 January 3, 2022 November 25, 2024 VINTAI RUSSIA July 9, 2024 October 18, 2023 KALUGA RUSSIA April 6, 2024 July 4, 2022 October 15, 2023 November 25, 2024 TISZAUJVAROS HUNGARY March 11, 2024 August 31, 2023 MLADENOVAC SERBIA August 19, 2024 June 15, 2024 April 1, 2022 February 14, 2023 January 3, 2022 54 INTEGRATED ANNUAL REPORT Supplier chain Supplier management is one of the most important business processes in the automotive industry. AD Plastik Group has a robust management system for this group of its stakehold- ers, based on publicly available reference documents and in- ternally prescribed procedures and instructions for continu- ous monitoring of their per- formance. Suppliers are famil- iar with the selection criteria through the company’s core documents, all according to the standards and specifi c require- ments of customers in the au- tomotive industry. Sustainable Supplier Management Policy, General Terms and Conditions of Purchase, Supplier Quality Manual and Compliance Ques- tionnaire on Corporate Social Responsibility Guidelines are published on the company’s website. The company cooperates with suppliers of basic and auxilia- ry materials, packaging, tools, equipment and services. As materials, services, compo- nents, tools, equipment are very diverse, the supplier base is very wide. Basic and auxilia- ry materials are procured from world-renowned suppliers with the consent of customers, while respecting high standards of INTEGRATED ANNUAL REPORT 55 quality and sustainability. In line with the com- pany’s clear focus, suppliers are encouraged to make greater use of recycled materials, create preconditions for internal recycling and recov- ery of materials within set quality requirements. Despite a very strict system and regular imple- mentation of supplier supervision, the market crisis has highlighted weaknesses in the supply chain and the frequent need for risk and oppor- tunities analysis. In the past period, the analyses required the rapid fi nding of replacement ma- terials and solutions as well as their validation, while taking care of product quality, timely deliv- ery and price competitiveness. The pandemic, disruptions in the materi- als and raw materials market, transport flows, disruptions to regular routes, unplanned ex- tensions of contract deadlines and a lack of AD PLASTIK AD PLASTIK TOGLIATTI AD PLASTIK KALUGA AD PLASTIK TISZA ADP, MLADENOVAC TOTAL Total suppliers 1,066 472 372 485 375 2,770 Assessed suppliers 274 76 45 90 31 516 Assessed suppliers in % 26% 16% 12% 19% 8% 19% Geographical location EU, HR, TR EU, RU, TR, CH EU, RU EU EU, HR, SRB EU, RU, HR, SRB, TR, CH electronic components have threatened deliv- eries throughout the past year. Prices on the materials and raw materials market are a special challenge, their movements are breaking his- torical records, and existing protection mech- anisms require rapid adjustments and changes. All suppliers, whose products or services aff ect the quality of the company’s products, are sub- ject to strict supervision processes according to the demanding standards of the automotive industry, and once a year, supervision is carried out according to sustainability criteria. Despite the stated challenges in the supply chain, AD Plastik Group has not given up in strength- ening sustainability, so in 2021 regular audits of the supplier processes and verifi cation of com- pliance with sustainability guidelines were con- ducted via an online questionnaire. 56 INTEGRATED ANNUAL REPORT Information technologies and security Support for remote modes of operation has been continued and intensifi ed over the past year, which has brought with it certain challeng- es in organizing operational activities, capacity planning and providing an appropriate level of security. The company’s employees were provid- ed with all the necessary preconditions for un- interrupted work, provided with suffi cient ca- pacity for data exchange and all protective and security mechanisms, otherwise present at their workplaces. Although the area of the company’s business operations in Croatia has not experi- enced the consequences of the earthquake, the need for stronger preparation and planning of the response to natural disasters has been rec- ognized. This resulted in the introduction of a new mechanism for rapid alerting of emergency situations, updating response plans and regular simulation of emergency situations, which fur- ther strengthened the resistance of AD Plastik. The introduction of the renowned Document Management System (DMS) has improved digital document management, improving the existing system, reducing the need for physical space and signifi cantly speeding up document search. In 2021, the system was implemented at produc- tion sites in Croatia with a clear strategy for fur- ther implementation regarding other members of the Group. In order to respond in a timely manner in the event of a problem with one of the IT systems, a new monitoring system for informing and moni- toring IT equipment and critical applications has been implemented within the whole Group. All critical applications have been upgraded, which has improved security and stability of opera- tions in the applications themselves. By using advanced data archiving systems, disk space rationalization has been achieved and the level of availability of the entire system has been in- creased. At the Tisza production site, all critical services have been virtualized, maintenance and operation have been improved, thus increasing their availability. Development of information 57 INTEGRATED ANNUAL REPORT security program and strengthening organiza- tional and technical security measures has been systematically worked on. The information se- curity stance was reviewed and all security risks were revised, reducing high-rated risks by 18 percent and medium-rated risks by 10 percent. Based on this, awareness-raising activities were conducted for employees who have access to business information on information security topics, which covered 90 percent of such em- ployees. Automated rules on DLP systems have been im- proved, and the sharing and retrieval of business data with external partners has been made pos- sible through a new data sharing system, thus further strengthening data protection. The se- curity approach to working with partners and suppliers has been improved, and the securi- ty operations center fully monitors all security events at production sites in Croatia, Serbia and Hungary, as well as the activities of shared ser- vices in Russia. Confi rmation of access and work in the fi eld of information security was achieved through an independent recertifi cation audit according to the standard ISO/IEC 27001:2013 and the issu- ance of a new certifi cate for the production sites Solin, Zagreb and Mladenovac. Based on customer requirement, the AD Plastik Group was certifi ed for the fi rst time in 2021 ac- cording to the TISAX® standard, an information security system for the automotive industry. In this way the very strict requirements for the protection of business information, prototypes, parts and components as well as personal dana have been satisfi ed, which are a prerequisite for the exchange and work with confi dential intel- lectual property of customers. The certifi cation was successfully implemented at the production sites Solin, Zagreb and Kaluga, and the company was included in the network of suppliers on the ENX platform, with a confi rmed high level of security in its business operations. 58 INTEGRATED ANNUAL REPORT The shares of AD Plastik Group have been listed on the Za- greb Stock Exchange since June 2003, and since Decem- ber 2018 they have been list- ed in the Prime Market, the most demanding market seg- ment. The ADPL share is in- cluded in the domestic indices Crobex, Crobextr, CrobexPrime, Crobex10, Crobex10tr, Crobex- Plus and Crobexindu, as well as the regional index AdriaPrime. Slightly less than 70 percent of the shares are available in the market, and the company Inter- kapital vrijednosni papiri car- ries out the activities of a mar- ket maker. In addition to Erste Research and Wood&Company, they provide share coverage by business analysis. The joint stock company AD Plastik was established in the Republic of Croatia, and the share capital of HRK 419,958,400 was divided into 4,199,584 shares with a nominal value of HRK 100. The company meets the high- est standards of transparency and corporate governance and continuously improves and de- velops its relationships with shareholders, investors and an- alysts. ADPL Share By increasing the value of the company, regular dividend pay- ments, timely and transparent reporting and informing, the company continuously demon- strates the importance of this group of stakeholders. Part of the activities aimed at increas- ing visibility in the capital mar- kets, refers to the continuous presentations of the company at domestic and foreign invest- ment conferences. Activities in the past period were also focused on meeting the regulatory requirements of ESMA and HANFA, so for the fi rst time the fi nancial state- ments for 2021 were presented in a single electronic reporting format (ESEF). Revenue, operating and capital expenses, related to the sus- tainability objectives, are part of this Integrated Annual Re- port. 59 INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT 59 ADPL is among the ten most liquid issues in 2021 in the domestic capital market, with a turnover of HRK 48.3 million, which is 2.8 percent of the total turnover of shares in the Zagreb Stock Ex- change. The price of the ADPL share increased by 3.4 percent, compared to the end of last year, and as of December 31, 2021 it amount- ed to HRK 165.5. The highest price in this peri- od was HRK 198, while the lowest price was HRK 148. The movement of the ADPL share price was signifi cantly aff ected by the global lack of sem- iconductors, but despite the serious challeng- es, most shares in the automotive industry still recorded an increase in prices compared to the year before. Despite numerous uncertainties and challenges during the year, capital markets have SHARE TREND been growing thanks to the continued favorable monetary policy of the world’s leading banks and the strong recovery of the companies’ business operations in global markets. For the fourth year in a row, US markets have been outperforming all other major global capital markets, with the S&P 500 index growth of 25 percent. Some sta- bilization was also recorded in the domestic cap- ital market, with a signifi cant strengthening of almost all indexes. Although the market looked quite diverse during the year, Crobex recorded growth of 19.6 percent. The turnover of shares within the book of off ers on the Zagreb Stock Exchange is a quarter lower than a year earlier, and the total turnover is ultimately almost by 19 percent lower. + 3.4 % ADPL + 19.6 % CROBEX 60 INTEGRATED ANNUAL REPORT The company’s strategy envisages a balanced imple- mentation of the attractive dividend payment policy, taking into account business plans, results and other relevant facts. When the legal and statutory precondi- tions are met, a dividend payment of at least fi fty per- cent of the available amount is proposed. The stated amount is defi ned by the Charter, which together with the Dividend Payment Policy is available on the compa- ny’s website. When making a decision on the draft ap- propration of profi t, it is primarily necessary to ensure successful regular business operations and continuous development of the company. By the decision of the General Assembly from March and July, in 2021 a dividend in the total amount of HRK 66.3 million was paid. HRK 8 per share was paid from 2019 retained earnings, and HRK 8 from 2020 earnings. Taking into account the last price at the end of the re- porting period, the dividend yield is 9.7 percent. DIVIDEND As of December 31, 2021, the share was traded at a P/E of 20.9. The lower generated profi t aff ected the decline in earnings per share (EPS), which amounted to HRK 7.9, compared to HRK 11.4 in 2020. Return on equity (ROE) is 3.9 percent, compared to 5.5 percent a year earlier. ADPL 31 Dec 2020 31 Dec 2021 INDEX Final price (HRK) 160.0 165.5 103.4 Average price (HRK) 148.3 177.9 119.9 The highest price (HRK) 202.0 198.0 98.0 The lowest price (HRK) 93.0 148.0 159.1 Volume 878,018 271,791 31.0 Turnover (HRK) 121,169,950 48,342,627 39.9 Market capitalization 671,933,440 695,031,152 103.4 P/E 14.1 20.9 148.4 EPS (HRK) 11.4 7.9 69.5 ROE 5.5 % 3.9 -160 bps INTEGRATED ANNUAL REPORT 61 As of December 31, 2021, the company owned 50,353 shares, which was 1.2 percent of the share capital. In 2021, 18,705 shares were disposed as re- wards to management and em- ployees. The Employee Stock Ownership Programme ESOP is being fi nalized and employees have another 600 shares to pay off under this program, or 0.01 percent of the company’s share capital. OWNERSHIP STRUCTURE Small shareholders 23.3% 100% Treasury shares 1.2% AO HAK 30.0% Pension funds 25.3% Other institutional investors 7.2% Management, employees and ex-employees; 13.1% 62 INTEGRATED ANNUAL REPORT The ten largest shareholders own 57.65 percent of the company’s shares. Compared to 2020, the new shareholders among the ten largest are Katija Klepo with a 1.61 percent share and Ivica Tolić with a 0.97 percent share in the company. Josip Boban and ADP ESOP d.o.o. are no longer among the company’s ten largest shareholders. The joint custodial account of the client Privredna banka Zagreb increased its shares by 0.4 percent, while AD Plastik d.d. and Raif- feisen MPF category A of Privredna banka Zagreb reduced their shares by 0.44 and 0.04 percent, respectively. 10 largest shareholders 57.65% SHAREHOLDER NUMBER OF SHARES SHARE [%] 1 AO Holding Avtokomponenty 1,259,875 30.00 2 Privredna banka Zagreb d.d. Raiff eisen MPF category B 454,939 10.83 3 Raiff eisenbank Austria d.d. Raiff eisen voluntary pension fund 205,458 4.89 4 Erste & Steiermarkische bank d.d. PBZ CO MPF - category B 121,980 2.90 5 Hrvatska poštanska banka d.d. / Capital fund d.d. 116,541 2.78 6 Katija Klepo 67,633 1.61 7 Privredna banka Zagreb d.d. Joint custodial account of a client 59,919 1.43 8 AD Plastik d.d. 50,353 1.20 9 Privredna banka Zagreb d.d. Raiff eisen MPF - category A 43,538 1.04 10 Ivica Tolić 40,881 0.97 2,421,117 57.65 63 INTEGRATED ANNUAL REPORT In accordance with the Zagreb Stock Exchange Rules, AD Plastik Group published the 2022 Events Calendar at the end of 2021. It contains all the relevant events and any change or update of the calendar shall be published as soon as it is made and not later than one week before the event itself. EVENTS CALENDAR ON STOCK EXCHANGE DATE 24 Feb 2022 Unaudited Annual Report 2021 10 Mar 2022 Supervisory Board meeting 22 Apr 2022 Integrated Annual Report 2021 27 Apr 2022 Financial Statement for the fi rst quarter of 2022 28 Apr 2022 Presentation of the Annual Report 2021 and results for the fi rst three months of 2022 to interested fi nancial analysts and public representatives 24 May 2022 Supervisory Board meeting 14 July 2022 General Assembly 27 July 2022 Financial Statement for the second quarter of 2022 and Semi-Annual Financial Statement for 2022 28 July 2022 Dividend payment (if voted at the General Assembly) 15 Sept 2022 Supervisory Board meeting 27 Oct 2022 Financial Statement for the third quarter of 2022 and Financial Statement for the nine months of 2022 15 Dec 2022 Supervisory Board meeting 64 INTEGRATED ANNUAL REPORT Financial results for 2021 The Group’s operating revenue for 2021 amounted to HRK 1,126.2 million and was by 7.6 percent lower than in 2020, while in AD Plastik d.d. it was by 14.5 percent lower - HRK 745.4 million. Although mar- ket indicators were signifi cantly more favorable in the fi rst half of the year, in the 2nd half movements were changed due to increased disruptions in the supply of semiconductors. Decreased production and a shortage of vehicles aff ected the expected trends in the number of newly registered cars in the European market. Meanwhile, these trends are more favorable in the Russian market, and the Group achieved revenue growth of 11.4 percent in Russia. EBITDA in the reporting period decreased by 24.5 percent at the Group level - HRK 125.3 million, while in AD Plastik d.d. it was lower by 35.5 percent - HRK 76.3 million. The Group’s net profi t decreased by 30.3 percent compared to 2020 - HRK 32.7 million, while at AD Plastik d.d. it was lower by 76.2 percent - HRK 16.3 million. At the same time, it should be noted that in the comparable 2020 year, there were signifi cant one-off positive eff ects from the sale of non-operating assets and used government grants amounting of HRK 32.9 million at the Group level and HRK 30.3 million at AD Plastik d.d. Lower EBIT- DA aff ected the Group’s and the parent company’s net profi t trend, with the additional impact of the lower profi t from the affi liated Romanian company on the Group’s result, i.e. lower income from its div- idend on the parent company’s net profi t. The trend of the Russian ruble exchange rate in the reporting period had a positive eff ect on the company’s busi- ness results. In the reporting period, new deals worth EUR 152 million were sealed for the European and Russian markets, which shows that the industry intensively prepares for the end of the crisis. 65 INTEGRATED ANNUAL REPORT * In addition to the measures defi ned by International Financial Reporting Standards (IFRS), AD Plastik Group also uses Alter- native Performance Measures (APM) in its reports. An overview and defi nition of the measures used in this document are provided in Appendix 1. KEY PERFORMANCE INDICATORS INDICATORS AD PLASTIK GROUP AD PLASTIK D.D. 2020 2021 INDEX 2020 2021 INDEX Operating revenue 1,218,581 1,126,150 92.4 871,660 745,405 85.5 Sales revenue 1,186,766 1,102,413 92.9 844,247 726,823 86.1 Operating expenses 1,149,686 1,092,641 95.0 825,630 737,774 89.4 EBITDA 165,885 125,321 75.5 118,393 76,334 64.5 Net profi t 46,929 32,723 69.7 68,633 16,340 23.8 NFD 335,830 356,353 106.1 294,900 323,054 109.5 NFD/EBITDA 2.02 2.84 140.5 2.50 4.23 169.3 EBITDA margin 13.61% 11.13% -248.5 13.58% 10.24% -334.2 Neto profi t margin 3.85% 2.91% -94.5 7.87% 2.19% -568.2 ROE 5.45% 3.85% -159.6 8.56% 2.03% -653.0 Capex 67,420 76,668 113.7 42,920 43,031 100.3 (in HRK 000) 66 INTEGRATED ANNUAL REPORT Operating revenue per sales markets • Revenue of AD Plastik Group in EU and Serbian markets has decreased by 13.0 percent • Revenue of AD Plastik Group in Russia has increased by 11.4 percent 1,126.2 MHRK RUSSIA 26.8% RUSSIA 22.2% 2020 2021 EU and SERBIA 77.8% EU and SERBIA 73.2% 1,218.6 MHRK INTEGRATED ANNUAL REPORT 67 In 2021, AD Plastik Group generated revenue of HRK 824.5 million in the EU and Serbian markets, which is 73.2 percent of the total revenue. Com- pared to 2020, revenue was lower by 13.0 percent and its movement is influenced by the lack of semiconductors in the market. In the reporting period, new deals worth EUR 79.9 million were sealed for the Stellantis Group in the European market. Operating revenue in the Russian market in- creased by 11.4 percent and amounted to HRK 301.6 million. In the reporting period, it account- ed for 26.8 percent of the Group’s total reve- nue, compared to 22.2 percent a year earlier. Russian companies fully generate their reve- nue in the Russian market, and the semiconduc- tor crisis aff ected that market with somewhat less intensity. In the reporting period, new deals worth EUR 71.8 million were sealed for the Re- nault-Nissan-AvtoVAZ Alliance and the Volkswa- gen Group. OPERATING EXPENSES (in HRK 000) OPERATING EXPENSES AD PLASTIK GROUP AD PLASTIK D.D. 2020 2021 INDEX 2020 2021 INDEX Changes in the value of work in process and fi nished products -9,778 1,031 -10.5 -3,821 1,627 -42.6 Cost of raw material and supplies 603,364 548,014 90.8 404,068 307,984 76.2 Cost of goods sold 61,537 71,808 116.7 90,236 116,869 129.5 Service costs 92,828 93,407 100.6 66,232 62,716 94.7 Staff costs 253,513 254,809 100.5 168,13 161,487 96.0 Depreciation and amortisation 96,991 91,812 94.7 72,363 68,703 94.9 Other operating expenses 48,457 31,050 64.1 26,751 18,084 67.6 Provisions for risks and charges 1,823 710 38.9 1,665 175 10.5 Impairment of trade receivables, (net) 951 -1 - 5 129 2.580.0 OPERATING EXPENSES 1,149,686 1,092,640 95.0 825,629 737,774 89.4 68 INTEGRATED ANNUAL REPORT NET FINANCIAL RESULT The strengthening of the Russian ruble ex- change rate in the reporting period, along with lower fi nancing costs, had a favorable eff ect on the Group’s net fi nancial result. The lower div- idend income from the affi liated Romanian company aff ected the results of the parent com- pany which were less favorable compared to the year before. In the reporting and comparative period, exchange rate diff erences within and outside the Group are presented on a net basis. NET FINANCIAL RESULT AD PLASTIK GROUP AD PLASTIK D.D. 2020 2021 INDEX 2020 2021 INDEX FINANCIAL REVENUE 362 5,020 1386.0 44,067 23,248 52.8 Positive exchange rate diff erences - 4,207 - - - - Interest income 362 741 204.7 3,542 3,454 97.5 Dividends - - - 40,525 19,722 48.7 Other revenue - 72 - - 72 - FINANCIAL EXPENSES 31,870 5,777 18.1 12,517 6,747 53.9 Negative exchange rate diff erences 21,895 - - 2,084 366 17.5 Interest expenses 9,975 5,777 57.9 7,207 4,711 65.4 Loans impairment (IFRS ) - - - 3,226 1,670 51.8 FINANCIAL RESULT -31,508 -757 2.4 31,550 16,501 52.3 (in HRK 000) 69 INTEGRATED ANNUAL REPORT FINANCIAL POSITION The Group’s net fi nancial debt as of December 31, 2021 amounted to HRK 356.4 million, with an NFD/EBITDA ratio of 2.8. In the parent company, it amounted to HRK 323.1 million, and the NFD/ EBITDA ratio of 4.23 was achieved. Lower EBITDA had the greatest impact on the achieved indica- tor values. In the reporting period, the company duly repaid all loan liabilities and provided addi- tional liquidity through HBOR’s program for per- manent working capital on extremely favorable terms. Indebtedness ratio was improved and as of De- cember 31, 2021 it was 0.43 at the Group level, compared to 0.44 at the end of 2020. In the par- ent company it decreased from 0.39 to 0.38. In the observed period, a return on equity (ROE) of 3.9 percent was achieved at the Group level, and 2.0 percent in the parent company. As of December 31, 2021, Group had HRK 30.2 million in cash on its account as well as unused short-term credit lines in the amount of over HRK 70 million. Due to uncertainties and decline in customer or- ders, AD Plastik Group’s investments remained at lower levels. The total value of investments real- ized in 2021 amounted to HRK 76.7 million, which was 13 percent more than in 2020. Of the total amount of investments, HRK 52.9 million was in- vested in tangible assets and HRK 23.8 million INVESTMENTS in intangible assets. The most signifi cant tangi- ble investments relate to specifi c investments regarding new projects and construction in- vestments, while intangible investments most- ly relate to the capitalized costs of new projects development. ABBREVIATED BALANCE SHEET AD PLASTIK GROUP AD PLASTIK D.D. 31 Dec 2020 31 Dec 2021 INDEX 31 Dec 2020 31 Dec 2021 INDEX ASSETS 1,541,345 1,470,466 95.4 1,357,618 1,269,543 93.5 Noncurrent assets 980,222 980,861 100.1 935,859 924,326 98.8 Current assets 537,463 482,073 89.7 401,065 339,460 84.6 Prepaid expenses and accrued income 23,661 7,532 31.8 20,695 5,757 27.8 LIABILITIES 680,720 631,221 92.7 529,934 488,323 92.1 Noncurrent liabilities 188,179 267,386 142.1 147,157 235,514 160.0 Current liabilities 474,575 354,558 74.7 366,886 246,253 67.1 Accrued expenses and deferred revenue 17,966 9,277 51.6 15,892 6,556 41.3 CAPITAL 860,625 839,245 97.5 827,684 781,220 94.4 (in HRK 000) 70 INTEGRATED ANNUAL REPORT AD Plastik Group with consolidation of the corresponding part of ownership in the affi liated company In order to present a clearer picture of business, a comparable, shortened, consolidated prof- it and loss account of AD Plastik Group for 2020 and 2021 has been created, with profi t and loss Operating revenue of AD Plastik Group with con- solidated corresponding part of ownership in the affi liated company amounted to HRK 1,386 million, recording a decrease by 6.6 percent account of the affi liated company Euro Auto Plastic Systems s.r.l. Mioveni, Romania (50 per- cent of ownership of AD Plastik d.d.). compared to 2020. EBITDA amounted to HRK 153.6 million, representing a decrease of 23.5 per- cent, while net profi t was lower by 30.3 percent, amounting to HRK 32.7 million. POSITIONS 2020 2021 INDEX OPERATING REVENUE 1,484,384 1,386,321 93.4 OPERATING EXPENSES 1,391,224 1,333,140 95.8 Material costs 904,572 875,549 96.8 Staff costs 277,207 279,727 100.9 Amortization 107,625 100,378 93.3 Other costs 101,819 77,486 76.1 FINANCIAL REVENUE 362 5,692 1,571.5 FINANCIAL EXPENSES 33,405 6,661 19.9 TOTAL REVENUE 1,495,379 1,391,842 93.1 TOTAL EXPENSES 1,435,262 1,339,801 93.3 Profi t before taxation 60,117 52,042 86.6 Profi t tax 13,189 19,319 146.5 PROFIT OF THE PERIOD 46,929 32,723  EBITDA 200,785 153,559 76.5 (in HRK 000) 71 INTEGRATED ANNUAL REPORT ABBREVIATED P/L AND THE BALANCE SHEET OF THE AFFILIATED COMPANY EAPS Disruptions in the production of new cars due to the lack of semiconductors have also aff ect- ed the business of the affi liated Romanian com- pany EAPS. Thus, operating revenue amounted to HRK 535.9 million and was lower by 1.1 percent than a year earlier, while net profi t decreased by 23.5 percent, amounting to HRK 30.6 million. EAPS primarily generates its revenue in Roma- nian market and, apart from that, it supplies its products to the markets of Algeria, Morocco, Iran, Brazil, Colombia, South Africa, Russia etc. The company has no fi nancial liabilities towards AD Plastik d.d. nor liabilities towards external en- tities, and as of December 31, 2021, its cash on ac- count amounted to HRK 44.2 million. Investments in the observed period amounted to HRK 15.1 million, and a dividend in the amount of HRK 39.0 million was paid, of which HRK 19.5 million to AD Plastik. EAPS results have been included in the results of AD Plastik Group by equity method. POSITIONS 2020 2021 INDEX Operating revenue 541,869 535,867 98.9 Operating expenses -493,337 -496,523 100.6 Net fi nancial result -3,069 -425 13.8 Profi t before taxation 45,463 38,919 85.6 Profi t tax -5,498 -8,342 151.7 Profi t of the period 39,964 30,578 76.5 POSITIONS 31 Dec 2020 31 Dec 2021 INDEX Noncurrent assets 98,236 94,634 96.33 Current assets 244,768 212,571 86.85 TOTAL ASSETS 343,004 307,205 89.56 Capital + provisions 133,167 122,001 91.62 Noncurrent liabilities and provisions 19,709 14,817 75.18 Current liabilities 190,128 170,387 89.62 TOTAL LIABILITIES 343,004 307,205 89.56 100% realization shown (in HRK 000) (in HRK 000) INTEGRATED ANNUAL REPORT 72 In addition to the fi nancial performance measures defi ned by International Financial Repor-ting Standards (IFRS), AD Plastik Group also uses certain alternative performance measures in its reports, considering them useful for business performance analysis for investors. Alternative performance measures show a comparative periods so that the company’s results can be compared over diff erent periods. EBITDA AND EBITDA MARGIN EBITDA (Earnings before Interest, Taxes, De- preciation and Amortization) is operating prof- it (operating revenue minus operating expens- es) increased by amortization of tangible and intangible assets. The company also presents an EBITDA margin that represents a percentage of EBITDA relative to operating revenue. Alternative performance measures NET DEBT AND NET DEBT TO EBITDA Net debt represents the sum of current and non- current liabilities to banks and current and non- current loans to non-banking companies, minus cash and cash equivalents. AD Plastik Group uses the ratio of net debt to EBITDA as an indicator NET PROFIT MARGIN It is calculated by the ratio of realized net prof- it and operating revenue. The company uses this measure to track its profi tability relative to op- erating revenue. of fi nancial stability and the company’s ability to repay its fi nancial obligations. When calculating the indicators on a quarterly basis, the EBITDA realized in the last four quarters is taken into ac- count. AD PLASTIK GROUP 31 Dec 2020 31 Dec 2021 Non-bank loans 49,181 47,382 Noncurrent liabilities to banks 169,611 238,100 Current liabilities to banks 179,705 101,023 Cash and cash equivalents -62,667 -30,152 Net fi nancial debt 335,830 356,353 AD PLASTIK D.D. 31 Dec 2020 31 Dec 2021 Non-bank loans 37,684 37,586 Noncurrent liabilities to banks 139,426 217,479 Current liabilities to banks 153,458 77,785 Cash and cash equivalents -35,669 -9,797 Net fi nancial debt 294,900 323,054 (in HRK 000) (in HRK 000) INTEGRATED ANNUAL REPORT 73 ROE This measure is used to monitor the realized re- turn on equity. It is calculated on an annual and quarterly basis. When calculating the indicators on an annual basis, the ratio is the net profi t of the current period and the average value of eq- uity (average value of equity at the end of the reporting period and the value of equity of the reporting period of the previous year). At the quarterly level, it is calculated by the ratio of net profi t for the last four quarters and the average value of equity (average value of equity at the end of the reporting period and the value of eq- uity at the end of the same period of the previ- ous year). CAPEX Capital investments are indirect cash flow posi- tion and they are related to payments for tangi- ble and intangible assets. This measure is used as an indicator of the use of funds to achieve fu- ture economic flows and ensure the distribution of funds in accordance with the Group’s strategy. INDEBTEDNESS RATIO The indebtedness ratio is the ratio of total lia- bilities to total assets. This measure is used to monitor the company’s fi nancial risk in terms of growth of liabilities in relation to assets. MARKET CAPITALIZATION Market capitalization is the total market value of the company, and it is calculated as the product of the total number of shares and the last share price on the day of the reporting period. 31 Dec 2020 31 Dec 2021 Last price in the period (HRK) 160 165.5 Number of shares (000) 4,200 4,200 Market capitalization (in HRK 000) 671,933 695,031 EPS AND P/E These measures are used so that investors can analyze the value of the share. Earnings per share (EPS) are calculated by dividing net profi t by the weighted average number of shares. The quarterly calculation uses the net profi t realized in the last four quarters. P/E is the ratio of price to earnings per share (EPS). The price represents the share price on the last day of the reporting period, and in the quarterly calculation, net profi t represents the realized profi t in the last four quarters. 31 Dec 2020 31 Dec 2021 Net profi t of the period (in HRK 000) 46,929 32,723 Average weighted number of shares (000) 4,131 4,143 EPS (HRK) 11.36 7.90 74 INTEGRATED ANNUAL REPORT Risks and opportunities In its business operations, AD Plastik Group en- counters external and internal factors that may influence the occurrence of various risks, includ- ing risks related to climate change. Each type of risk can positively or negatively af- fect business results, and timely assessment and quality management create the preconditions for identifying opportunities and sustainability of business. Internal factors are influenced by the company’s continuous improvement of its business policies and procedures, while direct Business risks include all those risks arising from the environment in which the company oper- ates, the industry itself and its specifi cs. They di- rectly aff ect the stability and maintaining com- pany’s competitive advantage. impact on external factors, such as the impact of economic, political or regulatory changes, is very limited. Through its responsible business opera- tions, the company also contributes to the fi ght against climate change and negative impacts on sustainability indicators. The permanent task of the company’s Manage- ment Board is continuous improvement in the fi eld of business and sustainability risks man- agement, as a fundamental lever of successful business management as a whole. BUSINESS RISKS BUSINESS ENVIRONMENT RISK EXTREME WEATHER CONDITIONS AND NATURAL DISASTERS INFECTIOUS DISEASES REPUTATIONAL RISK RISK OF NON-PERFOR- MANCE OF CONTRACTUAL OBLIGATIONS COMPETITIVE RISK RISK OF RELYING ON ONE CUSTOMER TECHNOLOGY RISK LABOR SHORTAGE RISK 75 INTEGRATED ANNUAL REPORT BUSINESS ENVIRONMENT RISK This category includes political, macroeconomic and social risks and the risk of force majeure. As the company operates in a global market, with production sites in fi ve countries, it is exposed to various business environment risks on which it cannot directly aff ect. Such risks are mitigated to some extent namely through the dispersion of business in diff erent markets.The automotive industry is cyclical, and car sales are subject to the influence of various factors, from diff erent market trends, income levels, personal consumption or inflation rates and the like. That is why macroeconomic, political and social stability in the countries where busi- ness is conducted are important for business and can directly aff ect the competitiveness and business results of the company. Instabilities in individual countries where busi- ness is conducted can lead to undesirable trade eff ects, aff ect the realization of the company’s strategic plans or the regular conduct of busi- ness. Therefore, the AD Plastik Group continu- ously monitors long-term market and macroe- conomic indicators and is constantly focused on opening new business markets. Extreme weather conditions and natural disasters Risks such as natural disasters, in the countries where business is conducted or there is a wider supply chain, can have direct or indirect impact on the company’s business operations. Although Infectious diseases The pandemic we are witnessing is a force ma- jeure that carries special risks, so in addition to healthcare ones, it has created a whole range of disruptions that aff ect the global economy. Thus, in the reporting period, the prices of raw mate- rials, energy sources and transport increased signifi cantly, and a special challenge for the au- tomotive industry is the global lack of semicon- ductors in the market. The negative eff ects were partially mitigated by adjusting business operations, rationalizing the Group’s production sites are not located in risk areas, which reduces the risk, it is managed by insuring assets and constantly investing in quality equipment and infrastructure. costs and keeping investments at lower levels. Timely response to the pandemic and preven- tive measures have ensured business continuity and all prerequisites for the protection of em- ployee health. In case of occurrence of infectious diseases, the primary goal of all activities of the company is aimed at preserving and protecting the health of employees and the sustainability of business because the lack of employees represents the greatest threat to business in that case. 76 INTEGRIRANI GODIŠNJI IZVJEŠTAJ REPUTATIONAL RISK By raising awareness of the importance of hu- man action on climate change, end consumers, but also investors, are paying increasing atten- tion to the reputation of producers in sustain- able development. The impact of an individual product on climate change is becoming increas- ingly important, but also of the production pro- cess in which it is manufactured. Corporate social responsibility is one of the most important com- ponents of the development policy of AD Plastik Group, which it proves in its daily business op- erations. Representatives of the company advo- cate sustainable business at various panels and conferences, and the results of third party au- dits are positive and in line with the company’s policies and strategy. Reputational risk is recog- nized and although it does not pose a threat in the near future, the company has been contin- uously working to improve its reputation among all stakeholders. RISK OF NON-PERFORMANCE OF CONTRACTUAL OBLIGATIONS Contractual relations with customers, among other things, defi ne quality standards and prod- uct delivery deadlines. In that process, the com- pany is exposed to the risks of non-performance of contractual obligations that may arise due to delays in production and deliveries as a result of unforeseen circumstances or non-performance of contractual obligations of suppliers. Breach of contractual obligations may adversely aff ect co- operation and business and lead to termination of the contract. In 2021, the consequences of the pandemic had a strong impact on the supply chain, so disrup- tions were present throughout the whole year. Lack of raw materials, disruptions of transport routes and the consequent extension of delivery deadlines and rising material prices were a spe- cial challenge. Managing the purchasing process has been further hampered by frequent changes in customer orders due to the global lack of sem- iconductors in the market. In order to ensure un- interrupted production processes, the develop- ment of the market situation was monitored on a daily basis. The risk was assessed through con- stant communication with suppliers, and stocks of certain materials were created, and alterna- tive solutions were actively found. Despite very demanding conditions, AD Plastik Group fulfi lled all its contractual obligations to customers in the reporting period. This risk is managed by regular evaluation of suppliers, by monitoring the quality and stabil- ity of deliveries and securing supplies if neces- sary. Customers continuously audit all processes at production sites of the Group, and in 2021, 39 customer audits were successfully conducted. INTEGRATED ANNUAL REPORT 77 COMPETITIVE RISK AD Plastik Group has positioned itself in the de- manding automotive market as a supplier of high reliability, cost and technical competitiveness. Competitiveness in the automotive industry is primarily influenced by price, product quality and reliability. The distance between the production sites of customers and suppliers signifi cantly aff ects price competitiveness, and almost all of the Group’s factories are located close to their main customers. The entry of new suppliers into the customer panel is a gradual and limited process, but if you prove yourself as a reliable partner, the cooperation is certainly long-term. The company’s partnerships with its customers are based namely on quality and reliability, which ensures long-term and successful cooperation. RISK OF RELYING ON ONE CUSTOMER AD Plastik Group generates most of its reve- nue from the Renault Group, which poses a risk to business in the event of signifi cant disrup- tions to this customer’s business. The company’s strategy is to reduce exposure to this custom- er and increase the share in revenue from other customers. In the past few years, Renault Group’s share in the total revenue has been reduced from 69 to 56 percent, and the customer port- folio has been further expanded with new names such as Suzuki, Bentley, Rehau, Toyota and oth- ers. The increasing trend of merging various car manufacturers reduces the possibility of diver- sifying the customer portfolio, but at the same time opens up opportunities to expand cooper- ation and markets. TECHNOLOGY RISK Technology is of great importance in the qual- ity, added value and price of the product itself, but the importance of its impact on the envi- ronment is growing. The automotive industry is irrevocably focused on investing and develop- ment of new products and technologies in order to preserve and enhance its competitiveness. Falling behind in this sense reduces the acquired market position, reduces the chances of sealing future deals and consequently adversely aff ects business results of the company. The key technologies of AD Plastik Group are not direct polluters of the environment and thus the risk of compliance of technologies with increas- ingly demanding environmental regulations is minimized. Following the latest technological trends and market demands, the company regu- larly invests in new and more modern machines, thus contributing to the reduction of environ- mental footprint. Information technology and security are ex- tremely important in the automotive industry in order to ensure the necessary exchange of in- formation with customers and suppliers without time delay. Disruptions in the communication system can cause delays in production and deliv- eries, so continuous improvements and invest- ments in these business segments reduce the possibility of disruptions in operation. 78 INTEGRATED ANNUAL REPORT LABOR SHORTAGE RISK AD Plastik Group bases its business on a long-standing tradition, expertise and dedicat- ed work of its employees. It is namely knowl- edge and adaptation to technological and market trends that have ensured the success and pros- perity of the company. In times of rapid and in- tense change, it is extremely important to enable our employees to constantly develop knowledge FINANCIAL RISKS MARKET RISK CURRENCY RISK CREDIT RISK INTEREST RATE RISK LIQUIDITY RISK PRICE RISK Financial risks refer to all risks that may impair the fi nancial stability of the company, such as signifi cant changes in exchange rates, rising in- terest rates, delays in collection of receivables and others. The management of these risks is centralized and it is done in the Finance Depart- ment within the parent company. The fi nancial risks of the business are monitored and man- aged through internal risk reports. On this basis, activities are undertaken with the aim of eff ec- tive risk management. The Finance Department also manages activities in the domestic and in- ternational fi nancial markets and consolidates the cash flows of Group members. and skills required for working and following new trends. The company reduces the labor shortage risk and the impact on business primarily by de- tailed planning of its needs for specifi c job posi- tions, hiring the best candidates and continuous education of existing employees. The key areas of their development are prescribed and the ed- ucation of employees is planned accordingly. 79 INTEGRATED ANNUAL REPORT MARKET RISK Market risk is the risk of fluctuation of fair value or future cash flows of a fi nancial instrument be- cause of changes in market prices. Price chang- es often refer to movements in interest rates or exchange rates, but also include changes in the prices of basic products that are necessary for business. Currency risk Currency risk occurs during the exposure to un- expected changes in the exchange rate between two currencies and it includes transaction and balance risk. The transaction risk represents the risk of negative impact on cash flow, while bal- ance risk occurs as change in value of balance sheet items, expressed in foreign currencies as a result of changes in currency rates. AD Plastik Group operates in diff erent coun- tries, thus being exposed to the risks of chang- es in the exchange rates of their currencies. Most of its revenue is generated in euros, and about twenty-fi ve percent of revenue is gener- ated in the Russian market. Thus, it is mostly ex- posed to changes in the EUR/HRK and EUR/RUB exchange rates. The Group is also exposed to changes in the EUR/HUF, EUR/RSD and EUR/LEI exchange rates. In 2021, there was no signifi cant fluctuation in the exchange rate of the Croatian kuna against the euro, while changes in the ex- change rate of the Russian ruble had a positive eff ect on the net fi nancial result. The compa- ny continuously monitors exchange rate move- ments and future projections and occasionally uses FX forward transactions regarding curren- cies that have seasonal exchange rate fluctu- ations, in order to reduce transaction risk. In Russia more signifi cant changes in the ruble ex- change rate are coordinated with customers on a regular basis through changes in sales prices, that is, by using natural hedging. Balance risk is sought to be reduced by balancing open foreign exchange positions by individual currency within balance sheet items. One of the basic measures for balancing the foreign exchange sub-balance is borrowing in the currency in which revenue is generated per individual company. 80 INTEGRATED ANNUAL REPORT Interest rate risk It represents a risk of possible losses arising from the changes in market interest rates. Group is not signifi cantly exposed to interest rate risk resulting from credit indebtedness and from as- sets on which it generates revenue from interest rates of approved loans of the parent company to subsidiaries. Interest rate risk is minimal re- garding credit indebtedness because the com- pany has contracted loan arrangements almost entirely with a fi xed interest rate. The market situation and interest rate projections are reg- ularly monitored and, if necessary, interest rate on existing borrowings is adjusted or refi nanced with new borrowings so that the fair value of the interest rate, which is paid, is in line with the most favorable interest rates available in the market at a certain point. The level of the interest rate on the assets realized by the company is related to the decisions of the Ministry of Finance on the interest rates level between subsidiaries. Price risk A company may be exposed to price risks of various kinds, risks of price, quantity, cost and political risks. Price risk arises from unfavora- ble trends in the price of goods in the market, their availability and demand, costs that increase due to unfavorable trends in raw material prices and changes in regulations and laws that direct- ly aff ect the price of goods and their availability. Price risk is directly related to the business envi- ronment risks that determine it. Group’s business operations are exposed to risk associated with changes in prices of key raw ma- terials and materials, transport, other produc- tion costs as well as with strong pressure from competitors and customers. Price risk was par- ticularly pronounced in the reporting period, in which a signifi cant increase in raw material and energy sources prices, a shortage of raw materi- als and an increase in dependent transport pur- chasing costs were recorded, all as a result of the pandemic. Price increase risk is reduced by open price cal- culation with the customers, according to which changes in price of raw materials, materials and other costs are harmonized with most of cus- tomers on a monthly, quarterly or semi-annual level (depending on the customer). CREDIT RISK The credit risk arises when one contracting par- ty fails to meet its fi nancial obligations on time, which jeopardizes the market position of the other party. The company’s credit risk may arise from the inability to collect receivables from its customers and the loans granted. AD Plastik Group cooperates with reputable cus- tomers that are fi nancially stable companies, which is also the company’s business policy. This minimizes the risk of collection and receivables are realized within the agreed deadlines. Due to the potential deterioration of the fi nancial sta- bility of individual customers, most of them have the support of their home countries in main- taining business and liquidity as very important economic entities. The most important custom- ers in 2021 were Revoz Slovenia, Reydel France, AvtoVAZ Russia, Hella Slovenia and Renault Rus- sia, of which AD Plastik Group generates over 80 percent of its revenue. Credit risk related to loans granted is under the control of the com- pany as these are loans granted to subsidiaries in which the parent company is the sole owner. INTEGRATED ANNUAL REPORT LIQUIDITY RISK Liquidity risk represents the risk of company not being able to convert assets into liquid assets in a short time, ie the inability to fulfi ll its obliga- tions to creditors. Therefore, AD Plastik Group maintains optimal amounts of funds on the ac- count along with secured available credit lines. Quality cash flow management is extremely im- portant for liquidity risk management. Each company within the Group, based on opera- tional business plans, fi nancial liabilities and in- vestment needs, plans its future cash needs on a monthly, quarterly and annual basis. Based on the received data, the parent company’s Fi- nance Department prepares a consolidated cash flow plan of the Group and makes decisions on placing surplus funds in deposits or covering the lack of funds from short-term fi nancing sources. It undertakes activities to ensure timely credit lines for capital investments and project fi nanc- ing. The realization of planned cash flows, the level of liabilities and available funds of all Group companies is monitored on a daily basis. Short- term liquidity is provided through contracted credit lines, and at the end of the year EUR 10 million is available for use. The parent company issued corporate guaran- tees for the needs of subsidiaries in the follow- ing amounts: HRK 72,917 thousand to banks, HRK 10,103 thousand to suppliers. INTEGRATED ANNUAL REPORT 82 Operational risks arise from losses caused by inadequate procedures and failed internal pro- cesses, human factor, system or external events. The company manages them through a process quality system whereby preventive systems of early detection of operational risks and pre- vention of errors and weaknesses in process- es, procedures, potential human errors, system errors or unpredictable external events are de- veloped. Internal Audit Service assesses the ef- fectiveness of the organization’s risk manage- ment, investigates, examines and evaluates the eff ectiveness of the internal control system, and reports on the fi ndings and proposes solu- tions. By effi cient operational risk management, better security is achieved, awareness is raised on the importance of existing procedures and creating new ones, on control of key indicators which need to be introduced and systematical- ly monitored, which signifi cantly improves the operational quality, effi ciency and transparency. An important factor in managing these risks are also reliable IT solutions as well as cyber securi- ty of business, so improving, further developing and implementing new technologies in everyday business are a continuous work in progress. These risks arise from changes in fi scal and oth- er regulations which directly, positively or nega- tively, aff ect the company results and compet- itiveness. With regard to conducting business in diff erent countries, the company adheres to diff erent regulatory frameworks, in line with the company’s core policies and values. There were no signifi cant changes in the reporting period, except for reporting in accordance with the so- called Taxonomy Regulation. It sets out six environmental objectives to be re- ported through traffi c share, capital and oper- ating expenses related to sustainable econom- ic activities. For 2021, the fi rst two objectives are reported: climate change mitigation and climate change adaptation. The company’s activity is not recognized as an activity that can make a key contribution to the environmental objectives of the Regulation, and it should be observed in this context. Automated and autonomous driving, electrifi cation, connectivity and the design of much lighter vehicles are the future of the au- tomotive industry. The development and production of automo- tive polymer components are not recognized as an activity that can signifi cantly aff ect the environmental footprint. Despite that, continuous research and development of materials, which perfect- ly match the cars of the future and reduced greenhouse gas emis- sions, are opportunities to expand the business to new markets and customers. OPERATIONAL RISKS LEGISLATIVE RISKS OPPORTUNITIES 83 INTEGRATED ANNUAL REPORT 84 Business Plan for 2022 In the last two years business planning has been hampered due to external and unpredict- able circumstances over which AD Plastik Group has no influ- ence. Accordingly, business plans are revised and adapted to the market situation, while fi nancial stability and sustain- ability of business operations remain the top-priorities of the company. In conformity with its estab- lished business practices, the business plan of the AD Plas- tik Group for 2022 was adopt- ed at the end of the reporting period, according to which a slight growth compared to the reporting year is projected. Al- though the plan included risks related to the semiconductor crisis and the consequences of the pandemic, the new chal- lenges of the Russian-Ukrainian crisis have unexpected eff ects on the global economy, and thus the company’s business. AD Plastik Group has two fac- tories in Russia and generates about 25 percent of its revenue in that market. Although fac- tories in Russia produce prod- ucts exclusively for the Rus- sian market, for now there are many unknowns related to fur- ther business operations and the development of the geopo- litical situation. At the time of making this report, the compa- ny is not able to publish its fi - nancial objectives for 2022, nor to accurately predict the impact of external factors on business operations. At the moment, disruptions in supply chains and logistics flows are present, and as a re- sult, production shutdowns are occurring at Russian car man- ufacturers’ sites. AD Plastik Group’s factories in Russia work in accordance with the opera- tional plans of their customers and are ready to increase the utilization of their production capacities at any time. At the same time, new deals are being sealed in the Euro- pean market, contracted pro- jects are being realized and de- velopment activities are being continued. The survival of the company is certain, but also the necessity of changes brought by new circumstances. Despite the uncertainties and rather complex challenges, the company’s focus in 2022 is pri- marily on preserving fi nancial stability and reducing negative impacts on business. INTEGRATED ANNUAL REPORT 85 INTEGRIRANI GODIŠNJI IZVJEŠTAJ Temeljni kapital AD Plastika iznosi 419.958.400 kuna, a podijeljen je na 4.199.584 dionice nominalne vrijednosti 100 kuna. Kompani- ja nema većinskog vlasnika, a najveći pojedinačni vlasnik je di- oničar OAO Holding Avtokomponenti s 30 posto udjela u temel- jnom kapitalu. Slijede ga mali dioničari s 22 posto te mirovinski fondovi s 20,5 posto, što ukupno čini 72,5 posto dionica. Ostatak je podijeljen između menadžmenta i zaposlenika (14,1 posto) te ostalih institucionalnih investitora (11,8 posto), a dio dionica je u trezoru (1,6 posto). Dioničari svoja prava ostvaruju putem Glavne skupštine i Nadzornog odbora u skladu sa zakonodavstvom Re- publike Hrvatske. U . godini najznačajnija promjena u vlasničkoj strukturi rast je udjela malih dioničara od 1,7 posto te izlazak iz vlasničke struk- ture Erste Plavi OMF kategorije B, s prodajom udjela od 1,2 posto. Vlasnička struktura OAO HAK 30,00% MALI DIONIČARI 21,99% MIROVINSKI FONDOVI 20,48% MENADŽMENT I ZAPOSLENICI 14,07% DRUGI INSTITUCIONALNI INVESTITORI 11,81% TREZORSKE DIONICE 1,60% 2021. Sustaina b i l it y Repor t 85 Material topics and 87 boundaries Ethics and integrity 90 Stakeholders 92 Employees 94 Community 114 Economy 118 Environment 122 GRI Content Index 149 ESG Indicators Index 155 Opinion by the Commission 160 of the Managing Committee of the HR BCSD INTEGRATED ANNUAL REPORT 86 Sustain- ability Report The fi fth Integrated Annual Report of the AD Plastik Group refers to the period from Janu- ary 1 to December 31, 2021 and contains data on all business entities of the AD Plastik Group. It has been created in accordance with GRI (Global Reporting Initiative) standards and the core re- porting option has been selected. The compa- ny reports in one-year cycles, and the business and calendar years are concordant. The report has been verifi ed by the Croatian Business Council for Sustainable Development, a professional and independent body, and its opinion can be found on page 164 of this docu- ment. AD Plastik Group is a member of HR BCSD, and the President of the Management Board of the company is the Deputy President of the HR BCSD Assembly. The Group’s Integrated Annu- al Report is published on the websites of the company, the Zagreb Stock Exchange and the UN Global Compact. It can be provided to all interested stakeholders upon request in elec- tronic or printed form. The Integrated Annual Report of AD Plas- tik Group 2020 was published on April 23, 2021. The company has been reporting regularly on sustainable business since 2012 and this is the ninth Sustainability Report. Contact person: Megi Drezga Janković Head of the CSR Committee Matoševa 8, 21 21 Solin dop@adplastik.hr 87 INTEGRATED ANNUAL REPORT Material topics and boundaries Material topics have been identifi ed in accord- ance with the specifi cs of the business oper- ations, business circumstances, strategy and policies of the company, and the impact on stakeholders is adjusted to the results of the analysis and their boundaries are modifi ed ac- cordingly. As the opinion of stakeholders on the impor- tance of identifi ed material topics that are be- ing reported is extremely important, in addition to direct communication with individual stake- holders, there is a survey on the company’s web- site, and by completing it stakeholders help to improve future reports and corporate social re- sponsibility. The results of the survey, conducted among various stakeholders of the company in 2021, have indicated the need to change the materi- ality boundaries for certain topics. Thus, interest in the following topics has increased: eff luents and waste, labor/management relations, occupa- tional safety and health, training and education, customer health and safety, while the assessed importance of forced or compulsory labor and child labor as well as the rights of the domicile population has decreased. In line with the circumstances and new market trends, the company has, based on its own as- sessment, increased the importance of following topics: procurement practices, materials, eff lu- ents and waste, environmental compliance and occupational safety and health. The pandemic and the consequences it brought pointed to the exceptional importance of pre- serving occupational health and safety, so changes in this segment are expected, but also permanent. In addition, the last two years have revealed all the shortcomings in the procure- ment practices and improvements that need to be implemented. At the same time, the com- pany’s continued focus on sustainable business and trends in the automotive market require im- provements in the fi leds of materials and waste. Furthermore, the increasingly frequent amend- ments to the regulations on reporting and en- vironmental protection require increasing com- mitment and focus on this topic in everyday business. 88 INTEGRATED ANNUAL REPORT ECONOMIC STANDARDS • Economic impact • Market presence • Indirect economic impacts • Procurement practices ENVIRONMENTAL STANDARDS • Materials • Energy • Water • Emissions • Eff luents and Waste • Environmental Compliance • Supplier Environmental Assessment SOCIAL STANDARDS • Employment • Labor/management relations • Ocupational safety and health • Training and education • Diversity and equal opportunity • Non-discrimination • Freedom of association and collective bargaining • Local communities • Customer health and safety • Marketing and labelling • Forced or compulsory labor and child labor • Rights of the domicile population Indirect economic impacts Freedom of association and collective bargaining Marketing and labelling Employment Supplier Environmental Assessment Economic impact Materials Energy Water Emissions Eff luents and Waste Labor/management relations Ocupational safety and health Customer health and safety Diversity and equal opportunity Non-discrimination Market presenceProcurement practices Environmental Compliance Training and education HIGH HIGH LOW LOW Impacts on business operations Impacts on stakeholders Local communities Forced or compulsory labor and child labor Rights of the domicile population -5 -5 -4 -4 -3 -3 -2 -2 -1 -1 0 0 1 1 2 2 3 3 45 45 89 INTEGRATED ANNUAL REPORT 90 INTEGRATED ANNUAL REPORT Ethics and integrity In accordance with its mission and vision, AD Plastik Group strives to achieve strategic goals, growth and development in all business seg- ments and successful fi nancial results. Ad- herence to the principles of corporate social responsibility and ethical business has been chosen as the only right direction on its path to successful realization of goals. The core values of the company are prescribed by the Code of Business Conduct and Policies, as well as the ethical standards of the company and each individual within it. The aim of this document is to conscientious- ly and continuously establish a balance in the economic, social and environmental aspects of business when making all business decisions. All employees are acquainted with the Code of Business Conduct and Policies, and each new employee at all Group production sites receives a copy in their native language. It promotes the equal right to respect and dignity regardless of race, religion, sex, age, national origin, political beliefs, sexual orientation, marital status, disa- bility or any other personal characteristic and stipulates that all employees are obliged to treat each other with respect and dignity while encouraging collaboration and teamwork. Adherence to ethical standards is also the re- sponsibility of the Group’s business partners, and decisions on their selection are made ac- cordingly. The company does not tolerate any form of har- assment or discrimination in the workplace, nor any form of abuse. By pursuing an equal oppor- tunities policy, there is no discrimination in any segment of the human resources processes. Particular attention is paid to the compliance of business with the development goals of the community, especially in terms of preserving the interests of children and the environment in which they grow and develop. In order to protect children and minors, the Group applies 91 INTEGRATED ANNUAL REPORT the principle of prohibition of child labor and, accordingly, no employment contracts are con- cluded with persons under the age of 15 years, ie 18 years. To ensure this in all countries where business is conducted, mechanisms are addi- tionally used to check the age of job candidates. Respecting children’s rights in practice, the company participates in projects that strength- en the welfare of children and conducts internal training to raise awareness of its employees on this topic. Anti-corruption policy, among other things, prohibits donations that do not comply with the Group’s fairness standards and do not con- form to local regulations. AD Plastik Group re- spects the principles of free competition and, in accordance with the Antimonopoly Policy, strictly prohibits agreements of entrepreneurs aimed at distorting competition. During the reporting period, there were no re- ported cases of discrimination or human rights WOMEN 51.5% violations, suspicions of corruption or conduct contrary to the principle of freedom of compe- tition. One employment dispute was initiated and one employment dispute initiated before the reporting period was resolved. The com- pany opposes any material support of political parties and promotes transparent public advo- cacy through business and interest organiza- tions. The Code of Business Conduct and Policies are published on the company’s website and clear- ly prescribe the procedure for reporting irregu- larities and non-compliance with the company’s principles. INTEGRATED ANNUAL REPORT 92 By continuous, transparent and two-way com- munication with all its stakeholders, the Group contributes to a better understanding of their needs and quality long-term development and ongoing improvement of CSR. In the reporting period, very intensive consul- tations and communication with employees and customers, shareholders and suppliers, took place as usual. Due to the specifi cs of market circumstances, communication with second- ary Group stakeholders was also more frequent. Communication occasionally took place directly with the highest management, but mostly it took place with the company’s middle management, which, according to the company’s internal pro- cedures, must inform the highest management of all conclusions. Apart from direct consultations, the compa- ny confi rms its development and progress Stakeholders regarding CSR also through regular evaluations of external agencies, audits by its customers and their regular evaluation of satisfaction at spe- cialized portals. Within the automotive industry, clear and high standards of CSR have been set, which are a prerequisite for cooperation. As the recognized stakeholder groups are het- erogeneous, the communication tools and chan- nels are adjusted. Apart from regular and direct communication with all stakeholders, the Inte- grated Annual Report is available on the com- pany’s website. Through memberships in various organisations and associations, the company ac- tively participates in the improvement of CSR by various workshops, public gatherings, confer- ences, visits and consultations. Special attention is paid to the exchange of opinions with employ- ees, so regular surveys of organizational climate and satisfaction are conducted, bulletin boards, intranet and other digital communication tools KEY STAKEHOLDERS SECONDARY STAKEHOLDERS EMPLOYEES TRADE UNIONS AND WORKERS’ COUNCIL CUSTOMERS INVESTORS SHAREHOLDERS CREDITORS AND ANALYSTS SUPPLIERS STATE AND LOCAL AD- MINISTRATION BODIES COMMUNITY INTEGRATED ANNUAL REPORT 93 INTEGRATED ANNUAL REPORT as well as ADP Mailbox and internal newsletter are used, all with the aim of more effi cient and intensive communication. Communication, con- sultation and negotiation with trade unions and Workers’ council are held regularly, and audits and evaluations at suppliers’ sites are carried out according to the previous plan and needs. Good practice has been continued in terms of examination of stakeholders’ opinion on the im- portance of individual material topics through a questionnaire. The questionnaire is available on the company’s website throughout the year, and the CSR Committee is in charge of analyzing the collected results, encouraging stakeholders to get involved, proposing improvements and re- porting to the highest management. The survey examines social, economic and en- vironmental topics in order to engage the var- ious stakeholders as intensively as possible and better understand the importance of individual topics for certain groups of stakeholders, and accordingly adjust their reporting to their needs and interests. Occupational health and safety is predictably one of the most important topics also in the past period, but the topic of labor/management rela- tions has shown to be equally important. The re- maining topics assessed as most important are mainly social topics in the fi eld of product re- sponsibility, such as customer health and safety, compliance and product labeling. This shows that the awareness of stakeholders about the importance of sustainable business and the impact of sustainable business on the fi - nal product is continuously increasing. Topics in RESULTS OF THE SURVEY the fi eld of labor relations and decent work, such as non-discrimination, equal pay for women and men and the like, were also assessed as impor- tant. It is interesting to point out that eff luents and waste is becoming an increasingly important topic for almost all stakeholders. Observing diff erent groups of stakeholders, dif- ferences in expressed interests are visible. Thus, for employees, the most important topics are those from the social fi eld, while the communi- ty assessed the topics from the economic fi eld as the most interesting ones. Among them, eco- nomic impact, market presence, procurement practices and the like stand out. Other stakeholders singled out topics from the product responsibility category as the most im- portant ones. Stakeholders assessed the topics related to labor relations and safe work, ie occu- pational health and safety as equally important. 94 INTEGRATED ANNUAL REPORT Each employee contributes to the improve- ment of the company and better interpersonal relationships with his/her knowledge, skills and commitment. Employees are the most important and most valuable resource of the company, that builds a stimulating work environment by involv- ing them in the development of the company it- self, by two-way and transparent communication and regular and effi cient informing. By recog- nizing the needs of employees and eff ectively directing their personal and professional devel- opment, they are enabled to realize their full po- tential. Human resources development and manage- ment strategy is a key lever for achieving busi- ness goals, but also for adopting for challenging times. The lack of semiconductors, disruptions in logis- tics flows and transport aff ected the chang- es in operational plans, so human resources plans had to be adjusted accordingly. The fo- cus was primarily on quality planning and man- agement of the number of employees and cost Employees rationalization. Thanks to many years of experi- ence and the ability to adapt quickly, and above to competencies and commitment of employ- ees, sudden changes in plans were realized in accordance with the circumstances. Despite nu- merous challenges, AD Plastik Group has shown its resilience and endurance in this segment too. Regular analyses and employee polls provide in- sight into real sources of motivation, on the ba- sis of which guidelines and activities aimed to create a stimulating atmosphere are adjusted. At the same time, despite the circumstances, the principles of equal opportunities and non-dis- crimination have been incorporated into all hu- man resources procedures. In the reporting peri- od, the emphasis continued to be on preserving the health and achieving a balance between the private and business life of employees. Thus, during 2021, special attention was paid to at-risk groups and pregnant women, work from home was enabled, in shifts and in teams, while respecting the family circumstances of employ- ees. INTEGRATED ANNUAL REPORT 95 Share of employees by region and type of employment contract The share of employees by type of performed work The largest share of AD Plastik Group employees is in Croatia, and the share of employees in Rus- sia increased slightly compared to last year, while the trend of decreasing the share of temporary employees has continued this year as well. Due to a number of measures aimed at preserving jobs, On the basis of the type of work they perform, AD Plastik Group’s employees are divided into management (the Management Board and top management – executive directors and direc- tors), indirect workers (administration employ- ees and production administration employees), and direct workers (workers in production). TYPE OF CONTRACT COUNTRY PRODUCTION SITE INDEFINITE TERM DEFINITE TERM TEMPORARY AND OCCASIONAL EMPLOYMENT EMPLOYED IN TOTAL SHARE Croatia SOLIN 640 55 1 695 52.2% ZAGREB 469 165 0 634 Russia TOGLIATTI 425 4 0 429 27.5% KALUGA 270 0 0 270 Hungary TISZAUJVAROS 308 0 7 308 12.1% Serbia MLADENOVAC 174 29 0 203 8.0% Slovenia NOVO MESTO 5 0 0 5 0.2% TOTAL 2,291 253 8 2,544 90.1% 9.9% Temporary employment agencies, student services, vouchers and services contracts and based on the necessary compliance with the work of customers during 2021, the number of employees who work part-time for a defi ned pe- riod has increased and there were 355 such em- ployees in the reporting period. Indirect workers Direct workers Management 42.9 % 55.4 % 1.7 % 96 INTEGRATED ANNUAL REPORT The largest share of employees, 58.02 percent, ranges from 31 to 50 years of age, while the small- est is between 18 and 20 years old. Compared to the previous period, the share of employees aged 21 to 30 decreased. The average age of women is 43 years, men 41, while the total average age of all employees is 41.5 years. As in previous years, most women and men are between the ages of 36 and 40. The above data show that the AD Plas- tik Group supports the principle of prohibition of child labor and does not employ persons un- der 18 years of age. Age structure of employees men 16.3% 14.2% 14.0% 13.6% 12.3% 9.1% 10.6% 4.6% 0.6% 0% 5.0% men 100% 75% 50% 25% 0% women women total Gender structure of employees by age The share of women and men is almost un- changed compared to the previous year, and the trend of gender structure of employees main- tains balance and equal representation of the sexes, by which the company supports and pro- motes policies of gender equality, diversity and equal opportunities. 2017 2018 2019 52.6% 47.4% 50.3% 49.7% 50.7% 49.3% 48.6% 51.4% 48.5% 51.5% 2020 2021 <18 18- 20 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 > 60 500 375 250 125 0 97 INTEGRATED ANNUAL REPORT AD Plastik Group fosters a culture of commu- nication and open social dialogue, and two-way communication is one of the key determinants in building employee trust. In crisis situations, timely and regular informing on all relevant top- ics is extremely important, and in the past pe- riod, this applied, in particular, to topics related to health and safety and changes in plans. The primary goal was to provide a sense of securi- ty to its employees in uncertain and challenging times through timely and transparent communi- cation. Representative of the Workers’ Council is a member of the company’s Supervisory Board, thus employees are involved in business super- vision and decisions concerning their position. Regular elections for the Workers’ Council were held in the reporting period. Collective agreements cover 81.21 percent of employees at the Group level, while the rights and obligations of other employees are regulat- ed by various regulations in accordance with le- gal provisions. TRADE UNIONS AND THE WORKERS’ COUNCIL In 2021, an annex to the one-year collective agreement was signed in Croatia, by which em- ployees maintained a high level of social and material rights, despite rather diffi cult circum- stances. The agreement was signed with three trade unions operating within the company, and another trade union was established during the year. In AD Plastik Togliatti, the Collective Agree- ment is in force until December 31, 2022, and its amendments were signed in 2019, while in Kalu- ga the long tradition of good social dialogue continues. In Hungary, the rights signed by the collective agreement, which was valid until the end of 2021, were applied. The law prescribes the shortest periods in which employees must be notifi ed of important changes in each individual country where busi- ness is conducted. These deadlines must be met and they range from eight days to a maximum of three months, depending on the country. 98 INTEGRATED ANNUAL REPORT Flexibility and quick adjustments to changes in business marked the year 2021, despite the an- nual and medium-term plans for the number of employees of AD Plastik Group. During the year, planned employments are updated in accord- ance with operational plans, and in 2021, given the circumstances in the market, they were quite conservatively planned. Compared to the previ- ous year, signifi cantly less employment hires were realized, while number of employees leav- ing the company was almost equal. After several consecutive years of stable growth in the number of employees, in the last two years the impact of the pandemic on this trend has been noticeable. More conservative planning and adjustment to uncertainties, due to the lack of semiconductors in the market, consequently led to a reduction in the total number of employ- ees in the reporting period. The labor market during 2021 was much more dynamic than the year before and an increas- ing number of employees leaving the companies was recorded globally. This can also be applied to EMPLOYMENT the regions in which AD Plastik Group operates, hence the pool for recruiting target groups of candidates was signifi cantly larger. When select- ing candidates, the company focused primarily on its own bases, ie employees who were previ- ously employed in AD Plastik Group. In addition to ensuring the required number of employ- ees, an important aspect is also the retention of company knowledge. Therefore, fluctuation is an indicator that is especially monitored, in par- ticular the voluntary fluctuation. Thus, the volun- tary fluctuation in 2021 amounted to 18.2 percent, while the total fluctuation was 30.7 percent. When identifying increased fluctuations in cer- tain groups of experts or departments, special activities are carried out to identify the causes and defi ne an action plan to reduce fluctuation. The average monthly fluctuation rate and the total fluctuation rate in 2021 were slightly high- er than the previous year. The peak of fluctua- tion was in March and July due to the process of optimizing the number of employees, all in line with changes and adjustments to custom- ers. The largest share of new employment was 99 INTEGRATED ANNUAL REPORT in Russia, and compared to the previous period it increased signifi cantly, while in Croatia it de- creased. The reason for this is the increase in business activities in Russian factories in line with the new sealed deals. The share of newly employed men in the Group increased, but due to the increased fluctuation, the ratio of women to men did not change. By continuously monitoring and improving the employment strategy, the company strives to create a gender-balanced work environment in which all employees have equal opportunities, rights and possibilities regardless of their paren- tal status. Bearing in mind that planning a family and starting a family represent a major change, and being aware of the need for an equal distri- bution of care responsibilities between men and women, special attention is paid to encouraging fathers to use parental leave. At the same time, all employees are provided with equal opportu- nities for maternity and parental leave. In the observed period, the number of men who exer- cised this right increased, which is a positive in- dicator and incentive for further continuation of activities in this area. All employees of the AD Plastik Group are guar- anteed the right to maternity and parental leave in accordance with the regulations of the country where business is conducted. The duration of ma- ternity and parental leave varies from country to country and can range from one to three years. Employees who have an employment contract for a defi nite term or work part-time have the same privileges and rights as those who work full-time. Trend in the number of employees 0 2,386 2,876 2,953 2,887 2,544 2017 2018 2019 2020 2021 100 INTEGRATED ANNUAL REPORT January February March April May June July August September October November December Employees who joined or left the company by months joined the company left the company 42 -46 -55 -55 -83 -48 -76 -73 -63 -53 -115 -59 -108 48 54 35 39 30 18 102 55 28 18 26 INTEGRATED ANNUAL REPORT 101 Fluctuation rate by months Fluctuation by gender Fluctuation by type of contract Fluctuation rate by region fluctuation men Serbia women Russia Croatia Hungary indefi nite term contract defi nite term contract total employees who left the company 5.00% 3.75% 2.50% 1.25% 0% 20% 15% 10% 5% 0% 1.6% 2.1% 2.0% 1.9% 3.8% 4.4% 3.0% 2.9% 2.8% 2.5% 2.1% 1.8% 60 45 30 15 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 120 90 60 30 0 INTEGRATED ANNUAL REPORT 102 INTEGRATED ANNUAL REPORT Maternity and parental leave TOTAL NUMBER OF EMPLOYEES MATERNITY AND PARENTAL LEAVE USED RETURNING TO WORK AFTER MATERNITY LEAVE REMAINING EMPLOYED ONE YEAR AFTER RETURNING TO WORK AD PLASTIK D.D. men 701 10 8 7 women 628 46 22 22 AD PLASTIK TOGLIATTI men 172000 women 257 40 5 3 AD PLASTIK KALUGA men 107 0 0 0 women 163 4 5 3 AD PLASTIK TISZA men 127 5 0 0 women 181 17 2 2 ADP, MLADENOVAC men 124000 women 79 2 4 4 AD PLASTIK, NOVO MESTO men 3000 women 2 000 AD PLASTIK GRUPA men 1,234 15 8 7 women 1,310 109 38 34 TOTAL 2,544 124 46 41 Share of employment by gender Share of employment by region Serbia Croatia Hungary Russia 2.8% 33.7% 10.3% 53.1% 41.8% 58.2% All employees of the Group are entitled to maternity and parental leave, and their duration varies in the countries where business is conducted from one to three years. Therefore, the return extends over a longer period of time. 103 INTEGRATED ANNUAL REPORT PERCENTAGE OF SENIOR MANAGEMENT FROM THE LOCAL COMMUNITY OCCUPATIONAL HEALTH AND SAFETY Senior management of the company consists of Management Board members, executive direc- tors and directors. Local employment is defi ned as the employment of people who live in the cer- tain county, district or region in which certain members of the Group operate. Signifi cant plac- es of operation are the headquarters of individ- ual Group’s production sites. In 2021, senior management of the company consisted of 45 employees, 42 of whom were from the local community, which accounts for 93 percent of the share of local population in the highest management structure. The largest share of employees is the local pop- ulation, but at the same time the company en- courages mobility and the development of its own experts and managers. Through internal employment, development of an international career within all Group members is enabled, pre- serving in this way company knowledge and en- abling the exchange of best practices. The observed period was extremely demanding due to the duration of the pandemic, but also the consequences it caused. The company con- tinued to implement preventive activities to pre- vent the spread of the virus within the compa- ny, primarily taking into account the health and safety of its employees. The company’s Crisis Management Committee regularly held meet- ings and took care of the implementation of pre- scribed measures and the epidemiological situa- tion at all production sites. In cooperation with the Teaching Institute of Public Health of the Split-Dalmatia County, a lecture and conference on the topic of vaccina- tion were organized. As the creation of safe and healthy workplaces is one of the company’s fundamental commit- ments, risk and hazard assessments were regu- larly conducted in all parts of the organization, and the potential hazards were minimized by im- plementing preventive actions. Continuous im- provement of working conditions, and ensuring working conditions without negative impacts increase employee satisfaction and motivation. In Mladenovac, the glassrun channels assem- bly process has been ergonomically improved, INTEGRATED ANNUAL REPORT 104 which eliminated excessive fatigue due to inap- propriate position and body movement. Preserving and promoting health is part of the strategy of human resource development and awareness of the impact of the work environ- ment and working conditions on the health of each individual. This is one of the reasons for joining the project “Healthy Living“, within which the certifi cate “Health Friendly Company” is awarded. During 2021, an educational workshop “Preservation of mental health” was held, as an introduction to the campaign on the importance of mental health. New employees regularly participate in training on occupational health and safety, which consists of theoretical and practical part. Other employ- ees also periodically participate in such trainings, and the acquired knowledge is regularly moni- tored and evaluated. The implementation of the prescribed measures for occupational health and safety is supervised by the occupational safety service at its regular internal audits, and the re- sults are reported to the Occupational Safety and Health Committee and the employees. All issues related to occupational safety are regu- larly coordinated with the representatives of the trade unions and the Workers’ Council. The health condition of employees in workplaces with special working conditions and those who work night shifts is regularly monitored by refer- ring them to specialist examinations by occupa- tional physicians. In the reporting period, the number of injuries is the same as in the previous year and they do not have lasting consequences for the health of em- ployees. The injuries were caused by a collision with an object, a fall in the same plane, a cut with a scalpel or they happened during arrival or de- parture from work. No occupational accidents of suppliers or visitors staying or working at the AD Plastik Group production sites were recorded. Injury rates 2019 2020 2021 SOLIN 20 0 493 0 7 0 205 0 5 0 275 0 ZAGREB 19 0 305 0 16 0 124 0 16 0 319 0 VINTAI 000000000000 KALUGA 0000000010410 TISZAÚJVÁROS 26 0 578 0 16 0 77 0 13 0 52 0 MLADENOVAC 4 0 125 0 1 0 13 0 5 0 119 0 TOTAL 69 0 1,501 0 40 0 419 0 40 0 806 0 Injuries Injuries Injuries Lost days Lost days Lost days Deaths Deaths Deaths Occupational diseases Occupational diseases Occupational diseases INTEGRATED ANNUAL REPORT 105 INTEGRATED ANNUAL REPORT Injury rates by gender Parameter PARAMETER 2019 2020 2021 IR (injury rate) 2.38 1.38 1.58 ODR (occupational disease rate) 000 LDR (lost days rate) 0.20 0.06 0.14 IR (rate of lost working hours per 200,000 hours worked) 2.40 1.50 1.71 AR (absentee rate due to death case) 000 men women 60% 45% 30% 15% 0% 52% 58% 58% 42%42% 48% 2019 2020 2021 106 INTEGRATED ANNUAL REPORT Lifelong education and development of compe- tencies of each individual employee are a neces- sity in modern business and human resources development. Knowledge and skills are the basic premise of successful dealing with market chal- lenges, technological progress and high set busi- ness standards. AD Plastik Group clearly defi nes the processes that are systematically managed in order to meet the desired level of human re- sources development. Onboarding is the starting point for the develop- ment of each individual, and further development is planned and implemented accordingly on an annual basis. Trainings or projects that off er the possibility of additional development, focused on diff erent operational areas and processes within the the company, are planned. Employees regular- ly attend professional seminars and conferences TRAINING AND EDUCATION MENTORSHIP Mentorship is a special model of employee de- velopment in the AD Plastik Group and the men- tor-mentee pairing is approached with special care, determining the initial levels of knowledge. Mentorship takes place exclusively in key busi- ness areas, and in 2021, three mentoring pro- grams were monitored, which contributed to the sharing of knowledge, but also to the recognition of the expertise and excellence of mentors. in their fi eld of work, all in order to develop and create a competitive advantage. During 2021, ep- idemiological measures continued to complicate the organization of diff erent types of education, but despite this, 209 courses on various educa- tional topics were realized. These were mostly var- ious professional seminars and trainings that were mainly conducted through digital platforms. The educational platforms Automotive Industry Action Group, Ford Supplier Learning Institute and Cour- sera signifi cantly contributed to the development of employees in the observed period. The average number of training hours per employ- ee was 26 hours, which is an increase compared to the previous year, despite the epidemiological sit- uation. Examination of the quality of educational content shows that the educational needs of the Group’s employees were met. of training per employee 26 hours INTEGRATED ANNUAL REPORT EDUCATION AND TRAINING During 2021, employees participated in educa- tions related to diversity and inclusion for HR professionals, IMDS, Supply Chain Sustainabili- ty, trainings on monitoring, measuring and re- porting emissions, corruption, anti-corruption and compliance. These educations and trainings HEALTH MANAGEMENT In addition to trainings and workshops focused on knowledge and business skills, in 2021, in co- operation with the Institute of Public Health, ed- ucations on prevention and protection against COVID-19 viruse were conducted. cover all areas of corporate social responsibili- ty, and 21 employees participated in them. Rais- ing employees’ awareness on socially responsible topics also takes place through internal newslet- ter ADP News, which is regularly distributed to all employees. 107 STARTER PROGRAM During 2021, the Starter project continued, in- ternship program for master engineers with technical/technology degree without work ex- perience. Under the guidance of a mentor, they ANNUAL INTERVIEWS WITH EMPLOYEES Annual interviews and feedback to employees are a direct incentive for the further develop- ment of each individual. In 2021, a series of work- shops on the importance of feedback for employ- ees was held, and the management also attend- ed a large number of practical exercises. Percentage of employees who received a perfor- mance appraisal and individual development as- sessment: • engineers and highly professional staff (22.7 percent of men and 23.6 percent of women) • other machine setters and staff (23.5 percent of men and 34.1 percent of women) • production workers (21.6 percent of men and 27.2 percent of women) have been acquiring knowledge successfully, and during the year three of the fi ve young engineers from this program were employed in the devel- opment quality and sales departments. 108 INTEGRATED ANNUAL REPORT AD - REWARDING EXCELLENCE In the reporting period, 91 employees were awarded who, through their eff orts and com- mitment, signifi cantly contributed to the achi- evement of the goals of their departments. REWARDING IDEAS FOR IMPROVEMENT In 2021, 27 ideas for improvement were imple- mented and awarded, which is a signifi cant im- provement compared to the previous report- ing year. 109 INTEGRATED ANNUAL REPORT Methods and tools of the automotive industry 39 % Quality standards 2 % Professional knowledge 2 % IT knowledge 3 % Occupational safety and health 4 % Corporate social responsibility 3 % Expert knowledge 23 % Foreign languages 9 % Development of personal competencies 9 % Installed technologies and means of work 6% EMPLOYEE DEVELOPMENT IN NUMBERS Average number of training hours per employee gender and category Share of diff erent programs Production workers 25.7 27.1 27.5 26.4 25.0 50.2 25.6 22.7 0 Engineers and highly professional staff Machine setters and other staff Senior and middle management men women INTEGRATED ANNUAL REPORT 110 DIVERSITY AND EQUAL OPPORTUNITIES Diversity and equal opportunities ensure re- spect for personal integrity and are included in management, employment and promotion pro- cesses. The company’s goal is to make every em- ployee feel like an equal member of the work en- vironment and activities are aimed at building open and inclusive relationships. Compared to the previous period, the share of women in senior management structures decreased slightly, while the share of wom- en over 50 years of age in middle management increased. The share of women within the man- agement-leading structure of AD Plastik Group is a total of 38.19 percent. The ratios of women and men in various management positions have been stable for many years, with 64.8 percent of total management aged 30 to 50, while the share of those over 50 is 29.2 percent. There was a minor change in the Group’s educa- tional structure due to the fluctuation of direct workers, so the share of employees with lower education reduced from 16 to 14 percent. Management gender structure Senior Management 0% Middle Management Line Management men women 73.3% 56.6% 67.9% 26.7% 43.4% 32.1% 111 INTEGRATED ANNUAL REPORT Management age structure Management Board structure by age and gender Audit Committee structure by age and gender Employee educational structure 18-30 30-50 >50 MEN 003 WOMEN 000 18-30 30-50 >50 MEN 003 WOMEN 010 men women 18-30 30-50 >50 SENIOR MANAGEMENT MIDDLE MANAGEMENT LINE MANAGEMENT men menwomen women Higher education, University degree, Master’s degree Unqualifi ed workers, Semi-qualifi ed workers Secondary education, Qualifi ed workers, Highly qualifi ed workers 22 % 14 % 64 % 60 45 30 15 0 112 INTEGRATED ANNUAL REPORT AD Plastik Group builds its organizational cul- ture by promoting and acheiving the company’s values and creating a sense of belonging. The continuation of the pandemic during 2021 was still severely restricting social activities, but any easing of epidemiological measures was used to launch them. In Solin, the AD Plastik team participated in the business futsal league, and employees ADP ACTIVITIES throughout Croatia used the services of the Multisport card to access sports and recrea- tional facilities. Although in-person gatherings of larger groups of employees were minimized due to the epidemiological situation, the com- pany’s day was marked in an appropriate way. Gathering was organized through digital plat- forms and seedlings were distributed to em- ployees, as a symbol of sustainable develop- ment, which also marked Earth Day. 113 INTEGRATED ANNUAL REPORT TISZA GARDEN The employees of the factory in Tiszaújváros, on their own initiative, landscaped a garden in the heart of the industrial complex and created their own oasis where they can connect with nature. IT’S OK NOT TO BE OK In order to promote, raise awareness and pre- serve the mental health of employees, a cam- paign «It’s OK not to be OK» was conducted at the Group level. It was launched on the occa- sion of the International Mental Health Day, and its goal was to recognize one’s own and other GOOD DEEDS Employees of AD Plastik Togliatti participat- ed in the humanitarian action «Good Deeds», which has multiple benefi ts for the community. The goal of the action is to help children living in orphanages by collecting plastic caps. AD Plas- tik Togliatti has been participating in this action since 2017 and its employees have collected a GARDEN OF MEMORY The international action «Garden of Memo- ry» provides for the planting of 27 million trees in memory of those killed during World War II. Planting is carried out in diff erent Russian re- gions, taking into account climatic character- istics. The aim of the action is to raise the lev- el of awareness of the general public about the Thanks to their joint eff orts and involvement, they have created a place to relax and socialize in the breaks between their work commitments. people’s signs of mental health distress. In Cro- atia, the provision of psychological counseling and support services has also been contracted with external experts, which ensures anonymity for employees and provides them with free help. total of two tons of plastic that was recycled, and all the proceeds have been donated to the Togli- atti Foundation, which takes care of the rehabil- itation of children with disabilities. Project par- ticipants raise community awareness about the importance of waste separation, and at the same time help the most needy ones. problems of aff orestation, and with their partic- ipation the companies show a high level of so- cial and environmental responsibility. Employees of AD Plastik Togliatti participated in this action and together with other participants and forest- ers, planted a total of 1.5 hectares of forest dur- ing 2021. 114 INTEGRATED ANNUAL REPORT Community The Group is aware of its economic and social impact in the communities where it works and its mission is to operate in harmony with the en- vironment. Investing in a community enables its progress, but also the progress of every com- munity factor. Employing the local population enables them dignity of work and additional ed- ucation, and the company promotes the sustain- able development of business and the commu- nity overall. For many years, the company has been active- ly developing its cooperation with many educa- tional institutions, aware of the importance of integrating theory and practice to make edu- cation as quality as possible and ensure better employment opportunities. Apart from student internships and employment, cooperation with students is achieved through assistance in the making of diploma theses and guest lectures. At the Group level, 43 university students and 6 high school students successfully completed their internship during 2021 and 5 diploma the- ses were written, while 3 are still in the making. Planned visits of students to factories in Croatia were postponed due to the epidemiological situ- ation. Group experts held several lectures at the higher education institutions in Croatia. The company nurtures a culture of diversity and equal opportunities and it has been participating in the Experience is worth its weight in gold pro- ject for many years. The project goal is to enable professional practice and potential employment of students with disabilities or lower fi nancial status. The company participated in virtual ca- reer fairs in Mladenovac and Togliatti, and AD Plastik Tisza established cooperation with the University of Debrecen. As pandemic was largely present in 2021, the funds planned for holiday materials and gifts have been redirected to the Split Clinical Hospital Center. It is a gratitude to the medical staff who has been fi gting tirelessly against the pandemic, reminding us of the real value of togetherness. Solidarity in action was also shown by the Group employees by raising funds to help colleagues from earthquake aff ected areas in Petrinja. AD Plastik Group cooperates with institutions at the local and national level in line with the com- pany’s policies and capabilities. Company rep- resentatives publicly advocate for topics with the positive impact on the community and the economy, and during the reporting period they participated in various events. The interests of industry and exporters are primarily advocat- ed, encouraging the further development of the economy and CSR. March 15 Conference “Invest smartly - Invest in Croatia“, panel „Being an entrepreneur in Croa- tia“, participant Marinko Došen May 21 Conference on the 4th Industrial Revo- lution, panel „Good Practices - Experiences and Recommendations“, participant Mladen Peroš September 13 „Croatia: on the road to the euro“, panel „Introduction of the euro in Croatia - ex- pectations for the business community“, partic- ipant Josip Divić September 22 Conference „What is Dalmatia without tourism“, participant Marinko Došen November 9 Conference on Sustainable Devel- opment, panel „Industrial Policy“ - participant Marinko Došen Social responsibility and relationship with the community are woven into all company’s busi- ness processes that are communicated clearly and transparently through integrated annual re- ports. 115 INTEGRATED ANNUAL REPORT By participating in the work of various associa- tions AD Plastik Group aims to strengthen the influence of entrepreneurs in promoting the strategic interests of the economy, entrepre- neurship and exports. It encourages the nec- essary changes and with its contribution to the work of various bodies, associations and institu- tions, it directly contributes to the development of the community in which it operates. • President of the Management Board Marinko Došen is a member of the Assembly of the Cro- atian Chamber of Economy and the Member of the Management Board Mladen Peroš is the Deputy President of the Economic Council of the County Chamber Split • National Plastics and Rubber Industry Associa- tion, and Community of manufacturers of parts and accessories for the automotive industry of the Croatian Chamber of Economy and the re- gional Vocational Plastics and Rubber Manufac- turing Group of the County Chamber Split • Marinko Došen is the President of the Business Council for Economic Cooperation with the Russian Federation • Membership in the Croatian Exporters Associ- ation, whose Vice President is Marinko Došen • Membership in the Club of Exporters • Founders of AD Klaster which brings togeth- er leading Croatian automotive parts manufac- turers, and Marinko Došen is the President of COMMITMENTS TO EXTERNAL INITIATIVES the Assembly, while Director of Logistics of AD Plastik Group Denis Miletić is the Director of AD Klaster • Marinko Došen is a diversity ambassador and also the Vice President of the HR BCSD Assem- bly • Participation in the work of Community for Corporate Social Responsibility, Community for Environmental Protection in the Economy and Community for the Human Resources Develop- ment of the Croatian Chamber of Economy • AD Plastik Group is the signatory of the Code of Business Ethics of the Croatian Chamber of Economy and the United Nations Global Com- pact Initiative, thus having committed to pro- mote and support the ten principles of the UNGC and seventeen sustainable development global goals. • In Russia, AD Plastik Group is a member of the Automotive Cluster • AD Plastik Group is a member of the Serbian Automotive Cluster • AD Plastik Group in Hungary is a member of several professional associations, namely na- tional associations of entrepreneurs and em- ployers, plastic processors and car compo- nents manufacturers, the automotive cluster of northern Hungary and the Chamber of Com- merce and Industry. INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT 116 Association of boatmen Saint Ilija Metković Conference “Challenges of Change 2021“ Conference on Sustainable Development Conference “MTECH 2021“ SPONSORSHIPS AND DONATIONS Rulebook on Donations and Sponsorships of AD Plastik Group is pub- lished on the company’s website, and the management of sponsorship and donations is based on recognizing the needs and social responsi- bility of the company as a desirable partner of the community in which it operates. DONATIONS SPONSORSHIPS HUMANITARIAN ACTION AND HEALTH Split Clinical Hospital Center COVID department monitors for monitoring vital functions Association of persons with cerebral palsy and polio purchase of a standing frame State Budget of the Republic of Croatia aid for the reconstruction of earthquake- aff ected areas Employees post-earthquake reconstruction aid to employees from the Petrinja, Sisak and Glina areas Maestral Children’s Home participation in a charity dinner EDUCATION, CULTURE AND SPORT Computer donation to the Split 3 Elementary School Bol Elementary School renovation of an extended stay classroom Faculty of Electrical Engineering, Mechanical Engineering and Naval Architecture, University of Split acquisition of academic licenses for CAD / CAM laboratory Franciscan Province of the Most Holy Redeemer roof renovation of the Church of Our Lady of Health Sailing club Labud (“Swan“) Split organization of the sailing regatta «Mrduja» Youth water polo club POŠK support for achieving the goals of the season and the youth group Football club Sloga (“Harmony“) improving the work and conditions of the club Conference “Criminal Compliance – ISO 37001” Monograph of a basketball club “Kraljevica“ Water polo club Jadran functioning of the entire sports facility 117 INTEGRATED ANNUAL REPORT The global crisis of lack of semiconductor, along with disruptions in distribution chains, has signif- icantly slowed down the expected recovery of the automotive industry, which is visible also in the trends of economic values of AD Plastik Group in 2021. Direct economic value generated, compared to the previous year, decreased by 7.6 percent and amounted to HRK 1,126.2 million. This decline is a direct consequence of the reduction in cus- tomer orders due to the lack of semiconductors Economy Direct economic value generated and distributed in HRK 000 in the market. Economic value distributed in the reporting period is slightly lower and amounted to HRK 1,092.4 million, which is 0.97 percent less than a year earlier. The main reason for this trend comes from a significant increase in payments to capital providers, with the largest impact being the dividend payment in the total value of HRK 66.3 million. As a result of these trends, the eco- nomic value retained was lower than in previous years, but is still at acceptable levels. 2018 2019 2020 2021 Direct economic value generated 1,321,254 1,541,088 1,218,580 1,126,150 Sales revenue 1,298,446 1,509,216 1,186,765 1,102,413 Other revenue 22,808 31,872 31,815 23,737 Economic value distributed 1,211,022 1,432,132 1,103,095 1,092,444 Operating expenses 906,981 1,048,899 809,552 747,589 Wages and benefits to employees 253,485 296,408 253,513 254,809 Payments to capital providers 51,566 64,396 26,224 71,588 Payments to the state -1,419 21,946 12,295 16,801 Community investments 408 483 1,511 1,657 Economic value retained 110,232 108,956 115,485 33,706 INTEGRATED ANNUAL REPORT While managing topics in the field of econom- ics, the company is primarily guided by the goal of making the most significant possible contri- bution to all stakeholders and achieving profit goals to the satisfaction of all interested pub- lics. Through optimal management of economic resources, tax compliance and the use of availa- ble grants, it strives to create the greatest pos- sible economic value that will be fairly distribut- ed to stakeholders, ensuring primarily financial stability of the company and thus ability to con- tinue as a going concern. INTEGRATED ANNUAL REPORT 119 In accordance with the regulations in individual countries and the company’s policy, all employees of the Group are registered and included in pen- sion funds. Pension contributions are paid in the name and at the expense of employees. The rate of pension contribution in Croatia is 20 percent of the contribution base, in Russia it is 22 percent to an amount up to 1,465,000.00 RUB, above which an additional 10 percent is paid. In Hungary, the rate of payments is 10 percent, while in Serbia 14 percent is paid from the gross sala- ry at the expense of employees and 11.5 percent at the expense of the employer. At all produc- tion sites, that is countries of operation, the en- try-level wages of AD Plastik Group employees Comparison of entry-level and minimum wage by country are higher than the prescribed minimum wages in a particular country or region. The basic wage is set depending on the job position and is equal for all employees, regardless of gender or any other characteristic. It is based on legal regula- tions and internal documents of each individual company which defi ne wages, additions to the wage, compensations and stimulations. Additional employee rewards are regulated by in- ternal rulebooks such as the rulebook on reward- ing excellence and suggestions for improvement. Employees who have an employment contract for a defi nite term or work part-time have the same privileges and rights as employees who have an employment contract for indefi nite term. Minimum wage Entry-level wage Croatia Russia (Kaluga) Russia (Vintai) Serbia Hungary 106.3 100 116.6 100.4 101.6 218.5 INTEGRATED ANNUAL REPORT 120 FINANCIAL ASSISTANCE Financial assistance received at the Group level in 2021 amounted to HRK 2 million, which is sig- nifi cantly lower than in previous years. The main reason is the non-use of tax reliefs, since the parent company incurred a tax loss. Although 2021 was extremely diffi cult for the automotive industry, the grants available were few and they were not signifi cant. The subsidiary in Serbia used grants in the amount of HRK 0.6 million related to Covid-19, while the parent company used HRK 1.3 million as subsequently recognized write-off of tax liabilities due to falling reve- nue in 2020. AD Plastik Group actively monitors tenders for the award of grants and accordingly plans, that is adjusts, as much as possible, its in- vestment plans. SIGNIFICANT INDIRECT ECONOMIC IMPACTS AD Plastik Group has a signifi cant impact on the environment in which it operates, and the in- tensity and types of indirect economic impacts of individual members on the environment are diff erent, ie specifi c with regard to the environ- ment in which they operate and the activities in which they are engaged. Growth in revenue and production volumes, until the outbreak of the pandemic, had a noticeable impact on increasing the number of vacancies in the supply chain. Due to market disruptions, this eff ect was absent in the reporting period. Improving social conditions is also one of the indirect economic impacts of the Group, which is best manifested in the creation of vacancies specifi c for the automotive industry. The Group’s research and development department is locat- ed in Croatia and it uses the most complex and advanced technologies. There is a signifi cant im- pact on improving skills and knowledge within the professional community through coopera- tion and partnerships with educational institu- tions, which is also an excellent channel for re- cruiting the best staff . Financial assistance received from the Government 2018 2019 2020 2021 TAX RELIEFS 6,110 9,827 12,790 117 SUBSIDIES 4,345 2,700 16,500 1,932 TOTAL 10,455 12,527 29,290 2,049 (in HRK ) 121 INTEGRATED ANNUAL REPORT TAXES There is no formally adopted tax strategy in the company, but the attitude and tax principles of all Group members are the same - to respect the legislative framework and good tax practices of the countries in which they operate, and to cor- rectly calculate and timely settle all tax liabilities. Tax havens or profi t transfers within the Group are not used for the purpose of paying lower tax liabilities, but by using available tax reliefs, which are usually related to capital investments and in- crements in the number of vacancies, tax plan- ning is performed in order to optimize them. Since 2018, the parent company has been a sig- natory to the Agreement on the Acquisition of the Special Status of Taxpayers, which raises transparency in tax management to the highest level. Thus, tax risks are reduced and partner- ship is maintained with the Tax Administration which has a comprehensive insight into all rele- vant facts and circumstances from which tax lia- bilities or tax risks arise. More detailed informa- tion on accounting policies related to taxes and notes is an integral part of the annual fi nancial statements within this document. 122 INTEGRATED ANNUAL REPORT Environment In cooperation with its customers and suppliers, the Group continuously works on fi nding envi- ronmentally friendly solutions, technologies and materials to reduce vehicle weight, their emis- sions and protect environment. Potential risks are prevented by continuous monitoring of en- vironmental impact, process improvements and planning. The precautionary principle is applied to avoid possible risks of applying new technologies before having full knowledge and CLIMATE CHANGE MITIGATION CLIMATE CHANGE ADAPTATION SUSTAINABLE USE AND PROTECTION OF WATER AND MARINE RESOURCES TRANSITION TO A CIRCULAR ECONOMY POLLUTION PREVENTION AND CONTROL PROTECTION AND RESTORATION OF BIODIVERSITY AND ECOSYSTEMS The Taxonomy Regulation, and delegated reg- ulations, are the legal framework that provides companies, their investors and legislators with criteria for determining economic activities that are environmentally sustainable and make a sig- nifi cant contribution to environmental objec- tives. In the reporting period, the Group reports on two of the six environmental objectives cov- ered by this Regulation, namely: understanding of their impact on the environ- ment and human health. Environmental care and conscientious management of natural resourc- es are the core values and permanent responsi- bility. The circular economy, greener production processes, energy effi ciency and quality waste management are part of the integrated strategy, which is the basis for making plans, strategies, and realization of the activities. EU TAXONOMY climate change mitigation climate change adaptation 123 INTEGRATED ANNUAL REPORT MATERIALS By analyzing legal regulations and acts, multi- disciplinary teams have analyzed legal acts and regulations and determined the type of activity, capital and operating costs and a calculation ad- equate to the reporting obligation. When calcu- lating key performance indicators (revenue, cap- ital investments and operating costs), activities and investments related to environmentally sus- tainable economic activities were identifi ed and put in relation to the fi nancial statements data. Revenue is stated in relation to total revenue in statement of comprehensive income, and capital investments in relation to capital investments in statement of cash flows (purchases of property, plant and equipment, investment property and intangible assets). OPEX indicator is stated in re- lation to total operating costs less depreciation and amortisation in statement of comprehensive Input materials management is integral part of business processes from off er making to serial production, and it is covered by the quality, en- vironmental protection and sustainable suppli- er management policies. Input materials used in production processes, with signifi cant cost im- pact, are important because of the environmen- tal impact. This is managed by the close coop- eration of Sales, Research, Purchasing, Product and Process Development, Production, Quality and Environmental Protection. The basic raw materials for the production of plastic com- ponents are thermoplastic organic polymers used in injection moulding, thermoforming and blow moulding. Component painting technolo- gy uses paints, varnishes and solvents based on REVENUE CAPEX OPEX AD PLASTIK GROUP 0.00 % 11.06 % 0.30 % AD PLASTIK D.D. 0.00 % 8.81 % 0.24 % VOC. The fi nal products of the Group are in line with the technical specifi cations of custom- ers, with whom it continuously works on the material development and improvement, and the application of environmentally sustainable standards. The products are packed and trans- ported in returnable metal or plastic packaging, and part is packed in appropriate cardboard packaging, covered in foil and placed on wood- en pallets. During 2021, chemical leasing model continued, in line with the Law on Sustainable Waste Management. Thus, waste solvents from the painting technology are disposed of so they get regenerated and returned to the painting technology process purifi ed. 237 tons of regen- erated solvent were used with this model. income. The presented share of capital costs re- fers primarily to the energy effi ciency of facilities, installation, maintenance and repair of energy ef- fi cient equipment and does not have a signifi cant share in total costs. The Group activity is not rec- ognized as one that makes a key contribution to the environmental objectives of the Regula- tion, so it should be considered so. However, the company constantly works on improvements and quality care for the environment in which it operates, and within the strategy of CSR it has clearly set goals and activities. The Taxonomy Regulation has not yet been fully implemented, and the implemented part is strongly focused on companies that signifi cantly contribute to envi- ronmental pollution and emit high levels of CO 2 , and the Group is not one of them. 124 INTEGRATED ANNUAL REPORT Material used by weight or quantity MATERIAL PRODUCTION SITE 2019 2020 2021 PP/PE/PES (t) SOLIN 13,411 8,762 2,953 ZAGREB 3,995 VINTAI 3,675 2,173 1,873 KALUGA 2,498 1,627 2,967 TISZAÚJVÁROS 1,749 2,088 1,977 MLADENOVAC 1,225 478 410 TOTAL 22,558 15,128 14,175 PAINT, VARNISH, SOLVENTS (t) SOLIN 000 ZAGREB 647 689 620 VINTAI 21 11 13 KALUGA 2.8 3 0 TISZAÚJVÁROS 000 MLADENOVAC 176 1 1 TOTAL 847 704 634 Recycled input materials MATERIAL PRODUCTION SITE 2019 2020 2021 PP/PE/PES, PAINT, VARNISH, SOLVENTS (t) SOLIN 1,919 754 247 ZAGREB 408 VINTAI 356 10 272 KALUGA 104 102 350 TISZAÚJVÁROS 192 241 880 MLADENOVAC 000 TOTAL 2,571 1,106 2,157 125 INTEGRATED ANNUAL REPORT Share of material used that is recycled input material Material used for the packaging of the fi nal product (t) Paper used for offi ce operations purposes (t) PRODUCTION SITE CARDBOARD PLASTIC FOIL WOODEN PALLETS SOLIN, ZAGREB 123.00 14.50 135.00 KALUGA 156.60 9.20 0 MLADENOVAC 82.20 6.90 71.00 TOTAL 361.80 30.60 206.00 SOLIN 4.30 ZAGREB 8.26 VINTAI 5.06 KALUGA 6.03 TISZAÚJVÁROS 5.70 MLADENOVAC 1.02 TOTAL 30.37 MATERIAL PRODUCTION SITE 2019 2020 2021 PP/PE/PES, PAINT, VARNISH, SOLVENTS (t) SOLIN 13.65% 7.97% 8.35% ZAGREB 8.83% VINTAI 9.69% 0.45% 14.43% KALUGA 4.16% 6.27% 11.80% TISZAÚJVÁROS 10.98% 11.54% 44.53% MLADENOVAC 0% 0% 0% TOTAL 7.70% 5.25% 14.66% 126 INTEGRATED ANNUAL REPORT Direct and indirect energy is used for the oper- ation of production plants. Direct energy con- sumption includes the consumption of natural gas, LPG, heating oil and fuel for the propulsion of company’s motor vehicles. Indirect energy consumption means electricity consumption, and the total consumption of direct and indi- rect energy varies and is directly related to the amount of production. The company conscientiously and continuously manages energy and takes initiatives to ensure effi cient and rational consumption. Energy ef- fi ciency provides fi nancial and energy savings, and, accordingly, an energy effi ciency manage- ment system has been implemented at the pro- duction sites in Solin, Zagreb and Mladenovac according to the requirements of ISO  standard. That is the backbone and the basis for more effi cient use of the Energy Consumption Reduction Program. In accordance with the in- ternal procedures and instructions of the Tech- nical Aff airs department, regular and appropri- ate records of energy consumption are kept at the production sites of the AD Plastik Group, ENERGY and based on that, measures for improvement are proposed. Electricity is the main energy source in the Group’s production plants and premises, the main driver of machines, heating, cooling and lighting devices of work areas. To- tal energy consumption in 2021 was lower than in previous periods due to reduced production. The purchased electricity was not obtained from renewable energy sources. During 2021, activities of replacing lighting fi x- tures with LED lighting were continued. A cool- ing plant was purchased in Zagreb, while a dryer for drying and preparing materials was purchased in Solin. Gas-powered forklifts have been replaced by more technologically ad- vanced electric forklifts in Solin, Zagreb and Tiszaújváros. The Hungarian factory has also in- troduced a system for measuring electricity ef- fi ciency, which communicates wirelessly with a central server that has analytics software. Such consumption monitoring and analysis of in- coming data allow to timely undertake meas- ures for more effi cient use of electricity. Energy consumption within the organization by energy sources 2019 2020 2021 SHARE Electrical energy (GJ) 163,094 147,757 136,189 79.15% Natural gas (GJ) 39,631 37,102 33,214 19.30% Liquefi ed petroleum gas (GJ) 2,969 5,367 2,565 1.49% Heating oil (GJ) 410 24 104 0.06% TOTAL 206,104 190,250 172,072 100.00% INTEGRATED ANNUAL REPORT 127 Energy consumption outside the organization shows fuel consumption for vehicle needs during busi- ness trips. Energy intensity is measured by the ratio of total electricity consumption (kWh) and total weight of delivered products (kg). Energy consumption within the organization by production sites (GJ) Energy consumption outside the organization (GJ) PRODUCTION SITE 2019 2020 2021 SOLIN 40,755 40,130 32,912 ZAGREB 90,054 82,686 72,476 VINTAI 23,759 22,727 22,268 KALUGA 17,302 18,404 16,981 TISZAÚJVÁROS 19,784 16,315 17,137 MLADENOVAC 14,486 9,988 10,297 TOTAL 206,140 190,250 172,072 PRODUCTION SITE 2019 2020 2021 SOLIN 3,361 2,105 1,544 ZAGREB 493 401 245 VINTAI 4,093 3,343 2,849 KALUGA 55 44 35 TISZAÚJVÁROS 1,070 641 542 MLADENOVAC 148 88 36 TOTAL 9,220 6,622 5,250 Energy intensity PRODUCTION SITE 2019 2020 2021 SOLIN 2.71 3.25 3.05 ZAGREB 3.58 VINTAI 1.81 1.86 1.76 KALUGA 1.92 2.00 1.37 TISZAÚJVÁROS 3.19 3.73 4.06 MLADENOVAC 3.19 3.78 3.36 TOTAL 2.56 2.92 2.86 2.56 2.92 4 3 2 1 0 2019 2020 2021 2.86 INTEGRATED ANNUAL REPORT 128 INTEGRATED ANNUAL REPORT Water is a unique and irreplaceable natural re- source used in business, so the care for its con- sumption and the quality of water discharged is approached with special attention within the company. Regular monitoring of water con- sumption and reporting on the state of the wa- ter supply and wastewater discharge systems enable managing this resource in a quality man- ner. Possible deviations from the planned values are quickly identifi ed and, accordingly, measures and activities for improvement are introduced. AD Plastik Group’s production sites do not have WATER AND EFFLUENTS a negative impact on water and the aquatic eco- system, and the supply is mostly provided from the public water supply system. A small part is supplied from its own well in Zagreb, from which water is used for sanitary and technological needs and, if necessary, replenished in closed re- circulation systems. Technological needs include cooling of machines and tools, water curtain in the process of applying paints and varnishes and humidifi cation of the air. Water consumption is monitored by direct measurement on a water meter. PUBLIC WATER SUPPLY (m³) PRIVATE WELL (m³) TOTAL CONSUMPTION (m³) 2019 2020 2021 2019 2020 2021 2019 2020 2021 SOLIN 41,506 31,339 23,400 0 0 0 41,506 31,339 23,400 ZAGREB 12,416 13,329 9,535 7,790 9,136 6,941 20,206 22,465 16,476 VINTAI 6,767 6,126 6,597 0 0 0 6,767 6,126 6,597 KALUGA 2,275 2,842 3,575 0 0 0 2,275 2,842 3,575 TISZAÚJVÁROS 831926959000831926959 MLADENOVAC 3,921 2,429 2,548 0 0 0 3,921 2,429 2,548 TOTAL 67,716 56,991 46,614 7,790 9,136 6,941 75,506 66,127 53,555 Water consumption by source 129 INTEGRATED ANNUAL REPORT Eff luents are divided into sanitary, techno- logical water and rainwater. They are purifi ed through sedimentation tanks, grease separa- tors and separators before being poured into the internal drainage system, which drains them further to the city water purifi er. The col- lected sediment and sludge generated in this process are regularly removed, and prior to actual disposal, stored and handled as hazard- ous waste, in accordance with waste manage- ment regulations. Eff luents are not recycled in production plants and are controlled by sam- pling according to the requirements of water permits. All eff luents meet the permitted con- centrations for discharging in public drainage systems. AD Plastik Group’s production sites a are not owned, leased or managed by protected areas or in their immediate vicinity, nor in are- as of high value in terms of biodiversity outside protected areas. Therefore, they do not have a negative impact on protected areas. Water consumption in the technological processes of production Water consumption per kg of product (l/kg of product) PRODUCTION SITE PRODUCTION PROCESS (m³) COOLING OF PREMISES (m³) TOTAL (m³) SOLIN 1,437 0 1,437 ZAGREB 8,726 0 8,726 VINTAI 1,319 0 1,319 KALUGA 1,588 0 1,588 TISZAÚJVÁROS 40 0 40 MLADENOVAC 505 TOTAL 13,115 0 13,115 PRODUCTION SITE 2020 2021 SOLIN 0.41 0.48 ZAGREB 0.22 0.23 VINTAI 0.60 0.37 KALUGA 0.40 0.46 TISZAÚJVÁROS 0.30 0.03 MLADENOVAC 0.48 0.01 TOTAL 0.40 0.26 130 INTEGRATED ANNUAL REPORT SOLIN ZAGREB VINTAI KALUGA TISZAÚJVÁROS MLADENOVAC Chemical oxygen demand (COD) eff luents (t) 2.98 0.32 0 0 0 0 Biochemical oxygen demand (BOD) eff luents (t) 1.43 0.14 0 0 0 0 2019 2020 2021 DESTINATION SOLIN 41,506 18,804 12,963 Adriatic Sea/Mediterranean Sea ZAGREB 8,471 6,466 7,750 Sava River/Danube River/Black Sea VINTAI 6,767 4,097 6,597 Volga River/Caspian Sea KALUGA 2,275 1,808 3,575 Oka River/Volga River/Caspian Sea TISZAÚJVÁROS 831 556 959 Tisza River/ Danube River/Black sea MLADENOVAC 3,921 2,079 2,548 Veliki Lug River/Danube River/Black Sea TOTAL 63,771 33,810 34,392 Eff luents analysis Amount of discharged water and its destination (m³) 131 INTEGRATED ANNUAL REPORT Emissions have a direct impact on the environ- ment and the local community, as well as an in- direct impact on the company’s fi nancial perfor- mance. The management of this aspect is based on the application of environmental protection and energy management policies, by which the company continuously seeks to reduce its neg- ative impact on the environment. Regular activ- ities are defi ned by the company’s procedures and internal instructions, and their eff ectiveness is checked through internal and external audits. Greenhouse gas emissions are the result of com- bustion of energy sources necessary for oper- ation, and AD Plastik Group, in accordance with legislation and regulations, regularly conducts tests of emissions from stationary sources and reports on them. The weight of air emissions is determined directly from measurements or indi- rectly from calculations based on energy source consumption. EMISSIONS PRODUCTION SITE 2019 2020 2021 SOLIN 35 6 11 ZAGREB 1,652 1,647 1,573 VINTAI 62 60 67 KALUGA 301 262 0 TISZAÚJVÁROS 167 223 202 MLADENOVAC 224 196 145 TOTAL 2,441 2,394 1,998 PRODUCTION SITE DIRECT CH 4 EMISSIONS (t) DIRECT CH 4 EMISSIONS EXPRESSED IN CO EQ (t) DIRECT N 2 O EMISSIONS (t) DIRECT N 2 O EMISSIONS EXPRESSED IN CO EQ (t) DIRECT CH 4 AND N 2 O EMISSIONS EXPRESSED IN CO EQ (t) SOLIN 0 0.01 0 0.02 0.03 ZAGREB 0.03 0.78 0 0.74 1.52 VINTAI 0 0.03 0 0.03 0.06 KALUGA 00000 TISZAÚJVÁROS 0 0.10 0 0.10 0.20 MLADENOVAC 0 0.07 0 0.07 0.14 TOTAL 0.03 0.99 0 0.96 1.95 Direct greenhouse gas emissions (t CO 2 ) * t CO 2 - Emission data calculated according to national standard Direct CH 4 and N 2 O greenhouse gas emissions by weight t - Emission data calculated according to national standard 132 INTEGRATED ANNUAL REPORT PRODUCTION SITE 2019 2020 2021 SOLIN 3,096 3,077 2,518 ZAGREB 4,686 4,111 3,411 VINTAI 1,740 1,664 1,703 KALUGA 918 1,053 1,305 TISZAÚJVÁROS 1,288 954 940 MLADENOVAC 808 497 592 TOTAL 12,536 11,356 10,470 PRODUCTION SITE 2019 2020 2021 SOLIN 0.71 0.84 0.84 ZAGREB 0.89 VINTAI 0.49 0.51 0.50 KALUGA 0.49 0.52 0.38 TISZAÚJVÁROS 0.84 0.97 0.97 MLADENOVAC 0.66 0.94 0.87 TOTAL 0.64 0.76 0.74 In the review of direct greenhouse gas emis- sions for 2021, 95.8 percent of emissions refer to those generated by the combustion of nat- ural gas used for the operation of boiler rooms for the production of thermal energy, systems for regenerative combustion of volatile organic compounds and flaming processes. LPG used for forklift operation accounts for 3.8 percent, and the share of heating oil also used for boiler room operation is 0.38 percent. The share of direct CH 4 and N 2 O gas emissions in 2021 was 0.10 percent. Indirect greenhouse gas emissions (t CO 2 ) * t CO 2 - Emission data calculated according to national standard Indirect greenhouse gas emissions are caused by the use of electricity obtained from non-re- newable sources. Greenhouse gas emissions intensity (kg CO 2eq / kg of the product) The greenhouse gas emissions intensity shows the ratio of total direct and indirect greenhouse gas emissions per kilogram of delivered product. 133 INTEGRATED ANNUAL REPORT PRODUCTION SITE TRANSPORT OF PRODUCTS TO THE END CUSTOMER ARRIVAL TO WORK / DEPARTURE BUSINESS TRIPS BY VEHICLE BUSINESS TRIPS BY PLANE TOTAL SOLIN 1,018.00 566.37 110.79 98.52 1,793.68 ZAGREB 1,609.59 669.91 17.54 0.00 2,297.04 VINTAI 177.47 535.07 195.96 0.00 908.50 KALUGA 142.12 69.30 2.40 0.00 213.82 TISZAÚJVÁROS 327.41 141.44 37.73 0.00 506.58 MLADENOVAC 264.70 45.32 2.55 0.00 312.57 TOTAL 3,539.29 2,027.41 366.97 98.52 6,032.19 58.67% 33.61% 6.08% 1.63% Other indirect greenhouse gas emissions (t CO 2 ) t CO 2 - Emission data calculated according to national standard 134 INTEGRATED ANNUAL REPORT 2020 PRODUCTION SITE R RC RC RA R RA 227ea SOLIN 128 3 4 92 4 125 40 ZAGREB 0 1220 0 151 0 0 0 VINTAI 04000000 KALUGA 011300000 TISZAÚJVÁROS 016084000 MLADENOVAC 12 81 0 3 0 0 164 TOTAL 140 1473 4 330 4 125 204 2021 PRODUCTION SITE R R RC RA RA RC RA HCFC-22 RA 227ea SOLIN 123 0 3 4 250 0 9 0 125 40 ZAGREB 0 0 940 0 202 0 0 0 0 0 VINTAI 00400000000 KALUGA 003400000000 TISZAÚJVÁROS 000084006100 MLADENOVAC 9 3 81 0 0 3 0 0 0 164 TOTAL 132 3 1404 4 536 3 9 61 125 204 Refrigerant quantity in equipment (kg) Refrigerant quantity in equipment (kg) Refrigeration systems and fi re protection sys- tems use refrigerants that damage the ozone layer due to their chemical composition. They are regularly serviced and maintained by author- ized service technicians, which is recorded on the service cards. In 2021, additional equipment was installed, which increased the amount of re- frigerants R410A in Solin and Zagreb, R407C in Kaluga, HCFC in Tiszaújváros and R449A in Solin. In Solin, the air conditioning chamber was dis- posed of, which disposed 7.5 kg of R22, and in Zagreb, the equipment that disposed 160 kg of R407C. Due to equipment failure, 16.4 kg of R407C and 14.6 kg of HCFC-22 were released into the at- mosphere in Tiszaújváros and 120 kg of R407C in Zagreb. 135 INTEGRATED ANNUAL REPORT 2019 2020 2021 PRODUCTION SITE NO X SO 2 CO VOC NO X SO 2 CO VOC PM (10) NO X SO 2 CO VOC PM (10) SOLIN 0.02 0.06 0.26 0 0 0 0 0 0 0.01 0.02 0 0 0 ZAGREB 0.93 0 0.10 11.24 1.01 0 0.63 12.16 0.01 1.06 0 0.09 9.64 0.05 VINTAI 4.52 0.02 0.43 0 4.13 0.03 0 0 0.10 6.13 0.03 0 15.18 0.10 KALUGA 0 0 0.19 0 0 0 0.20 0 0 0 0 0 0 0 TISZAÚJVÁROS 00000000000000 MLADENOVAC 0.29 0 0.14 0 0.30 0 0.15 0 0 0.42 0 0.20 0 0 TOTAL 5.76 0.08 1.12 11.24 5.44 0.03 0.98 12.16 0.11 7.62 0.05 0.29 24.82 0.15 Other emissions from the production plants refer to emissions of NO 2 , SO 2 , CO and PM (10), and are the result of obtaining thermal ener- gy in boiler rooms. In 2021, the measured val- ues of emissions from stationary sources were in accordance with legal provisions. In order to NO X ,SO X and other relevant air emissions by weight and type (t) Emission data calculated according to national standard WORKING FLUIDS CONTAINED IN EQUIPMENT (kg) 2019 2020 2021 R 300 140 132 R 003 RC 1,294 1,473 1,404 RA 004 RA 268 330 536 RA 009 RC 003 R 440 RA 125 125 125 reduce the negative impact on the environment caused by volatile organic compounds, 234.3 tons of volatile organic compounds were com- busted on regenerative incinerators of painting lines exhaust vents in Zagreb during 2021. 136 INTEGRATED ANNUAL REPORT The primary goals, but also duties, are to prevent and avoid waste generation. Preserving the en- vironment is the task of the company, but also of all employees. This is achieved by regular moni- toring, supervision and optimization of existing business processes and defi ning planned meas- ures when developing new products. Separate waste collection and prescribed disposal are an integral part of daily activities. Records on the generated waste handed over for disposal are kept according to the legally prescribed docu- mentation. Data on the weight of waste handed over for disposal are obtained by measuring the weight when handing it over to authorized collectors and are used for reporting and assessing the achievement of set waste reduction goals. Ac- cordingly, activities for advancement and im- provement are defi ned. WASTE During 2021, 58.2 percent of the total amount of waste was handed over to authorized dispos- al companies for recycling, of which 1,317.8 tons of non-hazardous and 266.5 tons of hazardous waste. Non-hazardous waste refers to: packaging waste (cardboard, plastic foil), wood packaging, plastic waste, waste scrap metal and waste from pro- cessed textile fi bres. Hazardous waste refers to: waste paints and var- nishes, waste solvents, waste sludge from paints and varnishes, packaging tainted with hazard- ous substances, electronic and electrical waste, waste hydraulic oils, water sludge, separator sludge, waste printing cartridges, fluorescent tubes, absorbents, fi ltering materials, greasy rags and gloves. 2019 2020 2021 NON- HAZARDOUS HAZARDOUS NON- HAZARDOUS HAZARDOUS NON- HAZARDOUS HAZARDOUS SOLIN 286.69 24.32 270.47 18.83 259.60 16.89 ZAGREB 683.75 567.69 557.90 541.69 373.69 501.75 VINTAI 501.37 35.00 501.66 37.26 498.12 38.36 KALUGA 248.40 13.65 619.60 9.00 650.30 8.01 TISZAÚJVÁROS 254.00 2.00 188.14 4.63 238.41 8.36 MLADENOVAC 234.00 11.34 134.45 6.72 123.06 4.20 TOTAL 2,208.21 654.00 2,272.22 618.13 2,143.18 577.57 Total weight of waste by type (t) 137 INTEGRATED ANNUAL REPORT DISPOSAL METHODS SOLIN ZAGREB VINTAI KALUGA TISZAÚJVÁROS MLADENOVAC TOTAL Recycling 239.68 141.38 498.12 404.30 34.26 0 1,317.75 Storage before disposal 0.37 232.31 0 0 0 61.95 294.63 Fuel or other method for generating energy 0000000 Physico- chemical treatment 0000000 Incineration on land 0000000 Disposal at the landfi ll 19.55 0 0 246.00 204.14 61.11 530.80 TOTAL 259.60 373.69 498.12 650.30 238.41 123.06 2,143.18 Non-hazardous waste directed to disposal (t) INTEGRATED ANNUAL REPORT 138 INTEGRATED ANNUAL REPORT Stored non-hazardous waste before disposal Non-hazardous waste at the landfi ll Recycled non-hazardous waste NAME OF WASTE QUANTITY (t) Textile waste 405.42 Paper and cardboard packaging 244.11 Waste scrap metal 103.69 Plastic waste 86.21 Waste foil 33.08 Polyurethane foam waste 16.90 Wooden packaging (wooden pallets) 411.18 Polyurethane fi lm waste 7.65 Glass, fi berglass 3.00 Construction waste 2.28 Plastic and rubber 2.11 Mixture of concrete, brick, roof tile/tile and ceramic 1.31 Mixed metals 0.46 Iron-containing chips and sawdust 0.35 TOTAL 1,317.75 NAME OF WASTE QUANTITY (t) Plastic waste 188.98 Mixed packaging 33.16 Paper and cardboard packaging 21.28 Plastic, excluding packaging 21.26 Waste foil 20.10 Wooden packaging (wooden pallets) 6.16 Waste scrap metal 3.32 Textile waste 0.37 TOTAL 294.63 NAME OF WASTE QUANTITY (t) Plastic waste 154.22 Municipal waste 148.92 Textile waste 147.00 Mixed material waste 61.11 Plastic particles and sawdust 19.37 Bulky waste 0.18 TOTAL 530.80 139 INTEGRATED ANNUAL REPORT Hazardous waste directed to disposal (t) DISPOSAL METHODS SOLIN ZAGREB VINTAI KALUGA TISZAÚJVÁROS MLADENOVAC TOTAL Recycling 0 250.54 1.50 8.00 6.50 0 266.54 Storage before disposal 4.17 220.61 0 0 1.04 4.20 230.02 Fuel or other method for generating energy 11.37 18.88 0 0 0 0 30.25 Physico- chemical treatment 0 11.28 0 0 0.01 0 11.29 Incineration on land 0 0.43 0 0 0 0 0.43 Disposal at the landfi ll 1.35 0 36.86 0.01 0.81 0 39.03 TOTAL 16.89 501.75 38.36 8.01 8.36 4.20 577.57 Recycled hazardous waste NAME OF WASTE QUANTITY (t) Waste solvents 249.27 Hydraulic oils 9.50 Mineral oils 6.50 Solvent sludge 1.27 TOTAL 266.54 Hazardous waste stored before disposal NAME OF WASTE QUANTITY (t) Paints and varnishes waste sludge 129.61 Hazardous packaging waste 59.18 Greasy rags and fi lters 34.84 Waste halogen compounds 2.68 Separator sludge 2.00 Waste adhesives and solvents 1.39 Packaging under pressure 0.30 Laboratory waste 0.01 Oily water from the separator 0.01 TOTAL 230.02 140 INTEGRATED ANNUAL REPORT Hazardous waste treated by physico- chemical method Hazardous waste at the landfi ll Hazardous waste used as fuel or other method for generating energy NAME OF WASTE QUANTITY (t) Hydraulic oils 30.35 TOTAL 30.35 NAME OF WASTE QUANTITY (t) Waste generated from industrial cleaning 31.55 Waste generated from cleaning of premises and equipment 3.85 Electronic equipment 1.04 Greasy rags and fi lters 0.80 Oil contaminated sand 0.64 Work equipment 0.60 Waste printing cartridges 0.32 Packaging under pressure 0.20 Fluorescent tubes 0.03 TOTAL 39.03 NAME OF WASTE QUANTITY (t) Oily water from the separator 11.28 Oily fi lters 0.01 TOTAL 11.29 INTEGRATED ANNUAL REPORT 141 Hazardous and non-hazardous waste directed to disposal DISPOSAL METHODS 2019 2020 2021 SHARE Recycling 1,372.07 869.46 1,584.29 58.23% Storage before disposal 781.50 1,108.30 524.65 19.28% Fuel or other method for generating energy 42.38 39.95 30.25 1.11% Physico-chemical treatment 10.00 46.50 11.29 0.41% Incineration on land 1.02 0.00 0.43 0.02% Disposal at the landfi ll 655.24 826.14 569.83 20.95% TOTAL 2,862.21 2,890.35 2,720.74 100.00% 2019 2020 2021 PRODUCTION SITE EXPENDITU- RES INVESTMENTS EXPENDITU- RES INVESTMENTS EXPENDITU- RES INVESTMENTS Solin 501,773 2,159,880 527,400 939,188 400,324 411,290 Zagreb 1,549,283 1,405,043 1,727,760 5,017,200 1,614,278 446,886 Vintai 14,393 8,745 42,225 19,898 367,208 44,963 Kaluga 7,733 0 3,053 0 316,185 0 Tiszaújváros 282,36800034,950 178,013 Mladenovac 257,963 4,500 95,625 0 147,900 242,483 TOTAL 2,613,513 3,578,168 2,396,063 5,976,286 2,880,845 1,323,635 ENVIRONMENTAL PROTECTION EXPENDITURES AND INVESTMENTS EXPENDITURES IN  Removal and disposal of hazardous and non- hazardous waste Measurement of air emissions from stationary sources Eff luents and hazardous waste analyses Fees for water protection and management Fees to the Environmental Protection and Energy Effi ciency Fund INVESTMENTS IN  Purchase and installation of the cooling unit Reconstruction of rainwater pipelines Sewerage reconstruction Installation of rainwater separators Purchase of a dryer for drying and preparation of materials (in HRK) INTEGRATED ANNUAL REPORT 142 INTEGRATED ANNUAL REPORT ENVIRONMENTAL COMPLIANCE Taking care of the environment is the result of coordinated activities of all business process- es, and the permanent commitment is to raise awareness, monitor and enforce the law and con- stantly check the compliance of business pro- cesses with environmental laws and standards. The procedure for assessing compliance with applicable legal and other binding requirements related to environmental protection is carried out on a regular basis. This procedure is an in- tegral part of regular business activities, and special attention is paid to assessments in the development of new products and processes, Supplier environmental assessments are con- ducted regularly once a year and are mandatory in the phase of selecting a new supplier, and one of the selection criteria is the possession of en- vironmental protection certifi cate ISO 14001. In 2021, a total of 516 suppliers were assessed, thus including all suppliers of materials and equip- ment for the automotive industry and part of the service providers. All suppliers of materials for the Group’s production sites were assessed, thus representing polymers, paints, adhesives and various installation parts. AD Plastik Croatia monitors 171 suppliers of ma- terials and 103 suppliers of equipment, tools and services in terms of environmental impact, all of which are assessed once a year and their ratings are recorded on an internal portal. Suppliers who are not certifi ed with the environmental protec- tion certifi cate ISO  have confi rmed that their business operations are in accordance with the standard through a self-assessment ques- tionnaire. In the reporting period, no business SUPPLIER ENVIRONMENTAL ASSESSMENT purchase and implementation of new technolo- gies and equipment as well as the use of new and replacement raw materials. During 2021, external audits were successfully conducted at all production sites in accordance with the requirements of the ISO 14001 standard, and no non-compliances and irregularities were identifi ed. At no production site of the AD Plas- tik Group was an environmental inspection car- ried out and no fi nes or non-monetary sanctions were imposed for non-compliance with laws and regulations. relations were terminated due to the negative impact on the environment with any of the sup- pliers, nor was it determined that some of the suppliers have actual or potential negative im- pacts on the environment. Suppliers with the possibility of employing children or using child labor in some other form have not been identi- fi ed either. Through a questionnaire of compliance with the guidelines of CSR, the suppliers have confi rmed that they have a prescribed child labor prohibi- tion policy. As part of the comprehensive an- nual supplier assessment on issues of CSR, an assessment of the suppliers impact in terms of respect for human rights was conducted. Given the set criteria for the selection of sup- pliers, no deviation was observed in terms of respect for human rights, as expected. A com- prehensive supplier assessment in terms of im- pact on society was conducted in all compa- nies through a CSR questionnaire. 516 of them INTEGRATED ANNUAL REPORT 143 INTEGRATED ANNUAL REPORT confi rmed their commitment to respecting the human rights, the right to work, the prohibition of child labor and the fi ght against discrimination and corruption. A large number of assessed sup- pliers are suppliers of various consumables, in- tellectual, fi nancial, legal and other services, and suppliers for one-time purchases. In 2021, the share of assessed suppliers in relation to the to- tal number of suppliers is 18.63 percent. However, by relating the value of purchasing of assessed suppliers and the total value of purchasing, this share is signifi cantly higher and amounts to over 70 percent. AD Plastik Tisza, Hungary AD Plastik, Croatia Assessed in total ISO  Assessed in total ISO  Assessed in total ISO  Assessed in total ISO  AD Plastik Togliatti, Russia AD Plastik Kaluga, Russia 2019 2020 2021 47% 43% 40% 2019 2020 2021 32% 38% 33% 12 37 14 37 15 45 2019 2020 2021 2019 2020 2021 70% 67% 57% 27% 27% 28% 144 INTEGRATED ANNUAL REPORT ADP Mladenovac, Serbia 64% 68% 68% Assessed in total ISO  2019 2020 2021 INTEGRATED ANNUAL REPORT 145 INTEGRATED ANNUAL REPORT Contracted suppliers in total Assessed suppliers Assessed suppliers in % Value of assessed suppliers in K EUR Total value of purchasing in K EUR Assessed suppliers in % Assessed suppliers in relation to the total number of suppliers Value of assessed suppliers in relation to the total value of purchasing AD Plastik, Croatia AD Plastik Togliatti AD Plastik Kaluga AD Plastik Tisza ADP, Mladenovac 65.000 52.000 39.000 26.000 13.000 0 100% 80% 60% 40% 20% 0% 80% 77% 44% 79% 66% AD Plastik, Croatia AD Plastik Togliatti AD Plastik Kaluga AD Plastik Tisza ADP, Mladenovac 1,000 800 600 400 200 0 100% 80% 60% 40% 20% 0% 26% 16% 12% 19% 8% 146 INTEGRATED ANNUAL REPORT In the reporting period, the value of purchasing in Croatia decreased namely due to a decrease in customer orders as a result of the lack of elec- tronic components in the global market. The structure of suppliers remained unchanged, as did the ratio of local and import values of pur- chasing. The development of the materials mar- ket in the Republic of Croatia has not made sig- nifi cant progress, so local suppliers account for about 30 percent of the value of purchasing, mostly in the area of services and investments. THE SHARE OF LOCAL SUPPLIERS IN THE TOTAL VALUE OF PURCHASING The increase in the share of import suppliers is also visible in AD Plastik Togliatti due to the re- alization of investments in tools and equipment for the new project. The total value of purchas- ing is at the level of 2020. AD Plastik, Croatia . AD Plastik Togliatti, Russia 30,000 22,500 15,000 7,500 0 48%33% 46%30% 33%34% Import ImportLocal Local 140,000 105,000 70,000 35,000 0 2019 2020 2021 2019 2020 2021 INTEGRATED ANNUAL REPORT 147 147 AD Plastik Kaluga, Russia AD Plastik Kaluga records an increase in the share of local suppliers because, due to the structure of the products, it has the possibility of purchas- ing materials, mostly polypropylene, in the local Russian market. Import Local 2019 2020 2021 47% 47% 61% The value of purchasing in Mladenovac has in- creased due to the transfer of part of the pro- jects, supplier structure has changed too and the value of import purchasing has increased. AD Plastik Tisza, Hungary ADP Mladenovac, Serbia AD Plastik Tisza traditionally has a signifi cant share of local suppliers of materials due to their greater representation in the Hungarian market, and in 2021 this share further increased. Import ImportLocal Local 2019 2020 2021 2019 2020 2021 42% 33% 29%56% 57% 58% 10,000 7,500 5,000 2,500 0 12,000 9,000 6,000 3,000 0 16,000 12,000 8,000 4,000 0 INTEGRATED ANNUAL REPORT 148 INTEGRATED ANNUAL REPORT 148 REALIZED IN  Installation of Energy Saving software to improve machine performance Installation of high voltage surge arresters for the purpose of high voltage protection Development of a method for the regeneration of waste painted plastic products Implementation of the Employee Mental Health Support Program Sustainable Finance and Financial Literacy project launched for employees E-corner for production workers (Zagreb and Solin) NOT REALIZED DUE TO THE PANDEMIC Cooperation with elementary schools - introducing eighth grade students to STEM occupations in AD Plastik Group Launching a corporate volunteering project Internal campaign «Let’s volunteer!» TASKS FOR  Monitoring of CO 2 emissions in the area of purchase of materials and services Continuation of the Sustainable Finance and Financial Literacy project for employees Launching of the project Wellbeing - comprehensive care for employees TASKS INTEGRATED ANNUAL REPORT INTEGRATED ANNUAL REPORT GRI Content Index GRI Standard, Disclosure PageCOR UNGC GRI : General Disclosures 2016 Organizational Profile 102-1 Name of the organization 22 102-2 Activities, brands, products and services 23-27 102-3 Location of headquarters 22 102-4 Location of operations 22 102-5 Ownership and legal form 28, 61 102-6 Markets served 22 102-7 Scale of the organization 6 102-8 Information on employees and other workers 8 94-95 102-9 Supply chain 8, 12 54, 55 102-10 Significant changes to the organization and its supply chain 8, 12 146, 147 102-11 Precautionary principle or approach 122 102-12 External initiatives 17 115 102-13 Membership of associations 17 115 Strategy 102-14 Statement from senior decision-maker 10, 11 102-15 Key impacts, risks, and opportunities 74-82 Ethics and Integrity 102-16 Values, principles, standards, and norms of behavior 20, 90, 91 Governance 102-18 Governance structure 29-35 102-19 Delegating authority 29 102-20 Executive-level responsibility for economic, environmental, and social topics 29 102-21 Consulting stakeholders on economic, environmental, and social topics 29, 40, 87 GRI : General Disclosures 2016 Governance 102-22 Composition of the highest governance body and its committees 30 - 39 102-23 Chair of the highest governance body 32 102-24 Nominating and selecting the highest governance body 31, 34, 35 102-25 Conflicts of interest 16 38 102-26 Role of highest governance body in setting purpose, values, and strategy 16 36 102-27 Collective knowledge of highest governance body 17 29 102-28 Evaluating the highest governance body's performance 17 36 102-29 Identifying and managing economic, environmental, and social impacts all 40 150 INTEGRATED ANNUAL REPORT GRI Standard, Disclosure PageCOR UNGC 102-30 Eff ectiveness of risk management processes 36 102-31 Review of economic, environmental, and social topics all 36, 40 102-32 Highest governance body's role in sustainability reporting 36, 40 102-33 Communicating critical concerns 40 102-35 Remuneration policies 17 39 Stakeholder Inclusiveness 102-40 List of stakeholder groups 8 92, 93 102-41 Collective bargaining agreements 8 97 102-42 Identifying and selecting stakeholders 5, 8 92 102-43 Approach to stakeholder engagement 8 92 102-44 Key topics and concerns raised 93 GRI : General Disclosures 2016 Reporting Practice 102-45 Entities included in the consolidated fi nancial statements 70 102-46 Defi ning report content and topic Boundaries 87 102-47 List of material topics 88 102-48 Restatements of information 87 102-49 Changes in reporting 87 102-50 Reporting period 86 102-51 Date of most recent report 86 102-52 Reporting cycle 86 102-53 Contact point for questions regarding the report 86 102-54 Claims of reporting in accordance with the GRI Standards 86 102-55 GRI content index 149 - 154 102-56 External assurance 160 GRI : Management Approach 2016 103-1 Explanation of the material topic and its Boundary all 87 103-2 The management approach and its components all 90, 91 GRI : Economic Performance 2016 201-1 Direct economic value generated and distributed 8, 9 118 201-2 Financial implications and other risks and opportunities due to climate change 13 74 - 82 201-3 Defi ned benefi t plan obligations and other retirement plans 8 119 201-4 Financial assistance received from government 9 120 GRI : Market Presence 2016 202-1 Ratios of standard entry level wage by gender compared to local minimum wage 5, 8, 10 119 202-2 Proportion of senior management hired from the local community 8, 10 103 INTEGRATED ANNUAL REPORT 151 GRI Standard, Disclosure PageCOR UNGC GRI : Indirect Economic Impacts 2016 203-2 Signifi cant indirect economic impacts 8, 9 120 GRI : Procurement Practices 2016 204-1 Proportion of spending on local suppliers 8, 9 146, 147 GRI : Anti-corruption 2016 205-1 Operations assessed for risks related to corruption 16 90, 91 205-2 Communication and training about anti-corruption policies and procedures 4, 5 90, 91 205-3 Confi rmed incidents of corruption and actions taken 16 90, 91 GRI : Anti-competitive Behavior 2016 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly practices 16 90, 91 GRI : Taxes 2019 207-1 Approach to tax 121 207-2 Tax governance, control and risk management 17 121 207-3 Stakeholder engagement and management concerns related to tax 17 121 207-4 Country-by-country reporting 121 GRI : Materials 2016 301-1 Materials used by weight or volume 6, 9, 12, 13, 14, 15 124 301-2 Recycled input materials used 6, 9, 12, 13, 14, 15 124 GRI : Energy 2016 302-1 Energy consumption within the organization 7, 9, 12, 13, 14, 15 126, 127 302-2 Energy consumption outside of the organization 7, 9, 12, 13, 14, 15 127 302-3 Energy intensity 7, 9, 12, 13, 14, 15 127 GRI : Water and Eff luents 2018 303-1 Interactions with water as a shared resource 6, 9, 12, 14, 15 128 303-2 Management of water discharge-related impacts 6, 9, 12, 14, 15 128 303-3 Water withdrawal 6, 9, 12, 14, 15 128 303-4 Water discharge 6, 9, 12, 14, 15 130 303-5 Water consumption 6, 9, 12, 14, 15 128, 129 GRI : Biodiversity 2016 304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas 6, 12, 13, 14, 15 129 GRI : Emissions 2016 305-1 Direct (Scope 1) GHG emissions 7, 9, 12, 13, 14, 15 131 305-2 Energy indirect (Scope 2) GHG emissions 7, 9, 12, 13, 14, 15 132 305-4 GHG emissions intensity 7, 9, 12, 13, 14, 15 132 305-5 Reduction of GHG emissions 7, 9, 12, 13, 14, 15 131 305-6 Emissions of ozone-depleting substances (ODS) 7, 9, 12, 13, 14, 15 134, 135 INTEGRATED ANNUAL REPORT 152 INTEGRATED ANNUAL REPORT GRI Standard, Disclosure PageCOR UNGC 305-7 Nitrogen oxides (NOX), sulfur oxides (SOX), and other signifi cant air emissions 7, 9, 12, 13, 14, 15 135 GRI : Waste 2020 306-1 Waste generation and signifi cant waste-related impacts 9, 12, 13, 14, 15 136 306-2 Management of signifi cant waste-related impacts 9, 12, 13, 14, 15 136 306-3 Waste generated 9, 12, 13, 14, 15 136 306-4 Waste diverted from disposal 9, 12, 13, 14, 15 136, 137 306-5 Waste directed to disposal 9, 12, 13, 14, 15 136 - 140 GRI : Environmental Compliance 2016 307-1 Non-compliance with environmental laws and regulations 9, 13, 14, 15 142 GRI : Supplier Environmental Assessment 2016 308-1 New suppliers that were screened using environmental criteria 6, 7, 12, 13, 14, 15 142 - 144 308-2 Negative environmental impacts in the supply chain and actions taken 6, 7, 12, 13, 14, 15 142 GRI : Employment 2016 401-1 New employee hires and employee turnover 8 99 - 101 401-2 Benefi ts provided to full-time employees that are not provided to temporary or part-time employees 899 401-3 Parental leave 5102 GRI : Labor/Management Relations 2016 402-1 Minimum notice periods regarding operational changes 8 97 GRI : Occupational Health and Safety 2018 403-1 Occupational health and safety management system 3 103 - 105 403-2 Hazard identifi cation, risk assessment, and incident investigation 3 103 - 105 403-3 Occupational health services 3 103 - 105 403-4 Worker participation, consultation, and communication on occupational health and safety 3 103 - 105 403-5 Worker training on occupational health and safety 3 103 - 105 403-6 Promotion of worker health 3 103 - 105 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships 3 103 - 105 403-8 Workers covered by an occupational health and safety management system 3 103 - 105 403-9 Work-related injuries 3 104 403-10 Work-related ill health 3 104 GRI : Training and Education 2016 404-1 Average hours of training per year per employee 4 106 404-2 Programs for upgrading employee skills and transition assistance programs 4 106, 107 404-3 Percentage of employees receiving regular performance and career development reviews 4 109 GRI : Diversity and Equal Opportunity 2016 405-1 Diversity of governance bodies and employees 5 110, 111 INTEGRATED ANNUAL REPORT 153 GRI Standard, Disclosure PageCOR UNGC 405-2 Ratio of basic salary and remuneration of women to men 5, 8 119 GRI : Non-discrimination 2016 406-1 Incidents of discrimination and corrective actions taken 5, 8 90, 91 GRI : Freedom of Association and Collective Bargaining 2016 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk 8142 GRI : Child Labor 2016 408-1 Operations and suppliers at signifi cant risk for incidents of child labor 4, 8 142 GRI : Human Rights Assessment 2016 412-1 Operations that have been subject to human rights reviews or impact assessments 142 412-2 Employee training on human rights policies or procedures 4, 5 109 412-3 Signifi cant investment agreements and contracts that include human rights clauses or that underwent human rights screening 10 90, 91 GRI : Local Communities 2016 413-1 Operations with local community engagement, impact assessments, and develop- ment programs 4, 8, 9, 17 114 GRI : Supplier Social Assessment 2016 414-1 New suppliers that were screened using social criteria 5, 8, 10, 16 142, 143 414-2 Negative social impacts in the supply chain and actions taken 5, 8, 10, 16 142, 143 GRI : Public Policy 2016 415-1 Political contributions 90, 91 GRI : Customer Health and Safety 2016 416-1 Assessment of the health and safety impacts of product and service categories 3 52 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services 352 GRI : Marketing and Labeling 2016 417-1 Requirements for product and service information and labeling 52 INTEGRATED ANNUAL REPORT 154 INTEGRATED ANNUAL REPORT ENVIRONMENTAL 'E' UNIT 2021 GHG scope 1 - Direct CO Emissions 000 metric tonnes CO 2.00 GHG scope 2 - Indirect CO Emissions 000 metric tonnes CO 10.47 Total GHG (scope 1 + scope 2) 000 metric tonnes CO 12.47 GHG Scope 3 000 metric tonnes COe 6.03 Travel Emissions 000 metric tonnes CO 0.47 Methane Emissions (CH) 000 metric tonnes 0 Direct NO Emissions 000 metric tonnes 0 Direct Methane Emissions in CO equivalent 000 metric tonnes COe 0 Direct NO Emissions in CO equivalent 000 metric tonnes COe 0 Carbon per Unit of Production metric tonnes COe 0 Nitrogen Oxide Emissions 000 metric tonnes 0.01 Sulphur Dioxide Emissions 000 metric tonnes 0 Carbon Monoxide Emissions 000 metric tonnes 0 VOC Emissions 000 metric tonnes 0.02 Particulate Emissions 000 metric tonnes 0 Total Waste 000 metric tonnes 2.72 Hazardous Waste 000 metric tonnes 0.58 Waste Recycled 000 metric tonnes 1.58 Waste Sent to Landfi lls 000 metric tonnes 0.57 Spills Number 0 Total Energy Consumption 00 MWh 49.26 Electricity Used 00 MWh 37.83 Energy per Unit of Production MWh/production 0 Natural Gas Used 000 m³ 1,028.66 Crude Oil/Diesel Used 000 m³ 0.16 Total Water Withdrawal 000 m³ 53.56 Groundwater Withdrawals 000 m³ 6.94 Municipal Water Use 000 m³ 46.61 Cooling Water Inflow 000 m³ 13.12 Water Stress Exposure %0 Total Water Use 000 m³ 53.56 Water per Unit of Production liters/unit 0.26 Total Water Discharged 000 m³ 34.39 Waste Water 000 m³ 34.39 ESG Indicators Index 155 INTEGRATED ANNUAL REPORT ENVIRONMENTAL 'E' UNIT 2021 Chemical Oxygen Demand of Discharges 000 metric tonnes 0 Biological Oxygen Demand of Discharges 000 metric tonnes 0 Paper Consumption 000 metric tonnes 0.03 Raw Materials Used 000 metric tonnes 14.81 Recycled Materials % 14.66 Environmental Fines Number 0 Amount of Environmental Fines HRK millions 0 Number of Sites Number 8 ISO 14001 Certifi ed Sites Number 8 ISO 50001 Certifi ed Sites Number 4 Environmental protection expenditures HRK millions 2.88 Environmental protection investments HRK millions 1.32 Energy Effi ciency Policy (1) Y / N Y Emissions Reduction Initiatives (1) Y / N Y Environmental Supply Chain Management (2) Y / N Y Waste Reduction Policy (1) Y / N Y Water Policy (1) Y / N Y Sustainable Packaging (3) Y / N Y Risks of Climate Change Reported (4) Y / N Y Climate Change Policy (1) Y / N Y Biodiversity Policy (1) Y / N Y SOCIAL 'S' UNIT 2021 Employees Number 2,544 Part-Time Employees Number 355 Temporary Employees Number 253 Contractors Number 8 Employee Turnover % 30.70 Employee Voluntary Turnover % 18.20 Employees Unionized % 81.21 Employee Average Age Years 41.49 Women in Workforce % 51.49 Women in Management % 38.19 156 INTEGRATED ANNUAL REPORT SOCIAL 'S' UNIT 2021 Gender Pay Gap Breakout Y / N N Workforce Accidents - Employees Number 40.00 Total Accidents - Contractors Number 0 Lost Time from Accidents Hours 6.448 Lost Time Incident Rate Number 1.71 Lost Time Incident Rate - Contractors Number 0 Total Recordable Incident Rate Number 1.58 Total Recordable Incident Rate - Contractors Number 0 Fatalities - Employees Number 0 Fatalities - Contractors Number 0 Fatalities - Total (contractors + employees) Number 0 Fatalities - 3rd Party Number 0 Social Supply Chain Management (2) Y / N Y Suppliers ESG Guidelines encompassing E. S .G factors (2) Y / N Y Suppliers Audited Number 516 Supplier Audits Conducted Number 516 Supplier Facilities Audited Number 5 Suppliers Audited (in number) % 18.63 Suppliers Audited (in value) % 73.99 Suppliers in Non-Compliance %0 Community Spending - donation and sponsorship HRK millions 0.69 Health and Safety Policy Y / N Y ISO  Certfi ed Sites Number 5 Fair Wage Policy Y / N Y Training Policy Y / N Y Employee CSR Awareness Training (5) Y / N Y Total Hours of Employee Training Hours 66,825 Employee Training Cost HRK millions 0.80 Equal Opportunity Policy (1) Y / N Y Policy Against Child Labor (1) Y / N Y Human Rights Policy (1) Y / N Y Business Ethics Policy (1) Y / N Y Anti-Bribery Ethics Policy (1) Y / N Y Employee Protection/Whistle Blower Policy (1) Y / N Y Consumer Data Protection Policy (1) Y / N Y UN Global Compact Signatory Y / N Y Sustainable Development Goals Target Policy (11) Y / N Y 157 INTEGRATED ANNUAL REPORT GOVERNANCE 'G' UNIT 2021 Two Tier Board System Y / N Y Size of the Supervisory Board Number 7 Independent Members of the Supervisory Bord (6) Number 2 Women on the Supervisory Board Number 3 Youngest Member on the Supervisory Board Years 32 Oldest Member in the Supervisory Board Years 70 Supervisory Board Average Age Years 50 Supervisory Board Duration Years 4 Supervisory Board Meetings for the Year Number 5 Supervisory Board Meeting Attendance % 100 Directors Attending less than 75% of Supervisory Board Meetings Number 0 Size of the Management Board Number 3 Female Executives in the Management Board Number 0 Management Board Average Age Years 54 Management Board Duration Years 5 Management Board Meetings for the Year Number 51 Executive Changes per Year in the Management Board Number 1 Former CEO or its Equivalent on Board Y / N N CEO or Equivalent Appointed from Within in the Management Board Y / N Y Female Chief Executive Offi cer or Equivalent in the Management Bord Y / N N Internal audit Y / N Y Size of Audit Committee Number 4 Audit Committee Meetings Number 3 Audit Committee Meeting Attendance Percentage % 100 Independent Audit Committee Chairperson Y / N Y Supervisory Board Members on Audit Committee Number 4 I ndependent Supervisory Board Members on Audit Committee (7) Number 2 Size of Compensation Committee Number 3 Compensation Committee Meetings Number 4 Compensation Committee Meeting Attendance Percentage % 100 Independent Compensation Committee Chairperson Y / N N Supervisory Board Members on Compensation Committee Number 2 Independent Supervisory Board Members on Compensation Committee (8) Number 1 Size of Nomination Committee Number 3 Nomination Committee Meetings Number 3 158 INTEGRATED ANNUAL REPORT (1) Policies are available at the following link: https://www.adplastik.hr/wp-content/uploads/2019/11/191023-Kodeks-i-politike-EN-web.pdf (2) Details are available at the following link: https://www.adplastik.hr/en/about-us/purchasing (3) More details on page 123 of this Report (4) More details on pages 74 - 82 of this Report (5) More details on page 107 of this Report (6 and 7) Ivica Tolić and Bože Plazibat (8) Ivica Tolić (9) More details on page 29 of this Report (10) Available at the following link: https://www.adplastik.hr/wp-content/uploads/2021/07/General-Assembly-held.pdf (11) More details on pages 149-154 of this Report GOVERNANCE 'G' UNIT 2021 Nomination Committee Meeting Attendance Percentage % 100 Independent Nomination Committee Chairperson Y / N Y Supervisory Board Members on Nomination Committee Number 2 Independent Supervisory Board Members on Nomination Committee (8) Number 1 CSR/Sustainability Committee (9) Y / N Y Responsibility of the Management Board for CSR Y / N Y Executive Compensation Linked to ESG (10) Y / N Y Clawback Provision for Executive Compensation Y / N N BOD Nominees legal proceedings Y / N N Political Donations Y / N N Unequal Voting Rights (Including Preferred Stock) Y / N N Say On Pay Provision (10) Y / N Y Frequency of Say on Pay Votes Years 4 Say on Pay. Number Votes For Number 2.569.186 Say on Pay. Number Votes Against Number 58.420 Auditor from Big Four Y / N Y Auditor Ratifi cation Y / N Y Auditor Ratifi cation Votes For Number 2,637,588 Auditor Ratifi cation Votes Against Number 0 Number of Years current Auditor has been employed Years 2 Due to the growing interest of diff erent publics as well as for ease of reference, and based on previ- ous experiences and data monitored by customers, investors, Bloomberg and other stakeholders, AD Plastik Group publishes an abbreviated table of ESG indicators as part of its Integrated Annual Report. 159 INTEGRATED ANNUAL REPORT 160 INTEGRATED ANNUAL REPORT Opinion on Integrated Report of AD Plastik Group for 2021 We are looking at the fi fth Integrated, ie the 9th Sustainability Report of AD Plastik Group creat- ed in accordance with GRI Standards, which fully meets the criteria of GRI Standards for the core reporting option. It presents the Group’s busi- ness operations in one of the most challenging years for the economy, and not only in the Re- public of Croatia. Changes in the industry in which AD Plastik Group operates are continuous and transforma- tive. The industry is evolving towards automated and autonomous driving, as well as electrifi cation and vehicle connectivity with other systems. In general, we can say that business transformation is based on two trends: sustainability and con- nectivity. Driven by the climate change we are all witnessing, sustainable technologies and alter- native propulsion vehicles are increasingly tak- ing over the market. By reducing the weight of the vehicles, along with increased quality and safety, greenhouse gas emissions are also re- duced, and therefore polymeric materials are the basis for the production of an increasing num- ber of vehicle components, both interior and ex- terior. Due to the emission reduction imperative and the continuous emphasis on reducing vehi- cle weight as well as the increased share of plas- tic components, the role of AD Plastik Group in the development and production of the automo- tive industry is growing. In addition to the afore- mentioned imperatives regarding continuous reduction of environmental impact, in 2021 the industry faced the lack of semiconductors, which aff ected the decrease in production and sales of new cars. Disruptions in production pro- cesses also aff ected the entire supply chain. At the same time, AD Plastik Group has shown its business wisdom and strategic thinking. All these challenges were further aggravated by the COVID 19 pandemic, which put the compa- ny’s focus on employee health and safety, which were already high on its priority list. With con- stant measures and activities undertaken to pro- tect health, last year the company became the holder of the certifi cate “Health Friendly Com- pany”, which further confi rmed the importance of health and a healthy business environment at all its production sites. The fi rst part of the In- tegrated Report pointed to successful business operations in turbulent times and a stable or- ganization that has been successfully adapting to changes in market conditions. In the second part of the report, AD Plastik Group showed us how it manages its impacts in terms of sustaina- bility topics, how it determines their materiality and how it plans new improvements in the next business year based on monitoring and meas- urements. By the decision of the Management Board, in 2016 the CSR Committee of the AD Plastik Group was established, which consists of management 161 INTEGRATED ANNUAL REPORT staff of the most important areas of business related to sustainability. The Committee direct- ly reports to the President of the Management Board, and with the challenges and changes in business conditions in the market, it is becom- ing increasingly important in managing sustain- able practices of the company, in times when sustainability too is gaining an increasing role in business success. Progress in this part of the Report is evident in the explanation of how the company communicates with its stakeholders. This process has been constantly evolving and there are more and more concrete researches and communication with various primary stake- holders such as the local community and em- ployees. In relation to employees, we mentioned that the company has in the past focused on occupation- al health and safety, which was to be expected given the specifi c circumstances of the past pe- riod. We also notice a high percentage of em- ployees covered by collective agreements, which is very commendable. At the same time, the data show a relatively high level of employee fluctua- tion. This is the data that we suggest to analyze in the upcoming period so that it can be man- aged with the aim of reducing fluctuation. We also commend the monitoring of the number of fathers taking parental leave, which is an im- portant measure in implementing the diversity and equal opportunities policy in the workplace. In addition to monitoring this indicator, we sug- gest introducing monitoring of more indicators of the implementation of diversity and non-dis- crimination policy in the future, ie stating which control mechanisms have been established. The mentoring program is commendable, a very important measure to support the development of business careers of women and other discrim- inated groups in the labor market. We suggest publishing more information in the next report on how many pairs are participating in the men- toring process, which business level is involved, and who are the mentors and who are the men- tees. In addition to the mentoring program, the Starter, a program for interns that we commend, is also important and useful. Finally, with regards to the area of relationship with employees, we notice that AD Plastik Group organizes a large amount of training on corporate social respon- sibility, which is excellent, but it seems to us that the training is limited to a smaller number of em- ployees. Perhaps in the next reporting period, these topics can be made available for a wider audience. When it comes to the environment, AD Plas- tik Group has only good news. It has been con- tinuously working on the recycling of materials and there is a very high percentage of recycled or regenerated solvents. The data also show how the energy intensity per unit of product has decreased. The company approaches envi- ronmental issues responsibly and systematical- ly, with the clear intention of continuous pro- gress. In this area, we suggest trying to reduce the amount of used offi ce paper by introducing e-offi ces or some other form of digital business operations in the next reporting period. Along with the certifi cates, AD Plastik marked this year also with several important awards. We would like to highlight the very important award in this area, the Croatian Sustainability Index (HRIO), which the company won in the catego- ry of large companies. Congratulations on the Golden Key for the best exporter to Slovenia too. This report shows progress, both in report- ing practices as well as in the practices of man- aging material impacts in the fi eld of sustainabil- ity. A lot of eff ort invested in reducing negative impacts and progress regarding almost all ma- terial topics is visible. We hope that this trend in the AD Plastik Group will continue. HR BCSD Expert Commission on Sustainability Reporting 163 INTEGRATED ANNUAL REPORT 2021. 0303 Annua l Financia l Statemen t 163 Consolidated Financial 164 Statements of AD Plastik Group Financial Statements 238 of the company AD Plastik d.d. The Supervisory Board have not yet considered and determined the fi nancial statements, but shall give its decision at the meeting scheduled in May 2022. 164 INTEGRATED ANNUAL REPORT 164 Page Responsibility of the Management Board for the consolidated fi nancial statements 165 Independent Auditors report 166-174 Consolidated statement of comprehensive income 176-177 Consolidated statement of fi nancial position 178-179 Consolidated statement of changes in shareholders' equity 180-181 Consolidated statement of cash flows 182-183 Notes to the consolidated fi nancial statements 184-237 AD Plastik d.d., Solin CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED  DECEMBER  INTEGRATED ANNUAL REPORT 165 INTEGRATED ANNUAL REPORT 165 Pursuant to the Accounting Act of the Republic of Croatia, the Management Board is responsible for ensuring that consolidated fi nancial statements are prepared for each fi nancial year in accord- ance with International Financial Reporting Standards ("the IFRSs"), as adopted in the European Union, which give a true and fair view of the fi nancial position and results of operations of AD Plas- tik d.d., Solin and its subsidiaries (“the Group”) for that period. After making enquiries, the Manage- ment Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board continues to adopt the going concern basis in preparing the fi nancial statements. In preparing those fi nancial statements, the Management Board is responsible for: • selecting and then consistently applying suitable accounting policies; • making reasonable and prudent judgements and estimates; • following applicable accounting standards and disclosing and explaining any material departure in the fi nancial statements; • preparing the fi nancial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the fi nancial position of the Group and its’ compliance with the Croatian Accounting Act. The above stated responsibility includes the responsibility for accuracy of the Management Report, which is an integral part of separate fi nancial statements and submission of fi nancial statements in unique XBRL in electronic reporting format (ESEF) prescribed by regu- latory technical standards developed by ESMA (European Securities and Markets Authority) and adopted by the European Commission. The Management Board is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of embezzlement and other irregularities. Signed by the members of the Management Board: Responsibility of The Management Board for the consolidated fi nancial statements Marinko Došen President of the Management Board Mladen Peroš Member of Management Board Ivan Čupić Member of Management Board Management Board m b er o f n agement B o For AD Plastik d.d. Solin by: AD Plastik d.d. Matoševa 8 21210 Solin Republic of Croatia 22 April 2022 166 168 169 170 171 173 174 175 INTEGRATED ANNUAL REPORT 176 INTEGRATED ANNUAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED  DECEMBER  (All amounts are expressed in thousands of kunas) NOTES 2021 2020 Sales 4 1,102,4 13 1,186,76 5 Other income 5 23,7 37 31,815 Total income 1,126,150 1,218,580 Increase/(decrease)in the value of work in progress and fi nished products 24 (1,0 31) 9,77 8 Cost of raw material and supplies 6 (548,014) (603,364) Cost of goods sold 7 (71,808) (61,5 37) Service costs 8 (9 3,40 7) (92,828) Staff costs 9 (254,809) (253,5 1 3) Depreciation and amortisation 10 (91,812) (96,99 1) Other operating expenses 11 (31,050) (48,457) Provisions for risks and charges 12 (710) (1,82 3) Impairment of trade receivables, (net) 1 (951) Total operating expenses (1,092,64 0) (1,14 9,686) Profi t from operations 33,5 10 68,894 Finance income 13 5,020 362 Finance costs 14 (5,777) (31,87 0) Loss from fi nancing activities (7 57) (31,508) Share in the profi t of associates 22 15,118 19,982 Profi t before taxation 47 ,871 5 7 ,368 Income tax expense 15 (15,148) (10,44 0) Profi t for the year 32,7 23 46,9 29 177 INTEGRATED ANNUAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED  DECEMBER  (continued) (All amounts are expressed in thousands of kunas) ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS NOTES 2021 2020 Exchange diff erences on translation of a foreign operation,items for reclassifi cation in P&L 16 3,77 2 (17 ,694) Accruals of foreign exchange diff erences from the current year, net of tax 16 4,929 (16,841) Other comprehensive (loss)/income for the year, net of income tax 8,7 01 (34,535) Total comprehensive income for the year 41,42 4 12,393 PROFIT ATTRIBUTABLE TO Equity holders of the Company 32,72 3 46,9 29 Non-controlling interests - - TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO Equity holders of the Company 41,42 4 12,393 Non-controlling interests - - Basic and diluted earnings per share (in kunas and lipas) 17 7 .90 11.36 The accompanying policies and notes form an integral part of these of these fi nancial statements 178 INTEGRATED ANNUAL REPORT ASSETS NOTE 31.12.2021 31.12.2020 NON-CURRENT ASSETS Intangible assets 18 8 3,512 85,368 Goodwill 40 25,119 2 4,618 Property, plant and equipment 19 7 48,6 77 7 4 9,457 Right-of-use assets 20 2 3,7 45 7 ,7 26 Investment property 21 2 4,71 3 2 4,85 7 Investments in associates 22 6 7 ,5 31 71,964 Other fi nancial assets 23 - 62 Deferred tax assets 7 ,564 16,17 0 Total non-current assets 980,861 980,222 CURRENT ASSETS Inventories 24 1 9 3,427 181,97 5 Trade receivables 25 23 3,23 7 26 7 ,661 Other receivables 26 25,256 24,26 1 Current fi nancial assets 27 - 898 Cash and cash equivalents 28 30,152 6 2,66 7 Prepaid expenses and accrued income 29 7 ,5 32 23,66 1 Total current assets 48 9,604 56 1,123 TOTAL ASSETS 1,47 0,46 5 1,541,345 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT  DECEMBER  (All amounts are expressed in thousands of kunas) The accompanying policies and notes form an integral part of these of these fi nancial statements 179 INTEGRATED ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT  DECEMBER  (continued) (All amounts are expressed in thousands of kunas) The accompanying policies and notes form an integral part of these of these fi nancial statements SHAREHOLDERS' EQUITY AND LIABILITIES NOTE 31.12.2021 31.12.2020 CAPITAL AND RESERVES Share capital 30 4 19,958 4 19,958 Capital and other reserves 217 ,42 4 213,45 9 Retained earnings and profi t of the year 201,86 3 227 ,208 Total shareholders' equity 8 39,245 860,625 Long-term provisions 31 4,9 13 4,56 9 Long-term borrowings 32 2 45,223 17 9,47 6 Other long term liabilities 33 1,506 398 Lease liabilities 34 15,7 44 3,7 38 Total non-current liabilities 26 7 ,386 188,181 Advances received 35 38,5 68 32,129 Trade payables 36 120,038 165,111 Short-term borrowings 37 14 1,282 219,9 7 8 Other current liabilities 38 34,250 38,112 Lease liabilities 34 8,4 08 4,242 Short-term provisions 31 12,011 15,001 Accrued expenses 39 9,277 17 ,966 Total current liabilities 36 3,8 34 4 92,5 39 Total liabilities 6 31,220 680,7 20 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,47 0,46 5 1,54 1,345 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED  DECEMBER  (All amounts are expressed in thousands of kunas) Share capital Capital reserves Legal, statutory and general reserves Reserves from accruals of foreign exchange diff erences Reserves for own shares Own shares Retained earnings Exchange diff erences on translation of a foreign operation Total equi- ty attrib- utable to the equity holders of the parent Non- controlling interests Total Balance at 31 December 2020 4 19,958 192,394 83,218 (20,7 90) 20,88 9 (11,7 94) 227 ,208 (50,457) 860,625 - 860,625 Profi t for the year - - - - - - 32,7 23 - 32,7 23 - 32,7 2 3 Other comprehensive income for the year - - - 4,929 - - - 3,77 2 8,701 - 8,7 01 Total comprehensive income for the year - - - 4,929 - - 32,72 3 3,77 2 41,42 4 - 41,42 4 Dividends paid - - - - - - (66,29 3) - (66,293) - (66,29 3) Disposal of own (treasury) shares - 294 - - - 3,195 - - 3,48 9 - 3,489 Transactions with owners recognized directly in equity - 294 - - - 3,195 (66,293) - (6 2,804) - (62,804) Reversal of reserves for not written off costs of development - - (8,225) - - - 8,225 - - - - Balance at 31 December 2021 4 19,958 19 2,688 7 4,99 3 (15,86 1) 20,889 (8,5 99) 201,86 3 (46,68 5) 839,2 45 - 839,2 45 The accompanying policies and notes form an integral part of these of these fi nancial statements. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED  DECEMBER  (continued) (All amounts are expressed in thousands of kunas) Share capital Capital reserves Legal, statutory and general reserves Reserves from accruals of foreign exchange diff erences Reserves for own shares Own shares Retained earnings Exchange diff erences on translation of a foreign operation Total equi- ty attrib- utable to the equity holders of the parent Non- controlling interests Total Balance at 31 December 2019 4 19,958 192,394 60,968 (6,018) 20,88 9 (11,7 94) 21 9,051 (32,76 3) 86 2,684 - 862,684 Profi t for the year - - - - - - 46,929 - 46,9 29 - 46,9 29 Other comprehensive income for the year - - - (16,841) - - - (17 ,694) (34,5 35) - (34,5 35) Total comprehensive income for the year - - - (16,841) - - 46,9 29 (17 ,694) 12,393 - 12,39 3 Dividends paid - - - - - - (16,522) - (16,522) - (16,522) Additions to legal reserves - - 551 - - - (551) - - - - Transactions with owners recognized directly in equity - - 551 - - - (17 ,0 7 3) - (16,522) - (16,522) Provisions for unwritten development costs - - 21,69 9 - - - (21,699) - - - - Realization of recognised exchange diff erences - - - 2,069 - - - - 2,06 9 - 2,069 Balance at 31 December 2020 4 19,958 192,394 83,218 (20,7 90) 20,88 9 (11,7 94) 227 ,208 (50,457) 860,625 - 860,625 The accompanying policies and notes form an integral part of these of these fi nancial statements 182 INTEGRATED ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED  DECEMBER  (All amounts are expressed in thousands of kunas) CASH FLOWS FROM OPERATING ACTIVITIES NOTES 2021 2020 Profi t for the year 32,7 2 3 46,9 29 ADJUSTED FOR Income tax 15 15,1 48 10,44 0 Depreciation and amortisation 10 91,812 96,9 9 1 Tangible assets assets write-off 19 819 2,9 17 Intangible assets assets write-off 18 85 6 2,969 Interest expense and exchange rates recognised in profi t or loss 5,6 5 3 18,038 Share in profi t of associates (15,289) (19,982) Gain from sale of property, plant and equipment and intangible assets 5 (1,19 3) (480) Gain from sale of investment property 5 - (11,396) Gain from sale of fi nancial assets 13 (7 2) - Interest income 13 (7 41) (36 2) Decrease in long-term and short-term provisions (net) (2,57 2) (62) Loss allowance for trade receivables, net (1) 95 1 Write down and write off of inventories 24 2,941 1 3,099 Profi t from operations before working capital changes 1 30,084 160,052 (Increase)/decrease in inventories 24 (14,394) 11,985 Decrease/(Increase) in current and non-current trade receivables 35,003 (3,4 15) Increase in other receivables 26 (994) (3,045) Decrease in trade payables (42,668) (77 ,108) Increase/(decrease) of advances received 35 6,4 39 (6,015) Decrease in other current liabilities (7 56) (457) (Decrease)/Increase of accrued expenses and deferred income 39 (9,24 3) 11,144 Decrease of accrued income and prepaid expenses 29 16,128 46,7 04 Interest paid (6,4 94) (9,41 3) Income tax paid (7 ,832) (1,502) Cash flows from operating activities 105,273 128,9 30 183 INTEGRATED ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED  DECEMBER  (continued) (All amounts are expressed in thousands of kunas) CASH FLOWS FROM OPERATING ACTIVITIES NOTES 2021 2020 Interest received 74 1 7 1 5 Purchase of property, plant and equipment 19 (52,7 75) (5 2,443) Purchase of investment property 21 (94) (22) Purchase of intangible assets 18 (23,7 99) (14,955) Guarantees given - (8 98) Proceeds from sale of property, plant and equipment and intangible assets 2,950 3,108 Proceeds from sale of investment property - 24,05 3 Proceeds from sale of fi nancial assets 13 3 - Dividends received 19,5 18 4 0,517 Cash (used) from investing activities (5 3,326) 75 CASH FLOWS FROM FINANCING ACTIVITIES NOTES 2021 2020 Dividends paid (66,294) (16,522) Proceeds from borrowings 32,37 164,358 90,151 Repayment of borrowings 37 (17 3,905) (158,61 9) Repayment of lease liabilities 34 (8,62 4) (8,4 36) Cash used in fi nancing activities (84,46 5) (9 3,426) Unrealised exchange rate diff erences in respect of cash and cash equivalents 317 Increase/(decrease) in cash and cash equivalents, net 28 (32,515) 35,596 Cash and cash equivalents at the beginning of the year 28 6 2,66 7 27 ,071 Cash and cash equivalents at the end of the year 28 30,152 62,66 7 The accompanying policies and notes form an integral part of these of these fi nancial statements. INVESTING 184 INTEGRATED ANNUAL REPORT Set out below are the principal accounting pol- icies consistently applied in the preparation of the fi nancial statements for the current and prior year. . STATEMENT OF COMPLIANCE The separate fi nancial statements are prepared in accordance with the Accounting Act of the Republic of Croatia and International Financial Reporting Standards (IFRS), as adopted by the European Union. . BASIS OF PREPARATION The Group maintains its accounting records in the Croatian language, in Croatian kunas and in accordance with Croatian laws and the account- ing principles and practices observed by enter- prises in Croatia. The preparation of the consolidated fi nan- cial statements requires from the Manage- ment Board to make estimates and assumptions that aff ect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported amounts of revenues and ex- penses during the reporting period. These esti- mates are based on the information available as at the date of preparation of the fi nancial state- ments, and actual results could diff er from those estimates. The consolidated fi nancial statements of the Group represent aggregate amounts of assets, liabilities, capital and reserves of the Group as of 31 December 2021, and the results of operations for the year that ended. The fi nancial statements are presented in Cro- atian Kuna (HRK). All amounts presented in the fi nancial statements are expressed in thou- sands of HRK unless otherwise stated, and there may be diff erences of 1 in the totals due to rounding. Certain new accounting standards and inter- pretations have been published that are not mandatory for 31 December 2021 reporting pe- riods and have not been early adopted by the . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Group. These standards are not expected to have a material impact on the entity in the cur- rent or future reporting periods and on fore- seeable future transactions. . NEW STANDARDS AND AMANDMENTS TO EXISTING NOT YET ADOPTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED  DECEMBER  185 INTEGRATED ANNUAL REPORT Accompanying consolidated fi nancial state- ments comprise of the Companys fi nancial statements and the entities under its control. The control principle sets out the following three elements of control: • power over the investee; • exposure, or rights, to variable returns from involvement with the investee; and • the ability to use power over the investee to aff ect the amount of those returns. The Company re-evaluates the existence of its control when the facts and circumstances indi- cate that one or more of the above-mentioned control elements have occurred. Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. AD Plastik Group in the reporting period con- sists of companies: • AD Plastik d.d., Croatia • AO AD Plastik Togliatti, Russian Federation • ZAO AD Plastik Kaluga, Russian Federation • AD Plastik Tisza Kft. Hungary • ADP d.o.o., Serbia • AD Plastik d.o.o., Slovenia Revenue is measured based on the considera- tion specifi ed in a contract with a customer. The contract exists only if it is legally enforcea- ble and meets all of the following criteria: • the contract is approved, and the parties are committed to their obligations, • the rights to goods and services and payment terms can be identifi ed, • the contract has commercial substance, and • collection of consideration is probable. The defi nition of contract as stated above is by combining the clauses of following documenta- tion: the Buyer's General Terms and conditions, the Nomination letter, the Purchase agreement and Purchase order. The Group has contracts with Buyers (OEM) as Tier 1, with Buyer's suppliers as Tier 2, with sub- sidiaries and associates. The contracts exist for sales of following goods and services: • Product sale, • Tooling sale, • R&D activities • Royalty services, • Technical support services Contracts do not commit the customer to a . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . BASIS OF CONSOLIDATION . REVENUE RECOGNITION 186 INTEGRATED ANNUAL REPORT specifi ed quantity of products; however, the Group is generally required to fulfi l its custom- er’s purchasing requirements for the produc- tion life of the vehicle. Contracts do not typ- ically become a performance obligation until the Group receives either a purchase order for a specifi c number of parts at a specifi ed price. The long-term agreements with customers for specifi c product may range from fi ve to seven years, contracts may be terminated by custom- ers at any time, while occurred very rarely. The Group’s customers pay for products re- ceived in accordance with payment terms that are customary in the industry, typically 60 to 120 days. The Group’s contracts with its customers do not have signifi cant fi nancing components. Tooling and product sales may be contracted in separate agreements, or concluded at diff er- ent points in time, or may be contracted in one agreement. In either case, any binding obliga- tion for the customer with respect to parts is created only upon issuance of purchase orders. Revenue from tooling sale and product sale is recognised at point in time when the control is passed on the buyer. The Group has determined that royalty and technical support services, tooling and the de- livery of product parts are separate and distinct for the customer and therefore constitute sep- arate performance obligations under IFRS 15, when the ownership is transferred. The pric- es agreed in the contracts for the single per- formance obligations are considered to be the stand-alone. Revenue from sale of products Product sales are recognized when the prod- ucts are delivered to, and accepted by the cus- tomer and when the control of a product is transferred to the customer. Sales to custom- ers with whom self- invoicing has been ar- ranged are recognised upon receiving from such a customer the confi rmation of delivery, i.e. when control is transferred to the customer. Each delivery is considered as performance ob- ligation that is satisfi ed at point in time. Some of the Group's contracts include variable con- sideration which take a form of year-to-year price reductions („productivity“), but Group has concluded that those discounts do not give rise to a material right as those decreases are con- sistent with the pricing pattern in the automo- tive industry which takes into consideration learning curve eff ect. Some contracts with customers include war- ranty clauses for repair of faulty goods during a specifi ed long-term period and cover only a product's compliance with agreed specifi ca- tions. Such warranties granted by the Group are in most cases assurance type warranties recog- nised in accordance with IAS 37 when the con- trol of product transfers to customers. Revenue from the manufacture of tools Revenues from tools are matched with con- tracts that are specifi cally concluded for de- veloping an asset, or a group of assets, closely linked and interdependent on the design, tech- nology and function or their fi nal use or appli- cation. The Group estimates that the transfer . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . REVENUE RECOGNITION (continued) 187 INTEGRATED ANNUAL REPORT of control of tools, gauges and other devices is met at the time of „SOP“ (Start Of Production), i.e. start of the mass production on them. At that point the Group recognizes revenue from the sale of tools. Costs of modifi cation, comple- tion and similar tool costs are recognised by the Group as an increase in inventory value. Revenue from royalty and technical services The Group generates revenues from royalty fees by concluding contracts with affi liates to whom it sells the right to use intellectual prop- erty calculated on the amount of products pro- duced by these companies, and for which prod- ucts the Group has carried out development activities. The Group generates revenues from technical services on the basis of contracts it has with af- fi liated companies to which it provides techni- cal consulting services for the needs of devel- opment and industrialization. Revenue from royalty is recognised over time based on the generated sales of customers while revenue for technical support and con- sultancy services is recognised at point in time when the service is rendered. . BORROWING COSTS Borrowing costs directly attributable to the ac- quisition, construction or production of quali- fying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intend- ed use or sale. Borrowing costs that cannot be directly attributable to acquisition, construc- tion or production of qualifying asset, are cap- italised applying a capitalisation rate. Capital- isation rate is weighted average of borrowing costs applicable to the general borrowings, ex- cluding borrowing costs that are directly attrib- utable for acquisition of qualifying asset, until substantially all the activities necessary to pre- pare that asset for its intended use or sale are completed. Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profi t or loss in the period in which they are in- curred. . FOREIGN-CURRENCY TRANSACTIONS Transactions in foreign currencies are translat- ed into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions. Functional currency for Group is Croatian kuna. Functional curren- cies for companies included in Group are as fol- lows: • AD Plastik d.d., Croatia – Croatian kuna • AO AD Plastik Togliatti, Russian Federation - Russian rouble • ZAO AD Plastik Kaluga, Russian Federation - Russian rouble . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . REVENUE RECOGNITION (continued) 188 INTEGRATED ANNUAL REPORT . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . FOREIGN-CURRENCY TRANSACTIONS (continued) • AD Plastik Tisza Kft. Hungary - Hungarian for- int • ADP d.o.o., Serbia, - Serbian dinar • AD Plastik d.o.o., Slovenia - Euro Monetary assets and liabilities denominated in foreign currencies are translated into the func- tional currency at the exchange rate at the re- porting date. Non-monetary assets and liabili- ties that are measured at fair value in a foreign currency are translated into the functional cur- rency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency diff erences are generally recognised in profi t or loss and presented within fi nance costs. . FOREIGN OPERATIONS The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euro at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into euro at the exchange rates at the dates of the transactions. When a foreign operation is disposed of in its entirety or partially such that control, signifi - cant influence or joint control is lost, the cumu- lative amount in the translation reserve related to that foreign operation is reclassifi ed to prof- it or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the rel- evant proportion of the cumulative amount is reattributed to NCI. When the Group dispos- es of only part of an associate or joint venture while retaining signifi cant influence or joint control, the relevant proportion of the cumula- tive amount is reclassifi ed to profi t or loss. The Group may have a monetary item as an amount receivable from, or payable to a foreign entity. An item neither planned to be settled nor likely to arise in the foreseeable future is essentially part of the entity's net investment in a foreign operation and accounted for in accordance with IAS 21. The Group recognizes foreign exchange diff erences arising from monetary items that are part of the net foreign investment initial- ly in other comprehensive income and accu- mulates them under a separate component of equity – Reserves from accruals of foreign ex- change diff erences. On disposal of a net investment in a foreign op- eration, the entire balance of exchange diff er- ences is transferred from equity to profi t or loss. . INCOME TAX Current tax Income tax expense is based on taxable prof- it for the year and represents the sum of the tax currently payable and deferred tax. Income tax is recognised in the statement of com- prehensive income, except where it relates to items recognised directly in equity, in which case it is also recognised in equity. Current tax 189 INTEGRATED ANNUAL REPORT . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS. INCOME TAX (continued) represents tax expected to be paid on the basis of taxable profi t for the year, using the tax rates enacted at the date of the statement of fi nan- cial position, adjusted by appropriate prior-pe- riod tax liabilities. Deferred tax Deferred tax is provided using the balance sheet liability method, providing for temporary diff erences between the carrying amounts of assets and liabilities for fi nancial reporting pur- poses and the amounts used for taxation pur- poses. Deferred tax assets and liabilities are measured at the tax rate expected to apply to taxable profi t in the period in which the liability is expected to be settled or the asset realised, based on the tax rates in eff ect at the date of the statement of fi nancial position. The measurement of deferred tax liabilities and assets reflects the amount that the Group ex- pects, at the date of the statement of fi nan- cial position, to recover or settle the carrying amounts of its assets and liabilities. Deferred tax assets and liabilities are not dis- counted and are classifi ed in the statement of fi nancial position as non-current assets and/or non-current liabilities. Deferred tax assets are recognised only to the extent that it is proba- ble that the related tax benefi t will be realised. At each date of the statement of fi nancial po- sition, the Group reviews the unrecognised po- tential tax assets and the carrying amount of the recognised tax assets. Property, plant and equipment as well as intan- gible assets are recognised at purchase cost and subsequently reduced by accumulated de- preciation/amortisation. Intangible asset rep- resents capitalized development costs of all Group's projects... Intangible assets – Projects is depreciated according to its useful life which varies from 3 to 7 years. The purchase cost comprises the purchase price, import duties and non-refundable sales taxes (for property, plant and equipment) and any directly attrib- utable costs of bringing an asset to its work- ing condition and location for its intended use, such as employee remuneration, professional fees directly arising from putting an asset into its working condition, test costs (for intangible assets), as well as all other costs directly attrib- utable to bringing an asset to a condition for its intended use. Maintenance and repairs, replacements and im- provements of minor importance are expensed as incurred. Where it is obvious that expenses incurred resulted in an increase of expected fu- ture economic benefi ts to be derived from the use of an item of property, plant and equipment or intangible assets in excess of the original- ly assessed standard performance of the asset, they are added to the carrying amount of the asset. Gains or losses on the retirement or dis- posal of property, plant and equipment or in- tangible assets are included in the statement of comprehensive income in the period in which they occur. Depreciation commences on putting an asset into use. Depreciation is provided so as to write 190 INTEGRATED ANNUAL REPORT Intangible assets based on contracts with customers occurred during the allocation of the purchase price by the acquisition of AD Tisza in Hungary, and these intangible assets are amortized at rates ranging from 16.67% to 25.00%. . GOODWILL Goodwill represents the excess of the cost of acquisition over the Group’s share of the fair values of the identifi able net assets of a busi- ness at the acquisition date. Goodwill gener- ated by acquisition of a subsidiary is present- ed as an intangible asset. Goodwill is tested for . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS (continued) PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS DEPRECIATION RATES IN  % DEPRECIATION RATES IN  % Buildings 1.50 1.50 Machinery 7.00 - 10.00 7.00 - 10.00 Tools, furniture, offi ce and laboratory equipment, measuring and control instruments 7.00 – 50.00 7.00 – 50.00 Vehicles 20.00 20.00 IT equipment 10.00 - 20.00 10.00 - 20.00 Others 10.00 10.00 Intangible assets - Projects 14.29 – 33.33 20.00 Software 20.00 – 50.00 20.00 – 50.00 impairment annually or more often if the events and circumstances that indicate potential im- pairment occur. Goodwill is measured as cost of acquisition less accumulated losses due to impairment. Impairment losses on goodwill are not reversed. Gains and losses from the sale of down the cost or revalued amount of an asset other than land, property, plant and equipment and intangible assets under development over the estimated useful life of the asset using the straight-line method as follows: 191 INTEGRATED ANNUAL REPORT . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . GOODWILL (continued) a business include the net book value of good- will, which relates to the sold business. For the purposes of impairment testing, good- will is allocated to each of the Group's cash-gen- erating units (or groups of cash-generating units) that is expected to benefi t from the syn- ergies of the combination. . IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS At each reporting date the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is an indication that the assets have suff ered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group esti- mates the recoverable amount of the cash-gen- erating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identifi ed, the Group's assets are also al- located to individual cash-generating units or, if this is not possible, they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identifi ed. . INVESTMENTS IN ASSOCIATES An associate is an entity over which the Group has signifi cant influence but no control over the entity. Signifi cant influence is the power to participate in the fi nancial and operating policy decisions of the investee, but it is not control or joint control over those policies. The results of operations of associates are in- corporated in these fi nancial statements using the equity method of accounting. Under this method, the Group's share in the profi t or loss of associates is recognised in profi t and loss from the date of acquisition of signifi cant in- fluence until the date on which signifi cant in- fluence is lost. Investments are recognised initially at cost and are subsequently adjusted by the changes in the acquirer's share of the net profi t of the in- vestee. Where the Group's share of losses in an associ- ate is equal to or higher than the equity invest- ment in the associate, no further losses are rec- ognised, except where the Group has assumed an obligation or committed to make a payment on behalf of the associate. . INVENTORIES Inventories of raw material and spare parts are stated at the lower of cost and net realisable value, whichever is lower. Cost is determined using the weighted-average cost method. Net realisable value represents the estimated sell- ing price in the ordinary course of business less all variable selling costs. Small inventory is written off when put in use. The cost of product inventories i.e. the 192 INTEGRATED ANNUAL REPORT production price is based on direct materi- al used, the cost of which is determined using the weighted average cost method, then direct labour costs and fi xed overheads at the actu- al level of production which approximates the normal capacities, as well as variable overheads that are based on the actual use of the produc- tion capacities. Merchandise on stock is recog- nised at purchase cost. . OTHER TRADE RECEIVABLES AND PREPAYMENTS Other receivables and prepayments represent receivables and prepayments that are not in- cluded in fi nancial instruments, and they are carried at nominal amounts less an appropriate allowance for impairment for estimated irre- coverable amounts. Impairment is recognised whenever there is objective evidence that the Group will not be able to collect all amounts due according to the originally agreed terms. Signifi cant fi nan- cial diffi culties of the debtor, the probability of bankruptcy proceedings at the debtor, or de- fault or delinquency in payment are considered objective evidence of impairment. The amount of the impairment loss is determined as the dif- ference between the assets carrying amount and the present value of estimated future cash flows, discounted at the eff ective interest rate. Management determines the level of impair- ment allowance for doubtful receivables. The allowance for amounts doubtful of collection is charged to the statement of comprehensive in- come for the year. . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash comprises account balances with banks, cash in hand, deposits and securities at call or with maturities of less than three months. . PROVISIONS Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resourc- es will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each date of the statement of fi nancial position and adjusted to reflect the current best estimate. Where the ef- fect of discounting is material, the amount of the provision is the present value of the ex- penditures expected to be required to settle the obligation, determined using the estimated risk free interest rate as the discount rate. Where discounting is used, the reversal of such discounting in each year is recognised as a fi - nancial expense and the carrying amount of the provision increases in each year to reflect the passage of time. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the date of the statement of fi nancial position, taking into ac- count the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. . INVENTORIES (continued) . CASH AND CASH EQUIVALENTS 193 INTEGRATED ANNUAL REPORT . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Pension-related obligations and post- employment benefi ts In the normal course of business, the Group makes payments, through salary deductions, to mandatory pension funds on behalf of its em- ployees, as required by law. The contributions paid to the mandatory pension funds are rec- ognised as salary expense when accrued. The Group does not have any other retirement ben- efi t plan and, consequently, has no other obliga- tions in respect of the retirement benefi ts for its employees. In addition, the Group is not obliged to provide any other post-employment benefi ts. (b) Long-term employee benefi ts Long-term employee benefi ts represent jubilee awards and post employment benefi t obliga- tions. Post employment benefi t obligations fall- ing due more than 12 months after the report- ing date are discounted to their present value. Jubilee awards are paid in intervals according to time that employee was working for company. . FINANCIAL INSTRUMENTS Financial assets Trade receivables are initially recognised when they are originated. All other fi nancial assets are initially recognised when the Group be- comes a party to the contractual provisions of the instrument. A fi nancial asset (unless it is a trade receivable without a signifi cant fi nancing component) is initially measured at fair value plus transaction costs that are directly attributable to its ac- quisition or issue. A trade receivable without a signifi cant fi nancing component is initial- ly measured at the transaction price. On ini- tial recognition, a fi nancial asset is classifi ed as measured at amortised cost. Financial assets are not reclassifi ed subsequent to their initial recognition unless the Group changes its business model for managing fi - nancial assets, in which case all aff ected fi nan- cial assets are reclassifi ed on the fi rst day of the fi rst reporting period following the change in the business model. A fi nancial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose ob- jective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specifi ed dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Business model assessment The Group makes an assessment of the objec- tive of the business model in which a fi nancial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: • the stated policies and objectives for the . TERMINATION, LONG-SERVICE AND OTHER EMPLOYEE BENEFITS 194 INTEGRATED ANNUAL REPORT portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual in- terest income, maintaining a particular inter- est rate profi le, matching the duration of the fi nancial assets to the duration of any related liabilities or expected cash outflows or realis- ing cash flows through the sale of the assets; • how the performance of the portfolio is eval- uated and reported to the Group’s manage- ment; • the risks that aff ect the performance of the business model (and the fi nancial assets held within that business model) and how those risks are managed; • how managers of the business are compen- sated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and • the frequency, volume and timing of sales of fi nancial assets in prior periods, the reasons for such sales and expectations about future sales activity. Trade receivables are held in the business mod- el of holding for the purpose of collection. Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, relevant for the purpose of classifying fi nancial as- sets at amortised cost, ‘principal’ is defi ned as the fair value of the fi nancial asset on initial . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . FINANCIAL INSTRUMENTS (continued) recognition. ‘Interest’ is defi ned as consider- ation for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profi t margin. In assessing the main criterion, i.e. whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This in- cludes assessing whether the fi nancial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. The structure of the Group’s fi nancial assets is simple and primarily relates to trade receivables without a signifi cant fi nancial component, loans given and short-term deposits in banks at fi xed interest rates, while forward contracts are of in- signifi cant amount. This signifi cantly reduces the complexity of the assessment whether the fi nancial assets meet the criterion of ‘solely payments of principal and interest'. Subsequent measurement and gains and losses These assets are subsequently measured at amortised cost using the eff ective interest method. The amortised cost is reduced by im- pairment losses. Interest income, foreign ex- change gains and losses and impairment are recognised in profi t or loss. Any gain or loss on derecognition is recognised in profi t or loss. 195 INTEGRATED ANNUAL REPORT . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . FINANCIAL INSTRUMENTS (continued) Derecognition The Group derecognises a fi nancial asset when the contractual rights to the cash flows from the fi nancial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the fi nancial as- set are transferred or in which the Group nei- ther transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the fi nancial asset. The Group has mainly classifi ed its fi nancial as- sets as loans and receivables. Financial liabilities Debt securities are initially recognised when they are originated. All other fi nancial liabili- ties are initially recognised when the Group be- comes a party to the contractual provisions of the instrument. A fi nancial liability is initially measured at fair value plus transaction costs that are directly at- tributable to its acquisition or issue. Financial liabilities are classifi ed as measured at amortised cost. A fi nancial liability is classifi ed as as measured at amortised cost using the ef- fective interest method. Interest expense and foreign exchange gains and losses are recog- nised in profi t or loss. Any gain or loss on derecognition is also rec- ognised in profi t or loss. The Group derecog- nises a fi nancial liability when its contractual obligations are discharged or cancelled, or ex- pire. The Group also derecognises a fi nancial li- ability when its terms are modifi ed and the cash flows of the modifi ed liability are substantially diff erent, in which case a new fi nancial liability based on the modifi ed terms is recognised at fair value. On derecognition of a fi nancial liability, the dif- ference between the carrying amount extin- guished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profi t or loss. Impairment of non-derivative fi nancial assets The Group recognises loss allowances for ex- pected credit loss (ECLs) on fi nancial assets measured at amortised cost. Loss allowances for trade receivables are al- ways measured at an amount equal to lifetime ECLs. The Group measures loss allowances at an amount equal to lifetime ECLs. When determining whether the credit risk of a fi nancial asset has increased signifi cantly since initial recognition and when estimating ECLs, the Group considers reasonable and support- able information that is relevant and availa- ble without undue cost or eff ort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical ex- perience and informed credit assessment and including forward-looking information. The Group assumes that the credit risk on a fi - nancial asset has increased signifi cantly if early 196 INTEGRATED ANNUAL REPORT warning indicators have been activated in ac- cordance with the Group’s policy or contractual terms of the instrument. The Group considers a fi nancial asset to be fully or partially in default if: • the borrower is unlikely to pay its credit obli- gations to the Group in full, without recourse by the Group to actions such as realising secu- rity (if any is held); or • the fi nancial asset is more than 360 days past due based on historical experience of average market participant. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a fi nancial instrument. 12-month ECLs are the portion of ECLs that re- sult from default events that are possible with- in the 12 months after the reporting date (or a shorter period if the expected life of the in- strument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. Expected credit losses measurement In accordance with IFRS 9, assets that are car- ried at amortised cost must have attributed ex- cepted credit losses (ECL)- the formula for cal- culating the annual ECL is the following: Probability of default (PD) x Loss given default (LGD) x Exposure at default (EAD) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . FINANCIAL INSTRUMENTS (continued) Eff ective interest method The eff ective interest method is a method of calculating the amortised cost of a fi nancial as- set or liability, and of allocating interest income over the relevant period. The eff ective interest rate is the rate that exactly discounts estimat- ed future cash payments through the expected life of the fi nancial asset or liability, or, where appropriate, a shorter period. Impairment of fi nancial assets Financial assets are assessed for indications of impairment at each date of the statement of fi nancial position. A fi nancial asset is impaired where there is objective evidence that, as a re- sult of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash flows of the investment have been impacted. For fi nancial assets carried at amortised cost, the amount of the impairment is the diff erence between the asset’s carrying amount and the expected credit losses. Impairment loss on a fi nancial asset is recognised by reducing the carrying amount of the asset through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent re- coveries of amounts previously written off are credited against the allowance account. Derecognition of fi nancial assets The Group derecognises a fi nancial asset only 197 INTEGRATED ANNUAL REPORT . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . FINANCIAL INSTRUMENTS (continued) when the contractual rights to the cash flows from the asset have expired, when the asset is transferred and when substantially all the risks and rewards of ownership of the asset are passed onto another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to con- trol the transferred asset, the Group recognises its retained interest in the asset and an associ- ated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred fi - nancial asset, the Group continues to recognise the fi nancial asset and also recognises a collat- eralised borrowing for the proceeds received. Classifi cation as debt or equity Debt and equity instruments are classifi ed as either fi nancial liabilities or as equity in accord- ance with the substance of the underlying con- tractual arrangement. Interest income Interest income is recognised on a pro rata temporis basis, using the eff ective interest method. Interest earned on balances with com- mercial banks (demand and term deposits) is credited to income for the period as it accrues. Interest on trade receivables is recognised as income when accrued. . CONTINGENCIES Contingent liabilities have not been recognised in these consolidated fi nancial statements. They are disclosed if the possibility of outflow of re- sources embodying economic benefi ts is possi- ble. A contingent asset is not recognised in fi - nancial statements, but it is disclosed when the inflow of economic benefi ts becomes probable. . Events subsequent to the date of the statement of fi nancial position Events after the date of the statement of fi nan- cial position that provide additional information about the Group’s position at that date (adjust- ing events) are reflected in the fi nancial state- ments. Subsequent events that are not adjusting events are disclosed in the notes to the consolidated fi - nancial statements when material. . SEGMENT REPORTING In the consolidated fi nancial statements, the Group discloses sales revenues grouped by country. When assessing business performance and making decisions on the allocation of re- sources in accordance with IFRS 8, the Group's Management Board uses the division into two business segments: the EU and Serbia and Rus- sia. In the consolidated fi nancial statements, the Group's operating results, assets and liabil- ities are presented for above mentioned busi- ness segments. The division into segments is based on the Group's presence in the diff erent markets. Transactions between segments relate to sales of materials, revenues from engineering servic- es and royalty revenues. 198 INTEGRATED ANNUAL REPORT At inception of a contract, Group assesses whether a contract is, or contains lease. A con- tract is, or contains a lease, if the contract con- veys the right to control the use of an identifi ed asset for a period of time in exchange for con- sideration. To assess whether a contract conveys the right to control the use of an identifi ed asset, Group uses the defi nition of a lease in IFRS 16. Leases are recognised by the present value of the lease payments and showed either as right- of-use assets or together with property, plant and equipment. Group also recognises a fi nan- cial liability representing its obligation to make future lease payments. Lessees are recognised separately interest expense on the lease liabil- ity and the depreciation expense on the right- of-use asset. Lessees are also required to re-measure lease liability due to certain events (e.g. a change in lease term, a change in future lease payments, resulting from a change in an index or discount- ing rate). The standard includes two recogni- tion exemptions for lessees: “low-value“ leas- es (e.g. tablets and personal computers) and „short-term“ leases (leases which ends within 12 months). Low-value leases are assets with value lower than HRK 30,000. Right-of-use assets and lease liabilities will be reported separately in the statement of fi nan- cial position. The Group has elected not to apply the require- ments of IFRS  for low-value leases (e.g. print- ers) and short-term leases (e.g. apartments). Detailed movement of right of use assets are presented in Note 20 and movements of lease liability in Note 34. . GRANTS The Group recognizes grants as income over the period necessary to match them with relat- ed costs, for which they are intended to com- pensate on a systematic basis. A grant receivable as compensation for costs already incurred is derecognised as income in the period in which it is receivable. A grant re- lated to income is reported as deduction from the related expense. . INVESTMENT PROPERTY Investment property is property held by the Group to earn rentals or for capital appreciation or for both, but not for sale in the ordinary course of business or for administrative purposes. Investment property is measured initially at its cost, including transaction costs. Subsequent- ly, investment property is stated at cost less accumulated depreciation and any impairment loss. Investment property is depreciated on a straight-line basis at the rate of 1.5%. Investment property is derecognised when either it has been disposed of or permanent- ly withdrawn from use or no future economic benefi ts are expected from its disposal. Any gains or losses on the retirement or disposal of investment property are recognised in the in- come statement in the year of retirement or disposal. . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . LEASES 199 INTEGRATED ANNUAL REPORT In the application of the Group’s accounting policies, which are described in Note 2, the Management Board is required to make judge- ments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual re- sults may diff er from those estimates. The estimates and underlying assumptions are continually reviewed. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision aff ects only that period or in the period of revision and future periods if the revision aff ects both cur- rent and future periods. The key areas of estimation in applying the Group’s accounting policies that had a most sig- nifi cant impact on the amounts recognized in the fi nancial statements were as follows: Measurement of fair values Certain Group’s accounting policies and disclo- sures require the measurement of fair values for non-fi nancial assets. The Group has an established control frame- work with respect to fair value measurement which assumes the overall responsibility of the Management Board and fi nance department in relation to the monitoring of all signifi cant fair value measurements and consultation with external experts. Fair values are measured us- ing information collected from third parties in . CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY which case the Board and the fi nance depart- ment assess whether the evidence collected from third parties support the conclusion that such valuations meet the requirements of IF- RSs, including the level in the fair value hierar- chy where such valuations should be classifi ed. Fair values are categorised into diff erent level in a fair value hierarchy based on the inputs used in the valuation techniques as follows: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs other than quoted prices in- cluded in level 1, that are observable for the as- set or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 - input variables for assets or liabilities that are not based on observable market data (unobservable inputs). The fair value of fi nancial instruments traded in active markets is based on quoted market pric- es at the balance sheet date. A market is re- garded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regu- latory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The fair value of fi nancial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as lit- tle as possible on entity specifi c estimates. If all 200 INTEGRATED ANNUAL REPORT signifi cant inputs required to fair value an in- strument are observable, the instrument is in- cluded in level 2. If one or more signifi cant in- puts are not based on observable market data, the fair value estimate is included in level 3. Revenue from the sale of tools Tools are custom made for the customer and cannot be used for other purposes. In accord- ance with the automotive practice, those con- tracts may diff er with respect to the develop- ment of tools and transfer of the title to the customer. In such cases, the Group determines whether tool arrangements are sale, lease or development of own equipment, whether this is a lease arrangement and whether it is sepa- rate from the sale of car parts. The Group has assessed that the sale of car parts is a separate . CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) performance obligation from the sale of tools since the customer has the control over the use of tool and unconditional right for payment upon the transfer of control of tool to the cus- tomer. Additionally, the development of the tool is not integrated with the production of parts to produce a combined output and those two are not interrelated as tool can be sold without aff ecting the sale of car parts. In addition, although in production of parts the Group may continue to use tools that it sold to customers, the Group has concluded that its arrangements do not contain a lease be- cause customers control the use of the asset. In particular, customers, by placing orders, de- termine whether to produce parts using those tools, in what quantity and also the location of parts’ production. 201 INTEGRATED ANNUAL REPORT . SEGMENT INFORMATION The Group has adopted IFRS 8 Operating Seg- ments with eff ect from 1 January 2009. IFRS 8 requires operating segments to be identifi ed on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allo- cate resources to the segments and to assess their performance. EU AND SERBIA RUSSIA TOTAL External income 824,545 301,605 1,126,150 Intra segment income 43,297 12 43,309 Total income 867,842 301,617 1,169,459 EBITDA 82,565 42,756 125,321 Profi t for the year 6,546 26,177 32,723 Year ended 31 December 2021 EU AND SERBIA RUSSIA INTRA – SEG- MENT EFFECT TOTAL Total assets 1,393,888 279,804 (203,226) 1,470,466 Capital and reserves 832,055 74,879 (67,688) 839,246 Liabilities 561,833 204,925 (135,538) 631,220 Total equity and liabilities 1,393,888 279,804 (203,226) 1,470,466 In 2021 the Group generated 12.5% (in 2020: 16.1%) of income from buyer Revoz and 12.3% of income from buyer AvtoVAZ (in 2020: 10.0%). 202 INTEGRATED ANNUAL REPORT . SEGMENT INFORMATION (continued) EU AND SERBIA RUSSIA TOTAL External income 947,831 270,749 1,218,580 Intra segment income 36,272 327 36,599 Total income 984,103 271,076 1,255,179 EBITDA 127,324 38,561 165,885 Profi t for the year 42,211 4,718 46,929 EU AND SERBIA RUSSIA INTRA - SEGMENT EFFECT TOTAL Total assets 1,495,998 235,314 (189,967) 1,541,345 Capital and reserves 887,576 39,683 (66,633) 860,626 Liabilities 608,422 195,631 (123,334) 680,719 Total equity and liabilities 1,495,998 235,314 (189,967) 1,541,345 Year ended 31 December 2020 EBITDA represents profi t before income taxes, fi nance income/costs and depreciation and amor- tisation 203 INTEGRATED ANNUAL REPORT . SEGMENT INFORMATION (continued) 2021 2020 Russia 302,262 271,330 Slovenia 278,613 414,723 France 110,535 108,424 Romania 108,799 112,492 Hungary 92,506 71,745 Italy 44,895 34,605 United Kingdom 38,691 31,973 Germany 36,434 47,826 Spain 33,524 39,043 Slovakia 20,574 20,788 Serbia 17,880 15,236 Croatia 8,268 9,878 Other countries 9,432 8,703 1,102,413 1,186,766 2021 2020 Car parts sales 995,994 1,097,980 Revenue from tools 88,425 72,750 Merchandise 9,979 6,821 Engineering services revenue 7,821 7,819 Royalty revenue 194 1,396 1,102,413 1,186,766 Sales revenue based on geographical location of the customer: Sales segmentation by type of the product is shown below: 204 INTEGRATED ANNUAL REPORT . OTHER INCOME . COST OF RAW MATERIAL AND SUPPLIES . COST OF GOODS SOLD 2021 2020 Income from maintaining safety stock 6,137 3,633 Rental income and income from the sale of services to tenants 3,561 3,718 Income from damages and insurance 3,524 2,718 Gain from sale of property, plant and equipment and intangible assets 1,193 480 Income from fi nancial support 1,000 - Income from product development, validation, quality control and laboratory testing 829 283 Income from consumption of own products and services 609 2,350 Income from invoicing recharged costs 402 1,030 Gain on disposal of investment property - 11,396 Other operating income 6,482 6,207 23,737 31,815 2021 2020 Direct materials 501,642 556,391 Electricity 26,547 27,048 Other raw material and supplies 19,825 19,925 548,014 603,364 2021 2020 Cost of tools sold 67,626 56,571 Cost of trade goods and spare parts sold 4,182 4,966 71,808 61,537 205 INTEGRATED ANNUAL REPORT . SERVICE COST 2021 2020 Transport 37,136 42,966 Maintenance costs 15,370 11,976 Intellectual services 14,605 7,713 Software licenses 5,387 4,751 Logistic services at distribution warehouses 4,045 121 Rental costs 3,656 5,231 Security and fi re services 2,744 2,651 Municipal utility fees 2,263 2,748 Licence fees 1,512 4,794 Telecommunication and information system costs 977 1,540 Water supply 854 1,103 Marketing 783 1,017 Forwarding and shipping costs 605 756 Other service costs 3,470 5,461 93,407 92,828 The total amount of charged fees for the audit of consoli- dated and separate fi nancial statements of AD Plastik d.d. and its subsidiaries for 2021 amounts to HRK 1,004,476 (in 2020 HRK 972,986). 206 INTEGRATED ANNUAL REPORT . DEPRECIATION AND AMORTISATION Other staff costs comprise jubilee awards, bo- nuses, termination benefi ts, commuting costs, cost of student service and other business-re- lated costs. The Group included income from reversal of provision for employees’ bonuses in amount of HRK 3,982 thousand and income from reversal of provision for unused vacation days in amount of HRK 481 thousand as cost re- duction within category “Other staff cost”. . STAFF COSTS 2021 2020 Net wages and salaries 154,366 147,002 Taxes and contributions 83,403 85,323 Other staff costs 15,675 18,308 Provisions for termination benefi ts, net (Note 31) 1,365 652 Provisions for employees’ bonuses, net (Note 31) - 2,010 Provisions for jubilee awards, net (Note 31) - 218 254,809 253,513 Also, within “Other staff cost” income from reversal of provisions for jubilee awards in amount of HRK 99 thousand is shown. In the prior period, reversal of provision for unused vacation days in amount of HRK 4,121 thousand is includes in cost reduction within “Other staff cost”. Total staff costs are decreased by state subsidies for employment preservation in 2020, in the amount of HRK 20,507 thousand. 2021 2020 Depreciation of property, plant and equipment (Note 19) 60,451 58,612 Amortisation of intangible assets (Note 18) 22,123 29,144 Depreciation of right of use asset (Note 20) 8,851 8,500 Depreciation of investment property (Note 21) 387 735 91,812 96,991 207 INTEGRATED ANNUAL REPORT . OTHER OPERATING EXPENSES . PROVISIONS FOR RISKS AND CHARGES 2021 2020 Taxes 3,669 4,304 Customer complaints 3,501 5,482 Cost of unusable inventories and inventory shortage costs 2,941 13,140 Membership fees, contributions, municipal utility fees 2,910 2,902 Insurance premiums 2,750 2,955 Cost of goods provided free of charge 2,189 2,503 Business trips 2,002 1,782 Gifts, donations and sponsorships 1,657 1,511 Bank fees and commissions 1,021 920 Safety at work and health services 902 1,166 Capitalised development cost write-off 856 2,969 Non-current tangible assets write off 819 2,888 Professional training costs 797 706 Entertainment 708 875 Supervisory Board fees 547 363 Other expenses 3,781 3,990 31,050 48,457 2021 2020 Provision for legal cases (Note 31) 710 825 Provisions for warranties (Note 31) - 998 710 1,823 208 INTEGRATED ANNUAL REPORT 2021 2020 Interest expense 5,295 9,702 Interest expense on lease liabilities 482 273 Foreign exchange losses, net - 21,895 5,777 31,870 . FINANCE INCOME . FINANCE COSTS . INCOME TAX 2021 2020 Foreign exchange gains, net 4,207 - Interest income 741 362 Other fi nancial income 72 - 5,020 362 2021 2020 Current tax (7,405) (11) Deferred tax (7,743) (10,429) (15,148) (10,440) Income tax comprises the following: 209 INTEGRATED ANNUAL REPORT . INCOME TAX (continued) Deferred tax assets arise from the following: 2021 OPENING BALANCE CHARGED TO STATEMENT OF COMPR. INCOME CHARGED TO OTHER COMPR. INCOME CLOSING BALANCE TEMPORARY DIFFERENCES Provisions for jubilee awards and termination benefi ts 756 8 (2) 762 Deferred tax liabilities from allocation of purchase price on fair value of Tisza Automotive Kft. (675) 169 - (505) Deferred tax assets from carried-over tax losses 6,446 (107) (870) 5,469 Diff erences between tax depreciation rates and accounting depreciation rates (1,077) (8) 9 (1,076) Investment tax credit 7,805 (7,805) - - Impairment of Investment property 2,914 - - 2,914 Balance at 31 December 16,170 (7,743) (863) 7,564 2020 OPENING BALANCE CHARGED TO STATEMENT OF COMPR. INCOME CHARGED TO OTHER COMPR. INCOME CLOSING BALANCE TEMPORARY DIFFERENCES Provisions for jubilee awards and termination benefi ts 711 45 - 756 Deferred tax liabilities from allocation of purchase price on fair value of Tisza Automotive Kft. (842) 167 - (675) Deferred tax assets from carried-over tax losses 5,317 (1,673) 2,802 6,446 Diff erences between tax depreciation rates and accounting depreciation rates (1,118) 41 - (1,077) Investment tax credit 16,814 (9,009) - 7,805 Impairment of Investment property 2,914 - - 2,914 Balance at 31 December 23,797 (10,429) 2,802 16,170 210 INTEGRATED ANNUAL REPORT . INCOME TAX (continued) Reconciliation between the accounting and tax results is shown as follows: 2021 2020 Profi t before tax 47,871 57,368 Tax using the Company’s domestic tax rate (18%) 8,617 10,326 Eff ect of tax rates in foreign jurisdictions 1,514 480 TAX EFFECT OF Share of profi t of equity-accounted investees reported, net of tax (2,752) (3,597) Non-deductible expenses 3,874 5,558 Tax exempt revenue (3,780) (1,169) Non-taxable incentives for jobs preservations - (5,624) Write-off of deferred tax assets 7,675 4,460 Changes in the assessment of the cost of income tax from previous years -6 Profi t tax expense 15,148 10,440 Eff ective tax rate 31.64% 18.20% On 24 October 2012 company AD Plastik d.d. fi led with the Ministry of Economy the Applica- tion for Incentive Measures for the investment project "Expansion of Production for the Pur- pose of Export of Car Industry Products", in ac- cordance with the Act on Investment Promo- tion and Development of Investment Climate (OG 111/2012 and 28/2013) and the Investment Promotion and Development of Investment Cli- mate (OG 40/2013). As a result, company AD Plastik d.d. made in- vestments in fi xed assets, having thus met the prerequisites for the utilization of the tax in- centives for 2021. From the date of 0 January 2022 the Company doesn't have the right of use of remaining tax incentives. Due to those rea- sons on the date of 31 December 2021 the rever- sal recognition of deferred tax assets was done in the amount of HRK 7,675 thousand. 211 INTEGRATED ANNUAL REPORT RESERVES FROM ACCRUALS OF FOREIGN EXCHANGE DIFFERENCES – TRANSAC- TIONS WITH SUBSIDIARIES EXCHANGE DIFFERENC- ES FROM TRANSLATION A FOREIGN OPERATIONS – TRANSACTIONS WITH SUBSIDIARIES 2021 2020 2021 2020 Balance at beginning of the year (20,790) (6,018) (50,457) (32,763) Exchange diff erences from translation of foreign operations - - 3,772 (17,694) Accruals of foreign exchange diff erences from the current year 6,162 (21,051) - - Income tax (1,232) 4,210 - - Exchange diff erences from translation of foreign operations, net 4,929 (16,841) 3,772 (17,694) Realization of exchange diff erences - 2,069 - - Balance at end of year (15,861) (20,790) (46,685) (50,457) . EXCHANGE DIFFERENCES FROM TRANSLATION OF FOREIGN OPERATIONS AND RESERVES FROM ACCRUALS OF FOREIGN EXCHANGE DIFFERENCES – TRANSACTIONS WITH SUBSIDIARIES 212 INTEGRATED ANNUAL REPORT . EARNINGS PER SHARE Basic earnings per share are determined by dividing the Group’s net profi t by the weight- ed average number of ordinary shares in issue during the year, excluding the average num- ber of ordinary shares redeemed and held by the Group as treasury shares. The basic earn- ings per share equal the diluted earnings per share, as there are currently no share options that would potentially increase the number of issued shares. 2021 2020 Net profi t (in HRK '000) 32,723 46,929 Weighted average number of shares 4,143,207 4,130,526 Basic and diluted earnings per share (in HRK and lipas) 7.90 11.36 2021 2020 Issued ordinary shares at 1 January 4,199,584 4,199,584 Eff ect of treasury shares held (50,353) (69,058) Eff ect of treasury shares disposed of (6,024) - Weighted-average number of ordinary shares at 31 December 4,143,207 4,130,526 . INTANGIBLE ASSETS Projects comprise investments in the devel- opment of new products that are expected to generate economic benefi ts in future periods. Consequently, the costs are amortised over the period in which the related economic benefi ts flow into the Group. Intangible assets under de- velopment mostly consists of capitalised devel- opment cost of new products. In 2021, the cost of net salaries and wages of HRK 3,750 thou- sand, the cost of taxes and contributions from salaries of HRK 1,283 thousand and the cost of contributions to salaries of HRK 679 thousand were capitalized in intagible assets. In the previous 2020, the capitalized cost of net salaries and wages amounted to HRK 3,907 thousand, the cost of taxes and contributions from salaries amounted to HRK 1,428 thou- sand, and the cost of contributions to salaries amounted to HRK 794 thousand. 213 . INTANGIBLE ASSETS (continued) Licences and Software Projects Other intangible assets Customer contracts Intangible assets under development Prepayments for intangible assets TOTAL COST Balance at 31 December 2019 14,286 265,882 7,519 10,226 28,944 13 326,870 Additions----14,900 55 14,955 Assets put into use 1,603 18,183 3 - (19,778) (11) - Disposals - (1,700) - - - - (1,700) Write off - (18,547) - - (461) - (19,009) Eff ect of exchange diff erences (320) (4,420) 3 - (251) (7) (4,994) Balance at 31 December 2020 15,569 259,397 7,526 10,226 23,354 50 316,122 Additions----23,851(52)23,799 Assets put into use 715 17,572 272 - (18,560) - - Disposals - (1,330) - - - - (1,330) Write off (106) (87,241) - - - - (87,347) Transferred to property, plant and equipment (Note 19) - - (1,567) - - - (1,567) Eff ect of exchange diff erences (1) 660 (1) - - 2 660 Balance at 31 December 2021 16,177 189,059 6,230 10,226 28,645 - 250,337 ACCUMULATED AMORTISATION Balance at 31 December 2019 11,282 207,265 749 2,542 - - 221,838 Charge for the year (Note 10) 1,705 24,521 1,123 1,795 - - 29,144 Disposals - (38) - - - - (38) Write off - (16,040) - - - - (16,040) Eff ect of exchange diff erences (116) (4,037) 4 - - - (4,149) Balance at 31 December 2020 12,871 211,670 1,875 4,338 - - 230,754 Charge for the year (Note 10) 1,665 17,546 1,117 1,794 - - 22,123 Disposals - (8) - - - - (8) Write off (106) (86,385) - - - - (86,491) Transferred to property, plant and equipment (Note 19) - - (135) - - - (135) Eff ect of exchange diff erences (11) 587 5 - - - 581 Balance at 31 December 2021 14,419 143,411 2,863 6,132 - - 166,825 NET BOOK VALUE Balance at 31 December 2020 2,698 47,727 5,650 5,888 23,354 50 85,368 Balance at 31 December 2021 1,758 45,648 3,367 4,094 28,645 - 83,512 214 . PROPERTY, PLANT AND EQUIPMENT Land Buildings Plant and equipment Other tangible assets Assets under development Prepayments for tangible assets Total COST Balance at 31 December 2019 136,835 383,874 973,791 2,659 20,641 2,391 1,520,193 Additions - - - - 51,586 857 52,443 Assets put into use 194 9,184 54,955 175 (62,544) (1,963) - Disposals - - (4,521) (10) - - (4,531) Write off and retirements - (4,039) (10,200) (275) - - (14,514) Transferred from investment property (Note 21) 262 2,821 - - - - 3,083 Eff ect of exchange diff erences (956) (21,334) (72,713) (276) (288) (361) (95,929) Balance at 31 December 2020 136,335 370,506 941,312 2,273 9,395 923 1,460,746 Additions - - - - 41,534 11,240 52,775 Assets put into use - 5,626 35,358 499 (40,671) (811) - Disposals - - (4,602) (5) - - (4,607) Write off and retirements - (1,918) (135,417) (128) (288) - (137,751) Transferred from intangible assets (Note 18) 1,432 - - - - - 1,432 Eff ect of exchange diff erences 210 4,555 12,695 8 144 356 17,968 Balance at 31 December 2021 137,976 378,768 849,345 2,646 10,114 11,709 1,390,561 ACCUMULATED DEPRECIATION Balance at 31 December 2019 - 102,266 628,866 2,155 - - 733,287 Charge for the year (Note 10) - 5,683 52,760 169 - - 58,612 Disposals - - (3,554) (10) - - (3,564) Write off and retirements - (1,659) (9,755) (183) - - (11,597) Transferred from investment property (Note 21) -907----907 Eff ect of exchange diff erences - (5,839) (60,271) (248) - - (66,357) Balance at 31 December 2020 - 101,358 608,047 1,883 - - 711,288 Charge for the year (Note 10) - 6,236 53,921 294 - - 60,451 Disposals - - (4,167) (5) - - (4,172) Write off and retirements - (1,640) (135,165) (128) - - (136,933) Eff ect of exchange diff erences - 1,425 9,828 (3) - - 11,250 Balance at 31 December 2021 - 107,378 532,463 2,042 - - 641,884 NET BOOK VALUE Balance at 31 December 2020 136,335 269,148 333,265 390 9,395 923 749,457 Balance at 31 December 2021 137,976 271,390 316,882 604 10,114 11,709 748,677 215 INTEGRATED ANNUAL REPORT . PROPERTY, PLANT AND EQUIPMENT (continued) . RIGHT OF USE ASSET From assets mentioned in Note 19 Proper- ty, plant and equipment and in Note 21 Invest- ment property, pledged assets are lands with the book value on the date of 31.12.2021 of (all in HRK thousand) 142,811 (31.12.2020 141,792), build- ings 213,297 (31.12.2020 214,983) and plant and equipment 63,362 (31.12.2020 70,334). The men- tioned assets include land in the net book value of HRK 11,245 thousand and buildings with the net book value of HRK 11,416 thousand that are part of investment property. LAND BUILDINGS PLANT AND EQUIPMENT TOTAL COST Balance at 31 December 2019 213 15,920 8,939 25,072 Additions 31 1,208 1,030 2,269 Lease modifi cation, net - (564) (1,696) (2,260) Eff ect of exchange diff erences (51) (103) (152) (306) Balance at 31 December 2020 193 16,461 8,121 24,775 Additions - 13,870 11,201 25,071 Lease modifi cation, net 28 (17) (391) (380) Retirements - (5,652) (4,065) (9,717) Eff ect of exchange diff erences 15 29 (130) (86) Balance at 31 December 2021 236 24,691 14,736 39,663 ACCUMULATED DEPRECIATION Balance at 31 December 2019 19 5,584 3,571 9,174 Charge for the year (Note 10) 13 5,827 2,660 8,500 Lease modifi cation, net - (454) - (454) Eff ect of exchange diff erences (5) (85) (80) (170) Balance at 31 December 2020 27 10,872 6,151 17,050 Charge for the year (Note 10) 16 5,710 3,125 8,851 Lease modifi cation - - (227) (227) Retirements - (5,652) (4,097) (9,749) Eff ect of exchange diff erences 2 25 (34) (7) Balance at 31 December 2021 45 10,955 4,918 15,918 NET BOOK VALUE Balance at 31 December 2020 166 5,589 1,970 7,725 Balance at 31 December 2021 191 13,736 9,818 23,745 216 INTEGRATED ANNUAL REPORT . RIGHT OF USE ASSET (continued) AMOUNTS RECOGNISED IN PROFIT AND LOSS 2021 2020 Depreciation expense on right of use assets 8,851 8,500 Interest expense on lease liabilities 482 273 Expense relating to leases of low value 2,166 1,768 Expense relating to short-term leases 1,111 2,428 Expenses relating to variable lease payments not included in the measurement of lease liability 379 1,034 12,989 14,003 In accordance with IFRS 16, Group has classifi ed leases for land, buildings and plant and equip- ment as “Right-of-use asset”. Within the cate- gory "Buildings", apartments and the leases of offi ce buildings and warehouses used by the Group in business are located in. The "Plant and equipment" category includes concluded ma- chines, car and forklift rental agreements. 217 INTEGRATED ANNUAL REPORT . INVESTMENT PROPERTY LAND BUILDINGS TOTAL COST Balance at 31 December 2019 16,797 38,010 54,807 Value increase of investment property - 22 22 Transferred to property, plant and equipment (Note 19) (262) (2,821) (3,083) Disposal (5,290) (14,303) (19,593) Eff ect of exchange diff erences - (581) (581) Balance at 31 December 2020 11,245 20,327 31,572 Value increase of investment property - 94 94 Derecognition - (14) (14) Eff ect of exchange diff erences - (187) (187) Balance at 31 December 2021 11,245 20,220 31,465 ACCUMULATED DEPRECIATION Balance at 31 December 2019 - 13,783 13,783 Charge for the year (Note 10) - 734 734 Transferred to property, plant and equipment (Note 19) - (907) (907) Disposal - (6,936) (6,936) Eff ect of exchange diff erences - 40 40 Balance at 31 December 2020 - 6,714 6,714 Charge for the year (Note 10) - 388 388 Derecognition - (14) (14) Eff ect of exchange diff erences - (336) (336) Balance at 31 December 2021 - 6,752 6,752 NET BOOK VALUE Balance at 31 December 2020 11,245 13,613 24,858 Balance at 31 December 2021 11,245 13,468 24,713 218 INTEGRATED ANNUAL REPORT . INVESTMENT PROPERTY (continued) . INVESTMENTS IN ASSOCIATES Income from the rental of the building in 2021 amounts to HRK 1,998 thousand (2020: HRK 2,039 thousand), and the depreciation charge for the year 2021 amounts to HRK 388 thousand (2020: HRK 734 thousand). At 31 December 2021 the carrying amount ap- proximates the fair value. Fair value has been internally determined by the Group based on the income capitalisation method which assumes the sustainable annual lease income which investment property gen- erates or is able to generate during its ordinary course of business. This valuation technique considers the present value of net future cash flows to be generated from the property, tak- ing into account expected rental growth rate, occupancy rate and other costs not borne by the tenants. Among other factors, the discount rate estimation considers the quality of the buildings and their location, potential tenants’ quality and currently achievable lease terms. Underlying assumptions used in determination of fair value are based on unobservable inputs whereby the most signifi cant ones are yield at level of 8% and rent ranging from 5 to 5.50 eur per sqm. Those inputs are derived from the publications of reputable property valuation companies and from the current eff ective lease contracts of the Group. NAME OF ASSOCIATE PRINCIPAL ACTIVITY COUNTRY OF INCORPO- RATION AND BUSINESS OWNERSHIP INTEREST IN % AMOUNT OF EQUITY INVESTMENT, HRK'000 2021 2020 2021 2020 EURO Auto Plastic Systems Manufacture of other vehicle spare parts and accessories Mioveni, Romania 50.00% 50.00% 67,531 71,964 67,531 71,964 NAME OF ASSOCIATE AMOUNT OF EQUITY INVESTMENT 31.12.2019 SHARE IN THE RESULT FOR THE YEAR  DIVIDEND PAID AMOUNT OF EQUITY INVESTMENT 31.12.2020 EURO Auto Plastic Systems 92,507 19,982 (40,525) 71,964 Total 92,507 19,982 (40,525) 71,964 219 INTEGRATED ANNUAL REPORT . INVESTMENTS IN ASSOCIATES (continued) . OTHER FINANCIAL ASSETS . INVENTORIES NAME OF ASSOCIATE AMOUNT OF EQUITY INVESTMENT 31.12.2020 SHARE IN THE RESULT FOR THE YEAR  DIVIDEND PAID AMOUNT OF EQUITY INVESTMENT 31.12.2021 EURO Auto Plastic Systems 71,964 15,289 (19,722) 67,531 Total 71,964 15,289 (19,722) 67,531 Euro Auto Plastic Systems s.r.l. is considered to be associate since the management of its oper- ations is under the control of Faurecia Automo- tive Holdings s.a.s. The detailed information on the fi nancial position and fi nancial performance is disclosed in the section Business: Financial results 2021 of the integrated annual report part of which are also these fi nancial statements. 31.12.2021 31.12.2020 Other fi nancial assets - 62 -62 31.12.2021 31.12.2020 Raw material and supplies on stock 99,256 85,772 Finished products 27,509 31,149 Tools 25,434 33,235 Prepayments for inventories 23,167 14,021 Work in progress 12,346 13,915 Merchandise on stock 5,715 3,883 193,427 181,975 220 INTEGRATED ANNUAL REPORT . INVENTORIES (continued) . TRADE RECEIVABLES The amount of inventories recognised as an ex- pense during the 2021 was HRK 844,344 thou- sand (in the 2020 the expense was HRK 900,510 thousand). Total write-down of inventories in 2021 was HRK 2,941 thousand (in 2020 it was HRK 13,099 thousand). 31.12.2021 31.12.2020 Foreign trade receivables 230,776 261,736 Domestic trade receivables 3,733 5,994 Foreign trade receivables from the associate 2,545 4,380 Impairment loss allowance (3,817) (4,449) 233,237 267,661 The average debtors’ days were 73 days in 2021 (2020: 73 days). The movements in allowance loss in respect of trade receivables are presented as follows: 2021 2020 Balance at beginning of the year 4,449 3,530 Movements based on IFRS 9 expected credit losses calculation for year end 760 1,046 Collected during the year (761) (95) Receivables written off (590) (199) Exchange diff erences (41) 167 Total impairement loss allowance 3,817 4,449 221 INTEGRATED ANNUAL REPORT 31.12.2021 31.12.2020 0-90 days past due 32,296 19,958 91-180 days past due 1,589 2,700 181-365 days past due 2,504 2,034 Over 365 days past due 1,376 892 Not due 195,472 242,077 233,237 267,661 . TRADE RECEIVABLES (continued) . OTHER RECEIVABLES . CURRENT FINANCIAL ASSETS Ageing analysis of receivables is shown as follows: At 31 December 2021, the carrying amount of the receivables from companies in the same group was HRK 89,907 thousand (2020: HRK 100,235 thousand). 31.12.2021 31.12.2020 Receivables from the State and State institutions 20,801 21,029 Prepayments made 4,244 3,045 Due from employees 190 135 Other receivables 21 53 25,256 24,262 31.12.2021 31.12.2020 Receivables for given guarantees - 898 -898 222 INTEGRATED ANNUAL REPORT . CASH AND CASH EQUIVALENTS . PREPAID EXPENSES AND ACCRUED INCOME . SHARE CAPITAL 31.12.2021 31.12.2020 Current account balance 27,879 48,923 Deposits 2,235 13,714 Cash in hand 38 30 30,152 62,667 As at 31 December 2021 the amount of HRK 2,235 thousand (31 December 2020 HRK 13,714 thousand) includes short term deposits which bear interest rate ranging from 4.00% to 7.00%. 31.12.2021 31.12.2020 Accrued income on tools 277 11,424 Prepaid operating expenses 3,405 1,900 Other accrued income 3,850 10,337 7,532 23,661 Accrued income presented within this note are trade receivables, as they give right to collect pay- ment from customer, but were not invoiced at the balance sheet date. Subscribed capital amounts to HRK 419,958 thousand and consists of 4,199,584 shares, with a nominal value of HRK 100.00 per share (2020: HRK 419,958 thousand; 4,199,584 shares, with a nominal value of HRK 100.00 each). Capital re- serves are the diff erences between the nominal and sale value of shares. Statutory and general reserves consist of legal and statutory reserves and reserves for unwritten development costs. Reserves were made by transferring from re- tained earnings to the position of legal and general reserves in the Group's capital in ac- cordance with the local legislation. The transfer of capitalized development costs to intangible assets is made on the basis of net book value. 223 INTEGRATED ANNUAL REPORT . SHARE CAPITAL (continued) . LONG-TERM AND SHORT- TERM PROVISIONS The treasury share item refers to 50,353 treas- ury shares as at 31.12.2021 while on 31.12.2020 treasury shares amounted 69,058. Reserves for own shares are created based on Board deci- sions for future purchases of own shares. Retained earnings consists of retained earn- ings, profi t for the year and all the transfers from retained earnings (dividend payments, transfer to reserves). Reserves of accruals foreign exchange have been formed on the basis of accrued exchange rate diff erences in the Group's capital. In accordance with the General Assembly de- cision on 16 March 2021, a decision to use part of the 2019 profi t for dividend payments in the amount of HRK 8 per share was adopted. In accordance with the General Assembly deci- sion on 15 July 2021, a decision to use part of the 2020 profi t for dividend payments in the amount of HRK 8 per share was adopted (dur- ing 2020, a decision was made on the payment of dividends from retained earnings in 2019 in the amount of HRK 12.00 per share). SHORT-TERM LONG-TERM 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Vacation accrual 3,588 4,101 - - Employee bonuses 4,220 8,000 - - Termination benefi ts 1,589 223 2,739 2,742 Jubilee awards (long-service benefi ts) 439 336 1,637 1,827 Legal cases 1,177 1,343 537 - Risks within the warranty period 998 998 - - 12,011 15,001 4,913 4,569 224 INTEGRATED ANNUAL REPORT Movement in provisions was as follows: JUBILEE AWARDS RETIRE- MENT/ TERMI- NATION BENE- FITS LEGAL CASES VACATION ACCRUAL EMPLOYEE BONUSES RISKS WITH- IN THE WAR- RANTY PERIOD TOTAL Balance at 1 January 2021 2,163 2,965 1,343 4,101 8,000 998 19,570 Increase/ (decrease) in provisions,net (88) 1,363 371 (513) (3,779) - (2,646) Balance at 31 December 2021 2,075 4,328 1,714 3,588 4,221 998 16,924 Balance at 1 January 2020 1,996 2,349 617 8,354 6,317 - 19,633 Increase/ (decrease) in provisions,net 167 616 726 (4,253) 1,683 998 (64) Balance at 31 December 2020 2,163 2,965 1,342 4,101 8,000 998 19,569 The part of the provision included in other staff costs is shown in Note 9. Jubilee awards and termination benefi ts According to the Union (Collective) Agreement, the Group has the obligation to pay long-ser- vice (jubilee awards), retirement-related and other benefi ts to employees. Benefi ts payable upon retirement and long-service benefi ts are defi ned in the Collective Agreement and em- ployment agreements. No other post-retire- ment benefi ts are provided. Long-service benefi ts are paid for full years of service in the month of the current year in which the service is determined as completed. The present value of defi ned benefi t obliga- tions arising from long-service benefi ts and benefi ts payable upon retirement is deter- mined using the Projected Credit Unit method and serves as the basis for arriving at the past and current service costs, the interest expense and the actuarial gain or loss. For employees of the Group, legal contributions for pension insurance are paid. Legal contribu- tions form the basis for pensions paid by the Pension Funds to Group's employees upon their retirement.All companies within the Group use a discount rate, fluctuation rate and mortality data that are in line with the company's country of residence when calculating provisions. . LONG-TERM AND SHORT-TERM PROVISIONS (continued) 225 INTEGRATED ANNUAL REPORT . LONG-TERM BORROWINGS 31.12.2021 31.12.2020 Long-term borrowings 316,536 259,164 Deposits received - 185 Long-term commodity loans provided by suppliers 4,636 6,419 321,172 265,768 Current portion of long-term borrowings (Note 37) (75,949) (86,291) 245,223 179,477 From total long term borrowings in amount of HRK 245,223 thousand at 31.12.2021, HRK 93,823 thousand refers to loans denominated in HRK currency while HRK 151,400 thousand refers to loans denominated in EUR. From total long term borrowings and deposits in amount of HRK 179,477 thousand at 31.12.2020, HRK 10,462 thousand refers to loans and depos- its denominated in HRK currency while HRK 169,015 thousand refers to loans denominated in EUR. Long-term borrowings are used to fi nance cap- ital investments and development projects. In- struments of collateral provided for the for long-term loans include mortgage on real es- tate and equipment (Note 19) and payment in- struments. The majority of existing long-term loans are paid quarterly. In 2021, the weighted average interest rate on the long-term loans was 1.32% (2020: 2.11 %). Movements in payables for long-term borrowings during the year: 2021 2020 Balance at 1 January 179,477 237,906 New loans raised 137,333 36,887 Decrease in deposits received (185) (415) Exchange diff erences, net (107) (3,181) Reclassifi cation to short-term loans (Note 37) (69,789) (91,720) Transfer to grant liabilities (1,506) - Balance at 31 December 245,223 179,477 226 INTEGRATED ANNUAL REPORT . OTHER LONG TERM LIABILITIES . LEASE LIABILITIES . ADVANCES RECEIVED 2021 2020 Grant liabilities 1,506 - Other long term liabilities - 398 Total other long term liabilities 1,506 398 Grant liabilities arose as a result of borrowing from a fi nancial institution at an interest rate lower than the market rate. 2021 2020 Balance at 1 January 7,980 16,100 Additions 25,071 2,269 Lease modifi cations, net (195) (1,807) Interest expense on lease liabilities 482 273 Principal paid (8,624) (8,436) Interest paid (482) (273) Eff ect of exchange diff erences (80) (146) 24,152 7,980 Long-term liabilities 15,744 3,738 Short-term liabilities 8,408 4,242 31.12.2021 31.12.2020 Foreign customers 38,568 32,129 38,568 32,129 Advances received from foreign customers represent cash advanced ordered tools. 227 INTEGRATED ANNUAL REPORT 36. TRADE PAYABLES 37. SHORT-TERM BORROWINGS 31.12.2021 31.12.2020 Foreign trade payables 89,582 128,601 Domestic trade payables 30,456 36,510 120,038 165,111 Average payment period for trade payables during 2021 equalled to 59 days (2020: 79 days). 31.12.2021 31.12.2020 Short-term loans – principal payable 63,144 131,240 Current portion of long-term borrowings (Note 32) 75,949 86,291 Short-term commodity loans provided by suppliers 1,592 1,590 Short-term borrowings – interest payable 596 858 141,281 219,978 From total short term borrowings in amount of HRK 141,281 thousand at 31.12.2021, HRK 14,263 thousand refers to loans denominated in HRK currency, while HRK 127,018 thousand refers to loans denominated in EUR. From total short term borrowings in amount of HRK 219,978 thousand at 31.12.2020, HRK 21,252 thousand refers to loans denominated in HRK currency, HRK 9,382 thousand refers to loans denominated in RUB currency, while HRK 189,344 thousand refers to loans denominated in EUR. The short-term borrowings were used to fi - nance development projects and for working capital purposes. Instruments of collateral pro- vided for the short-term borrowings are pay- ment instruments (bills of exchange, promisso- ry notes and corporate guarantee by AD Plastik d.d.) The short-term borrowings represent loans provided by the commercial banks, with an weighted average interest rate of 1.11% (2020: 1.31 %). 228 INTEGRATED ANNUAL REPORT 2021 2020 Balance at 1 January 219,978 232,141 New loans raised 27,025 53,264 Reclasifi cation on current portion of long-term borrowings (Note 32) 69,789 91,720 Invoiced interest 4,623 9,702 Exchange diff erences 49 910 Interest paid (5,241) (9,140) Repayments of received loans (173,905) (158,619) Transfer to grant liabilities (1,037) - Balance at 31 December 141,281 219,978 . SHORT-TERM BORROWINGS (continued) . OTHER CURRENT LIABILITIES 31.12.2021 31.12.2020 Due to the State and State institutions 19,581 22,559 Amounts due to employees 12,449 14,397 Grant liabilities 1,037 - Other current liabilities 1,183 1,157 34,250 38,113 Grant liabilities arose as a result of borrowing from a fi nancial institution at an interest rate lower than the market rate. 229 INTEGRATED ANNUAL REPORT . ACCRUED EXPENSES . GOODWILL 31.12.2021 31.12.2020 Other current liabilities 8,663 17,438 Accrued tool expenses 614 527 9,277 17,965 31.12.2021 31.12.2020 Goodwill resulting from acquisition of Tisza Automotive Kft. 18,014 18,014 Goodwill resulting from acquisition of KZA 7,105 6,604 25,119 24,618 Recognized goodwill relates to: • the diff erence between fair value of net assets of KZA and the value paid for the purchase of KZA by ZAO AD Plastik Kaluga. Company KZA has been merged with company ZAO AD Plas- tik Kaluga. • the diff erence between fair value of the net assets of AD Plastik Tisza Kft. and the value paid for the purchase of AD Plastik Tisza Kft. by AD Plastik d.d. Solin. 2021 2020 Balance at 1 January 24,618 26,543 Eff ect of exchange diff erences 501 (1,925) Balance at 31 December 25,119 24,618 In 2021 the Group tested goodwill for impair- ment which is allocated on cash generating unit. In 2021 recoverable amount of each cash generating unit was determined under fair val- ue less cost of the disposal concept. Fair value was determined using income approach and Movement of goodwill: 230 INTEGRATED ANNUAL REPORT . GOODWILL (continued) . RELATED PARTY TRANSACTIONS discounted cash flows which require the use of assumptions. The calculations use cash flow projections based on fi nancial budgets cover- ing a three-year period. Cash flows beyond the three-year period are extrapolated using the estimated growth rates which is determined for each cash generating unit separately. The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources. The cash flow projections included specifi c es- timates for three years and a terminal growth rate thereafter. The terminal growth rate was determined based on the estimate of the long- term GDP growth rate, consistent with the as- sumptions that a market participant would make. Budgeted EBITDA was estimated taking into account past experience, adjusted as follows. • new projects with customers either contract- ed with, announced by or subject to the nego- tiations with customers. By performing the impairment test of goodwill, the Group has concluded that no impairment should be recognised. RECEIVABLES AND PAYABLES FOR GOODS,SERVICES AND INTEREST RECEIVABLES PAYABLES 31.12.2021 31.12.2020 31.12.2021 31.12.2020 EURO Auto Plastic Systems, Romania 2,545 4,381 - 1,657 Sankt-Peterburgskaya investicionnaya kompaniya - - 114 166 2,545 4,381 114 1,823 PURCHASE TRANSACTIONS Operating and fi nancing income and expenses INCOME PURCHASES 2021 2020 2021 2020 EURO Auto Plastic Systems, Romania 9,311 9,648 10,883 - AO Holding Autokomponenti 1,000 - - - Sankt-Peterburgskaya investicionnaya kompaniya --451659 10,311 9,648 11,334 659 Transactions with associated companies were as follows: 231 INTEGRATED ANNUAL REPORT RECEIVABLES AND PAYABLES FOR LOANS RECEIVABLES PAYABLES 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Sankt-Peterburgskaya investicionnaya kompaniya - - 37,586 37,684 - - 37,586 37,684 . RELATED PARTY TRANSACTIONS (continued) . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Sankt-Peterburgskaya investicionnaya kom- paniya is member of Group in which is also company AO Holding Autokomponenti. The Company AO Holding Autokomponenti holds 30% of shares in Company AD Plastik d.d. The total remuneration provided to the members of the Supervisory Board of AD Plastik d.d. and subsidiaries, The President and members of Management Board, Board Assistants and Gen- eral directors of subsidiaries in 2021 amounts to 16,570 HRK thousand (in 2020 HRK 14,826 thou- sand). . GEARING RATIO The Group's gearing ratio, expressed as the ratio of net debt to equity, is as follows: 31.12.2021 31.12.2020 Short-term borrowings (Note 37) 141,282 219,978 Long-term borrowings (Note 32) 245,223 179,291 Cash and cash equivalents (Note 28) (30,152) (62,667) Net debt 356,353 336,602 Equity 839,245 860,625 Net debt-to-equity ratio 42.46% 39.11% Comodity loans at 31 December 2021 amount- ed HRK 6,228 thousand (31 December 2020: HRK 8,009 thousand) (Note 32 and Note 37). Above referred amounts are included in the Groups net debt. Equity consists of share capital, re- serves, reserves for own shares, own shares, re- tained earnings and profi t for the year. 232 INTEGRATED ANNUAL REPORT . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) . CATEGORIES OF FINANCIAL INSTRUMENTS 31.12.2021 31.12.2020 Financial assets 267,727 353,237 Trade receivables (Note 25) 233,237 267,661 Given loans and other fi nancial assets (Notes 23, 27) - 62 Cash and cash equivalents and deposits (Note 28) 30,152 62,667 Accrued income and other fi nancial assets 4,338 22,847 Financial liabilities 552,976 595,217 Loans and deposits received (Notes 32, 37) 386,505 399,455 Trade, other payables and accruals 142,319 187,782 Lease liabilities (Note 34) 24,152 7,980 Accrued income and other liabilities include accrued income, other receivables less receivables from the State and advances given. Trade, other payables and accruals includes: trade payables, lease liabilities, other payables, accrued expenses less payables to the State which includes refund of COVID-19 grants. Details of concentration of credit risk are in- cluded in Note 25 Trade receivables. The Group undertakes certain transactions de- nominated in foreign currencies. Hence, expo- sures to exchange rate fluctuations arise. The carrying amounts of the Group’s foreign-cur- rency denominated monetary assets and Detailed information on credit risk manage- ment is stated under chapter Risks and oppor- tunities in business of the Integrated annual report which integral part are those fi nancial statements. . FOREIGN CURRENCY RISK MANAGEMENT monetary liabilities at the reporting date are provided in the table below using the middle exchange rates of the Croatian National Bank: 233 INTEGRATED ANNUAL REPORT . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) At 31 December ASSETS LIABILITIES NET FX POSITION 2021 2020 2021 2020 2021 2020 EUR 422,945 431,897 588,829 649,595 (165,884) (217,698) USD 58 29 2 32 56 (3) GBP 30 6 18 5 12 1 CZK - 1,017 - - - 1,017 RON - 824 - - - 824 423,033 433,773 588,849 649,632 (165,816) (215,859) In HRK 422,945 thousand of EUR assets and HRK 588,829 EUR liabilities (in 2020 HRK 431,897 thousand) is included exposure on EUR intra Group receivables and loans in amount of HRK 206,775 thousand (in 2020 HRK 182,220 thou- sand). In addition, the reminder of HRK 51,645 thousand of assets and HRK 173,446 thousand of liabilities as at 31 December 2021 (31 Decem- ber 2020: HRK 101,684 thousand of assets and HRK 127,805 thousand of liabilities) relates to exposure in domestic currencies. Foreign currency sensitivity analysis Foreign currency risk note includes exchange rate exposure of all monetary positions in all companies of the Group, which generate foreign exchange diff erences in separate reports of those companies. On 31 December 2021, if EUR were to depreciate/appreciate by 1% compared to HRK, assuming all other variables remain un- changed, net profi t of the Group for 2021 would be HRK 820 thousand (lower)/higher (2020: HRK 975 thousand higher/(lower), because of (negative)/positive foreign exchange diff erenc- es generated by conversion of trade receiva- bles, cash and cash equivalents, trade payables and loans received denominated in EUR. On 31 December 2021, if RUB were to depreciate/ appreciate by 1% compared to EUR, assuming all other variables remain unchanged, net profi t of the Group for 2021 would be HRK 744 thousand lower/higher (2020: HRK 326 thousand) (lower)/ higher, because of (negative)/positive foreign exchange diff erences generated by conversion of trade receivables, cash and cash equivalents, trade payables and loans received originally de- nominated in euros. . LIQUIDITY RISK MANAGEMENT Ultimate responsibility for liquidity risk man- agement rests with the Management Board. The Group manages its liquidity using bank- ing facilities (overdrafts) and by continuous- ly monitoring forecast and actual cash flows and matching the maturity profi les of fi nancial . FOREIGN CURRENCY RISK MANAGEMENT (continued) 234 INTEGRATED ANNUAL REPORT . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) 2021 Weighted average interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years TOTAL CARRYING AMOUNT ASSETS Non-interest bearing - 182,209 80,026 3,257 - - 265,492 265,492 Interest bearing 4.90% 2,244 - - - - 2,244 2,235 184,453 80,026 3,257 - - 267,736 267,727 LIABILITIES Non-interest bearing - 84,340 49,356 8,623 - - 142,319 142,319 Interest bearing 1.24% 1,933 16,088 127,125 245,581 7,328 398,055 386,505 Lease liability 2.13% 725 1,453 6,653 16,226 - 25,057 24,152 86,998 66,897 142,401 261,807 7,328 565,431 552,976 2020 Weighted average interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years TOTAL CARRYING AMOUNT ASSETS Non-interest bearing - 186,261 136,601 16,599 - 62 339,523 339,523 Interest bearing 2.60% 2,084 11,719 - - - 13,803 13,714 188,345 148,320 16,599 - 62 353,326 353,237 LIABILITIES Non-interest bearing - 105,240 76,537 6,863 185 - 188,825 188,825 Interest bearing 1.65% 39,931 24,796 159,841 181,789 2,262 408,619 398,410 Lease liability 2.23% 364 730 3,275 4,225 - 8,594 7,982 145,535 102,063 169,979 186,199 2,262 606,038 595,217 . LIQUIDITY RISK MANAGEMENT (continued) assets and liabilities. The following tables detail the Group’s remaining contractual maturity for its non-derivative fi nancial assets and liabilities. The tables have been drawn up based on the undiscounted cash flows of fi nancial assets and liabilities based on the earliest date on which the Group can require payment i.e. can be re- quired to pay. 235 INTEGRATED ANNUAL REPORT . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) . LIQUIDITY RISK MANAGEMENT (continued) From total interest bearing liabilities in amount of HRK 386,505 thousand at 31.12.2021, HRK 108,081 thousand refers to liabilities denomi- nated in HRK currency while HRK 278,424 thou- sand refers to liabilities denominated in EUR. From total interest bearing liabilities in amount of HRK 398,410 thousand at 31.12.2020, HRK 31,924 thousand refers to liabilities denominat- ed in HRK currency, HRK 9,142 thousand refers to liabilities denominated in RUB currency while HRK 357,734 thousand refers to liabilities de- nominated in EUR. Fair value is the price that would be generated from the sales of some item of an asset or paid for transferring some liability in a fair transac- tion between market participants at the meas- urement date, regardless of whether it would be directly visible or evaluated by applying some other valuation technique. At 31 December 2021 and 31 December 2020, the carrying amounts of cash, receivables, long-term and short-term li- abilities, accrued expenses, short-term borrow- ings and other fi nancial instruments approx- imate their fair values due to the short-term maturity of these assets and liabilities. . FAIR VALUE OF FINANCIAL INSTRUMENTS 236 INTEGRATED ANNUAL REPORT . EVENTS AFTER THE REPORTING PERIOD AND GOING CONCERN ASSUMPTION It is evident that the business activities are af- fected by the Russian-Ukrainian crisis, given that AD Plastik Group has two factories in Russia in which it generated approximately 25 percent of its consolidated revenue in 2021. These factories produce products exclusively for the Russian market and the current circum- stances complicate their business operations. The negative eff ects are noticeable primarily through: — volatility of the Russian rouble ex- change rate against the euro, — disruptions in the supply chain, and — announcements of a temporary shut- down of some of the main customers in the Russian market. Detail information about the fi nancial results and fi nancial position of factories operating on the Russian market is published in Note 4. Seg- ment information. In conjunction with its consolidated fi nan- cial statements for the year ended 3 Decem- ber 2021, management believes that the fi nan- cial statement impacts of these events and market conditions will be non-adjusting events (with the exception of the going concern as- sessment). This is because the signifi cant ad- verse changes in economic conditions and the political/ business environment developed as a direct consequence of events occurring af- ter the reporting date – i.e. the Russian-Ukrain- ian crisis invasion of Ukraine and the resulting implementation of economic sanctions by the international community. Since these impacts are generally considered to be non-adjusting events they do not aff ect amounts recognised as of 3 December 2021. In particular, among other things, such outcomes that would not have been reasonably expected as of 3 Decem- ber 2021 were not reflected in the recoverable amount calculations of non-fi nancial assets un- der IAS  Impairment of Assets or expected credit loss calculations of fi nancial assets under IFRS  Financial Instruments. That said, management cannot exclude the pos- sibility that the eff ects of the conflict will re- sult in the need to adjust the carrying amounts of the Group's assets in subsequent periods, including as a result of potential impairment write-downs. The Group remains committed to maintain- ing its presence in the Russian market for the foreseeable future. However, the Management Board can't rule out the possibility that ex- tended restrictions, escalating severity of such measures or the consequent negative impact of such measures on Russia's economic environ- ment will have a negative impact on the Group's operations in the country and its fi nancial posi- tion and performance in the medium and long term. We continue to closely monitor situations and will respond to mitigate the impact of such events and the circumstances as they occur. From the view point of the Group’s going con- cern assumption, cash flows from Russia to the parent company are not a signifi cant business item, and the liquidity of the Group, including 237 INTEGRATED ANNUAL REPORT . CONTIGENT LIABILITIES Based on the Management's estimate, the Group had no material contingent liabilities at 31 December 2021 and 3 December 2020 which would require to be disclosed in the notes to the consolidated fi nancial statements. The Group had no capital expenditure commit- ments contracted at 31 December 2021 which would require to be disclosed in the notes to the fi nancial statements. As at 31 December 2021 and 31 December 2020 there were no mate- rial legal actions with a potential negative out- come for the Group other than those reflected in these consolidated fi nancial statements. available unused credit lines, is more than sat- isfactory. Accordingly, management concluded that the above circumstances do not represent events or conditions that may cast signifi cant doubt on the Group’s ability to continue as a go- ing concern. While in Russia the business is adapting to the new circumstances, in the European market it is running smoothly and in accordance with busi- ness plans, as well as commercial activities relat- ed to sealing new deals. Despite the circumstances, the stability of AD Plastik Group's business operations is not en- dangered, development of the situation is moni- tored, various action scenarios have been devel- oped with the primary goal of minimizing risks and consequences. 237 . APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS These consolidated fi nancial statements were approved by the Management Board of AD Plastik d.d. and authorised for issue on 22 April 2022. For AD Plastik d.d. Solin by: Marinko Došen President of the Management Board Mladen Peroš Member of Management Board Ivan Čupić Member of Management Board Management Board Member of M anageme n INTEGRATED ANNUAL REPORT 238 INTEGRATED ANNUAL REPORT Page Responsibility of the Management Board for the separate fi nan- cial statements 239 Independent Auditors report 240-248 Separate statement of comprehensive income 250 Separate statement of fi nancial position 251-252 Separate statement of changes in shareholders' equity 253 Separate statement of cash flows 254-255 Notes to the separate fi nancial statements 256-309 AD Plastik d.d., Solin SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED  DECEMBER  INTEGRATED ANNUAL REPORT 239 Pursuant to the Accounting Act of the Republic of Croatia, the Management Board is responsible for ensuring that separate fi nancial statements are prepared for each fi nancial year in accordance with International Financial Reporting Standards (IFRSs), as adopted in the European union, which give a true and fair view of the fi nancial position and results of operations of AD Plastik d.d. Solin (the "Company") for that period. After making enquiries, the Management Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board continues to adopt the going concern basis in preparing the separate fi nancial statements. In preparing those separate fi nancial state- ments, the Management Board is responsible for: • selecting suitable accounting policies and then applying them consistently • making reasonable and prudent judgements and estimates • following applicable accounting standards and disclosing and explaining any material de- parture in the separate fi nancial statements • preparing the separate fi nancial statements under the going concern principle unless it is inappropriate to presume that the Company will continue in business. The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the fi nancial position of the Company and their compliance with the Croatian Accounting Act. The above stated responsibility includes the responsibility for accu- racy of the Management Report, which is an integral part of separate fi nancial statements and sub- mission of fi nancial statements in unique XBRL electronic reporting format (ESEF) prescribed by regulatory technical standards developed by ESMA (European Securities and Markets Authority) and adopted by the European Commission. The Management Board is also responsible for safe- guarding the assets of the Company, and hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities. Signed on behalf of the Management Board Responsibility of the Management Board for the separate fi nancial statements Marinko Došen President of the Management Board Mladen Peroš Member of Management Board Ivan Čupić Member of Management Board Management Board e mber o f a nagement B o For AD Plastik d.d. Solin by: AD Plastik d.d. Matoševa 8 21210 Solin Republic of Croatia 22 April 2022 240 242 243 244 245 246 247 248 249 250 INTEGRATED ANNUAL REPORT NOTES 2021 2020 Sales 4 726,82 3 844,2 47 Other income 5 18,582 27 ,41 3 Total income 7 45,405 871,660 Increase in the value of work in progress and fi nished products (1,6 27) 3,821 Cost of raw material and supplies 6 (307 ,984) (404,068) Cost of goods sold 7 (116,869) (90,236) Service costs 8 (6 2,716) (66,2 32) Staff costs 9 (161,487) (168,1 30) Depreciation and amortisation 10 (68,7 03) (7 2,36 3) Other operating expenses 11 (18,084) (26,7 51) Provisions for risks and charges (net) 12 (175) (1,665) Impairment of trade receivables (net) 25 (129) (5) Total operating expenses (7 37 ,77 4) (825,629) Profi t from operations 7 ,6 31 46,0 31 Financial income 13 23,2 48 44,06 7 Financial expenses 14 (6,7 47) (12,517) Profi t from fi nancing activities 16,501 31,550 Profi t before taxation 2 4,132 77 ,581 Income tax expense 15 (7 ,7 92) (8,948) Profi t for the year 16,340 68,6 33 Total comprehensive income for the year 16,340 68,6 33 Earnings per share Basic and diluted earnings per share (in kunas and lipas) 16 3.94 16.62 The accompanying accounting policies and notes form an integral part of these separate fi nancial statements. SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED  DECEMBER  (All amounts are expressed in thousands of kunas) INTEGRATED ANNUAL REPORT 251 INTEGRATED ANNUAL REPORT SEPARATE STATEMENT OF FINANCIAL POSITION AT  DECEMBER  ASSETS NOTE 31.12.2021 31.12.2020 NON-CURRENT ASSETS Intangible assets 17 7 3,552 70,4 7 9 Property, plant and equipment 18 535,2 32 558,4 94 Right-of-use assets 19 19,442 6,5 77 Investment property 20 22,661 22,815 Investments in associates 21 14 9,36 7 14 9,36 7 Other fi nancial assets 22 108,827 98,047 Long-term receivables 23 11,5 31 18,57 4 Deferred tax assets 15 3,7 1 3 11,506 Total non-current assets 92 4,325 9 35,85 9 CURRENT ASSETS Inventories 24 87 ,68 9 100,38 9 Trade receivables 25 215,296 225,6 7 3 Other receivables 26 13,7 38 14,9 12 Current fi nancial assets 27 12,940 24,421 Cash and cash equivalents 28 9,7 97 35,66 9 Prepaid expenses and accrued income 29 5,7 57 20,695 Total current assets 345,217 421,75 9 TOTAL ASSETS 1,269,542 1,35 7 ,618 (All amounts are expressed in thousands of kunas) INTEGRATED ANNUAL REPORT 252 INTEGRATED ANNUAL REPORT EQUITY AND LIABILITIES NOTE 31.12.2021 31.12.2020 Share capital 30 4 19,958 41 9,958 Capital and other reserves 278,8 95 28 3,6 31 Retained earnings and profi t of the year 82,36 7 12 4,095 Total shareholders' equity 781,220 827 ,684 Long-term provisions 31 3,854 3,98 5 Long-term borrowings 32 217 ,480 139,6 11 Other long term liabilities 33 1,506 39 7 Lease liabilities 34 12,6 7 3 3,164 Total non-current liabilities 235,5 13 14 7 ,15 7 Advances received 35 6,033 6,7 98 Trade payables 36 90,56 3 1 32,420 Short-term borrowings 37 115,48 5 19 1,142 Other current liabilities 38 18,218 19,680 Lease liabilities 34 7 ,1 38 3,612 Short-term provisions 31 8,816 12,680 Accrued expenses 39 6,556 16,445 Total current liabilities 25 2,809 382,777 Total liabilities 488,322 529,9 34 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,269,542 1,357 ,618 The accompanying accounting policies and notes form an integral part of these separate fi nancial statements. SEPARATE STATEMENT OF FINANCIAL POSITION AT  DECEMBER  (All amounts are expressed in thousands of kunas) 253 INTEGRATED ANNUAL REPORT The accompanying accounting policies and notes form an integral part of these separate fi nancial statements. Share capital Capital reserves General and legal reserves Reserves for own (treasury) shares Own (treasury) shares Retained earnings Total Balance at 31 December 2019 4 19,958 19 1,98 9 60,84 9 20,8 90 (11,7 95) 9 3,68 3 775,5 7 4 Profi t for the year - - - - - 68,63 3 68,6 33 Total comprehensive income for the year - - - - - 68,63 3 68,6 33 Dividends paid - - - - - (16,5 23) (16,52 3) Transactions with the owners of the Company - - - - - (16,52 3) (16,52 3) Reserves for not written off costs of development - - 21,6 99 - - (21,69 9) - Balance at 31 December 2020 4 19,958 19 1,98 9 82,548 20,8 90 (11,7 95) 12 4,095 827 ,684 Balance at 31 December 2020 4 19,958 19 1,989 82,548 20,8 90 (11,7 95) 124,095 827 ,684 Profi t for the year - - - - - 16,340 16,340 Total comprehensive income for the year - - - - - 16,340 16,340 Dividends paid - - - - - (66,292) (66,292) Disposal of own (treasury) shares - 29 3 - - 3,1 95 - 3,488 Transactions with the owners of the Company - 293 - - 3,195 (66,292) (6 2,804) Reversal of reserves for not written off costs of development - - (8,225) - - 8,225 - Balance at 31 December 2021 4 19,958 1 92,282 7 4,323 20,890 (8,600) 82,367 7 81,220 SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED  DECEMBER  (All amounts are expressed in thousands of kunas) 254 INTEGRATED ANNUAL REPORT CASH FLOWS FROM OPERATING ACTIVITIES NOTES 2021 2020 Profi t for the year 16,340 68,6 33 ADJUSTED FOR Income tax 15 7 ,7 92 8,948 Depreciation and amortisation 10 68,70 3 7 2,36 3 Tangible assets write-off 18 - 52 Intangible assets write-off 17 85 6 2,9 31 Interest expense and exchange rates recognised in profi t or loss 4,900 9,7 92 Dividend income 13 (19,7 22) (4 0,525) Gain from sale of property, plant and equipment and intangible assets 5 (1,303) (1,31 3) Gain from sale of investment property 5 - (11,396) Gain from sale of fi nancial assets 13 (7 2) - Interest income 13 (3,454) (3,542) (Decrease)/increase in long-term and short-term provisions (net) (3,7 5 3) 43 Impairment of loans given, net 14 1,67 0 3,226 Impairment of trade receivables, net 129 5 Obsolete stock write-off 24 1,328 3,22 3 Profi t from operations before working capital changes 7 3,41 4 112,44 0 Decrease/(increase) in inventories 24 11,37 3 (6,622) Decrease/(increase) in current and non-current trade receivables 8,9 71 (7 ,316) Decrease in other receivables 26 1,17 4 812 Decrease in trade payables (32,7 57) (62,45 3) Decrease of advances received 35 (7 65) (13,9 19) Increase in other current liabilities 355 2,1 99 (Decrease)/increase of accrued expenses and deferred income 39 (9,890) 12,386 Decrease of accrued income and prepaid expenses 29 14,9 36 47 ,56 5 Interest paid (5,16 3) (7 ,350) Cash flows from operating activities 61,648 7 7 ,7 42 SEPARATE STATEMENT OF CASH FLOW FOR THE YEAR ENDED  DECEMBER  (All amounts are expressed in thousands of kunas) INTEGRATED ANNUAL REPORT 255 INTEGRATED ANNUAL REPORT CASH FLOWS FROM INVESTING ACTIVITIES NOTES 2021 2020 Interest received 1,127 6,9 30 Purchase of property, plant and equipment 18 (20,387) (28,486) Purchase of investment property 20 (94) (22) Purchase of intangible assets 17 (22,54 9) (14,4 12) Guarantees given - (8 98) Proceeds from sale of property, plant and equipment and intangible assets 3,121 4,162 Proceeds from sale of investment property - 24,05 3 Proceeds from sale of fi nancial assets 1 33 - Dividends received 19,518 4 0,517 Cash (used) from investing activities (19,1 31) 31,844 CASH FLOWS FROM FINANCING ACTIVITIES NOTES 2021 2020 Dividends paid (66,294) (16,522) Proceeds from borrowings 32,37 155,9 34 52,505 Repayment of borrowings 37 (150,2 46) (110,77 3) Repayment of lease principal IFRS  34 (7 ,7 92) (7 ,49 7) Cash used in fi nancing activities (68,398) (82,287) Unrealised exchange rate diff erences in respect of cash and cash equivalents 97 2 (Decrease)/increase in cash and cash equivalents 28 (25,87 2) 27 ,37 1 Cash and cash equivalents at the beginning of the year 28 35,66 9 8,298 Cash and cash equivalents at the end of the year 28 9,7 97 35,669 The accompanying accounting policies and notes form an integral part of these separate fi nancial statements. SEPARATE STATEMENT OF CASH FLOW FOR THE YEAR ENDED  DECEMBER  (continued) (All amounts are expressed in thousands of kunas) 256 INTEGRATED ANNUAL REPORT Set out below are the principal accounting pol- icies consistently applied in the preparation of the fi nancial statements for the current and prior year. . STATEMENT OF COMPLIANCE The separate fi nancial statements are prepared in accordance with the Accounting Act of the Republic of Croatia and International Financial Reporting Standards (IFRSs), as adopted by the European union. . BASIS OF PREPARATION The Company maintains its accounting records in the Croatian language, in Croatian kunas and in accordance with Croatian laws and the ac- counting principles and practices observed by enterprises in Croatia. The preparation of the separate fi nancial state- ments requires from the Management Board to make estimates and assumptions that aff ect the reported amounts of assets and liabilities and disclosure of contingent assets and lia- bilities at the date of the fi nancial statements and the reported amounts of revenues and ex- penses during the reporting period. These es- timates are based on the information available as at the date of preparation of the separate fi nancial statements, and actual results could diff er from those estimates. The separate fi - nancial statements of the Company represent aggregate amounts of assets, liabilities, capital and reserves of the Company as of 31 Decem- ber 2021, and the results of operations for the year then ended. The Company also prepares its consolidated fi - nancial statements in accordance with Interna- tional Financial Reporting Standards, which in- clude the fi nancial statements of the Company, as the parent, and the fi nancial statements of the subsidiaries controlled by the Company. In these fi nancial statements, investments in en- tities controlled by the Company or in which the Company has signifi cant influence are car- ried at cost less impairment, if any. For a full understanding of the fi nancial positions of the 1. NEW STANDARDS AND AMANDMENTS TO EXISTING NOT YET ADOPTED Certain new accounting standards and inter- pretations have been published that are not mandatory for 31 December 2021 reporting pe- riods and have not been early adopted by the 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Company. These standards are not expected to have a material impact on the entity in the cur- rent or future reporting periods and on fore- seeable future transactions. NOTES TO THE SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED  DECEMBER  INTEGRATED ANNUAL REPORT 257 INTEGRATED ANNUAL REPORT Company and its subsidiaries, as a group, and of the results of their operations and their cash flows for the year, users are advised to read the consolidated fi nancial statements of the Group AD Plastik d.d. Details of the investments in subsidiaries and associates are presented in Note 21. The fi nancial statements are presented in Croa- tian Kuna (HRK). All amounts presented in the fi - nancial statements are expressed in thousands of kn unless otherwise stated, and there may be diff erences of 1 in the totals due to rounding. . REVENUE RECOGNITION Revenue is measured based on the considera- tion specifi ed in a contract with a customer. Contract exists only if it is legally enforeable and meets all of the following criteria: • the contract is approved and the parties are comitted to their obligations • the rights to goods and services and payment terms can be identifi ed • the contract has commercial substance • collection of consideration is probable. Defi nition of contract as stated above is by com- bining the clauses of following documentation: Buyer's General Terms and conditions, Nomina- tion letter, Purchase agreement and Purchase order. The Company has contracts with Buyers (OEM) as Tier 1, with buyer's suppliers as Tier 2, with subsidiaries and associates. Contracts ex- ists for sales of following goods and services: • product sale • tooling sale • R&D activities • royalty services • technical and engineering services Contracts do not commit the customer to a specifi ed quantity of products; however, the Company is generally required to fulfi ll its cus- tomers’ purchasing requirements for the pro- duction life of the vehicle. Contracts do not typically become a performance obligation un- til the Company receives either a purchase or- der for a specifi c number of parts at a specifi ed price. Long-term agreements with customers for specifi c product may range from fi ve to sev- en years, contracts may be terminated by cus- tomers at any time, while occurred very rarely. The Company’s customers pay for products re- ceived in accordance with payment terms that are customary in the industry, typically 60 to 120 days. The Company’s contracts with its customers do not have signifi cant fi nancing components. Tooling and product sales may be contracted in separate agreements, or concluded at diff er- ent points in time, or may be contracted in one agreement. In either case any binding obligation . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . BASIS OF PREPARATION (continued) 258 INTEGRATED ANNUAL REPORT for the customer with respect to parts is cre- ated only upon issuance of purchase orders. Revenue from tooling sale and product sale is recognised at point in time when the control is passed on Buyer. The Company has determined that royalty and technical support services, tooling and the de- livery of product parts are separate and distinct for the customer and therefore constitute sep- arate performance obligations under IFRS 15, when the ownership is transferred. The prices agreed in the contracts for the sin- gle performance obligations are considered to be the stand-alone. Revenue from sale of products Product sales are recognized when the products are delivered to, and accepted by the custom- er and when the control of a product is trans- ferred to the customer. Sales to customers with whom self-invoicing has been arranged are rec- ognised upon receiving from such a customer the confi rmation of delivery, i.e. when control is transferred to the customer. Each delivery is considered as performance obligation that is satisfi ed at point in time. Some of the Company's contracts include var- iable consideration which take a form of year- to-year price reductions („productivity“), but Company has concluded that those discounts do not give rise to a material right as those de- creases are consistent with pricing pattern in automotive industry which takes into consider- ation learning curve eff ect. Some contracts with customers include war- ranty clauses for repair of faulty goods during a specifi ed long term period and cover of only a product's compliance with agreed specifi ca- tions. Such warranties granted by the Compa- ny are in most cases assurance type warranties recognised in accordance with IAS 37 when the control of product transfers to customers. Revenue from the manufacture of tools Revenues from tools are matched with con- tracts that are specifi cally concluded for de- veloping an asset, or a group of assets, close- ly linked and interdependent on the design, technology and function or their fi nal use or application. The company estimates that the transfer of control of tools, gauges and other devices is met at the time of „SOP“ (Start Of Production), i.e. start of the mass production on them. At that point Company recognizes reve- nue from the sale of tools. Costs of modifi ca- tion, completion and similar tool costs Compa- ny recognizes as an increase in inventory value. Revenue from royalty and technical services Company generates revenues from licenses by concluding contracts with affi liates to whom it sells the right to use intellectual property cal- culated on the amount of products produced by these companies, and for which products the Company has carried out development ac- tivities. Revenue from licensesis recognised over time, according to the quantities of products pro- duced by the customer. . REVENUE RECOGNITION (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) INTEGRATED ANNUAL REPORT 259 INTEGRATED ANNUAL REPORT Company generates revenues from technical services on the basis of contracts it has with affi liated companies to which it provides tech- nical-administrative consulting services. Revenue from royalty is recognised over time based on the generated sales of customers while revenue for technical-administrative sup- port and consultancy services is recognised at point in time when the service is rendered. 2.4 BORROWING COSTS Borrowing costs directly attributable to the ac- quisition, construction or production of quali- fying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the as- sets are substantially ready for their intended use or sale. Borrowing costs that cannot be directly attrib- utable to acquisition, construction or produc- tion of qualifying asset, are capitalised apply- ing a capitalisation rate. Capitalisation rate is weighted average of borrowing costs applica- ble to the general borrowings, excluding bor- rowing costs that are directly attributable for acquisition of qualifying asset, until substan- tially all the activities necessary to prepare that asset for its intended use or sale are completed. Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is de- ducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profi t or loss in the period in which they are in- curred. . FOREIGN-CURRENCY TRANSACTIONS Transactions in foreign currencies are translat- ed into Croatian kunas at the rates of exchange in eff ect at the dates of the transactions. Cash, receivables and payables denominated in for- eign currencies are retranslated at the rates of exchange in eff ect at the date of the statement of fi nancial position. Gains and losses arising on translation are included in the statement of com- prehensive income for the year. At 31 December 2021, the offi cial exchange rate of the Croatian kuna against 1 Euro (EUR) was HRK 7.517174 (31 December 2020: 7.536898 HRK for EUR 1). . INCOME TAX Current tax Income tax expense is based on taxable profi t for the year and represents the sum of the tax currently payable and deferred tax. Income tax is recognised in the statement of comprehen- sive income, except where it relates to items recognised directly in equity, in which case it is also recognised in equity. Current tax represents tax expected to be paid on the basis of taxable profi t for the year, using the tax rates enacted at the date of the state- ment of fi nancial position, adjusted by appro- priate prior-period tax liabilities. The income tax rate for year 2020 and 2021 amounts to 18 percent. . REVENUE RECOGNITION (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 260 INTEGRATED ANNUAL REPORT Deferred tax Deferred tax is provided using the balance sheet liability method, providing for temporary diff er- ences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rate expected to apply to taxable prof- it in the period in which the liability is expected to be settled or the asset realised, based on the tax rates in eff ect at the date of the statement of fi nancial position. The income tax rate appli- cable to deferred tax assets is 18 percent. The measurement of deferred tax liabilities and assets reflects the amount that the Company expects, at the date of the statement of fi nan- cial position, to recover or settle the carrying amounts of its assets and liabilities. Deferred tax assets and liabilities are not discounted and are classifi ed in the statement of fi nancial po- sition as non-current assets and/or non-cur- rent liabilities. Deferred tax assets are recog- nised only to the extent that it is probable that the related tax benefi t will be realised. At each date of the statement of fi nancial position, the Company reviews the unrecognised potential tax assets and the carrying amount of the rec- ognised tax assets. Deferred tax assets and liabilities are off set when there is a legally enforceable right to set off current tax assets against current tax lia- bilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax as- sets and liabilities. In the case of a business combination, the tax eff ect is taken into account in calculating good- will or in determining the excess of the acquir- er’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent lia- bilities over cost. . PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS Property, plant and equipment as well as intan- gible assets are recognised at purchase cost and subsequently reduced by accumulated depreciation. Intangible asset represent cap- italized development costs of all Company's projects. Intangible assets – Projects is depre- ciated according to its useful life which varies from 3 to 7 years. The purchase cost comprises the purchase price, import duties and non-refundable sales taxes (for property, plant and equipment) and any directly attributable costs of bringing an asset to its working condition and location for its intended use, such as employee remuner- ation, professional fees directly arising from putting an asset into its working condition, test costs (for intangible assets), as well as all other costs directly attributable to bringing an asset to a condition for its intended use. Maintenance and repairs, replacements and im- provements of minor importance are expensed as incurred. Where it is obvious that expenses incurred resulted in an increase of expected fu- ture economic benefi ts to be derived from the use of an item of property, plant and equipment or intangible assets in excess of the originally . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . INCOME TAX (continued) INTEGRATED ANNUAL REPORT 261 INTEGRATED ANNUAL REPORT PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS DEPRECIATION RATES IN  % DEPRECIATION RATES IN  % Buildings 1.50 1.50 Machinery 7.00 - 10.00 7.00 - 10.00 Tools, furniture, offi ce and laboratory equipment, measuring and control instruments 7.00 – 50.00 7.00 – 50.00 Vehicles 20.00 20.00 IT equipment 10.00 - 20.00 10.00 - 20.00 Others 10.00 10.00 Intangible assets - Projects 14.29 – 33.33 20.00 Software 20.00 – 50.00 20.00 – 50.00 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) assessed standard performance of the asset, they are added to the carrying amount of the as- set. Gains or losses on the retirement or disposal of property, plant and equipment or intangible as- sets are included in the statement of compre- hensive income in the period in which they occur. . IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS At each reporting date the Company reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is an indication that the assets have suff ered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the . PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS (continued) Depreciation commences on putting an asset into use. Depreciation is provided so as to write down the cost or revalued amount of an asset other than land, property, plant and equipment and intangible assets under development over the estimated useful life of the asset using the straight-line method as follows: extent of the impairment loss (if any). Where it is not possible to estimate the recovera- ble amount of an individual asset, the Compa- ny estimates the recoverable amount of the cash-generating unit to which the asset be- longs. Where a reasonable and consistent ba- sis of allocation can be identifi ed, the Company's 262 INTEGRATED ANNUAL REPORT assets are also allocated to individual cash-gen- erating units or, if this is not possible, they are allocated to the smallest group of cash-gener- ating units for which a reasonable and consist- ent allocation basis can be identifi ed. . INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES A subsidiary is an entity over which the Com- pany has eff ective control over fi nancial and operating policy decisions of the Company. The results, assets and liabilities of subsidiaries are incorporated in these separate fi nancial state- ments using the cost method of accounting. An associate is an entity over which the Com- pany has signifi cant influence and usually an ownership interest from 20 to 50 percent, but no control over the entity. Signifi cant influence is the power to participate in the fi nancial and operating policy decisions of the investee, but it is not control or joint control over those poli- cies. The results of operations of associates are incorporated in these fi nancial statements us- ing the cost method of accounting. . INVENTORIES Inventories of raw material and spare parts are stated at the lower of cost and net realisable value, whichever is lower. Cost is determined using the weighted-average cost method. Net realisable value represents the estimated sell- ing price in the ordinary course of business less all variable selling costs. Small inventory is writ- ten off when put in use. The cost of product inventories i.e. the produc- tion price is based on direct material used, the cost of which is determined using the weighted average cost method, then direct labour costs and fi xed overheads at the actual level of pro- duction which approximates the normal ca- pacities, as well as variable overheads that are based on the actual use of the production ca- pacities. Merchandise on stock is recognised at purchase cost. . OTHER TRADE RECEIVABLES AND PREPAYMENTS Other trade receivables and prepayments rep- resent receivables and prepayments that are not included in fi nancial instruments, and they are carried at nominal amounts less an appro- priate allowance for impairment for estimated irrecoverable amounts. Impairment is recognised whenever there is objective evidence that the Company will not be able to collect all amounts due according to the originally agreed terms. Signifi cant fi nan- cial diffi culties of the debtor, the probability of bankruptcy proceedings at the debtor, or de- fault or delinquency in payment are considered objective evidence of impairment. The amount of the impairment loss is determined as the dif- ference between the assets carrying amount and the present value of estimated future cash flows, discounted at the eff ective interest rate. Management determines the level of impair- ment allowance for doubtful receivables based on receivables collection estimation. The . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, AND INTANGIBLE ASSETS (continued) INTEGRATED ANNUAL REPORT 263 INTEGRATED ANNUAL REPORT allowance for amounts doubtful of collection is charged to the statement of comprehensive in- come for the year. . CASH AND CASH EQUIVALENTS Cash comprises account balances with banks, cash in hand, deposits and securities at call or with maturities of less than three months. . PROVISIONS Provisions are recognized when the Compa- ny has a present obligation (legal or construc- tive) as a result of a past event and it is proba- ble (i.e. more likely than not) that an outflow of resources will be required to settle the obliga- tion, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each date of the statement of fi nancial position and adjusted to reflect the current best estimate. Where the ef- fect of discounting is material, the amount of the provision is the present value of the ex- penditures expected to be required to settle the obligation, determined using the estimat- ed risk free interest rate as the discount rate. Where discounting is used, the reversal of such discounting in each year is recognised as a fi - nancial expense and the carrying amount of the provision increases in each year to reflect the passage of time. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the date of the . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . OTHER TRADE RECEIVABLES AND PREPAYMENTS (continued) statement of fi nancial position, taking into ac- count the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. . TERMINATION, LONG-SERVICE AND OTHER EMPLOYEE BENEFITS (a) Pension-related obligations and post-em- ployment benefi ts In the normal course of business, the Company makes payments, through salary deductions, to mandatory pension funds on behalf of its em- ployees, as required by law. The contributions paid to the mandatory pen- sion funds are recognised as salary expense when accrued. The Company does not have any other retirement benefi t plan and, consequent- ly, has no other obligations in respect of the re- tirement benefi ts for its employees. In addition, the Company is not obliged to provide any oth- er post-employment benefi ts. (b) Long-term employee benefi ts Long-term employee benefi ts represent jubi- lee awards and and post employment benefi t obligations. Post employment benefi t obliga- tions falling due more than 12 months after the reporting date are discounted to their present value. Jubilee awards are paid in intervals ac- cording to time that employee was working for Company. INTEGRATED ANNUAL REPORT 264 INTEGRATED ANNUAL REPORT The cost of providing benefi ts is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each reporting date. Actuarial gains and losses are recognised in the period in which they arise. Past service cost is recognized immediately to the extent that entitlement to benefi ts has al- ready been acquired. Otherwise, it is amortized proportionately over a period of time until the right to receive benefi ts is acquired. . FINANCIAL INSTRUMENTS Financial assets Trade receivables are initially recognised when they are originated. All other fi nancial assets are initially recognised when the Company be- comes a party to the contractual provisions of the instrument. A fi nancial asset (unless it is a trade receivable without a signifi cant fi nancing component) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a signifi cant fi - nancing component is initially measured at the transaction price. On initial recognition, a fi nancial asset is classi- fi ed as measured at amortised cost. Financial assets are not reclassifi ed subsequent to their initial recognition unless the Company changes its business model for managing fi - nancial assets, in which case all aff ected fi nan- cial assets are reclassifi ed on the fi rst day of the fi rst reporting period following the change in the business model. A fi nancial assets is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose ob- jective is to hold assets to collect contractual cash flows • its contractual terms give rise on specifi ed dates to cash flows that are solely payments of principal and interest on the principal amount outstanding Business model assessment The Company makes an assessment of the ob- jective of the business model in which a fi nan- cial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: • the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether manage- ment’s strategy focuses on earning contrac- tual interest income, maintaining a particular interest rate profi le, matching the duration of the fi nancial assets to the duration of any re- lated liabilities or expected cash outflows or . TERMINATION, LONG-SERVICE AND OTHER EMPLOYEE BENEFITS (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 265 INTEGRATED ANNUAL REPORT realising cash flows through the sale of the as- sets • how the performance of the portfolio is evalu- ated and reported to the Company’s manage- ment • the risks that aff ect the performance of the business model (and the fi nancial assets held within that business model) and how those risks are managed • how managers of the business are compen- sated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected • the frequency, volume and timing of sales of fi nancial assets in prior periods, the reasons for such sales and expectations about future sales activity • trade receivables are held in the business model of holding for the purpose of collection Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, relevant for the purpose of classifying fi nancial assets at amortised cost, ‘principal’ is defi ned as the fair value of the fi nancial asset on initial rec- ognition. ‘Interest’ is defi ned as consideration for the time value of money and for the cred- it risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profi t margin. In assessing the main criterion, i.e. whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the fi nancial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.The structure of the Company’s fi nancial assets is simple and primarily relates to trade receiva- bles without a signifi cant fi nancial component and loans given. Subsequent measurement and gains and losses Financial assets are subsequently measured at amortised cost using the eff ective interest method. The amortised cost is reduced by im- pairment losses. Interest income, foreign ex- change gains and losses and impairment are recognised in profi t or loss. Any gain or loss on derecognition is recognised in profi t or loss. Derecognition The Company derecognises a fi nancial asset when the contractual rights to the cash flows from the fi nancial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the fi nancial asset are transferred or in which the Company . FINANCIAL INSTRUMENTS (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 266 INTEGRATED ANNUAL REPORT neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the fi nancial asset. The Company has mainly classifi ed its fi nancial assets as loans and receivables. Financial liabilities Debt securities are initially recognised when they are originated. All other fi nancial liabilities are initially recognised when the Company be- comes a party to the contractual provisions of the instrument. A fi nancial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acqui- sition or issue. Financial liabilities are measured at amortized cost. A fi nancial liability is classifi ed as meas- ured at amortized cost using the eff ective in- terest method. Interest expenses and exchange diff erences are recognized within profi t or loss. Any gain or loss on derecognition is also recog- nized within profi t or loss. The Company derecognises a fi nancial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognises a fi nancial lia- bility when its terms are modifi ed and the cash flows of the modifi ed liability are substantially diff erent, in which case a new fi nancial liability based on the modifi ed terms is recognised at fair value. On derecognition of a fi nancial liability, the dif- ference between the carrying amount extin- guished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profi t or loss. Impairment of non-derivative fi nancial assets The Company recognises loss allowances for expected credit loss (ECLs) on fi nancial assets measured at amortised cost. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. When determining whether the credit risk of a fi nancial asset has increased signifi cantly since initial recognition and when estimating ECLs, the Company considers reasonable and sup- portable information that is relevant and availa- ble without undue cost or eff ort. This includes both quantitative and qualitative information and analysis, based on the Compa- ny’s historical experience and informed credit assessment and including forward-looking in- formation. The Company assumes that the credit risk on a fi nancial asset has increased signifi cantly if ear- ly warning indicators have been activated in ac- cordance with the Company’s policy or contrac- tual terms of the instrument. The Company considers a fi nancial asset to be fully or partially in default if: • the borrower is unlikely to pay its credit . FINANCIAL INSTRUMENTS (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) INTEGRATED ANNUAL REPORT 267 INTEGRATED ANNUAL REPORT obligations to the Company in full, without re- course by the Company to actions such as re- alising security (if any is held) • the fi nancial asset is more than 360 days past due based on historical experience of average market participant. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a fi nancial instrument. 12-month ECLs are the portion of ECLs that re- sult from default events that are possible with- in the 12 months after the reporting date (or a shorter period if the expected life of the instru- ment is less than 12 months). The maximum period considered when estimat- ing ECLs is the maximum contractual period over which the Company is exposed to credit risk. Measeurement of expected credit losses In accordance with IFRS 9, assets that are car- ried at amortized cost must have attributed ex- cepted credit losses (ECL). Formula for calculat- ing yearly ECL is the following: Probability od default (PD) x Loss given de- fault (LGD) x Exposure at default (EAD). Compa- ny used publicly available information to model ECL for loans, as follows: Probability of default: Company used latest available Moody's Annual Default Study. Mar- ginal PD for automotive industry was used for every year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.15 FINANCIAL INSTRUMENTS (continued) YEARS CUMULATIVE PROBABAILITY OF DEFAULT MARGINAL PROBABILITY OF DEFAULT 1 2.3% 2.3% 2 4.6% 2.3% 3 6.7% 2.1% 4 8.7% 2.0% 5 10.6% 1.9% 6 12.3% 1.7% 7 13.9% 1.6% 8 15.5% 1.6% 9 16.9% 1.4% 10 18.0% 1.1% Probability of default used in calculation is shown in the table below: Loss given default: Company used latest availa- ble Moody's Annual Default Study. It was calcu- lated using annual default recoveries percent- age. LGD used in 2021 is 60.70%. Exposure at default: Company calculated it in- ternally taking into account anually repayment schedule for loans for every year of repayment. Eff ective interest method The eff ective interest method is a method of calculating the amortised cost of a fi nancial as- set or liability, and of allocating interest income over the relevant period. The eff ective interest 268 INTEGRATED ANNUAL REPORT rate is the rate that exactly discounts estimat- ed future cash payments through the expected life of the fi nancial asset or liability, or, where appropriate, a shorter period. Impairment of fi nancial assets Financial assets are assessed for indications of impairment at each date of the statement of fi - nancial position. A fi nancial asset are impaired where there is objective evidence that, as a re- sult of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash flows of the investment have been impacted. For fi nancial assets carried at amortised cost, the amount of the impairment is the diff erence between the asset’s carrying amount and the expected credit losses. Impairment loss on a fi nancial asset is recog- nised by reducing the carrying amount of the asset through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Sub- sequent recoveries of amounts previously writ- ten off are credited against the allowance ac- count. Derecognition of fi nancial assets The Company derecognises a fi nancial asset only when the contractual rights to the cash flows from the asset have expired, when the asset is transferred and when substantially all the risks and rewards of ownership of the asset are passed onto another entity. If the Company . FINANCIAL INSTRUMENTS (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) neither transfers nor retains substantially all the risks and rewards of ownership and contin- ues to control the transferred asset, the Com- pany recognises its retained interest in the as- set and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred fi - nancial asset, the Company continues to rec- ognise the fi nancial asset and also recognises a collateralised borrowing for the proceeds re- ceived. Classifi cation as fi nancial debt or equity Debt and equity instruments are classifi ed as either fi nancial liabilities or as equity in accord- ance with the substance of the underlying con- tractual arrangement. Interest income Interest income is recognised on a pro rata temporis basis, using the eff ective interest method. Interest earned on balances with com- mercial banks (demand and term deposits) is credited to income for the period as it accrues. Interest on trade receivables is recognised as income when accrued. . CONTINGENCIES Contingent liabilities have not been recognised in these separate fi nancial statements. They are disclosed if the possibility of outflow of resourc- es embodying economic benefi ts is possible. A contingent asset is not recognised in fi nancial INTEGRATED ANNUAL REPORT 269 INTEGRATED ANNUAL REPORT statements, but it is disclosed when the inflow of economic benefi ts becomes probable. 2.1 EVENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION Events after the date of the statement of fi nan- cial position that provide additional informa- tion about the Company’s position at that date (adjusting events) are reflected in the fi nancial statements. Subsequent events that are not ad- justing events are disclosed in the notes to the separate fi nancial statements when material. . SEGMENT REPORTING In separate fi nancial statements the Company discloses sales revenues grouped by country (Note 4). When assesing business performance and making decisions on the allocation of resources in accordance with IFRS 8 the Company's Man- agement Board uses the division into two oper- ating segments: EU and Serbia and Russia. In the consolidated fi nancial statements the Group's fi nancial results, assets and liabilities are disclosed for above mentions operating segments. . LEASES At inception of a contract, Company assesses whether a contract is, or contains lease. A con- tract is, or contains a lease, if the contract con- veys the right to control the use of an identi- fi ed asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use o an iden- tifi ed asset, Company uses the defi nition of a lease in IFRS 16. Leases are recognised by the present value of the lease payments and showed either as right- of-use assets or together with property, plant and equipment. Company also recognises a fi - nancial liability representing its obligation to make future lease payments. Lessees are rec- ognised separately interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees are also required to re-measure lease liability due to certain events (e.g. a change in lease term, a change in future lease payments, resulting from a change in an index or discount- ing rate). The standard includes two recogni- tion exemptions for lessees: „low-value“ leas- es (e.g. tablets and personal computers) and „short-term“ leases (leases which ends within 12 months). Low-value leases are considers assets with value lower than HRK 30,000. Right-of-use assets and lease liabilities will be reported separately in the statement of fi nan- cial position. The Company has elected not to apply the re- quirements of IFRS 16 for low-value leases (e.g. printers) and short-term leases (e.g. apart- ments). Detailed movement of right of use assets are presented in Note 19 and movements of lease liability in Note 34. . CONTINGENCIES (continued) . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 270 INTEGRATED ANNUAL REPORT Company recognizes grants as income over the period necessary to match them with related costs, for which they are intended to compen- sate on a systematic basis. Receivables from government to reimburse ex- penses that have already been incurred are rec- ognized in profi t or loss in the period in which the receivable is incurred. A grant related to income is reported as deduc- tion from the related expense in statement of comprehensive income . . . INVESTMENT PROPERTY Investment property is property held by the Company to earn rentals or for capital appre- ciation or for both, but not for sale in the or- dinary course of business or for administrative purposes. Investment property is measured initially at its cost, including transaction costs. Subsequently, investment property is stated at cost less accu- mulated depreciation and any impairment loss. Investment property is depreciated on a straight-line basis at the rate of 1.5%. Investment property is derecognised when ei- ther it has been disposed of or permanently withdrawn from use or no future economic ben- efi ts are expected from its disposal. Any gains or losses on the retirement or disposal of in- vestment property are recognised in the income statement in the year of retirement or disposal. In the application of the Company’s account- ing policies, which are described in Note 2, the Management Board is required to make judge- ments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual re- sults may diff er from those estimates. The estimates and underlying assumptions are continually reviewed. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision aff ects only that period or in the period of revision and future periods if the revision aff ects both cur- rent and future periods.The key areas of esti- mation in applying the Company’s accounting policies that had a most signifi cant impact on the amounts recognized in the fi nancial state- ments were as follows: Measurement of fair values Certain Company's accounting policies and dis- closures require the measurement of fair val- ues, for non-fi nancial assets. The Company has an established control frame- work with respect to fair value measurement which assumes the overall responsibility of the Management Board and fi nance department in relation to the monitoring of all signifi cant fair value measurements and consultation with ex- ternal experts. . CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) . GRANTS INTEGRATED ANNUAL REPORT 271 INTEGRATED ANNUAL REPORT . CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) Fair values are measured using information collected from third parties in which case the Board and the fi nance department assess whether the evidence collected from third par- ties support the conclusion that such valua- tions meet the requirements of IFRSs, including the level in the fair value hierarchy where such valuations should be classifi ed. Fair values are categorised into diff erent level in a fair value hi- erarchy based on the inputs used in the valua- tion techniques as follows: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs other than quoted prices in- cluded in level 1, that are observable for the as- set or liability either directly (ie as prices) or in- directly (ie derived from prices). Level 3 - input variables for assets or liabilities that are not based on observable market data (unobservable inputs). The fair value of fi nancial instruments traded in active markets is based on quoted market pric- es at the balance sheet date. A market is re- garded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regu- latory agency, and those prices represent actu- al and regularly occurring market transactions on an arm’s length basis. The fair value of fi nan- cial instruments that are not traded in an active market (for example, over-the-counter deriv- atives) is determined by using valuation tech- niques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specifi c estimates. If all signifi cant inputs re- quired to fair value an instrument are observ- able, the instrument is included in level 2. If one or more signifi cant inputs are not based on ob- servable market data, the fair value estimate is included in level 3. Revenue from the sale of tools Tools are custom made for the customer and cannot be used for other purposes. In accord- ance with the automotive practice, those con- tracts may diff er with respect to the develop- ment of tools and transfer of the title to the customer. In such cases, the Company deter- mines whether tool arrangements are sale, lease or development of own equipment, whether this is a lease arrangement and whether it is sepa- rate from the sale of car parts. The Company has assessed that the sale of car parts is a separate performance obligation from the sale of tools since the customer has the control over the use of tool and unconditional right for payment upon the transfer of control of tool to the customer. Additionally, the development of the tool is not integrated with the production of parts to pro- duce a combined output and those two are not interrelated as tool can be sold without aff ecting the sale of car parts. In addition, although in pro- duction of parts the Company may continue to use tools that it sold to customers, the Company has concluded that its arrangements do not con- tain a lease because customers control the use of the asset. In particular, customers, by placing orders, determine whether to produce parts us- ing those tools, in what quantity and also the lo- cation of parts’ production. 272 INTEGRATED ANNUAL REPORT 2021 2020 Foreign sales 718,850 834,369 Domestic sales 7,973 9,878 726,823 844,247 2021 2020 Slovenia 271,118 405,116 Romania 108,799 112,246 France 99,752 108,424 Russia 46,711 36,410 Italy 44,895 34,605 Germany 32,994 42,975 Serbia 31,940 25,108 Spain 28,259 39,032 Hungary 26,273 5,064 Other 36,082 35,267 726,823 844,247 . SALES Sales segmentation by type is shown below: Revenues from merchandise consist of revenues from the sale of material and the sale of car parts that are not own production. 2021 2020 Car parts sales 563,610 724,216 Merchandise 84,647 70,238 Revenue from tools 52,630 25,050 Licence fees 15,237 15,145 Engineering services revenue 10,699 9,598 726,823 844,247 Sales segmentation by country is shown below: 273 INTEGRATED ANNUAL REPORT . OTHER INCOME . COST OF RAW MATERIAL AND SUPPLIES 2021 2020 Rental income and income from the sale of services to tenants 4,487 3,765 Income from damages and insurance 3,550 1,217 Income from consumption of own products and services 3,231 2,551 Gain from sale of property, plant and equipment and intangible assets 1,303 1,313 Income from fi nancial support 1,000 - Income from product development, validation, quality control and laboratory testing 839 301 Income from maintaining safety stock 609 2,350 Gain on disposal of investment property - 11,396 Other operating income 3,563 4,520 18,582 27,413 2021 2020 Direct materials 276,216 371,111 Electricity 18,088 18,841 Other raw material and supplies 13,680 14,116 307,984 404,068 274 INTEGRATED ANNUAL REPORT . COST OF GOODS SOLD . SERVICE COSTS 2021 2020 Cost of merchandise 78,614 68,803 Costs of tools sold 38,018 21,083 Other costs of goods sold 237 350 116,869 90,236 2021 2020 Transport 24,483 30,750 Intelectual service cost 12,288 4,776 Maintenance costs 6,066 6,398 Software licenses 4,855 4,720 Logistic services at distribution warehouses 2,980 2,419 Rental costs 2,236 3,364 Security and fi re services 2,040 1,997 Communal fee 1,629 1,824 Engineering services costs 1,419 1,399 Licence fees 1,049 3,928 Marketing 777 1,002 Water 736 935 Telephone, cell phone, internet costs 620 751 Other service costs 1,538 1,969 62,716 66,232 INTEGRATED ANNUAL REPORT 275 INTEGRATED ANNUAL REPORT . STAFF COSTS . DEPRECIATION AND AMORTISATION 2021 2020 Net wages and salaries 98,060 95,426 Taxes and contributions on and out of salaries 51,325 54,208 Other staff costs 10,760 16,127 Provisions for termination benefi ts, net (Note 31) 1,342 359 Provisions for employees bonuses, net (Note 31) - 2,010 161,487 168,130 Other staff costs comprise jubilee awards, bo- nuses, termination benefi ts, commuting costs, cost of sudent service and other business-re- lated costs. Company included income from reversal of provision for employee bonuses in amonut of HRK 4,000 thousand and income from reversal of provision for unused vacation days in amount of HRK 1,227 thousand as cost reduction within category "Other staff cost". Further, within "Other staff cost" income from 2021 2020 Depreciation of property, plant and equipment (Note 18) 43,153 40,781 Amortisation of intangible assets (Note 17) 17,298 23,430 Depreciation of right of use assets (Note 19) 8,003 7,565 Depreciation of investment property (Note 20) 249 587 68,703 72,363 reversal of provision for jubilee awards is shown in amount of HRK 12 thousand. In the previous period, reversal of provision for unused vacation days in amount of HRK 3,982 thousand was shown as a cost reduction through „Other staff cost“. Total staff costs is decreased by state subsidies for employment preservation in 2020. in amount of HRK 18,993 thousand. 276 INTEGRATED ANNUAL REPORT . OTHER OPERATING EXPENSES . PROVISIONS FOR RISKS AND CHARGES 2021 2020 Customer complaints 3,318 5,249 Membership fees, contributions, municipal utility fees 2,156 2,556 Cost of own consumption and goods provided free of charge 2,054 2,369 Business trips 1,837 1,646 Cost of unusable inventories and inventory shortage costs 1,328 3,264 Insurance premiums 1,014 1,231 Withholding tax 955 1,440 Capitalised development cost write-off 856 2,931 Gifts, donations and sponsorships 692 575 Supervisory Board fees 547 363 Professional training costs 538 441 Entertainment/representation costs 442 364 Safety at work and health services 379 650 Other expenses 1,968 3,672 18.084 26,751 At 31 December 2021 the Company has no given advances and credits granted to the members of the administrative, managerial and supervisory bodies. 2021 2020 Provision for possible litigation losses (Note 31) 175 667 Provisions for warranties (Note 31) - 998 175 1,665 INTEGRATED ANNUAL REPORT 277 2021 2020 Dividend income from associate 19,722 40,525 Interest income 3,454 3,542 Gain from sale of fi nancial assets 72 - 23,248 44,067 . FINANCIAL INCOME . FINANCIAL EXPENSES 2021 2020 Interest expense 4,294 6,991 Loans impairment 1,670 3,226 Interest expense on lease liabilities 417 216 Foreign exchange losses, net 366 2,084 6,747 12,517 INTEGRATED ANNUAL REPORT 278 INTEGRATED ANNUAL REPORT . INCOME TAX 2021 2020 Deferred tax (7,792) (8,948) (7,792) (8,948) Income tax comprises the following: 2021 2020 Balance at 1 January 11,505 20,453 Increase of deferred tax assets 13 786 Usage of deferred tax assets (130) (4,946) Reversal recognition of deferred tax assets (7,675) (4,788) Balance at 31 December 3,713 11,505 Deferred tax, as presented in the statement of fi nancial position, is as follows: Deferred tax assets arise from the following: 2021 OPENING BALANCE (CHARGED)/ CREDITED TO STATEMENT OF COMPREHENSIVE INCOME, NET CLOSING BALANCE TEMPORARY DIFFERENCES Provisions for jubilee service and termination benefi ts 786 13 799 Impairement of investment property 2,914 - 2,914 TAX BENEFITS Provisions for MINGO/Goverment benefi ts 7,805 (7,805) - Balance at 31 December 11,505 (7,792) 3,713 279 INTEGRATED ANNUAL REPORT 2020 OPENING BALANCE (CHARGED)/ CREDI- TED TO STATEMENT OF COMPREHENSIVE INCOME, NET CLOSING BALANCE TEMPORARY DIFFERENCES Provisions for jubilee service and termination benefi ts 725 61 786 Impairement of investment property 2,914 - 2,914 TAX BENEFITS Provisions for MINGO/Goverment benefi ts 16,814 (9,009) 7,805 Balance at 31 December 20,453 (8,948) 11,505 Reconciliation between the accounting and tax results is shown as follows: 2021 2020 Accounting profi t before tax 24,132 77,580 Tax at the rate of 18% 4,344 13,964 Non-deductible expenses 2,663 4,454 Tax exempt revenues (6,890) (7,909) Non-taxable incentives for jobs preservations - (5,624) Write-off of deferred tax assets 7,675 4,063 Profi t tax expense 7,792 8,948 Eff ective tax rate 32.29% 11.53% The eff ective income tax rate in Republic of Cro- atia in year 2021 was 18% the same as it was for the year 2020. On 24 October 2012 the Company fi led with the Ministry of Economy the Applica- tion for Incentive Measures for the investment project "Expansion of Production for the Purpose of Export of Car Industry Products", in accord- ance with the Act on Investment Promotion and Development of Investment Climate (OG 111/2012 and 28/2013) and the Investment Promotion and Development of Investment Climate (OG 40/2013). As a result, the Company made investments in fi xed assets, having thus met the prerequisites for the utilization of the tax incentives for 2021. From the date of 01 January 2022 the Company doesn't have the right of use of remaining tax incentives. Due to those reasons on the date of 31 December 2021 the reversal recognition of de- ferred tax assets was done in the amount of HRK 7,675 thousand. . INCOME TAX (continued) INTEGRATED ANNUAL REPORT 280 . EARNINGS PER SHARE Basic earnings per share are determined by di- viding the Company's net profi t by the weight- ed average number of ordinary shares in issue during the year, excluding the average number of ordinary shares redeemed and held by the Company as treasury shares. The basic earn- ings per share equal the diluted earnings per share, as there are currently no share options that would potentially increase the number of issued shares. 2021 2020 Net profi t (in HRK '000) 16,340 68,633 Weighted average number of shares 4,143,207 4,130,526 Basic and diluted earning per share (in kunas and lipas) 3.94 16.62 2021 2020 Issued ordinary shares at 1 January 4,199,584 4,199,584 Eff ect of treasury shares held (50,353) (69,058) Eff ect of treasury shares disposed of (6,024) - Weighted-average number of ordinary shares at 31 December 4,143,207 4,130,526 281 INTEGRATED ANNUAL REPORT . INTANGIBLE ASSETS SOFTWARE PROJECTS OTHER INTANGIBLE ASSETS INTANGIBLE ASSETS UNDER DEVELOPMENT TOTAL COST Balance at 31 December 2019 10,683 229,722 5,611 24,919 270,935 Additions - - - 14,412 14,412 Transfer from assets under development 1,497 14,321 - (15,818) - Disposals - (1,700) - - (1,700) Retirements/Write Off s - (18,547) - (424) (18,971) Balance at 31 December 2020 12,180 223,796 5,611 23,089 264,676 Additions - - - 22,549 22,549 Transfer from assets under development 336 16,466 22 (16,824) - Disposals - (1,330) - - (1,330) Retirements/Write Off s (106) (80,868) - - (80,974) Balance at 31 December 2021 12,410 158,064 5,633 28,814 204,921 ACCUMULATED AMORTISATION Balance at 31 December 2019 8,892 177,268 685 - 186,845 Charge for the year (Note 10) 1,400 20,908 1,122 - 23,430 Disposals - (38) - - (38) Retirements/Write Off s - (16,040) - - (16,040) Balance at 31 December 2020 10,292 182,098 1,807 - 194,197 Charge for the year (Note 10) 1,090 15,085 1,123 - 17,298 Disposals - (8) - - (8) Retirements/Write Off s (106) (80,012) - - (80,118) Balance at 31 December 2021 11,276 117,163 2,930 - 131,369 NET BOOK VALUE Balance at 31 December 2020 1,888 41,698 3,804 23,089 70,479 Balance at 31 December 2021 1,134 40,901 2,703 28,814 73,552 282 INTEGRATED ANNUAL REPORT Projects comprise investments in the devel- opment of new products that are expected to generate economic benefi ts in future periods. Consequently, the costs are amortised over the period in which the related economic benefi ts flow into the Company. Intangible assets under development mostly consists od capitalised development cost of new products. In 2021, the cost of net salaries and wages of HRK 3,750 thousand the cost of taxes and contributions from salaries of HRK 1,283 thousand and the cost of contributions to sal- aries of HRK 679 thousand were capitalized in intagible assets. In the previous 2020, the capitalized cost of net salaries and wages amounted to HRK 3,907 thousand the cost of taxes and contributions from salaries amounted to HRK 1,428 thou- sand and the cost of contributions to salaries amounted to HRK 794 thousand. . INTANGIBLE ASSETS (continued) INTEGRATED ANNUAL REPORT 283 INTEGRATED ANNUAL REPORT LAND BUILDINGS PLANT AND EQUIPMENT ASSETS UNDER DEVELOPMENT TOTAL COST Balance at 31 December 2019 130,284 250,838 548,874 17,700 947,696 Additions - - - 28,486 28,486 Transfer from assets under development 194 4,157 37,000 (41,351) - Disposals - - (4,394) - (4,394) Retirements/Write Off s - - (6,837) - (6,837) Transfer to investment property (Note 20) 262 2,821 - - 3,083 Balance at 31 December 2020 130,740 257,816 574,643 4,835 968,034 Additions - - - 20,387 20,387 Transfer from assets under development - 2,107 16,737 (18,844) - Disposals - - (5,161) - (5,161) Retirements/Write Off s - - (1,463) - (1,463) Balance at 31 December 2021 130,740 259,923 584,756 6,378 981,797 ACCUMULATED DEPRECIATION Balance at 31 December 2019 - 73,432 304,412 - 377,844 Charge for the year (Note 10) - 3,798 36,983 - 40,781 Disposals - - (3,205) - (3,205) Retirements/Write Off s - - (6,786) - (6,786) Transfer from investment property (Note 20) - 907 - - 907 Balance at 31 December 2020 - 78,137 331,404 - 409,541 Charge for the year (Note 10) - 3,886 39,267 - 43,153 Disposals - - (4,665) - (4,665) Retirements/Write Off s - - (1,464) - (1,464) Balance at 31 December 2021 - 82,023 364,542 - 446,565 NET BOOK VALUE Balance at 31 December 2020 130,740 179,679 243,239 4,835 558,493 Balance at 31 December 2021 130,740 177,900 220,214 6,378 535,232 . PROPERTY, PLANT AND EQUIPMENT 284 INTEGRATED ANNUAL REPORT From assets mentioned in Note 18 Property, plant and equipment and in Note 20 Invest- ment property, pledged assets are lands with book value on the date of 31.12.2021 of (in thou- sand HRK) 141,791 (31.12.2020: 141,791), buildings 186,165 (31.12.2020: 188,061) and plant and equip- ment 63,362 (31.12.2020: 70,334). The mentioned assets include investment property, land in the net book value of 11,245 and buildings in the net book value of 11,416 (in thousand HRK). . RIGHT OF USE ASSET BUILDINGS PLANT AND EQUIPMENT TOTAL COST Balance at 31 December 2019 15,464 5,794 21,258 Additions 1,208 1,030 2,238 Lease modifi cation, net (565) (1,701) (2,266) Balance at 31 December 2020 16,107 5,123 21,230 Additions 13,811 7,154 20,965 Lease modifi cation, net - (128) (128) Retirements (5,652) (4,065) (9,717) Balance at 31 December 2021 24,266 8,084 32,350 ACCUMULATED DEPRECIATION Balance at 31 December 2019 5,226 2,316 7,542 Charge for the year (Note 10) 5,797 1,768 7,565 Lease modifi cation (454) - (454) Balance at 31 December 2020 10,569 4,084 14,653 Charge for the year (Note 10) 5,666 2,337 8,003 Lease modifi cation (5,652) (4,096) (9,748) Balance at 31 December 2021 10,583 2,325 12,908 NET BOOK VALUE Balance at 31 December 2020 5,538 1,039 6,577 Balance at 31 December 2021 13,683 5,759 19,442 . PROPERTY, PLANT AND EQUIPMENT (continued) INTEGRATED ANNUAL REPORT 285 AMOUNTS RECOGNISED IN PROFIT AND LOSS 2021 2020 Depreciation expense on right of use assets 8,003 7,565 Interest expense 417 216 Expense relating to leases of low value 1,350 1,011 Expense relating to short-term leases 598 1,426 Expenses relating to variable lease payments not included in the measurement of lease liability 288 927 10,656 11,145 In accordance with IFRS 16, Company has clas- sifi ed leases for buildings and plant and equip- ment as “Right of use asset”. Within the catego- ry "Buildings", the leases of offi ce buildings and . RIGHT OF USE ASSET (continued) warehouses used by the Company in business are positioned. The "Plant and equipment" cat- egory includes concluded car and forklift rental agreements. 286 INTEGRATED ANNUAL REPORT . INVESTMENT PROPERTY LAND BUILDINGS TOTAL COST Balance at 31 December 2019 16,797 33,660 50,457 Value increase of investment property - 22 22 Transferred to property, plant and equipment (Note 18) (262) (2,821) (3,083) Disposal (5,290) (14,303) (19,593) Balance at 31 December 2020 11,245 16,558 27,803 Value increase of investment property - 94 94 Balance at 31 December 2021 11,245 16,652 27,897 ACUMULATED DEPRECIATION Balance at 31 December 2019 - 12,243 12,243 Charge for the year (Note 10) - 587 587 Transferred to property, plant and equipment (Note 18) - (907) (907) Disposal - (6,936) (6,936) Balance at 31 December 2020 - 4,987 4,987 Charge for the year (Note 10) - 249 249 Balance at 31 December 2021 - 5,236 5,236 NET BOOK VALUE Balance at 31 December 2020 11,245 11,571 22,816 Balance at 31 December 2021 11,245 11,416 22,661 Income from the rental of the building in 2021 amounts to HRK 1,998 thousand (2020: HRK 2,034 thousand), and the depreciation charge for the year 2021 amounts to HRK 249 thousand (2020: HRK 587 thousand). At December 31 2021 the carrying amount of investment property approximates fair value. INTEGRATED ANNUAL REPORT 287 INTEGRATED ANNUAL REPORT . INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES Set out below are details of the Company's subsidiaries at the end of the reporting period: NAME OF SUBSIDIARY COUNTRY OF INCORPORATION AND BUSINESS OWNERSHIP INTEREST IN % AMOUNT OF EQUITY INVESTMENT, IN HRK '000 31.12.2021 31.12.2020 31.12.2021 31.12.2020 AD Plastik Tisza Kft. Tiszaújváros, Hungary 100.00% 100.00% 70,959 70,959 ZAO AD Plastik Kaluga Kaluga, Russian Federation 100.00% 100.00% 36,504 36,504 ADP d.o.o. Mladenovac, Serbia 100.00% 100.00% 15,013 15,013 AO AD Plastik Togliatti Samara, Russian Federation 100.00% 100.00% 5,078 5,078 AD PLASTIK d.o.o. Novo Mesto, Slovenia 100.00% 100.00% 58 58 127,612 127,612 Further information about subsidiaries partly owned by the Company, but in which the Company holds a signifi cant non-controlling interest is set out in the following table: NAME OF ASSOCIATE COUNTRY OF INCORPORATION AND BUSINESS OWNERSHIP INTEREST IN % AMOUNT OF EQUITY INVESTMENT, HRK '000 31.12.2021 31.12.2020 31.12.2021 31.12.2020 EURO Auto Plastic Systems Mioveni, Romania 50.00% 50.00% 21,755 21,755 21,755 21,755 Total investments in subsidiaries and associates 149,367 149,367 AD Plastik d.d., Solin has a 50-percent equity share in EURO Auto Plastic Systems, but has no control over the entity. However, the company is treated as an associate. Detailed information on fi nancial position is disclosed in the section Business; Financial results 2021 of this integrat- ed annual report. 288 INTEGRATED ANNUAL REPORT Set out below is a summary of fi nancial information about the subsidiaries: AO AD PLASTIK TOGLIATTI, SAMARA, RUSSIAN FEDERATION 31.12.2021 31.12.2020 Current assets 102,095 79,523 Fixed assets 70,167 48,816 Total assets 172,262 128,339 Short-term liabilities (90,706) (81,034) Long-term liabilities and provisions (17,302) (7,399) Total Liabilities (108,008) (88,433) Net assets 64,254 39,906 ZAO AD PLASTIK KALUGA, KALUGA, RUSSIAN FEDERATION 31.12.2021 31.12.2020 Current assets 59,576 49,504 Fixed assets 63,478 57,985 Total assets 123,054 107,489 Short-term liabilities (27,949) (25,561) Long-term liabilities and provisions (84,425) (82,151) Total Liabilities (112,374) (107,712) Net assets 10,680 (223) AD PLASTIK TISZA KFT, TISZAÚJVÁROS, HUNGARY 31.12.2021 31.12.2020 Current assets 38,658 40,404 Fixed assets 53,753 52,216 Total assets 92,411 92,620 Short-term liabilities (42,205) (30,989) Long-term liabilities and provisions (24,690) (34,579) Total Liabilities (66,895) (65,568) Net assets 25,516 27,052 . INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES (continued) INTEGRATED ANNUAL REPORT 289 INTEGRATED ANNUAL REPORT ADP D.O.O., MLADENOVAC, SERBIA 31.12.2021 31.12.2020 Current assets 32,637 28,057 Fixed assets 54,375 55,856 Total assets 87,012 83,913 Short-term liabilities (53,551) (49,446) Long-term liabilities and provisions (24,121) (22,346) Total Liabilities (77,672) (71,792) Net assets 9,340 12,121 AD PLASTIK D.O.O., NOVO MESTO, SLOVENIA 31.12.2021 31.12.2020 Current assets 3,558 3,584 Fixed assets 20 - Total assets 3,578 3,584 Short-term liabilities (149) (148) Long-term liabilities and provisions - - Total Liabilities (149) (148) Net assets 3,429 3,436 . OTHER FINANCIAL ASSETS 31.12.2021 31.12.2020 Long-term loans to subsidiaries 114,993 115,295 Other fi nancial assets - 62 Impairment of given loans (6,166) (4,496) Current portion of long-term loan receivables (Note 27) - (12,813) 108,827 98,048 Long-term investment loans were granted to the subsidiaries with maturities from one to ten years and an interest rate of 3.00%. During the . INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES (continued) 2020 loans were granted with the interest rate of 3.42 %. INTEGRATED ANNUAL REPORT 290 . LONG-TERM RECEIVABLES . INVENTORIES 31.12.2021 31.12.2020 ADP d.o.o., Mladenovac, Serbia 11,531 18,574 11,531 18,574 31.12.2021 31.12.2020 Raw material and supplies on stock 54,059 49,071 Finished products 16,252 18,460 Work in progress 6,945 6,474 Merchandise on stock 4,910 3,151 Prepayments for tools 2,951 5,017 Tools 2,572 18,216 87,689 100,389 The amount of inventories recognised as an ex- pense during the 2021 was HRK 583,159 thou- sand (in the 2020 the expense was HRK 658,917 thousand). Total inventory write – off was HRK 1,328 thousand in 2021 ( in 2020 it was HRK 3,223 thousand). The inventories were deemed as ob- solete. The inventory write – off is located in note 11 – Other operating expenses, line „Cost of unusable inventories and inventory shortage costs“. 25. TRADE RECEIVABLES 31.12.2021 31.12.2020 Foreign trade receivables (unrelated companies) 155,746 190,926 Foreign trade receivables (intra group) 54,791 25,764 Domestic trade receivables 3,733 5,994 Foreign trade receivables (associates) 2,545 4,379 Impairment allowance on receivables (1,519) (1,390) 215,296 225,673 The average credit period on sales is 96 days (2020: 98 days). 291 INTEGRATED ANNUAL REPORT Movements in the impairment allowance on doubtful trade receivables can be presented as follows: 2021 2020 Balance at beginning of the year 1,390 1,385 Collected amounts reversed (15) (95) Movements based on IFRS 9 expected credit losses calculation for year end 144 100 Total impairment allowance 1,519 1,390 Ageing analysis of not impaired receivables can be presented as follows: 31.12.2021 31.12.2020 0 - 90 days past due 18,510 20,429 91 - 180 days past due 8,838 7,475 180 - 365 days past due 16,828 2,441 Over 365 days past due 8,756 1,146 Not due 162,364 194,182 215,296 225,673 The majority of the receivables past due be- yond 365 days comprise amounts owed by the subsidiaries. At December 31 2021, the carrying amount of the receivables from companies in the same group was HRK 47,669 thousand (2020: HRK 68,931 thousand). . TRADE RECEIVABLES (continued) 292 INTEGRATED ANNUAL REPORT . OTHER RECEIVABLES 31.12.2021 31.12.2020 Receivables from the State and State institutions 12,066 12,570 Foreign prepayments made 885 1,516 Domestic prepayments made 766 813 Amounts due from employees 14 3 Other receivables 7 10 13,738 14,912 Amounts due from the State and State institutions comprise from these receivables: 31.12.2021 31.12.2020 VAT refund receivables 8,581 9,382 State support - EU project 2,822 276 Receivables for sick leave 492 514 Other receivables 171 103 State support for job preservation - 2,295 12,066 12,570 . CURRENT FINANCIAL ASSETS 31.12.2021 31.12.2020 Current portion of long-term loan receivables (Note 22) - 12,813 Interest receivables 12,940 10,711 Receivables for given warranty - 897 12,940 24,421 Interest receivables mostly relate to loans given to subsidiaries. 293 INTEGRATED ANNUAL REPORT . CASH AND CASH EQUIVALENTS 31.12.2021 31.12.2020 Foreign account balance 8,573 33,689 Current account balance 1,207 1,966 Cash in hand 17 14 9,797 35,669 . PREPAID EXPENSES AND ACCRUED INCOME 31.12.2021 31.12.2020 Other accrued income 3,718 8,596 Prepaid operating expenses 1,763 674 Accrued income on tools 277 11,424 5,757 20,694 Accrued income presented within this note are trade receivables, as they give right to collect pay- ment from customer, but were not invoiced at the balance sheet date. INTEGRATED ANNUAL REPORT 294 INTEGRATED ANNUAL REPORT . CAPITAL Subscribed capital amounts to HRK 419,958 thousand and consists of 4,199,584 shares, with a nominal value of HRK 100 per share (2020: HRK 419,958 thousand, comprising 4,199,584 shares, with a nominal value of HRK 100 each). Capital reserves are the diff erences between the nominal and selling values of a share. General and legal reserves consist of legal re- serves up to 5% of the amount of share capital (defi ned by the Croatian Company law), and of unwritten development costs. Under Croatian Accounting Law, Article 19, Paragraph 14, AD Plastik d.d. has made provisions for not written - off development costs stated in Assets. The provision was made with the transfer from Re- tained earnings to the position of General and legal reserves of Company's equity. Amount od provisions at least amounts capitalised development costs stated in Assets at the end of previous year. Own treasury shares refers to treasury shares of the Company. The company owns 50,353 treasury shares on 31.12.2021. The company owned 69,058 treasury shares on the date of 31.12.2020. On 16 March 2021, the General Assembly made the Decision regarding the payment of dividend from retained earnings of 2019 in the amount of eight kuna per share. On 15 July 2021, the General Assembly made the Decision on the use of profi t for 2020, according to which the profi t is partly used for the pay- ment of dividends in the amount of eight kuna per share. . LONG-TERM AND SHORT-TERM PROVISIONS SHORT-TERM LONG-TERM 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Vacation accrual 798 2,025 - - Employee bonuses 4,000 8,000 - - Termination benefi ts 1,561 199 2,269 2,289 Jubilee awards (long-service benefi ts) 282 183 1,585 1,696 Legal cases 1,177 1,275 - - Risks within the warranty period 998 998 - - 8,816 12,680 3,854 3,985 INTEGRATED ANNUAL REPORT 295 JUBILEE AWARDS RETIREMENT/ TERMINATION BENEFITS LEGAL CASES VACATION ACCRUAL EMPLOYEE BONUSES RISKS WITHIN THE WARRAN- TY PERIOD TOTAL Balance at 1 January 2021 1,879 2,488 1,275 2,025 8,000 998 16,665 Increase/ (decrease) in provisions,net (12) 1,342 (98) (1,227) (4,000) - (3,995) Balance at 31 December 2021 1,867 3,830 1,177 798 4,000 998 12,670 Balance at 1 January 2020 1,897 2,129 599 6,007 5,990 - 16,622 Increase/ (decrease) in provisions,net (18) 359 676 (3,982) 2,010 998 43 Balance at 31 December 2020 1,879 2,488 1,275 2,025 8,000 998 16,665 According to the collective agreement, the Company has the obligation to pay long-ser- vice (jubilee awards), termination benefi t upon regular retirement and other benefi ts to em- ployees. Long-service benefi ts (jubilee awards and termination benefi t upon regular retire- ment) are defi ned in the union agreement and employment agreements. No other post-re- tirement benefi ts are provided. Long-service benefi ts are paid for full years of service in the month of the current year in which the service is determined as completed. The present value of defi ned benefi t obliga- tions arising from long-service benefi ts and termination benefi ts upon regular retirement is determined using the projected credit unit method and serves as the basis for arriving at the past and current service costs, the interest expense and the actuarial gain or loss. For employees of the Company, legal contri- butions for pension insurance are paid. Legal contributions form the basis for pensions paid by the Croatian Pension Fund to Croatian em- ployees after their retirement. Key assumptions used in calculating the required provisions in 2021 are the discount rate of 1.29% and the fluc- tuation rate of 11.37%. Discount rate of 1.86% and the fluctuation rate of 10.12% were used in calcu- lation of the required provisions in the year of 2020. Fluctuation rate is based on average fluc- tuation of employees in the last 5 years. . LONG-TERM AND SHORT- TERM PROVISIONS (continued) Movement in provisions was as follows: 296 INTEGRATED ANNUAL REPORT . LONG – TERM BORROWINGS AND DEPOSITS 31.12.2021 31.12.2020 Long-term borrowings 276,239 213,214 Liabilities for received deposits - 185 276,239 213,399 Current portion of long-term borrowings (Note 37) (58,759) (73,788) Total long-term borrowings 217,480 139,611 Long-term borrowings are used to fi nance cap- ital investments and development projects. In- struments of collateral provided for the long- term loans include mortgage on real estate and/or equipment (Note 18) and payment in- struments. Majority of the long-term loans are repayable on a quarterly basis. In 2021, the weighted average interest rate on the long-term loans was 1.22 (in the 2020 the av- erage interest rate on the long-term loans was 1.68%). The Company regularly meets all its obli- gations arising from the loans and observes all the conditions specifi ed in the underlying con- tracts. From total long-term loan liabilities in amount of HRK 217,480 thousand at 31.12.2021, HRK 93,823 thousand refers to loans and de- posits denominated in HRK currency while HRK 123,657 thousand refers to loans denominated in EUR. From total long-term loan liabilities in amount of HRK 139,611 thousand at 31.12.2020, HRK 10.462 thousand refered to loans and deposits denom- inated in HRK currency while HRK 129,149 thou- sand refered to loans denominated in EUR. Movements in the long-term part of long-term borrowings during the year were as follows: 2021 2020 Balance at 1 January 139,611 177,344 New loans raised 137,333 - Decrease for the realization of received deposits (185) (415) Foreign exchange diff erences (324) 1,885 Transfer on the short-term part of long-term loans (Note 37) (57,449) (39,203) Transfer on grant liabilities (1,506) - Total long-term borrowings 217,480 139,611 INTEGRATED ANNUAL REPORT 297 INTEGRATED ANNUAL REPORT . OTHER LONG TERM LIABILITIES 2021 2020 Grant liabilities 1,506 - Other long term liabilities - 397 Total other long term liabilities 1,506 397 Grant liabilities arose as a result of borrowing from a fi nancial institution at an interest rate lower than the market rate. . LEASE LIABILITIES IFRS  . ADVANCES RECEIVED 2021 2020 Balance at 1 January 6,776 13,853 Additions 20,965 2,239 Lease modifi cations, net (138) (1,819) Interest expense on lease liabilities 417 216 Principal paid (7,792) (7,497) Interest paid (417) (216) 19,811 6,776 Long-term liabilities 12,673 3,164 Short-term liabilities 7,138 3,612 31.12.2021 31.12.2020 Foreign customers 6,033 6,798 6,033 6,798 298 INTEGRATED ANNUAL REPORT . TRADE PAYABLES 31.12.2021 31.12.2020 Foreign trade payables 60,108 95,910 Domestic trade payables 30,456 36,510 90,563 132,420 In 2021, the average days payables outstanding was 67 (2020: 86 days). . SHORT – TERM BORROWINGS 31.12.2021 31.12.2020 Short-term borrowings – principal payable 56,379 116,822 Current portion of long-term borrowings (Note 32) 58,759 73,788 Short-term borrowings – interest payable 347 532 115,485 191,142 From total short-term loan liabilities in amount of HRK 115,485 thousand at 31.12.2021, HRK 14,264 thousand refers to loans and deposits denom- inated in HRK currency while HRK 101,221 thou- sand refers to loans denominated in EUR. From total short-term loan liabilities in amount of HRK 191,142 thousand at 31.12.2020, HRK 21,252 thousand refers to loans and deposits denomi- nated in HRK currency while HRK 169,890 thou- sand refers to loans denominated in EUR. The short-term borrowings were used to fi - nance development projects and for working capital purposes. Instruments of collateral pro- vided for the short-term borrowings are pay- ment instruments. In 2021, the weighted average interest rate on the short-term loans was 1.15% (1.27% in 2020). The Company fulfi ls all its obligations under the loans regularly. 299 INTEGRATED ANNUAL REPORT . OTHER CURRENT LIABILITIES 2021 2020 Balance at 1 January 191,142 208,986 Reclassifi cation from long-term loans (Note 32) 57,449 39,203 New loans raised 18,601 52,504 Interest expenses 3,885 6,991 Exchange rate diff erences (72) 1,365 Interest paid (4,237) (7,134) Principal repaid (150,246) (110,773) Transfer on grant liabilities (1,037) - Balance at 31 December 115,485 191,142 31.12.2021 31.12.2020 Amounts due to employees 8,575 10,445 Due to the State and State institutions 8,478 9,143 Grant liabilites 1,037 - Other current liabilities 128 91 18,218 19,679 Grant liabilities arose as a result of borrowing from a fi nancial institution at an interest rate lower than the market rate. . SHORT – TERM BORROWINGS (continued) 300 INTEGRATED ANNUAL REPORT . ACCRUED EXPENSES 31.12.2021 31.12.2020 Other current liabilities 5,942 3,677 Accrued tool expenses 614 527 Accrued expenses for reimbursement of incentives for job preservation - 12,242 6,556 16,446 . RELATED-PARTY TRANSACTIONS RECEIVABLES AND PAYABLES FOR GOODS AND SERVICES RECEIVABLES PAYABLES 31.12.2021 31.12.2020 31.12.2021 31.12.2020 ADP d.o.o. Mladenovac, Serbia 32,692 22,393 7,127 7,809 AO AD Plastik Togliatti, Russia 25,416 11,985 - 52 ZAO AD Plastik Kaluga, Russia 7,408 9,947 12 23 EURO Auto Plastic Systems, Romania 2,545 4,379 - - AD Plastik Tisza, Hungary 807 11 364 154 AD Plastik d.o.o., Slovenia - 2 3,294 3,201 68,868 48,717 10,797 11,239 RECEIVABLES AND PAYABLES FOR LOANS AND INTEREST RECEIVABLES PAYABLES 31.12.2021 31.12.2020 31.12.2021 31.12.2020 ZAO AD Plastik Kaluga, Russia 83,289 82,645 - - ADP d.o.o. Mladenovac, Serbia 23,936 24,264 - - AO AD Plastik Togliatti, Russia 14,542 14,600 - - Sankt-Peterburgskaya investicionaya kompaniya - - 37,700 37,850 121,767 121,509 37,700 37,850 INTEGRATED ANNUAL REPORT 301 INTEGRATED ANNUAL REPORT During the 2021 in its fi nancial statements Com- pany recognized a impairment of receivables based on expected credit losses (all regarding the impairment of given loans) in the amount of HRK 1,670 thousand. Total amount of receiva- bles impairment based on expected credit loss on the date of 31 December 2021 is HRK 6,166 thousand and it is related with the Companies - ADP doo Mladenovac HRK 1,702 thousand (2020: HRK 808 thousand), AO AD Plastik Togliatti HRK 604 thousand (2020: HRK 201 thousand) and ZAO ADP Kaluga HRK 3,860 thousand (2020: HRK 3,487 thousand). Corporate guarantees are disclosed within business section of the in- tegrated annual report which integral part are those fi nancial statements. Sankt-Peterburgskaya investicionnaya kom- paniya is member of Group in which is also company AO Holding Autokomponenti. Com- pany AO Holding Autokomponenti holds 30% of shares in Company AD Plastik d.d. PURCHASE TRANSACTIONS OPERATING INCOME AND EXPENSES INCOME PURCHASES 2021 2020 2021 2020 ZAO AD Plastik Kaluga, Russia 27,447 17,373 12 224 ADP d.o.o. Mladenovac, Serbia 18,736 14,781 46,904 46,379 AO AD Plastik Togliatti, Russia 15,780 14,451 - 104 EURO Auto Plastic Systems, Romania 9,311 9,401 10,883 - AO Holding Autokomponenti 1,000 - - - AD Plastik Tisza, Hungary 850 68 2,337 2,951 AD Plastik d.o.o., Slovenia - 2 1,418 1,397 73,124 56,076 61,554 51,055 FINANCIAL TRANSACTIONS FINANCIAL INCOME AND EXPENSES INCOME EXPENSES 2021 2020 2021 2020 EURO Auto Plastic Systems, Romania 19,722 40,525 - - ZAO AD Plastik Kaluga, Russia 2,437 2,433 - - AO AD Plastik Togliatti, Russia 384 438 - - ADP d.o.o. Mladenovac, Serbia 632 722 - - Sankt-Peterburgskaya investicionaya kompaniya - - 451 659 23,175 44,118 451 659 The total remuneration provided to the members of the Supervisory Board, President and mem- bers of Management Board and Board Assistants in 2021. amounts to HRK 9,104 thousand (in 2020 HRK 7,741 thousand kunas). . RELATED-PARTY TRANSACTIONS (continued) 302 INTEGRATED ANNUAL REPORT . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Company’s gearing ratio, expressed as the ratio of net debt to equity, is expressed as follows: 31.12.2021 31.12.2020 Short-term borrowings (Note 37) 115,485 191,142 Long-term borrowings (Note 32) 217,479 139,426 Cash and cash equivalents (Note 28) (9,797) (35,669) Net debt 323,167 294,899 Equity 781,220 827,684 Net debt-to-equity ratio 41.37% 35.63% Equity consists of share capital, reserves, reserves for own shares, own shares, retained earnings and profi t for the year. . GEARING RATIO INTEGRATED ANNUAL REPORT 303 INTEGRATED ANNUAL REPORT . CATEGORIES OF FINANCIAL INSTRUMENTS 31.12.2021 31.12.2020 Financial assets 362,407 422,418 Trade receivables (Note 25) 215,296 225,673 Given loans and other fi nancial assets (Notes 22, 27) 121,767 121,571 Non-current trade receivables (Note 23) 11,531 18,574 Cash and cash equivalents and deposits (Note 28) 9,797 35,669 Accrued income and other fi nancial assets 4,016 20,931 Financial liabilities 458,097 485,086 Loans and deposits received (Notes 32, 37) 332,964 330,754 Trade, other payables and accruals 105,322 147,557 Lease liabilities (Note 34) 19,811 6,775 Accrued income and other liabilities includes: accrued income, other receivables less receiva- bles from the State and advances given. Trade, other payables and accruals includes amounts from Statement of fi nancial position: trade payables, lease liabilities, other payables less payables to the State and accrued expens- es. Details of concentration of credit risk are in- cluded in Note 25 Trade receivables. Detailed information on credit risk manage- ment is stated under chapter Risks and oppor- tunities in business of the Integrated annual report which integral part are those fi nancial statements. The Company limits its exposure to credit risk by granting loans only to subsid- iaries thus having control over the timing and the amount of cash flows. The Company mon- itors changes in credit risk by continuously monitoring liquidity and fi nancial operations of each subsidiary against key performance indi- cators such as are debt to equity ratio, working capital and EBITDA. Probability of default: Company used latest available Moody's Annual Default Study. Mar- ginal PD for automotive industry was used for every year. Lifetime probabilities of default are based on historical data published by Moody`s rating agency for Automotive industry group and are recalibrated based on PD-adjusted for Russian . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) 304 INTEGRATED ANNUAL REPORT . CATEGORIES OF FINANCIAL INSTRUMENTS (continued) Corporates as published by European Banking Authority. Loss given default (LGD) parameters generally reflect an assumed LGD rate of 60.70%. 31.12.2021 31.12.2020 ZAO AD Plastik Kaluga 81,161 81,374 ADP d.o.o. Mladenovac 21,052 21,108 AO AD Plastik Togliatti 12,779 12,813 TOTAL 114,992 115,295 Balance of an impairment allowance of in amount of HRK 6,166 thousand (2020: HRK 4,496 thousand) in respect of loans given is recognised in statement of fi nancial position. Collaterals for loans given to subsidiaries are promissory notes. . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) The exposure to credit risk for loans given at amortised cost at the reporting date by subsid- iary was as follows: 305 INTEGRATED ANNUAL REPORT . FOREIGN CURRENCY RISK MANAGEMENT The Company undertakes certain transactions denominated in foreign currencies. Hence, ex- posures to exchange rate fluctuations arise. The carrying amounts of the Company’s foreign-currency denominated monetary assets and monetary liabilities at the reporting date are provided in the table below using the middle ex- change rates of the Croatian National Bank. thousand higher/lower), because of positive/ (negative) foreign exchange diff erences gen- erated by conversion of trade receivables, cash and cash equivalents, trade payables and loans received denominated in EUR. AT  DECEMBER ASSETS LIABILITIES NET FX POSITION 2021 2020 2021 2020 2021 2020 EUR 364,176 400,074 282,141 396,655 82,035 3,419 USD 51 27 2 32 49 (5) GBP 26 2 18 5 8 (3) CZK - 1,017 - - - 1,017 RON-824---824 364,253 401,944 282,161 396,692 82,092 5,252 Foreign currency sensitivity analysis On 31 December 2021, if EUR were to appre- ciate/depreciate by 1% compared to HRK, as- suming all other variables remain unchanged, net profi t of the Company for 2021. would be HRK 820 thousand higher/lower (2020.: HRK 34 . LIQUIDITY RISK MANAGEMENT Ultimate responsibility for liquidity risk man- agement rests with the Management Board. The Company manages its liquidity using bank- ing facilities (overdrafts) and by continuously monitoring forecast and actual cash flows and matching the maturity profi les of its fi nancial assets and liabilities. The following tables detail the Company’s re- maining contractual maturity for its non-deriv- ative fi nancial assets and liabilities. The tables have been drawn up based on the undiscounted cash flows of fi nancial assets and liabilities based on the earliest date on which the Company can require payment and can be required to pay. . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) 306 INTEGRATED ANNUAL REPORT . LIQUIDITY RISK MANAGEMENT (nastavak) 2021 WEIGHTED AVERAGE INTEREST RATE Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years TOTAL CARRYING AMOUNT ASSETS Non-interest bearing - 111,471 69,975 47,663 11,532 - 240,641 240,641 Interest bearing 2.68% 13,068 632 2,322 23,125 104,067 143,214 121,767 124,539 70,607 49,985 34,657 104,067 383,855 362,408 LIABILITIES Non-interest bearing - 64,525 34,975 5,823 - - 105,323 105,323 Interest bearing 1.20% 452 11,471 106,728 214,404 7,328 340,383 332,964 Lease liability 2.00% 609 1,219 5,627 12,978 - 20,433 19,811 65,586 47,665 118,178 227,382 7,328 466,139 458,098 2020 WEIGHTED AVERAGE INTEREST RATE Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years TOTAL CARRYING AMOUNT ASSETS Non-interest bearing - 144,916 104,673 32,684 18,574 62 300,909 300,909 Interest bearing 3.00% 373 719 25,887 22,893 85,464 135,336 121,509 145,289 105,392 58,571 41,467 85,526 436,245 422,418 LIABILITIES Non-interest bearing - 78,946 61,410 7,336 582 - 148,274 148,274 Interest bearing 1.52% 31,693 22,389 140,664 140,843 2,262 337,851 330,036 Lease liability 2.00% 309 617 2,778 3,215 - 6,919 6,775 110,948 84,416 150,778 144,640 2,262 493,044 485,085 . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) INTEGRATED ANNUAL REPORT 307 . LIQUIDITY RISK MANAGEMENT (nastavak) From total interest bearing liabilities in amount of HRK 332,964 thousand at 31.12.2021, HRK 108,081 thousand refers to liabilities denomi- nated in HRK currency while HRK 224,883 thou- sand refers to liabilities denominated in EUR. From total interest bearing liabilities in amount of HRK 330,036 thousand at 31.12.2020, HRK 31,924 thousand refers to liabilities denominat- ed in HRK currency while HRK 298,112 thousand refers to liabilities denominated in EUR. Lease liabilities at 31.12.2021 and at 31.12.2020 are de- nominated in HRK. . FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) . FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments held to maturity in the ordinary course of business are carried at the lower of cost and net amount less repaid por- tion. Fair value is the price that would be gen- erated from the sales of some item of an as- set or paid for transferring some liability in a fair transaction between market participants at the measurement date, regardless of whether it would be directly visible or evaluated by ap- plying some other valuation technique. At 31 December 2021, the carrying amounts of cash, receivables, short-term liabilities, accrued ex- penses, short-term borrowings and other fi - nancial instruments match their fair values. 308 INTEGRATED ANNUAL REPORT . EVENTS AFTER THE REPORTING PERIOD AND GOING CONCERN ASSUMPTION It is evident that the business activities are af- fected by the Russian-Ukrainian crisis, given that AD Plastik Group has two factories in Russia in which it generated approximately 25 percent of its consolidated revenue in 2021. These factories produce products exclusively for the Russian market and the current circumstanc- es complicate their business operations. The neg- ative eff ects are noticeable primarily through: • volatility of the Russian rouble exchange rate against the euro, • disruptions in the supply chain, and • announcements of a temporary shutdown of some of the main customers in the Russian mar- ket. In conjunction with its separate fi nancial state- ments for the year ended 3 December 2021, man- agement believes that the fi nancial statement im- pacts of these events and market conditions will be non-adjusting events (with the exception of the going concern assessment). This is because the signifi cant adverse changes in economic con- ditions and the political/ business environment developed as a direct consequence of events oc- curring after the reporting date – i.e. the Rus- sian-Ukrainian crisis invasion of Ukraine and the resulting implementation of economic sanctions by the international community. Since these im- pacts are generally considered to be non-adjust- ing events they do not aff ect amounts recog- nised as of 3 December 2021. In particular, among other things, such outcomes that would not have been reasonably expected as of 3 December 2021 were not reflected in the recoverable amount cal- culations of non-fi nancial assets under IAS  Impairment of Assets or expected credit loss cal- culations of fi nancial assets under IFRS  Finan- cial Instruments. That said, management can- not exclude the possibility that the eff ects of the conflict will result in the need to adjust the car- rying amounts of the parent company's assets in subsequent periods, including as a result of po- tential impairment write-downs. From the view point of the parent company’s go- ing concern assumption, cash flows from Russia to the parent company are not a signifi cant busi- ness item, and the liquidity of the parent compa- ny, including available unused credit lines, is more than satisfactory. Accordingly, management con- cluded that the above circumstances do not rep- resent events or conditions that may cast signif- icant doubt on the Group’s ability to continue as a going concern. While in Russia the business is adapting to the new circumstances, in the Euro- pean market it is running smoothly and in accord- ance with business plans, as well as commercial activities related to sealing new deals. Despite the circumstances, the stability of AD Plastik Group's business operations is not endangered, develop- ment of the situation is monitored, various action scenarios have been developed with the primary goal of minimizing risks and consequences. Total investment in subsidiaries domiciled in Rus- sia are presented in Note 21. Receivables from and payables to Russian subsidiaries as of 3 Decem- ber 2021 are presented in note 40. 309 INTEGRATED ANNUAL REPORT . CONTINGENT LIABILITIES Based on the Management's estimate, the Com- pany had no material contingent liabilities at 31 December 2021 which would require to be dis- closed in the notes to the fi nancial statements. The Company had no capital expenditure com- mitments contracted at 31 December 2021 which would require to be disclosed in the notes to the fi nancial statements. As at 31 December 2021 there were no material legal actions outstanding against the Company with an expected negative outcome other than those reflected in these sep- arate fi nancial statements. 309 . APPROVAL OF THE SEPARATE FINANCIAL STATEMENTS These separate fi nancial statements were approved by the Management Board of AD Plastik d.d. and authorised for issue on 22 April 2022. For AD Plastik d.d. Solin by: Marinko Došen President of the Management Board Mladen Peroš Member of Management Board Ivan Čupić Member of Management Board Management Board Member of M anageme n