Čakovečki mlinovi d.d.

Annual Report • Apr 29, 2024

Ernst & Young d.o.o. Radnička cesta 50, 10 000 Zagreb Hrvatska / Croatia MBS: 080435407 OIB: 58960122779 PDV br. / VAT no.: HR58960122779 Tel: +385 1 5800 800 Fax: +385 1 5800 888 www.ey.com/hr

Banka / Bank: Erste & Steiermärkische Bank d.d. Jadranski trg 3A, 51000 Rijeka Hrvatska / Croatia IBAN: HR3324020061100280716 SWIFT: ESBCHR22

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Čakovečki mlinovi d.d.

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Čakovečki mlinovi d.d. (the Company), which comprise the statement of financial position as at 31 December 2023, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2023 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We are independent of the Company in accordance with the International Ethics Standards Board of Accountants' (IESBA) International Code of Ethics for Professional Accountants, including International Independence Standards (IESBA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Republic of Croatia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying financial statements.

Key audit matters (continued)

Key Audit Matters	How we addressed Key Audit Matters
Revenue recognition and management override of controls Refer to Note 2.18 Revenue recognition and Note 4 Revenues with companies within the Group and Note 5 Revenue with companies outside the Group of the financial statements.	Audit procedures included but were not limited to understanding of the revenue recognition process, including contractual terms with customers, as well as assessment of compliance with policies related to applicable accounting standards.
The Company has revenues totalling EUR 28,542 thousand as at 31 December 2023.	We performed understanding and testing the operational effectiveness of the controls implemented in the revenue recognition process.
Revenue from contracts with customers is recognised when control of the goods is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods; and is	We tested a sample of revenue transactions before and after the balance sheet date, as well as approvals and refunds after the reporting date.
measured net of pricing allowances, other trade discounts, and price promotions to customers. The	We performed analysis of the volume of approvals to customers throughout the year.
judgements required by management to estimate trade discounts are complex due to the diverse range of contractual agreements and commercial terms to the Company's customers. Revenue recognition and valuation therefore involves estimates related to such agreements or actions.	We performed testing of returns after the end of the year on a sample and carried out procedures for searching and analysing unrecorded liabilities at the end of the year.
The Company uses a variety of shipment terms for its customers and the invoices are usually created for delivery notes in a certain period of time and this has an impact on the timing of revenue recognition. There is a higher risk that revenue could be	We evaluated revenue transactions by setting expectations on sales revenue for the current year by considering historical and planned data on revenue and discounts, incentives and rebates, and comparing with actual revenue and investigating unexpected differences.
recognized in the incorrect period for sales transactions occurring on and around the year end. Revenue is also an important element of how the Company measures its performance, among the other key performance measures. The Company	Based on a sample of key customers, we performed review of contract provisions and recalculation of the value of discounts, incentives and rebates.
focuses on revenue, which could create an incentive for revenue to be recognized before the control of the goods is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. Due to all mentioned above, there is also risk that the revenue is not properly classified,	We also obtained customer confirmations of amounts outstanding at the reporting date for a sample of customers and gained understanding of any significant differences between customer confirmations received and the Company's accounting records.
described, and disclosed in the financial statements, including notes, in accordance with the applicable financial reporting framework.	We performed analytical procedures on accounts receivable / sales revenue positions using audit tools designed for revenue testing.
Due to the significance and complexity of revenues in the financial statements, we have concluded revenue recognition to be key audit matter for our audit.	We performed testing of period-end journal entries with an emphasis on revenue accounts and non-standard and/or manual postings.
	We compared current year's related party turnover with last year's and performed analysis of significant and unusual movements.

A member firm of Ernst & Young Global Limited

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 kuna / 2.654,46 euro, fully paid; Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna / 2.654,46 eura uplaćen u cijelosti;

Key Audit Matters	How we addressed Key Audit Matters
	We also assessed the adequacy of relevant disclosures (Note 2.18 Revenue recognition and Note 4 Revenues with companies within the Group and Note 5 Revenue with companies outside the Group) in financial statements as well as their compliance with IFRS EU.
Assessment of impairment of investments in subsidiaries
See Note 2.2. Investments in subsidiaries, Note 3 Key accounting estimates and 21 Long term financial assets of the financial statements. The Company has investments in subsidiaries with carrying amount totalling EUR 10,537 thousand as at 31 December 2023.	Audit procedures included understanding of the investment impairment assessment process. We examined the methodology used by management to assess the carrying value of respective investment in subsidiaries to determine its compliance with IFRS EU and consistency of application.
The carrying amount of the investments in subsidiaries represents 34% of total assets. Due to the significance of carrying amount of the investments in subsidiaries to the overall financial statements, this is an area considered to be a key audit matter.	We evaluated management's impairment indicators assessment and management conclusion that there are no impairment indicators of investments in subsidiaries. We compared the current year (2023) actual results with the prior year (2022) actual results of subsidiaries to evaluate if the management assessment of the impairment indicators is adequate. We also compared net book value of investments shown in these financial statements with their net assets shown in financial statements of subsidiaries. We assessed adequacy of the relevant disclosures (Note 2.2. Investments in subsidiaries, Note 3
	Key accounting estimates and 21 Long term financial assets) in the financial statements and if these are in line with the requirements of IFRS EU.

Other matter

The financial statements of the Company for the year ended 31 December 2022 were audited by another auditor who expressed an unmodified opinion on those statements on 7 April 2023.

Other information

Management is responsible for the other information. Other information comprises the Management Report, Non-financial Report and Corporate Governance Statement included in the Annual Report, but does not include financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Other information (continued)

With respect to the Management Report, Non-financial Report and Corporate Governance Statement, we also performed procedures required by the Accounting Act. Those procedures include considering whether the Management Report is prepared in accordance with the requirements of Article 21 of the Accounting Act, whether the Non-financial Report is prepared in accordance with the requirements of Article 21a of the Accounting Act and whether the Corporate Governance Statement includes the information specified in Article 22 of the Accounting Act.

Based on the procedures undertaken, to the extent we are able to assess it, we report that:

1. the information given in the enclosed Management Report and Corporate Governance Statement is consistent, in all material respects, with the enclosed financial statements;

2.the enclosed Management Report is prepared in accordance with requirements of Article 21 of the Accounting Act; and

1. the enclosed Corporate Governance Statement includes the information specified in Article 22 of the Accounting Act.

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit of financial statements, we are also required to report if we have identified material misstatements in the Management Report, Non-financial Report and Corporate Governance Statement. We have nothing to report in this respect.

Responsibilities of management and Audit Committee for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Audit Committee is responsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Auditor's responsibilities for the audit of the financial statements (continued)

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with Audit Committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament and the Council, we provide the following information in our independent auditor's report, which is required in addition to the requirements of ISAs:

Appointment of Auditor and Period of Engagement

We were initially appointed as auditors of the Company on 30 August 2023, representing a total period of uninterrupted engagement appointment of 1 year.

Consistence with Additional Report to Audit Committee

We confirm that our audit opinion on the financial statements expressed herein is consistent with the additional report to the Audit Committee of the Company, which we issued on 25 April 2024 in accordance with Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and the Council.

Report on Other Legal and Regulatory Requirements (continued)

Provision of Non-audit Services

We declare that no prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament and the Council were provided by us to the Company within the European Union. In addition, there are no other non-audit services which were provided by us to the Company and which have not been disclosed in the financial statements.

Report based on Delegated Regulation (EU) 2018/815 on supplementing Directive 2004/109/EZ of European parliament and Council related to regulatory technical standard for specification of single electronic reporting format of reporting

Independent report on the compliance of financial statements prepared pursuant to Article 462 (5) of the Capital Market Act (Official Gazette 65/18, 17/20,83/21 and 151/22) applying the requirements of the Delegated Regulation (EU) 2018 / 815 on establishing of single electronic reporting format for issuers (the ESEF Regulation).

We have conducted a reasonable assurance engagement on whether the financial statements, as contained in the attached electronic file 7478000050QHZTAWQI34-2023-12-31-en.zip, are prepared, for the purposes of public disclosure pursuant to Article 462, paragraph 5 of the Capital Market Act, in all material respects in accordance with the requirements of the ESEF Regulation.

Responsibilities of the management and Audit Committee

Management is responsible for the preparation of the financial statements in accordance with ESEF Regulation.

Furthermore, management is responsible for maintaining an internal control system that reasonably ensures the preparation of financial statements without material non-compliances with ESEF Regulation requirements, whether due to fraud or error.

Management is also responsible for:

• the public disclosure of financial statements included in the annual report, in XHTML format and
• selecting and using XBLR codes in accordance with ESEF regulation

Audit Committee is responsible for overseeing the preparation of the financial statements in ESEF format as part of the financial reporting process.

Auditor's responsibilities

Our responsibility is to express a conclusion, based on the audit evidence gathered, as to whether the financial statements are free from material non-compliances with the requirements of the ESEF Regulation. We conducted our reasonable assurance engagement in accordance with International Standard for Assurance Engagements ISAE 3000 (revised)- Assurance engagements other than audits or reviews of historical financial information.

Work performed

The nature, timing and extent of the procedures selected depend on the auditor's judgment. Reasonable assurance is a high degree of assurance, however it does not guarantee that the scope of procedures will identify all significant (material) non-compliance with ESEF regulation.

In respect of the subject matter, we have performed the following procedures:

• we read the requirements of the ESEF Regulation,
• we have gained an understanding of the Company's internal controls relevant to the application of the requirements of the ESEF Regulation,
• we have identified and assessed the risks of material non-compliance with the ESEF Regulation due to fraud or error; and
• Based on this, devise and implement procedures to respond to the assessed risks and to obtain reasonable assurance for the purpose of expressing our conclusion.

Report based on Delegated Regulation (EU) 2018/815 on supplementing Directive 2004/109/EZ of European parliament and Council related to regulatory technical standard for specification of single electronic reporting format of reporting (continued)

The aim of our procedures was to assess whether:

• the financial statements, which are included in the annual report, are prepared in the relevant XHTML format,
• the information contained in the financial statements required by the ESEF Regulation is marked and all markings meet the following requirements:
  • o the XBRL markup language was used,
  • o the basic taxonomy elements listed in the ESEF Regulation with the closest accounting significance have been used, unless an additional taxonomy element has been created in accordance with Annex IV. ESEF Regulation,
  • o the labeled elements comply with the common labeling rules under the ESEF Regulation.

We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our conclusion.

Conclusion

Based on the procedures performed and evidence gathered, the financial statements presented in ESEF format for the year ended on 31 December 2023, contained in the aforementioned attached electronic file and prepared pursuant to Article 462 paragraph 5 of the Capital Market Act prepared for public disclosure, are prepared in all material respects in line with the requirements of Articles 3, 4 and 6 of the ESEF Regulation.

Further to this conclusion, as well as the opinion contained in this independent auditor's report related to accompanying financial statements and annual report for the year ended 31 December 2023, we do not express any opinion on the information contained in these presentations or on any other information contained in the aforementioned file.

The partner in charge of the audit resulting in this independent auditor's report is Ivana Krajinović.

Ivana Krajinović Member of the Management Board and Certified auditor

Ernst & Young d.o.o. Radnička cesta 50 10000 Zagreb Republic of Croatia 26 April 2024