Span d.d.

Annual Report • Apr 30, 2024

Annual Report 2023 S P A N A N N U A L R E P O R T 2 0 2 3 2 S P A N A N N U A L R E P O R T 2 0 2 3 3 Contents 6. STATEMENTS ON RESPONSIBILITY FOR COMPILING THE REPORT FOR THE OBSERVED PERIOD 124 7. AUDITED FINANCIAL STATEMENTS OF SPAN GROUP AND SPAN D.D. 125 1. I N T R O D U C T I O N 4 2.1.3.2.1. MICROSOFT PARTNER OF THE YEAR 2023 IN CROATIA AND U K R A I N E 6 5 1 . 1 . S T A T E M E N T B Y N I K O L A D U J M O V I Ć , P R E S I D E N T O F T H E M A N A G E M E N T B O A R D 4 2 . 1 . 3 . 2 . 2 . S P A N B E C O M E S T H E H O L D E R O F A L L S I X M I C R O S O F T S O L U T I O N P A R T N E R S T A T U S E S 6 6 1.2. ABOUT S P A N 6 2.1.3.2.3. MICROSOFT ADVANCED S P E C I A L I Z A T I O N S 6 7 1.2.1. SPAN IN N U M B E R S 8 2 . 1 . 3 . 2 . 4 . H E W L E T T P A C K A R D E N T E R P R I S E G O L D P A R T N E R S T A T U S 6 8 1.2.2. HISTORY AND D E V E L O P M E N T 9 2.1.3.2.5. SAVIYNT – FASTEST TRANSACTION IN 2 0 2 2 6 8 1 . 2 . 3 . O R G A N I Z A T I O N A L S T R U C T U R E O F T H E G R O U P 1 2 2.1.3.2.6. SPAN CYBERGRX B E N C H M A R K I N G 6 9 1.2.4. CORPORATE G O V E R N A N C E 1 2 2.1.3.2.7. SEVENTH ISO C E R T I F I C A T E 6 9 1 . 2 . 4 . 1 . S T A T E M E N T O F T H E A P P L I C A T I O N O F T H E C O R P O R A T E G O V E R N A N C E C O D E 1 3 2.1.3.2.8. CROATIA GRAND PRIX SECURITY 2 0 2 3 7 0 1.2.4.2. CORPORATE GOVERNANCE CODE - COMPLIANCE QUESTIONNAIRE FOR 2 0 2 2 1 6 2.1.3.2.9. TD SYNNEX SOLUTION DAYS 2 0 2 3 7 0 1 . 2 . 4 . 3 . C O R P O R A T E G O V E R N A N C E S T R U C T U R E 1 6 2.1.3.2.10. CEP R E C E R T I F I C A T I O N 7 0 1 . 2 . 4 . 3 . 1 . M A N A G E M E N T B O A R D 1 7 2 . 1 . 3 . 2 . 1 1 . S A P S U C C E S S F A C T O R S - C O N T R A C T S I G N E D 7 1 1 . 2 . 4 . 3 . 2 . S U P E R V I S O R Y B O A R D 2 4 2.1.3.2.12. VOLUNTEERING OSCAR A W A R D 7 2 1.2.4.3.2.1. AUDIT C O M M I T T E E 3 1 2.1.3.2.13. SPAN - ”HEALTH-FRIENDLY C O M P A N Y ” 7 2 1.2.4.3.2.2. NOMINATION AND REMUNERATION C O M M I T T E E 3 2 2.2. FINANCIAL INDICATORS FOR 2 0 2 3 7 3 1.2.4.3.3. GENERAL A S S E M B L Y 3 6 2 . 2 . 1 . O P E R A T I N G R E V E N U E , E B I T D A A N D N E T P R O F I T O F S P A N G R O U P 7 3 1 . 3 . O V E R V I E W O F O P E R A T I O N 3 7 2 . 2 . 2 . O P E R A T I N G R E V E N U E , E B I T D A A N D N E T P R O F I T O F S P A N D . D . 7 3 1.3.1. DESCRIPTION OF THE OPERATION AND MAIN A C T I V I T I E S 3 7 2 . 2 . 3 . K E Y F E A T U R E S O F T H E P E R I O D – 2 0 2 3 7 4 1.3.2. MAIN M A R K E T S 4 3 2 . 2 . 4 . R E V E N U E S B Y S E G M E N T S 7 7 1.3.3. INDUSTRY T R E N D S 4 3 2 . 2 . 5 . R E V E N U E S B Y G E O G R A P H I C M A R K E T S 7 8 1 . 3 . 4 . I M P A C T O F T H E N I S 2 D I R E C T I V E O N T H E B U S I N E S S C O M M U N I T Y 4 4 2.2.6. BALANCE S H E E T 7 9 1 . 3 . 5 . T H E G R O U P B U S I N E S S S T R A T E G Y 4 7 2.2.7. CASH F L O W 8 2 2. KEY FEATURES OF THE P E R I O D 4 8 2.2.8. OPERATION OF TOV SPAN U K R A I N E 8 2 2 . 1 . K E Y E V E N T S I N 2 0 2 3 4 8 2.3. INFORMATION FOR S H A R E H O L D E R S 8 4 2 . 1 . 1 . C O R P O R A T E E V E N T S 4 8 2.3.1. SHARE C A P I T A L 8 4 2.1.1.1. 30 YEARS OF S P A N 4 9 2 . 3 . 2 . O W N E R S H I P S T R U C T U R E A N D 1 0 L A R G E S T S H A R E H O L D E R S 8 4 2.1.1.2. ACQUISITIONS, ESTABLISHMENTS AND DISSOLUTIONS OF C O M P A N I E S 5 0 2.3.3. SHARE MOVEMENTS AND TRADING V O L U M E 8 5 2 . 1 . 1 . 2 . 1 . T H E A C Q U I S I T I O N O F G T T A R K V A R A , E S T O N I A ’ S L A R G E S T M I C R O S O F T P A R T N E R 5 0 2.3.4. SHARE BUY-BACK P R O G R A M 8 8 2 . 1 . 1 . 2 . 2 . E S T A B L I S H I N G A S P A N C O M P A N Y W I T H T H E R E G I S T E R E D O F F I C E I N G E O R G I A 5 1 2.3.5. ACQUISITIONS AND DISPOSALS OF OWN S H A R E S 8 8 2 . 1 . 1 . 2 . 3 . D E C I S I O N O F T H E S W I S S A G B O A R D O F D I R E C T O R S O N T H E D I S S O L U T I O N O F T H E C O M P A N Y 5 1 2.3.6. DIVIDEND PAYMENT P O L I C Y 8 9 2 . 1 . 1 . 3 . C H A N G E S I N T H E S U P E R V I S O R Y B O A R D 5 1 2 . 3 . 7 . C O N T R A C T S W I T H A F F I L I A T E D P E R S O N S 8 9 2 . 1 . 1 . 4 . G E N E R A L A S S E M B L Y O F S P A N D . D . 5 2 2.4. R I S K S 9 0 2.1.1.5. DECISION ON THE UTILIZATION OF PROFIT AND PAYMENT OF D I V I D E N D 5 2 2.4.1. FINANCIAL R I S K S 9 2 2 . 1 . 1 . 6 . I M P L E M E N T A T I O N O F T H E R E G I S T R A T I O N O F S H A R E C A P I T A L A D J U S T M E N T 5 2 2.4.2. LEGAL R I S K S 9 3 2.1.1.7. ESOP – ALLOCATION OF ADDITIONAL S H A R E S 5 2 2 . 4 . 3 . R I S K S R E L A T E D T O T H E O P E R A T I O N O F T H E C O M P A N Y 9 4 2.1.1.8. RESIGNATION OF A MEMBER OF THE MANAGEMENT BOARD OF SPAN D . D . 5 3 3 . P E O P L E A N D C O M M U N I T Y 9 8 2 . 1 . 1 . 9 . E M P L O Y E E S ’ R E P R E S E N T A T I V E I N T H E S U P E R V I S O R Y B O A R D O F S P A N D . D . E L E C T E D 5 3 3.1. HUMAN RESOURCE E X C E L L E N C E 9 9 2.1.1.10. ACQUISITIONS AND DISPOSALS OF OWN S H A R E S 5 3 3 . 2 . R E C R U I T M E N T , D E V E L O P M E N T A N D R E T E N T I O N O F E M P L O Y E E S 1 0 0 2.1.2. BUSINESS EVENTS AND A C H I E V E M E N T S 5 4 3 . 2 . 1 . R E C R U I T I N G A N D E M P L O Y I N G P R O F E S S I O N A L E M P L O Y E E S 1 0 0 2.1.2.1. SOFTWARE ASSET MANAGEMENT AND L I C E N S I N G 5 4 3.2.2. DEVELOPMENT OF TECHNOLOGICAL AND LEADERSHIP C A P A C I T I E S 1 0 4 2 . 1 . 2 . 2 . I N F R A S T R U C T U R E S E R V I C E S , C L O U D & C Y B E R S E C U R I T Y 5 4 3 . 2 . 3 . R E T E N T I O N O F E M P L O Y E E S – E N G A G E M E N T , R E M U N E R A T I O N A N D R E T E N T I O N 1 0 7 2.1.2.3. SOFTWARE & BUSINESS SOLUTIONS D E V E L O P M E N T 5 6 3 . 3 . I M P R O V E M E N T O F I N T E R N A L B U S I N E S S P R O C E D U R E S 1 0 8 2.1.2.4. SERVICE CENTER MANAGEMENT AND TECHNICAL S U P P O R T 5 9 3.4. ENCOURAGING POSITIVE CHANGES – RESULTS OF THE ORGANIZATIONAL CLIMATE S U R V E Y 1 0 9 2.1.2.5. INTERNATIONAL O P E R A T I O N S 6 0 3.5. BRAND AND C O M M U N I C A T I O N S 1 1 0 2.1.3. AWARDS, RECOGNITIONS AND A C H I E V E M E N T S 6 3 4 . S U S T A I N A B I L I T Y I N S P A N 1 1 1 2 . 1 . 3 . 1 . A W A R D S , R E C O G N I T I O N S A N D A C H I E V E M E N T S R E L A T E D T O T H E S H A R E 6 3 4 . 1 . C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y 1 1 2 2.1.3.1.1. LISTING INTO CROBEX10 ® AND C R O B E X 1 0 T R ® 6 3 4 . 2 . S U S T A I N A B I L I T Y R E P O R T F O R 2 0 2 2 1 1 3 2.1.3.1.2. ENLISTING IN THE FRONTIER MARKETS SMALL CAP I N D E X 6 4 4 . 3 . C O R P O R A T E V O L U N T E E R I N G I N S P A N 1 1 4 2 . 1 . 3 . 1 . 3 . Z A G R E B S T O C K E X C H A N G E A W A R D F O R T H E S T O C K W I T H T H E H I G H E S T I N C R E A S E I N T R A D I N G V O L U M E 6 4 4.4. MEMBERSHIPS IN UN GLOBAL COMPACT AND H R P S O R 1 1 6 2.1.3.2. AWARDS, RECOGNITIONS AND ACHIEVEMENTS IN O P E R A T I O N S 6 5 4 . 5 . R T L H E L P S C H I L D R E N 1 1 7 4 . 6 . G R E E N S P A N 1 1 8 5. PROCESSES AND T E C H N O L O G Y 1 1 9 5.1. ISO S T A N D A R D S 1 2 0 5.2. P A R T N E R S H I P S 1 2 2 5 . 3 . C O D E O F B U S I N E S S C O N D U C T 1 2 3 S P A N A N N U A L R E P O R T 2 0 2 3 4 S P A N A N N U A L R E P O R T 2 0 2 3 5 1. Introduction Everybody is clear that the need for digital solutions will not cease to exist and will almost certainly grow, but the question is how to determine the realistic needs and priorities in these new circumstances. Our customers did not cancel or stop or shut down projects. They w a n t e d s o m e t i m e o f f , d i f f e r e n t p r i o r i t i e s , l o w e r budgets, only in this year. While big “classic” projects slowed down, two new giants of the IT industry – artificial A year of challenges and a year of new o p p o r t u n i t i e s 1.1. Statement by Nikola Dujmović, President of the Management Board Modern developed societies are increasingly relying on digital technologies. This was especially so under the pressure of the pandemic, when the need for information and communication solutions increased day by day. Each segment of our industry grew little by little. There was a lack of professionals, especially developers, but there was plenty of work for everyone. Until, suddenly, almost over the night, the IT industry became saturated. Projects were slowing down. IT companies of all sizes started to lay off workers. Analysts were thinking of definitions of this phenomenon that occurred suddenly, caused by external factors, though without any evident announcement. Digital budget saturation might be the best description I have heard. When the pressure of the pandemic subsided and the threat of a global conflict increased, many felt fed up with that ”digital“ growth and wanted to get a break from that fast and almost forced digital revolution of the last couple of years. intelligence and cyber security – started to appear around the corner. The frequency of cyber attacks, their scope and the damage they cause are increasing and becoming a question of national, social and economic stability. Both current wars, in Ukraine and Israel, are waged both in the traditional battlefield and cyberspace at the same time. Cyber war is literally global and has not spared the area of Croatia either. At the same time, artificial intelligence, a branch of the digital economy that has been developed for seventy odd years, has been speedily transitioning from labs and academic c o m m u n i t y t o t h e t r a d i t i o n a l e c o n o m y . A r t i f i c i a l i n t e l l i g e n c e i n c r e a s e s p r o d u c t i v i t y , r e p l a c i n g people in demanding and boring tasks. Particularly rapid acceleration came with the commercialization of generative models that create a new value. We have made ourselves ready for this new order in the IT industry excellently. Our affiliated company Bonsai.tech has been developing solutions for our international customers w i t h A I t o o l s f o r y e a r s , t h u s w e a r e r e a d y f o r n e w o p p o r t u n i t i e s i n t h i s m a r k e t . W e h a v e b e e n d e v e l o p i n g a c y b e r s e c u r i t y t e a m f o r y e a r s a n d w e h a v e r e a d i l y c o u n t e r e d c y b e r a t t a c k s t h a t are growing day by day. S P A N A N N U A L R E P O R T 2 0 2 3 6 S P A N A N N U A L R E P O R T 2 0 2 3 7 In the past years, we have recorded a continuing growth of revenues with two thirds of our revenues being generated in the international market. Span Group 2 0 2 2 Croatia 3 2 % USA 1 9 % Slovenia 1 7 % UK 1 1 % Ukraine 9 % Others 1 2 % 1.2. About Span We were established on 23 March 1993, as a limited liability company. Under the decision of the company’s Assembly, we became a joint stock company on 13 December 2019. Our main activities include the provision of services of software asset management and licensing, infrastructure services of design and maintenance of information systems, work in Cloud and cyber security, management of information S p a n G r o u p 2 0 2 3 Croatia 3 4 % Slovenia 1 5 % technology and technical support service centers, as well as the development of software and business solutions. During the 30 years of operation, we have developed from an IT system integrator in Croatia, to a group that today operates on the international market. We are focused on our long-term relationships with customers and we cooperate with leading global and regional corporations. As a leading expert in Microsoft technologies and leading regional Microsoft partner, we are continuously working on improving the knowledge of our employees with the aim of providing higher quality solutions to our customers. USA 1 1 % UK 9 % Estonia 8 % Others 2 3 % As an IT service provider, we successfully monitor and respond to trends in the digital transformation of the operation, and with our work and company values, we try to be an example of the responsible and sustainable operation in Croatia. S P A N A N N U A L R E P O R T 2 0 2 3 8 S P A N A N N U A L R E P O R T 2 0 2 3 9 1.2.1. Span in numbers 1.2.2. History and development We started our journey in 1993 as a license provider and system integrator. Focused on Microsoft technologies, we became the first certified provider of Microsoft solutions in 1996, only to become a Microsoft Certified Solution Provider Partner in 1999. A year later, a Hungarian system integrator, Synergon, joined our ownership structure. 1993 company established 24/7 availability of Span s u p p o r t 58,700+ proactively monitored devices 202,000+ resolved tickets in 2 0 2 3 375 s u c c e s s f u l l y completed projects in 2023 99.96% incidents resolved in terms of SLA * The 1996 to 2001 period saw a significant transformation in the operation. Having obtained the status of the first Gold Microsoft Partner in Croatia and the leading Microsoft Partner in the Croatian market in 2001, we started providing technical support to customers, and this branch of operation, which we have developed continuously, is our largest division in terms of numbers today. At that time, we started offering consultancy services and designing business solutions for our customers. In the years that followed, we expanded to international markets. We opened offices in Great Britain, Slovenia, the United States, Azerbaijan, Germany, Ukraine, Switzerland, Moldova and finally, Georgia in 2023. The new goal that we set and achieved was listing our shares on the regulated Zagreb S t o c k E x c h a n g e m a r k e t , b e c o m i n g a j o i n t s t o c k c o m p a n y i n 2 0 1 9 , a n d l i s t i n g o u r s h a r e s o n the Zagreb Stock Exchange in September 2021. By doing so, we started a new development phase of operation oriented to an accelerated organic growth in the existing markets and an opportunity to continue to expand in international markets. Only six months after the Initial Public Offering, our share was included in the CROBEX® and CROBEXtr® indices, whereas in March 2023, it joined the 10 most liquid shares, being listed in the CROBEX10® and CROBEX10tr® indices. In the same year, the largest provider of stock indices on the global level, MSCI, enlisted our share in the MSCI Frontier Market Small Cap Index, which gives it additional visibility with global investors. W e c o n t i n u e t o f u r t h e r f o c u s o n c l o u d a n d c y b e r s e c u r i t y , a n d i n a d d i t i o n t o M i c r o s o f t as our main partner, we continue to operate with Google, Amazon and other renowned p a r t n e r s . I n c o n t i n u a t i o n o f t h e b u s i n e s s d e v e l o p m e n t p l a n , i n S e p t e m b e r 2 0 2 2 w e o p e n e d Span Cyber Security Center d.o.o., with a view to providing education, training and consultancy services to the business community in Croatia and the region. We also acquired GT Tarkvara, the Estonian leading Microsoft partner, and thus confirmed the strategic direction to further growth and expansion to new markets. 34 years a v e r a g e a g e o f employees * Service Level A g r e e m e n t 72.95% of employees with university or college d e g r e e 400+ employees with p r o f e s s i o n a l c e r t i f i c a t i o n S P A N A N N U A L R E P O R T 2 0 2 3 10 S P A N A N N U A L R E P O R T 2 0 2 3 11 1993 Span is f o u n d e d 1998 S p a n 2000 2001 F i r s t C r o a t i a n M i c r o s o f t G o l d P a r t n e r 2007 S p a n m a n a g e m e n t buy out 2011 I S O / I E C 2 7 0 0 1 2012 I S O / I E C 2 0 0 0 0 2014 McDonald’s UK IT o p e r a t o r o f t h e Y e a r A w a r d 2013 M i c r o s o f t P a r t n e r o f t h e Y e a r – C r o a t i a 2016 M i c r o s o f t P a r t n e r o f t h e Year – C r o a t i a S p a n A z e r b a i j a n , B a k u , A z e r b a i j a n e s t a b l i s h e d 2015 E u r o p e a n B u s i n e s s 2019 17 Microsoft c o m p e t e n c i e s achieved, 16 G o l d 2021 McDonald's Global T e c h n o l o g y P a r t n e r Microsoft Partner of the Year – Croatia 9 M i c r o s o f t A d v a n c e d S p e c i a l i z a t i o n s a c h i e v e d Shares listed on Zagreb Stock E x c h a n g e Span-IT S R L , Chișinău, Moldova e s t a b l i s h e d I S O / I E C 1 4 0 0 1 ISO/IEC 5 0 0 0 1 2 0 2 2 2023 I S O / I E C 2 2 3 0 1 A c q u i s i t i o n o f G T T a r k v a r a 12 Microsoft A d v a n c e d S p e c i a l i z a t i o n s a c h i e v e d 6 Microsoft S o l u t i o n s P r o v i d e r d e s i g n a t i o n s M i c r o s o f t P a r t n e r of the Year - C r o a t i a & U k r a i n e Span LLC, Tbilisi, Georgia e s t a b l i s h e d 1995 F i r s t Microsoft 1 9 9 6 l a u n c h e s Microsoft C T E C e d u c a t i o n c e n t e r S p a n p a r t n e r s w i t h H u n g a r i a n s y s t e m i n t e g r a t o r 2006 ISO 9 0 0 1 2009 Span IT, L o n d o n , U n i t e d K i n g d o m S p a n U S A , I N C ., C h i c a g o , I L e s t a b l i s h e d A w a r d I n f o c u m u l u s joins Span G r o u p Start of S p a n 2018 TOV Span, K y i v , U k r a i n e e s t a b l i s h e d 2020 A W S a n d G o o g l e Cloud Services Span Cyber Security Center established 12 Microsoft A d v a n c e d S p e c i a l i z a t i o n s C e r t i f i e d S y s t e m E n g i n e e r e m p l o y e d First Croatian M i c r o s o f t C e r t i f i e d Solution Provider Organization of M i c r o s o f t S y s t e m s & Development C o n f e r e n c e 1 9 9 9 S y n e r g o n F i r s t M i c r o s o f t E n t e r p r i s e Agreement in C r o a t i a e s t a b l i s h e d S p a n d.o.o., L j u b l j a n a , S l o v e n i a e s t a b l i s h e d D e v e l o p m e n t A c a d e m y p a r t n e r T O V S p a n a w a r d e d best Microsoft LSP partner in Ukraine Microsoft Partner of the Year – C r o a t i a a c h i e v e d A c q u i s i t i o n o f E k o b i t M i c r o s o f t P a r t n e r o f the Year – Ukraine GRIT Award for UN S u s t a i n a b l e Development Goal 8. I n - h o u s e installation of E x c h a n g e 4.0 – e m a i l e x c h a n g e s y s t e m Microsoft C e r t i f i e d S o l u t i o n P r o v i d e r P a r t n e r S P A N A N N U A L R E P O R T 2 0 2 3 1 2 S P A N A N N U A L R E P O R T 2 0 2 3 1 3 D O M E S T I C 1 0 0 % 7 0 % 6 0 % 3 5 % 8 2 . 1 3 % B o n s a i d . o . o . T r i l i x d . o . o . Span Cyber S e c u r i t y Center d.o.o. Ekobit d . o . o . Fintech digital s e r v i c e s d . o . o . INTERNATIONAL S U B S I D I A R I E S 1 0 0 % 1 0 0 % Span USA Inc., C h i c a g o 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % Span SWISS AG, Z u r i c h S p a n A z e r b a i j a n L L C , B a k u Span d.o.o, L j u b l j a n a Span IT Ltd, L o n d o n Span-IT s.r.l., K i š i n j e v Span GmbH, M u n i c h S p a n G T T a r k v a r a , T a l i n n Span LLC, T b i l i s i 1.2.3. Organizational structure of the Group 1 On 31 December 2023, Span d.d. (Span or Company) had business shares in the following companies: 1.2.4.1. Statement of the application of the Corporate Governance Code Pursuant to Article 272.p, in relation to Article 250.a of the Companies Act (Official Gazette no. 111/1993, 34/1999, 121/1999, 52/2000, 118/2003, 107/2007, 146/2008, 137/2009, 111/2012,125/2011, 6 8 / 2 0 1 3 , 110/2015, 40/2019, 34/2022, 114/2022, 18/2023, 1 3 0 / 2 0 2 3 Span d.d. S U B S I D I A R I E S hereinafter: “the Act”) and Article 22 of the Accounting Act (Official Gazette no. 78/2015, 134/2015, 120/2016, 116/2018, 42/2020, 47/2020, 114/2022, 82/2023), the Management of the company Span d.d., Zagreb, Koturaška cesta 47, Company ID:19 680551758 (hereinafter: “Span” or “Company”) hereby issues the following STATEMENT OF THE APPLICATION OF THE CORPORATE GOVERNANCE CODE I Span shares have been listed on the Zagreb Stock Exchange on 21 September 2021, and Span applies the Corporate Governance Code of the Zagreb Stock Exchange (ZSE) and the Croatian Financial Services Supervisory Agency (CFSSA) publicly available at the website of the ZSE ( www.zse.hr ) and the CFSSA ( www.hanfa.hr ). II Span hereby confirms that it operates in line with the good corporate governance practices and predominantly in compliance with the recommendations in the Code, a n d p u b l i s h e s a l l i n f o r m a t i o n r e q u i r e d b y p o s i t i v e r e g u l a t i o n s . Span shall present detailed explanations of departures from individual recommendations a n d a d d i t i o n a l a d j u s t m e n t s i n t h e A n n u a l C o m p l i a n c e Q u e s t i o n n a i r e f o r I s s u e r s o f S h a r e s a n d the Corporate Governance Practice Questionnaire for Issuers of Shares which, as defined in the O r d i n a n c e o n t h e d a t a c o n c e r n i n g c o r p o r a t e g o v e r n a n c e , t h e i s s u e r s a r e r e q u i r e d t o d e l i v e r t o the Croatian Financial Services Supervision Agency and on the form, deadlines, and manner of their submission (OG 59/2020, 12/2023), submit them for 2023 to the Croatian Financial Services Supervision Agency (CFSSA) not later than 30 April of the current calendar year and publish them o n t h e w e b s i t e s o f t h e C o m p a n y a n d t h e Z a g r e b S t o c k E x c h a n g e . III Controlling and Internal Audit, supervised by the Audit Committee, are in charge of internal control and risk management systems with regard to the financial reporting s y s t e m . 1.2.4. Corporate Governance Span is a joint stock company whose shares are listed on the regulated Zagreb Stock Exchange market and which applies the Corporate Governance Code of the Zagreb Stock Exchange and the Croatian Financial Services Supervisory Agency (HANFA), which is available online on the sites of the Zagreb Stock In line with the Audit Act (OG 127/17, 27/2024), in addition to the tasks defined in the Regulation (EU) No 537/2014 of the European Parliament and of the Council on specific requirements regarding statutory audit of public-interest entities and repealing Commission D e c i s i o n 2 0 0 5 / 9 0 9 / E C a n d a l l r e l e v a n t r e g u l a t i o n s , t h e A u d i t C o m m i t t e e s h a l l m o n i t o r t h e f i n a n c i a l r e p o r t i n g p r o c e s s a n d d e l i v e r r e c o m m e n d a t i o n s a n d s u g g e s t i o n s f o r s e c u r i n g t h e Exchange and HANFA ( Corporate Governance Code ). A Statement on the application of the Corporate Governance Code is a constituent part of the Annual Report of the Span Group. S p a n ’s i n t e r n a l r u l e s a n d m a n a g e m e n t p r o c e d u r e s , b a s e d o n t h e f u n d a m e n t a l p r i n c i p l e s o f c o r p o r a t e g o v e r n a n c e , p a r t i c u l a r l y t h e p r i n c i p l e s o f i m p a r t i a l i t y , t r a n s p a r e n c y , e q u i t y , a n d accountability, ensure more efficient operations and timely and objective communication of all key business activities and results the company achieved to the public. At the same time, they enable equal treatment of all shareholders, thus strengthening the trust of all stakeholders, including employees, partners, customers and other interested parties. integrity thereof, as well as monitor the effectiveness of the Company’s internal quality control a n d r i s k m a n a g e m e n t s y s t e m s , i n c l u d i n g t h e e f f e c t i v e n e s s o f p r o c e d u r e s f o r a p p r o v i n g and disclosing transactions among Management and Supervisory Board members and the C o m p a n y , a s w e l l a s i n t e r n a l a u d i t , w i t h o u t b r e a c h i n g i t s i n d e p e n d e n c e . Internal Audit’s key goals are providing senior management and the Supervisory Board w i t h g u a r a n t e e s a n d i n f o r m a t i o n t h a t w i l l h e l p t o a c h i e v e t h e o r g a n i z a t i o n ’s g o a l s , i n c l u d i n g the evaluation of the effectiveness of risk management activities. Controlling reports to the Management Board of the Company, and Internal Audit to the Audit Committee of the S u p e r v i s o r y B o a r d , a n d t h e M a n a g e m e n t B o a r d . 1 Span Group (“Group”) consists of Span d.d. (”Company”) and its s u b s i d i a r i e s Span LLC, K i j e v S P A N A N N U A L R E P O R T 2 0 2 3 1 4 S P A N A N N U A L R E P O R T 2 0 2 3 1 5 Internal Audit prepares a report once the audit has been completed, and this report contains the following: • list of the audits carried out • assessment of the adequacy and efficiency of internal controls and recommendations for i m p r o v e m e n t s • unlawfulness and irregularities determined during the audit, and recommendations and proposed measures to address them • a c t i v i t i e s u n d e r t a k e n i n r e l a t i o n t o t h e p r e v i o u s l y i s s u e d r e c o m m e n d a t i o n s . Reports are delivered to the Management Board and Audit Committee. During 2023, Span continued to maintain and continuously improve the existing six m a n a g e m e n t s y s t e m s c e r t i f i e d b y I S O s t a n d a r d s . S p e c i a l a t t e n t i o n w a s d i r e c t e d t o w a r d s information security management and IT services, as well as towards the ethical aspects of management in accordance with ISO 37001 standard. During 2023, the Risk management methodology was improved and the application for monitoring business objectives and risk m a n a g e m e n t w a s c o m p l e t e d . M o r e o v e r , a t t h e b e g i n n i n g o f 2 0 2 3 , t h e b u s i n e s s c o n t i n u i t y management system was certified (BCMS) in accordance with ISO 22301 standard. This has ensured a higher level of reliability of Span’s business processes and services it offers to its customers, and thus a higher level of trust. IV Ten significant Span shareholders as at 29/12/2023 are as follows: No. Name Number of shares Percentage (%) 1 DUJMOVIĆ NIKOLA 701,072 35.769 2 PONGRAC MARIJAN 1 1 2 ,1 9 8 5.7244 3 BANEK ZVONIMIR 107,995 5.5099 4 R A I F F E I S E N B A N K A U S T R I A D.D./ R A I F F E I S E N V O L U N T A R Y P E N S I O N F U N D 1 0 1 ,1 1 1 5.1587 5 ERSTE & STEIERMARKISCHE BANK D.D./ PBZ CO OMF - CATEGORY B 65,200 3.3265 6 PRIVREDNA BANKA ZAGREB D.D./THE BANK OF NEW YORK AS CUSTODIAN 50,525 2.5778 7 BOČKAL DAMIR 46,516 2.3733 8 PRIVREDNA BANKA ZAGREB D.D./ GENERALI JUGOVZHODNA EVROPA, DELNISKI 43,810 2.2352 9 PODRAVSKA BANKA D.D./OMNIBUS ACCOUNT FOR M21 - NATURAL PERSONS 36,253 1.8496 1 0 ERSTE & STEIERMARKISCHE BANK D.D./ PBZ CO OMF - CATEGORY A 26,128 1.3 3 3 1 S p a n d o e s n o t h a v e h o l d e r s o f s e c u r i t i e s w i t h s p e c i a l c o n t r o l r i g h t s o r h o l d e r s o f securities with limited voting rights with a certain percentage or number of votes, time r e s t r i c t i o n s f o r e x e r c i s i n g t h e r i g h t t o v o t e o r c a s e s w h e r e , i n c o o p e r a t i o n w i t h t h e c o m p a n y , t h e f i n a n c i a l r i g h t s f r o m s e c u r i t i e s a r e s e p a r a t e d f r o m h o l d i n g t h o s e s e c u r i t i e s . S p a n d o e s n o t h a v e s p e c i a l r u l e s o n a p p o i n t i n g o r r e v o k i n g m e m b e r s o f t h e M a n a g e m e n t B o a r d o r t h e S u p e r v i s o r y Board, amending the Articles of Association or special rules on the powers of the members of the Management Board or the Supervisory Board. Provisions of the Companies Act and the Articles of Association, available on Span’s website ( www.span.eu ), apply to all of the cited relations. V. The operation and competences of the General Assembly and the way of exercising and realizing the rights of shareholders are defined in the Companies Act and the Articles of Association of the Company. Calls and proposed decisions, as well as the decisions adopted, are published in line with the provisions of the Companies Act, provisions of the Capital Market Act, and Rules of the Zagreb Stock Exchange. Each share ensures the right to 1 vote. V I . In 2023, the Management Board consisted of 5 members, with a maximum 5-year term. Once their term expires, Management Board members and President may be reappointed for an infinite number of terms. The Management Board is responsible for managing the affairs of the Company, assuming a duty of care and conscientiousness, in line with the Companies Act, the Articles of Association and Rules of Procedure of the Management Board. In 2023, the Supervisory Board had 4 members. The President of the Supervisory B o a r d , J a s m i n K o t u r , a n d t h e M e m b e r Z v o n i m i r B a n e k r e s i g n e d f r o m t h e i r p o s i t i o n s a t t h e Supervisory Board, and at the meeting of the General Assembly of the Company that took place on 14 June 2023 Ivana Šoljan and Mirjana Marinković were elected as the new Members of the Supervisory Board. The two were elected for a period from the adoption of the decision of the General Assembly to the expiry of terms of office of the other members of the Supervisory Board of the Company, i.e. by 30 September 2024. The right to appoint and recall the fifth member of the Supervisory Board is given to Span employees, who elected Barbara Gradečak on 29 December 2023 as the representative of employees in the Supervisory Board with a four year term. Supervisory Board members have a maximum 4-year term. Powers of the Supervisory Board are defined by the provisions of the Companies Act, the Articles of Association of the Company, and the Rules of Procedure of the Supervisory Board. Within its competence, the Supervisory Board adopts decisions, assessments, opinions, gives consent to the decisions of the Management Board in line with the Rules of Procedure, the l a w , o r t h e A r t i c l e s o f A s s o c i a t i o n , g i v e s o r d e r s t o a u d i t o r s a n d t o g e t h e r w i t h t h e M a n a g e m e n t Board, defines which proposed decisions are to be adopted by the General Assembly. The Management Board and the Supervisory Board usually hold meetings or adopt decisions without holding a meeting, via correspondence, in line with the provisions of the Rules of Procedure, the law, and the Articles of Association. The Supervisory Board, acting in line with the provisions of the law, the Corporate Governance Code and the Rules of Procedure of the Supervisory Board, formed two committees, the Audit Committee and the Nomination and Remuneration Committee. Description of the jobs and competences of the Audit Committee and the Nomination and Remuneration Committee is available on Span’s website ( www.span.eu ). V I I . T h e M a n a g e m e n t B o a r d o f S p a n h a s a d o p t e d t h e P o l i c y o n D i v e r s i t y a n d Inclusion (hereinafter: Policy) on 18 December 2023 and signed the Diversity Charter of the Croatian Business Council for Sustainable Development. The policy is based on diversity, inclusivity and emphasizing the importance of fairness in ensuring equality of opportunity. It i n c l u d e s p r i n c i p l e s o f i n d i v i d u a l u n i q u e n e s s , p r a c t i c a l a d a p t a t i o n , i n d i v i d u a l r e s p o n s i b i l i t y o f each individual, a positive approach to diversity, openness and transparency, zero tolerance f o r d i s c r i m i n a t i o n , h a r a s s m e n t o r v i o l e n c e , e q u a l o p p o r t u n i t i e s a n d i n c l u s i v e l e a d e r s h i p , d e s c r i b e d i n m o r e d e t a i l i n t h e P o l i c y . T h e f o u n d a t i o n o f t h e P o l i c y l i e s i n t h e l e g a l f r a m e w o r k prescribed by the Anti-Discrimination Act. By adopting this Policy, the Management Board has committed to implementing the above-mentioned principles to create a positive and inclusive organizational culture. Due to the fact that the policy was adopted in December of 2023, the manner in which the Policy is implemented and the results during the reporting period will be published as part of the Annual Report for 2024. V I I I . In line with the provisions of Article 250 (4) and Article 272.p of the Act, this Statement represents a separate section and integral part of the annual report on the financial p o s i t i o n a n d b u s i n e s s p e r f o r m a n c e o f t h e C o m p a n y f o r t h e b u s i n e s s y e a r 2 0 2 3 . Span d.d. S P A N A N N U A L R E P O R T 2 0 2 3 1 6 S P A N A N N U A L R E P O R T 2 0 2 3 1 7 1.2.4.2. Corporate G o v e r n a n c e C o d e - Compliance Questionnaire for 2022 Applying the best practices of corporate governance, we ensure unbiased, transparent and responsible decision- making in our operations. In line with the requirements of the Corporate Governance Code, in 2023 we have published a Compliance Questionnaire for 2022 . 2 1.2.4.3. C o r p o r a t e Governance Structure The three fundamental bodies of Span are as follows: 1. Management Board 2. S u p e r v i s o r y Board 3. General Assembly 1.2.4.3.1. Management Board The Management Board of the Company is responsible for the strategic management and long-term performance of the whole Span G r o u p . I t i s o b l i g e d t o a c t o n l y o n b e h a l f o f S p a n a n d i t s s h a r e h o l d e r s at all times, taking care of the interests of the employees and the 2 The Questionnaire on Management Practices was also submitted to HANFA in the time period prescribed by relevant provisions of law w i d e r c o m m u n i t y , w i t h a v i e w t o i n c r e a s i n g S p a n v a l u e . M e m b e r s o f t h e M a n a g e m e n t B o a r d manage the affairs of the Company together, as well as independently as per individual areas o f b u s i n e s s a s s p e c i f i e d i n m o r e d e t a i l i n t h e R u l e s o f P r o c e d u r e f o r t h e M a n a g e m e n t B o a r d . I r r e s p e c t i v e o f t h e d i v i s i o n o f c o m p e t e n c e s , a l l m e m b e r s o f t h e M a n a g e m e n t B o a r d a r e responsible for the overall management of the affairs of the Company. The Management Board m a n a g e s i t s a f f a i r s i n c o m p l i a n c e w i t h t h e a p p l i c a b l e l a w s a n d b y - l a w s , t h e A r t i c l e s o f t h e A s s o c i a t i o n o f t h e C o m p a n y a n d t h e R u l e s o f P r o c e d u r e f o r t h e M a n a g e m e n t B o a r d . The Rules of Procedure for the Management Board regulates tasks, responsibility, organization, way of operation and decision-making of the Company Management Board, as part of the corporate management process, especially: a) Tasks and responsibilities of the Management Board; b) Organization and manner of operation and decision-making of the Management Board; c) Fields of work that members of the Management Board manage on their own; d) Authorizations and restrictions in managing the affairs of the Company; e) Preparing and convening meetings of the Management Board; f) Work at meetings and decision-making process; g) Record and conclusions, acts and archives; h) Rules for preventing conflict of interest; i) Cooperation with and relation to the Supervisory Board; j) Other issues of significance for the work of the Management Board. The division of labor and competences of the members of the Management Board is elaborated in more detail in the Appendix of the Rules of Procedure. The Management Board of Span consisted of 5 members in 2023. The number of the members of the Management Board is determined by a decision of the Supervisory Board. The Management Board is appointed for a term of office of not more than 5 years, with a possibility for reappointment, without restriction of the number of terms. The Management Board members in 2023 were: 1. Nikola Dujmović - President 2. Marijan Pongrac - Member 3. Dragan Marković - Member 4. Antonija Kapović – Member 5. Saša Kramar - Member • 4 year m a n d a t e • Each Committee has 3 m e m b e r s : - President (independent member of the Supervisory Board) - 2 e x t e r n a l To avoid conflicts of interest of all relevant p a r t i e s IV INDEPENDENCE P R O C E D U R E S M a n a g e m e n t B o a r d • 5 year m a n d a t e • 1 - 9 m e m b e r s a p p o i n t e d b y Supervisory Board AUDIT C O M M I T T E E F A I R N E S S III To protect shareholders rights and treat all shareholders equally including minorities S u p e r v i s o r y B o a r d • 4 year m a n d a t e • 5 m e m b e r s : - 4 appointed by General A s s e m b l y - 1 appointed by e m p l o y e e s N O M I N A T I O N AND REMUNERATION C O M M I T T E E A C C O U N T A B I L I T Y II To establish effective internal control a n d effective accountability system at all l e v e l s R o b u s t c o r p o r a t e g o v e r n a n c e m o d e l e n a b l i n g the execution of g o v e r n a n c e r e s p o n s i b i l i t i e s at all levels and e n s u r e s i n v e s t o r c o n fi d e n c e G e n e r a l A s s e m b l y T R A N S P A R E N C Y To ensure timely, accurate disclosure on all material matters (financial information, ownership and corporate governance information) I S h a r e h o l d e r s S P A N A N N U A L R E P O R T 2 0 2 3 18 Term of office of the Management Board members: Name and last name Start of the term Expiry of the term Nikola Dujmović 1 6 .1 2 .2 0 1 9 16.12.2024 Marijan Pongrac 1 6 .1 2 .2 0 1 9 16.12.2024 Dragan Marković 1 6 .1 2 .2 0 1 9 16.12.2024 Antonija Kapović 1 6 .1 2 .2 0 1 9 31.12.2023 Saša K r a m a r 23.01.2020 16.12.2024 * Antonija Kapović resigned from the position of Member of the Management Board on 31 December 2023. During 2023, 14 meetings of the Management Board took place, with the membership attendance of 96%. The Members Nikola Dujmović, Antonija Kapović, Marijan Pongrac and Saša Kramar attended 14 meetings, and Dragan Marković attended 12 meetings. The Management Board evaluated its effectiveness and the individual members' effectiveness, and communicated its conclusions to the Supervisory Board. N i k o l a D u j m o v i ć , P r e s i d e n t o f t h e M a n a g e m e n t B o a r d Nikola is a co-founder and has been the company’s Director since its foundation. An engineer by trade, he sees the possibilities for improvement and growth in everything he does, with an exceptionally rare talent to recognize or anticipate upcoming global tech trends. Nikola's business philosophy is simple – trust in what you do and follow the social responsibility concept, provide support and try to give the community more than you have received from it. From the start, Nikola saw the importance o f i n v e s t i n g i n p e o p l e a n d t h e i r s k i l l s . T h a t i s w h y t o d a y S p a n ’s employees have a chance to expand their knowledge by working with state-of-the-art tech, using that knowledge to efficiently solve their clients’ business challenges. Nikola is also responsible for Span’s expansion far b e y o n d C r o a t i a n b o r d e r s a n d h e w a s t h e f o r c e b e h i n d S p a n ’s p a r t n e r s h i p w i t h M i c r o s o f t , m a k i n g u s t h e c o m p a n y ’s l e a d i n g p a r t n e r i n t h e r e g i o n . E v e r y t h i n g f r o m d e s i g n a n d development of strategically important projects, corporate security, quality and compliance with legal matters and office administration falls under Nikola’s direct jurisdiction. Thanks to his e f f o r t s a n d v i s i o n , S p a n i s t o d a y o n e o f t h e l e a d i n g C r o a t i a n I T c o m p a n i e s a n d o n e o f t h e t o p Croatian exporters of software and services. With 35 years of rich experience, Nikola is also a member of the Management Boards of Span Cyber Security Center, and affiliated companies Trilix and Bonsai. He graduated from the Faculty of Electrical Engineering and Computing, University of Zagreb in 2002. S P A N A N N U A L R E P O R T 2 0 2 3 1 9 S P A N A N N U A L R E P O R T 2 0 2 3 2 0 S P A N A N N U A L R E P O R T 2 0 2 3 21 M a r i j a n P o n g r a c , Member of the M a n a g e m e n t Board, 23 years in Span Marijan is the Member of the Management Board for technology. He is a certified Microsoft IT expert, a system engineer and trainer. In Span, he is in charge of all Span’s technology projects, from infrastructure to software, overseeing every phase of projects, from development to support. Marijan started his career in Span as a System Engineer and Architect, quickly becoming a Business Unit Manager. He has forged his team of three into an expert crew of 460 professionals, and that is something he cites as one of his greatest achievements. Marijan’s work on creating a top-level IT team, ensuring its growth and development, and spreading its influence and knowledge is something that has cemented Span’s reputation as a trusted and competent company. For more than two decades, Marijan has led teams that D r a g a n M a r k o v i ć , Member of the M a n a g e m e n t Board, 8 years in Span As the Management Board Member in charge of operations management, Dragan supervises the work of the Financial, Controlling, A c c o u n t i n g , a n d I n t e r n a l I T d e p a r t m e n t s . R e l a t i o n s h i p s w i t h a s s o r t e d financial institutions, creditors, and investors also fall inside his area o f r e s p o n s i b i l i t i e s , a s w e l l a s a l l t h e m e r g e r s a n d a c q u i s i t i o n s S p a n is involved in. After Antonija Kapović’s resignation, he has taken over her duties until the end of the mandate of this composition of the Management Board. Dragan started his career path as an IT manager at E x p a n d i a I n v e s t a n d w e n t o n t o d e v e l o p h i s r i c h 2 8 - y e a r s - l o n g w o r k i n g experience at managing positions in the companies Iskon, Verso Mrežne Tehnologije, Hrvatski Telekom, King-ICT, and Proficio. He graduated from the Faculty of Electrical Engineering and Computing, University of design innovative solutions for clients with their knowledge and work with state-of-the- art technologies. With Marijan at the helm, Span teams design diverse technical solutions, manage software and infrastructure projects and organize follow-up and support services. Marijan’s business path started in 1992 in the family business, Skok, where he was the company Director until 1996. In the same year, he was employed as a system engineer in the Croatian public television (HRT), where he worked until 2001, when he came to Span. He graduated from the Faculty of Transport and Traffic Sciences, University of Zagreb in 1997. Zagreb in 1998. S P A N A N N U A L R E P O R T 2 0 2 3 2 2 S P A N A N N U A L R E P O R T 2 0 2 3 2 3 A n t o n i j a K a p o v i ć , Member of the M a n a g e m e n t Board, 14 years in Span Until her resignation that became effective on 31 December 2023, Antonija was the Member of the Management Board in charge of h u m a n r e s o u r c e s . T h e m a i n p u r p o s e o f H R a t S p a n i s a t t r a c t i n g , developing, motivating, and finally, retaining the best IT experts. U n d e r h e r l e a d e r s h i p , S p a n i m p l e m e n t e d a u n i q u e p e r f o r m a n c e management system, leading to significant increase of employees' engagement and satisfaction. Together with her team, she initiated Span Academy, a successful summer internship program intended for promising students of technical and information sciences, and Span Management Academy, a program intended for the development of future managers. Antonija started her career in HR back in 2001 at Saša Kramar, Member of the Management Board, 4 years in Span As the Member of the Management Board for Marketing, Sales and Business Development, Saša is responsible for Span’s international business development, managing a full portfolio o f m a r k e t i n g a n d s a l e s a c t i v i t i e s . T o g e t h e r w i t h h i s t e a m , h e i s s t r e n g t h e n i n g r e l a t i o n s h i p s w i t h o u r c u r r e n t a n d f u t u r e c l i e n t s , suppliers and partners. Besides overseeing these activities in Croatia, he also supervises Slovenia, Ukraine, Moldavia and Azerbaijan, Estonia and Georgia, with a constant focus on expanding to new international markets. During his first year in Span, we have already seen him restructure our Sales and Marketing departments with great success. His immense Belupo and went on to acquire experience in Microsoft Croatia, S&T Croatia, and in Atento in her 23 years of work. She graduated from the Faculty of Philosophy at the University of Zagreb in 2000, Psychology major, and completed her MSc studies of o r g a n i z a t i o n a l b e h a v i o r a t t h e B i r k b e c k U n i v e r s i t y i n L o n d o n i n 2 0 1 5 . experience in organizing these corporate branches as well as managing business development and strategic growth help transform Span into a truly international company. During his 34-years-long productive career, Saša has worked on managing positions in technology and telecommunication companies. He started his career at the Apple Center NOVEL in 1990 and moved to Iskon Internet in 2016. In the same year, he became the member of the Management of Hrvatski Telekom and performed that function until January 2020, at the same time performing the function of the President of the Supervisory Board of Combis since 2016, and the Member of the Supervisory Board of Crnogorski Telekom since 2017. He studied at the F a c u l t y o f E l e c t r i c a l E n g i n e e r i n g a n d C o m p u t i n g , U n i v e r s i t y o f Z a g r e b , o n l y t o c o n t i n u e t o improve his knowledge in Croatia and abroad. S P A N A N N U A L R E P O R T 2 0 2 3 2 4 1.2.4.3.2. Supervisory Board The Supervisory Board of Span consisted of 4 members by 14 June 2023: 1. Jasmin Kotur, President of the Supervisory Board; 2. Aron Paulić, Vice President of the Supervisory Board; 3. Ante Mandić, Member of the Supervisory Board; 4. Zvonimir Banek, Member of the Supervisory Board. The President of the Supervisory Board, Jasmin Kotur, and the Member Zvonimir Banek resigned from their positions at the Supervisory Board, and the General Assembly of the Company that took place on 14 June 2023 elected Ivana Šoljan and Mirjana Marinković as the new Members of the Supervisory Board. The two were elected for a period from the adoption of the decision of the General Assembly to the expiry of terms of office of the other members of the Supervisory Board of the Company, i.e. by 30 September 2024. After the meeting of the General Assembly of 14 June 2023 where the new members of the Supervisory Board were appointed, a constitutive meeting of the Supervisory Board of Span was held and Ante Mandić was unanimously appointed the new President of the Supervisory Board, so as of 14 June 2023 the Supervisory Board of Span consisted of four members: 1. Ante Mandić, President of the Supervisory Board; 2. Aron Paulić, Vice President of the Supervisory Board; 3. Ivana Šoljan, Member of the Supervisory Board; 4. Mirjana Marinković, Member of the Supervisory Board. Employees of the Company have the right to appoint and recall the fifth member of A n t e Mandić Ante is the President of the Supervisory Board. He started his career in 1978 in the army where, after initial activities directed to performing commanding duties, he continued to develop as a lecturer at the military academy, and then as a researcher and military advisor abroad. He left the army in 1991 a n d i n t h e s a m e y e a r f o u n d e d a c o m p a n y , I N 2 f o r t h e d e v e l o p m e n t a n d the Supervisory Board. The employees have, in free and direct elections held based on the provisions of the Labor Law, for the employees' representative in the Supervisory Board of the Company, elected Mrs. Barbara Gradečak as the employees’ representative with the term of office of 4 years, starting on 29 December 2023. implementation of software and provision of related services. By 2018, IN2 developed into a Group of 12 regional companies with more than 630 employees, and in the same year, it was sold to the Canadian group, Constellation Software. Today, Ante is the majority owner of INsig2 and advisor for business development. He is an active participant of the Croatian IT community, and through his career, he has performed the functions of the president of associations within the Croatian Employers’ Association and the Croatian Chamber of Economy. The President o f t h e R e p u b l i c o f C r o a t i a d e c o r a t e d h i m w i t h t h e O r d e r o f D a n i c a H r v a t s k a i n 2 0 1 4 f o r h i s c o n t r i b u t i o n t o t h e d e v e l o p m e n t o f t h e C r o a t i a n e c o n o m y . H e w a s a l s o d e c l a r e d t h e M a n a g e r of the Year in 1999 and 2021, and the Entrepreneur of the Year in 2014 and 2018. He graduated from the Technical Military Academy in Zagreb in 1978, acquiring the title Bachelor of Science in Nuclear Physics, i.e. an expert for nuclear weapons. He obtained a Master’s Degree in 1985 in the area of computer simulation. S P A N A N N U A L R E P O R T 2 0 2 3 2 5 S P A N A N N U A L R E P O R T 2 0 2 3 2 6 S P A N A N N U A L R E P O R T 2 0 2 3 27 A r o n Paulić Aron is the Vice President of the Supervisory Board and President of the Nomination and Remuneration Committee. He is responsible for the recruitment of candidates and the supervision of the process of nomination for the Supervisory Board and the Management Board so as to ensure transparency and decency. Moreover, he considers proposals for the remuneration of the members of the Management Board and supervises the amounts and the structure of remuneration of the senior management and employees as a whole. He started his career as a developer and h a s w o r k e d o n s y s t e m d e v e l o p m e n t a n d t h e s a l e o f a d v a n c e d s o l u t i o n s . H e h a s s p e n t t h e biggest part of his career in managerial positions in the media industry. He has been an active c r e a t o r o f t h e C r o a t i a n i n f o r m a t i o n i n d u s t r y f o r 3 0 y e a r s , a p u b l i s h e r o f I T m a g a z i n e s , b o o k s a n d d i g i t a l p u b l i c a t i o n s , a n a u t h o r o f n u m e r o u s a r t i c l e s a n d i n t e r v i e w s , a n d a n o r g a n i z e r o f fairs, conferences and seminars. He has collaborated with more than 800 associates in his c a r e e r , m a n y o f w h o m f o r m t h e b a c k b o n e o f t h e l o c a l I T i n d u s t r y t o d a y . H e s t a r t e d h i s c a r e e r in 1991 at AC NOVEL, where he worked on software development and sale positions. In 1993 he co-founded the media company BUG and has been its director since then. He graduated from the then Faculty of Electrical Engineering of the University of Zagreb in 1991, now the Faculty of Electrical Engineering and Computing. Ivana Šoljan I v a n a Š o l j a n g r a d u a t e d w i t h a d e g r e e i n t h e a t e r d i r e c t i n g a n d r a d i o b r o a d c a s t i n g and business communication. She also completed MSc studies in communication. O n e o f t h e f i r s t e n t r e p r e n e u r s i n C r o a t i a w i t h t h e e x p e r i e n c e i n l a u n c h i n g , f u n d i n g a n d s e l l i n g p r o j e c t s i n m e d i a , t o u r i s m a n d t e l e c o m m u n i c a t i o n i n d u s t r y , s h e a l s o boasts great experience in management since she has held executive positions in a couple of managerial teams (IN2, Jupiter Adria, Hrvatski telekom, Iskon, Europapress Holding, Z3 tv, etc.) as the Executive Director and Member of the Management Board, where she was mostly responsible for sales, marketing and business development. She also has great general management experience. Together with Ivica Mudrinić, she is the co-founder of Foundation Luka (Zaklada Luka), a charity that finances university tuition fees for talented female students lacking financial resources. Ivana is the Director and a Member of the Management Board in Backstage consulting d.o.o., Include d.o.o., and Nest 01 d.o.o. and the founder and Director of the Hub385 coworking area. S P A N A N N U A L R E P O R T 2 0 2 3 2 8 S P A N A N N U A L R E P O R T 2 0 2 3 2 9 Mirjana Marinković Mirjana is the Director of Sapientia Nova d.o.o. Zagreb, and of a series of project c o m p a n i e s w h e r e s h e d e v e l o p s e n t r e p r e n e u r i a l i d e a s . S h e g r a d u a t e d f r o m t h e Faculty of Economics, the University of Zagreb, in 1998. She went on to acquire formal education at the postgraduate studies in Accounting, Finance and Auditing major. In 2008, Mirjana was awarded the annual award Prof. dr. sc. Ferdo Barbara Gradečak Barbara Barbara acquired the Senior Economist for Internal and Foreign Trade title at the Faculty of Economics in Zagreb in 2006. She started her career in Amadeus M.A.J., and since 2010, she has worked in Span. She is assigned with payroll, incoming invoice booking, calculation of VAT and preparation of final accounts for other members of Span Group. She was actively involved in Spajić by the professional organization Croatian Association of Accountants and Financial Professionals (Hrvatska zajednica računovođa i financijskih djelatnika). She is certified as a professional TQ trainer. Her 25-year professional career has been connected to investment funds and the companies Expandia Invest and CAIB Invest since its very beginning, along with the leasing industry in Croatia, for which she organizes and manages the regional education program called Leasing Academy. She took part in important restructuring projects in Croatia, including the position of the Finance Director/Procurator at Hypo Alpe Adria Bank in the period from 2011 to 2012, and the Group Consolidation Manager in the project for restructuring Agrokor Group. She is specialized primarily for launching businesses, risk management, consolidation, IFRS/IAS standards and entrepreneurial activity. Mirjana has been a member of the Supervisory Board of Span d.d. since 14 June 2023. key activities of Span's operation, such as going public on the Zagreb Stock Exchange and implementation of the ESOP (Employee Stock Ownership Plan), which confirmed her expertise and professionalism. At the end of 2023, she was elected the representative of employees in the Supervisory Board of Span, which is also a recognition of her dedication to the improvement of the Company's operation. S P A N A N N U A L R E P O R T 2 0 2 3 3 0 S P A N A N N U A L R E P O R T 2 0 2 3 3 1 Independent Members account for 80% of the Members of the Supervisory Board. • The Supervisory Board held 6 meetings where it adopted the Business plan for 2023, a m e n d m e n t s t o t h e R u l e s o f P r o c e d u r e f o r t h e M a n a g e m e n t B o a r d a n d t h e R u l e s o f Procedure for the Supervisory Board and adopted the Business plan for 2023. The S u p e r v i s o r y B o a r d a d o p t e d t h e A n n u a l p l a n f o r i n t e r n a l a u d i t a n d P l a n o f t h e s e l e c t e d auditor of Span Group for 2023, reviewed and determined the Annual Financial Statements compiled by the Management Board, and the decision on the distribution of profits, auditor’s r e p o r t c o m p o s e d b y t h e a u d i t c o m p a n y D e l o i t t e d.o.o. a n d R e m u n e r a t i o n R e p o r t s o f t h e Management Board and the Supervisory Board. Based on the recommendation of the Audit C o m m i t t e e , t h e S u p e r v i s o r y B o a r d p r o p o s e d t o t h e A s s e m b l y t o a p p o i n t D e l o i t t e d.o.o. a s the auditor of Span Group for 2023. The cooperation between the Supervisory Board and the M a n a g e m e n t B o a r d w a s a s s e s s e d p o s i t i v e l y . • A t t h e m e e t i n g s , t h e a t t e n d a n c e o f m e m b e r s w a s r e c o r d e d a t 9 6 % . A l l t h e m e m b e r s o f t h e Supervisory Board were present at all meetings, except for Aron Paulić, who attended 5 out of 6 meetings. • The Supervisory Board decided by correspondence 5 (five) times in 2023, when it decided on the approval of contracts with associated entities, approved payment of bonuses to the Management Board based on the established goals and criteria for 2022, and approved the Questionnaire on Management Practices and Compliance Questionaire for issuers. • The Supervisory Board gave its approval for the Risk Appetite Statement for Span, adopted by the Management Board. • The Supervisory Board carried out self-evaluation of the profiles and competences of the members of the Supervisory Board and members of its committees where all the circumstances referred to in Article 41 of the Code were evaluated. The self-evaluation was conducted by the Deputy President of the Supervisory Board without engaging an external a u d i t o r . T h e S u p e r v i s o r y B o a r d d e t e r m i n e d t h a t i t s c o m p o s i t i o n a n d p r o f i l e , a s w e l l a s t h e composition and profile of its committees, correspond to the needs and activities of the C o m p a n y . B a s e d o n a r e c o m m e n d a t i o n f r o m t h e e v a l u a t i o n o f t h e p r i o r p e r i o d , t w o n e w f e m a l e m e m b e r s w e r e a p p o i n t e d a t t h e p o s i t i o n s o f m e m b e r e m p l o y e e s o f S p a n w h o h a d r e s i g n e d , a n d t o g e t h e r w i t h t h e f e m a l e r e p r e s e n t a t i v e o f e m p l o y e e s i n t h e S u p e r v i s o r y B o a r d , w o m e n n o w a c c o u n t e d f o r 6 0 % o f t h e t o t a l n u m b e r o f m e m b e r s . C o n s e q u e n t l y , with the number of female members in the Supervisory Board, which consists of a total of six members, the percentage of women was 50% and the level of women's representation was evaluated as above average. Having conducted the evaluation, the Supervisory Board e s t a b l i s h e d t h a t a l l t h e m e m b e r s o f t h e S u p e r v i s o r y B o a r d a n d i t s c o m m i t t e e s p o s s e s s k n o w l e d g e , a b i l i t i e s a n d p r o f e s s i o n a l e x p e r i e n c e r e q u i r e d f o r d e c i s i o n - m a k i n g i n a l l t h e issues that were on the agenda at the meetings of the Supervisory Board and its committees. Administrative support when preparing meetings of the Supervisory Board is provided by the S e c r e t a r y o f t h e C o m p a n y i n a n e f f e c t i v e a n d t i m e l y m a n n e r . • The Supervisory Board of the Company was informed by the Management Board in a proper, t i m e l y a n d t r a n s p a r e n t m a n n e r a b o u t a l l c r u c i a l i s s u e s c o n c e r n i n g t h e o p e r a t i o n o f t h e C o m p a n y a n d c o m p a n i e s d e p e n d e n t o n i t , w h i c h a r e i m p o r t a n t f o r t h e e x i s t e n c e o f t h e C o m p a n y . • No other payments, apart from the fee for their work in the Supervisory Board, were made to the Members of the Supervisory Board in 2023. The Supervisory Board of Span founded the Audit Committee and the Nomination and Remuneration Committee 1.2.4.3.2.1. Audit Committee Audit Committee performed tasks in line with the Audit Act, the Regulation (EU) 537/2014, other positive regulations and the Rules of Procedures of the Audit Committee. The Rules of Procedure of the Audit Committee of Span are available at the Company websites: Rules of Procedure of the Audit Committee . In 2023, the Audit Committee acted in the following composition: • Ante Mandić - President • Nataša Zelenika - Member • Tomislav Skorin - Member Nataša Zelenika Nataša graduated from the Faculty of Economics and Business in Zagreb. She started her career in 1999 as an auditor at EY Croatia, the position she left in 2008. Then, she occupied the position of the Finance and Accounting Manager at PBZ Croatia d.d., where she was in charge of the finance and accounting of the company and the fund. In 2010, she continued her path in the finance of Agrokor d.d. where she mostly worked on coordination and resolution o f t a x a t i o n i s s u e s o n t h e l e v e l o f t h e h o l d i n g c o m p a n y , w h i l e c o o p e r a t i n g c l o s e l y w i t h e x t e r n a l consultants. Since 2017, she has been the owner and Director of a consultancy company, which provides consulting services in the area of finance and accounting, as well as functions of e x t e r n a l a c c o u n t i n g t o v a r i o u s c u s t o m e r s . S h e h a s b e e n a m e m b e r o f t h e A u d i t C o m m i t t e e o f Span since its establishment. Tomislav Skorin Tomislav graduated from the Faculty of Economics and Business in Zagreb in 2001. He started his career in the same year as an auditor for Deloitte & Touche in Zagreb. Later, he worked as an Audit Supervisor for Confida revizija, a company in Zagreb. Tomislav continued S P A N A N N U A L R E P O R T 2 0 2 3 3 2 S P A N A N N U A L R E P O R T 2 0 2 3 3 3 h i s c a r e e r a s a S e n i o r C o n t r o l l e r a t I s k o n I n t e r n e t o n l y t o b e c o m e t h e C F O a n d t h e m e m b e r o f t h e M a n a g e m e n t o f T v o r n i c a p l i n s k i h t u r b i n a d.o.o. i n K a r l o v a c , a n d f i n a l l y t h e m e m b e r o f t h e Management of the Croatian Mint until November of 2023. Tomislav is an experienced CFO with a proven track record in the industry of production and audit and consultancy services. He is exceptionally committed to long-term prosperity and professional goals of the company, he b e l i e v e s i n o p e n c o m m u n i c a t i o n a n d c o n s i s t e n t l y a c h i e v e s a n d o v e r c o m e s t h e a g r e e d g o a l s , frequently in very demanding circumstances. During 2023, the Audit Committee held 4 (four) meetings where the recorded attendance of its members was 100%. During the meetings, the Committee considered and adopted the annual plan for audit and the report and the annual plan for internal audit for 2023. The Code of the Zagreb Stock Exchange stipulates that the Management Board, upon prior agreement of the Supervisory Board, has to adopt a policy that determines the nature and scope of risk the company must and is willing to take in order to achieve all long-term strategic goals (“tendency to take risks“). The Audit Committee gave a recommendation on the adoption of a Risk Appetite Statement, adopted by the Management Board of Span, which the Supervisory Board gave consent to. The Audit Committee considered and gave recommendations to the Supervisory Board to adopt the annual financial statements and consolidated annual financial statements of Span Group, along with a report on the condition of the Company and affiliates, with t h e r e p o r t s o f t h e a u t h o r i z e d a u d i t o r , D e l o i t t e d.o.o. f o r 2 0 2 2 . T h e A u d i t C o m m i t t e e g a v e recommendation to the Supervisory Board to adopt a submitted proposed Decision on appointing the auditor for 2023, appointing Deloitte d.o.o. as the auditor of the Group for 2023, a n d r e f e r i t t o t h e G e n e r a l A s s e m b l y f o r d e c i s i o n - m a k i n g , w h e r e t h e p r o p o s a l w a s a d o p t e d . The Audit Committee evaluated the effectiveness of risk management and the internal control system, procedures for approval and announcement of transactions between members o f t h e M a n a g e m e n t B o a r d o r t h e S u p e r v i s o r y B o a r d a n d t h e C o m p a n y ( o r p e r s o n s r e l a t e d t o any party) and effectiveness of the procedure for reporting irregularities and its application. The Audit Committee regularly presented its conclusions and recommendations to the Supervisory Board. 1.2.4.3.2.2. N o m i n a t i o n a n d Remuneration Committee Nomination and Remuneration Committee performed tasks specified in the Decision of the Supervisory Board on establishment of the Nomination and Remuneration Committee and provisions of the Rules of Procedure of the Committee, which are available at the websites o f t h e C o m p a n y : R u l e s o f P r o c e d u r e o f t h e N o m i n a t i o n a n d R e m u n e r a t i o n C o m m i t t e e . In 2023, the Committee worked with the following composition: • Aron Paulić - President • Hana Horak - Member • Lucia Ana Tomić - Member The Committee held 4 (four) meetings, which were attended by all the members. Hana Horak Prof. Hana Horak, PhD is a tenured Professor at the Faculty of Economics and Business, University of Zagreb, and head of a Jean Monnet Chair. She teaches Commercial Law and Company Law, European Company Law, EU Internal Market Law, Corporate Management and International Commerce Law. She is also the Head of the postgraduate specialist program “Legal and Economic Framework of Business in the European Union.” Since 2011, she has been the Chair of the Program Committee of the International Conference on European Company Law and Corporate Governance. She is the founder and Editor-in- Chief of the scientific magazine INTEREULAWEAST – Journal for International and European Law, Economics and Market Integrations. She has been a member of the European Law institute /ELI/ for years, and actively participates in ELI SIG Business and Financial Law as a member of the project team on the project "Corporate Sustainability, Financial Accounting and Share Capital ." Since 2020, she has been a member of the Advisory Board of the Croatian Hub, the European Law Institute. In 2022, she was elected a member of the Supervisory Board of the Croatian Academy of Legal Sciences. She is the President of ICC Croatia Commission on Corporate Responsibility and Anti-corruption. In 2023, within an education by the ESG Academy of the Croatian Chamber of Commerce, she gave a series of lectures on the legal framework of corporate governance in the area of sustainability and implementation of ESG factors. Moreover, she provided education for the Croatian Banking Association and lectures within ESG workshops of Privredna banka Zagreb and ASB Sisak. In 2023, she published a paper titled "Directors, information, remuneration and risk management // European company case law,” 2 (2023), 2; 149-161. doi: DOI: 10.5771/2752-177X-2023-2-149 (Horak, Hana; Tomić, Lucia)”, and as a project associate, she took part in the preparation of ELI Guidance on Company Capital and Financial Accounting for Corporate Sustainability // ELI Guidance on Company Capital and Financial Accounting for Corporate Sustainability. Vienna, Austria: European law Institute - ELI, 2023. 68. She participated in the conference “Companies at a Crossroad – a Way Forward,” organized by the Department of Corporate and Financial Law of the Faculty of Law in Rijeka, and co-organized by the Jean Monnet Inter-University Center of Excellence in Opatija, with a lecture entitled “Critical review of the EU Proposal for Corporate Sustainability Due Diligence Directive.“ As a speaker and moderator, she took part in the conference “Enhancing Integrity and Compliance in Operation – ESG Standards as an Instrument for the Prevention of Corruption,” organized by ICC Croatia and Croatian Chamber of Commerce. She has been a member of Span's Nomination and Remuneration Committee since its establishment. Lucia Ana T o m i ć Lucia boasts more than twenty years of experience working in the area of legal affairs and human resources. Working in a law office, in the banking and insurance sector, she specialized in the area of financial crime, prevention of money laundering and fraud and data protection. Currently, she is leading the Sector for Conformity, Regulatory Affairs and Procurement at Wiener Insurance, Vienna Insurance Group d.d. She has been appointed a member of the Nomination and Remuneration Committee in Span. Lucia has acquired degrees a t t h e F a c u l t y o f L a w i n Z a g r e b a n d t h e F a c u l t y o f E c o n o m i c s , w h e r e s h e c o n t i n u e d h e r 3 h t t p s : / / p a p e r s .s s r n .c o m / s o l 3 / p a p e r s .c f m ? a b s t r a c t _ i d = 4 3 3 9 4 3 5 S P A N A N N U A L R E P O R T 2 0 2 3 3 4 S P A N A N N U A L R E P O R T 2 0 2 3 3 5 education and acquired an MBA degree in the area of management and international mergers and acquisitions. In 2023, she took part in various conferences as a speaker (Leader events, Money Motion, European Company Law Association…) and gave lectures in universities in the region as a visiting lecturer. She is a full-time lecturer on Social Criteria and Governance at the ESG Academy. An author of a series of scientific articles in the HR area concerning remuneration and assessment of eligibility of members of management boards, her latest paper was published in 2023 under the title "Directors, information, remuneration and risk management // European company case law," 2 (202 3), 2; 149-161. doi: DOI: 10.5771/275 2-177X- 2023-2-149 (Horak, Hana; Tomić, Lucia). She is the Vice President of the ICC Commission on Corporate Social Responsibility and a licensed Coach at the European Mentoring and Coach Council. c) Individual Audit Plan T h e s t r a t e g i c p l a n , t h e a n n u a l p l a n , a n d t h e i n d i v i d u a l i n t e r n a l a u d i t p l a n a r e p r o p o s e d by the person responsible for managing internal audit, and are adopted by the Audit Committee. Within the annual plan of internal audit for 2023, the following areas of work and scope of implementation, as well as documents analyzed and reviewed within the audit, were identified and audited: GDPR – personal data management and protection, human resources, a c c o u n t i n g a n d f i n a n c e a r e a , s e r v i c e a r e a – C l o u d , S e c u r i t y a n d S O C , a n d a u d i t o f t h e information system in the area of information system security and risk management. The Nomination and Remuneration Committee determined the proposed goals of the Company for 2023, and key performance indicators (KPI) in order to determine the annual bonus for the Management Board, which was referred to the Supervisory Board and adopted, and also determined fulfillment of goals in order to determine the amount of the annual bonus for the Management Board for the previous year. It supervised the amount and structure o f r e m u n e r a t i o n f o r t h e s e n i o r m a n a g e m e n t a n d e m p l o y e e s a s a w h o l e a n d g a v e a p o s i t i v e assessment and recommendations to the Management Board concerning the latter's policies. It also assessed the composition, size, membership and quality of work of the Supervisory B o a r d . I t d e t e r m i n e d t h e p r o p o s a l o f t h e R e m u n e r a t i o n R e p o r t o f t h e M a n a g e m e n t B o a r d a n d Supervisory Board for 2022. At an emergency meeting, the Committee gave its positive opinion for the proposal of new members of the Supervisory Board of the company and recommended to the Supervisory Board to adopt the submitted proposal and refer it to the General Assembly for adoption, by which the target percentage of female members of the Supervisory Board of at least 40% of positions in supervisory boards was met, in line with the provisions of the Directive i m p r o v i n g g e n d e r b a l a n c e a m o n g d i r e c t o r s o f l i s t e d c o m p a n i e s p r o p o s e d b y t h e E u r o p e a n Commission in 2012. The Nomination and Remuneration Committee notified the Supervisory B o a r d o n a r e g u l a r b a s i s o n r e c o m m e n d a t i o n s a d o p t e d a t i t s m e e t i n g s a n d s u b m i t t e d a n n u a l reports on their work to the Supervisory Board. Internal audit Internal audit that was nominated in Span within good corporate governance practice is performed in line with the internationally recognized audit standards concerning internal audit, the code of professional ethics of internal auditors and rules of action of the internal audit. The internal audit affairs are performed in line with: a) Strategic Plan: The Strategic Plan for internal audit is adopted for a three-year (five-year) period by the Company, is based on risk assessment and is adjusted every year. b) Annual Plan: The Annual Plan for internal audit is produced by the Company based on the strategic plan and it must encompass: • Areas of operation that are a priority given the risk assessment, • List of planned audits, • Order of internal audits S P A N A N N U A L R E P O R T 2 0 2 3 3 6 S P A N A N N U A L R E P O R T 2 0 2 3 3 7 1.2.4.3.3. General Assembly The General Assembly decides on issues specified by the Company Act a n d t h e A r t i c l e s o f t h e A s s o c i a t i o n o f t h e C o m p a n y . T h e A r t i c l e s o f t h e Association of the Company, available at the websites at the following link: the 1.3. Overview of operation Articles of the Association of the Company , prescribe the manner of work of the General Assembly, its authorizations, rights of shareholders and manner of their realization. The General Assembly can adopt valid decisions if it is attended by shareholders, in person or through an attorney-in-fact, whose shares make more than a half of the share capital of the C o m p a n y . T h e r i g h t t o p a r t i c i p a t e i n t h e G e n e r a l A s s e m b l y i s e n s u r e d t o s h a r e h o l d e r s w h o have the share of the Company registered at their securities account in the computer system of the Central Depository and Clearing Company, and have reported their participation at the General Assembly in advance. An invitation to the General Assembly regulates the conditions for applying for participation at the General Assembly in more detail. The regular General Assembly of the Company was held on 14 June 2023 . The Assembly was chaired by Stjepan Lović, Attorney at Law. The Assembly was attended by shareholders and their representatives who held a total of 1,370,326 (one million three hundred seventy thousand three hundred twenty-six) shares, which entitle to 1,370,326 (one million t h r e e h u n d r e d s e v e n t y t h o u s a n d t h r e e h u n d r e d t w e n t y - s i x ) v o t e s o r 7 0 .5 2 % ( s e v e n t y p o i n t fifty-two percent) out of the total number of votes, or 69.91% (sixty-nine point ninety-one percent) of the share capital of the Company. In accordance with the published agenda, the Assembly made the following decisions: • Payment of dividend in the amount of HRK 10 (ten kuna)/ EUR 1.33 (one Euro and thirty- three cents), per share to the shareholders of the Company, proportionally to the number of shares they hold, and net profit for the business year 2022 that was left after the payment of dividend shall remain in the retained (undistributed) profit of the company; • Discharge was given to Members of the Management Board and the Supervisory Board of the Company; • T h e s h a r e c a p i t a l a n d t h e n o m i n a l a m o u n t o f s h a r e s w e r e a d j u s t e d t o E U R a s t h e o f f i c i a l currency in the Republic of Croatia in a manner that the share capital was increased to EUR 3,920,000.00 (three million nine hundred twenty thousand EUR), and the nominal amount of the share was increased to EUR 2.00 (two EUR); • T h e A r t i c l e s o f t h e A s s o c i a t i o n o f t h e C o m p a n y w e r e a m e n d e d i n l i n e w i t h t h e a d j u s t m e n t of the share capital and nominal amount of the share to EUR, and provisions of the Articles of the Association of the Company concerning the General Assembly were complemented; 1.3.1. D e s c r i p t i o n o f t h e o p e r a t i o n a n d main activities Software Asset Management & Licensing Software & Business Solutions Development 1) Software Asset Management and Licensing 4 Our business model is directed to providing a full service, with a possibility to adjust solutions to the business needs of an individual client. Our business activities are divided into four business segments: Infrastructure services, Cloud&Cyber Security Service Center Management & Technical Support The first step in the business relationship with a customer is licensing. This business segment includes the sales of program licenses and assistance to customers concerning the selection of the most appropriate program licenses for their operation • Revised Remuneration Report of the Management Board and the Supervisory Board during the business year 2022 was approved; • Remuneration for the Supervisory Board was specified; • New members of the Supervisory Board, Ivana Šoljan and Mirjana Marinković, were elected; • Deloitte Limited Liability Company for audit services was appointed as the auditor of the o p e r a t i o n o f t h e C o m p a n y a n d S p a n G r o u p i n t h e b u s i n e s s y e a r 2 0 2 3 . All Decisions from the General Assembly meetings , as well as records thereof have been published in line with the legal regulations and are available at the websites of the C o m p a n y . and taking care of the timely renewal of the licenses purchased. During this phase, the overall business operation of a customer is analyzed with the purpose of identifying the actual needs f o r a d e q u a t e s o f t w a r e a n d o p t i m i z i n g i t s o p e r a t i o n . I n t h i s w a y , w e s t r i v e t o a c h i e v e s a v i n g s f o r t h e c u s t o m e r a n d r e d u c e I T r i s k s t h e y a r e e x p o s e d t o a s e a r l y a s w i t h t h e v e r y c o n t r a c t i n g of the procurement of software, and we become the customer’s long-term consultant when the management of their software assets is involved. Our software asset management service unites expertise and the most sophisticated technology so that we can simplify licensing, e n s u r e c o m p l i a n c e , a u t o m a t e g o v e r n a n c e a n d o p t i m i z e s o f t w a r e u s e e x p e n s e s f o r o u r c u s t o m e r s . 4 https://www.span.eu/en/solutions-services/software-asset-management-sam- l i c e n s i n g / S P A N A N N U A L R E P O R T 2 0 2 3 3 8 S P A N A N N U A L R E P O R T 2 0 2 3 3 9 To provide software asset management services, we use modern technological tools and standards, and we are a certified partner of Snow, one of the leading suppliers of IT tools for the management of licenses and software assets. When it comes to sales of licenses, the most important supplier of the Group is Microsoft, and we have been a part of their partner network since the establishment. As 2) Infrastructure Services, Cloud & Cyber Security 5 Infrastructure services include the design and development of information systems according to the business needs of a customer, with an emphasis on Cloud&Cyber Security . To that end, we use advanced and innovative solutions and software tools of global leaders in the IT sector. Projects of a Microsoft Solutions Partner, we have become their hub of expertise for communication solutions, solutions for security, and Azure platform as well as advanced business applications. development of information systems can be of different duration, from one-year to multi- year projects, and we design and develop them according to specific business needs and standards of the customer (tailor-made solutions). The idea is to develop an IT system adjusted to the customer, which will support their current operation and business growth to the optimum, so this process includes a detailed analysis of the existing business processes of the customer. W h e n C l o u d s e r v i c e s a r e i n v o l v e d , w e h a v e e n s u r e d c o m p l e t e s o l u t i o n s t o o u r customers, from the service for the assessment of the preparedness of the customer, preparation and enabling the transition of the customer to the Cloud platform, to the management of Cloud itself. By multicloud environment services (use of more than one Cloud platform of different suppliers in the same environment), we ensure the supervision of the Microsoft Azure usluge Microsoft Dynamics Microsoft Power Platform Microsoft 365 Cloud environment, optimization of expenses and safety of the IT system. We are their leading partner with a permit to provide licensing services (LSP) and Cloud services (CSP) in the EU/EFTA region, Ukraine, Azerbaijan, Belarus and the CIS region. With our Microsoft Solutions Provider status in 5 areas, we continuously prove our success in innovation and implementation of Microsoft solutions. Our wide portfolio of suppliers is a result of our added value approach and cooperation with leading software producers which guarantee successful meeting of all user requirements for licensing. We are a certified partner of leading platforms of Cloud operations in the world - Microsoft Azure, Amazon Web Services and Google Cloud Partner, and these companies are our most significant suppliers in the segment of the infrastructure services and Cloud. 5 h t t p s : / / w w w .s p a n .e u / e n / s o l u t i o n s - s e r v i c e s / c l o u d - s e r v i c e s / S P A N A N N U A L R E P O R T 2 0 2 3 4 0 S P A N A N N U A L R E P O R T 2 0 2 3 4 1 Our goal is to convey knowledge and empower the business community to respond a s e f f i c i e n t l y a s p o s s i b l e t o t h e e v e r - p r e s e n t a n d i n c r e a s i n g l y s o p h i s t i c a t e d c y b e r t h r e a t s , which are one of the greatest risks for the operation. We want to achieve this through the Span Cyber Security Center which we opened in September 2022. The Center offers education, training and consultancy services intended for employees in the public and private sector, and the program is tailored to specific needs of the participants or a company, and includes active participation in real-life situations where professional hackers simulate real attacks on their business systems. 3) Service Center Management and Technical Support 7 T h i s s e g m e n t o f t h e o p e r a t i o n i n v o l v e s s e r v i c e s of complete supervision and management of the IT environment which we provide to customers depending on the contracted level of service. We This segment of the operation also includes taking care of the security of the IT systems 6 which we strive to make r e s i l i e n t t o c y b e r t h r e a t s o r a t t a c k s . I n t h e w o r l d o f c o n t i n u o u s threat evolution, increasing mobility and digitalization, you need around-the-clock vigilance, alertness and agility. Our Security Operations Center (SOC) is a full-service solution that protects your company from a wide range of cyber threats, 24 hours a day , 365 days a year . Our security analysts use advanced technologies, their extensive experience, and insight into the most recent threat intelligence knowledge to rapidly and effectively identify and prioritize all key events. Our professional certifications also prove our competences in this segment: ensure the complete availability of service, 24 hours a day , 7 days a week , and 365 days a year , i n d e p e n d e n t o n w h e t h e r t h e s y s t e m s w e r e d e s i g n e d , d e v e l o p e d a n d p u t i n t o o p e r a t i o n b y us or the respective customer. Even though contracting these services usually follows after we implement or integrate certain technological solutions for the customer in their own IT environment, we also provide them independently of the previous integration of technology in the customer’s environment, especially in cases when a customer has a need for specific k n o w - h o w , b e t t e r a v a i l a b i l i t y o f p r o f e s s i o n a l I T s u p p o r t o r a d d i t i o n a l r e s o u r c e s c a p a b l e t o perform high-risk large-scale operating actions. Span IT support service is organized in a manner adequate to the standards (ISO 20000, ISO 27001, ISO 9001, ISO 50001, ISO 14001, ISO 37001 i I S O 22301) and the best practice in industry (Information Technology Infrastructure Library – “ITIL”). 4) Software and Business Solutions Development 8 This business segment includes the development of our own IT solutions, or software platforms, software solutions, software products, and Microsoft business solutions. The development of software platforms implies the development of digital platforms of high performance, ready for global scaling that we base on the solutions of Cloud operation and micro service architecture. 6 https://www.span.eu/en/solutions-services/security- s e r v i c e s / 7 https://www.span.eu/en/solutions-services/24x7-support- s e r v i c e s / 8 https://www.span.eu/en/solutions-services/business-solutions- d e v e l o p m e n t / S P A N A N N U A L R E P O R T 2 0 2 3 4 2 S P A N A N N U A L R E P O R T 2 0 2 3 4 3 The development of software solutions concerns the development of specific software solutions according to the customer’s requirements in the area of different technologies. We have developed the so-called “Data Segregation Framework,” a specific solution based on Blockchain technology and intended for a transparent and secure monitoring of the access to confidential data and the so-called “RAM,” a comprehensive solution for the real time monitoring of the used hardware and licensed resources. The development of software products implies the production of our own software solutions among which: Span Resolution, 9 a flexible solution for IT service management, “Personal Data Protector (PDP),” 10 a comprehensive solution for collection and harmonization with the requirements of the General Data Protection Regulation 2016/679 (GDPR) and “Domain Name System C&A,” 11 an intelligent security solution that helps in the protection from and analysis of cyber attacks, stand out. We use the most sophisticated technologies and the most advanced tools in order to support the development of optimal software solutions. 1.3.2. Main markets 1.3.3. Industry trends We divide the main markets in: • Key International Clients • Domestic markets (include markets in the Republic of Croatia and the Republic of Slovenia) • Fast-growing markets (include markets in countries of East Europe and Central Asia). Stagnation and recession were primary market indicators in 2023 that led to a budget reduction for IT projects and generally more cautious investments. The reason for that was the war in Ukraine to a great extent, and in late 2023, we witnessed the start of a new war – in Israel. Despite all those factors, the business did not Our deep understanding of our clients’ business needs enables us to always offer the right IT solutions, utilizing cutting-edge technologies and the most advanced tools to support the development of optimal software solutions. s t o p . I n v e s t m e n t s a n d p r o j e c t s t h a t w e r e s l o w e d d o w n o r s k i p p e d i n 2 0 2 3 a r e e x p e c t e d t o b e g r a d u a l l y r e l a u n c h e d s o t h e I T i n d u s t r y i s p r o j e c t e d t o s e e a p o s i t i v e s h i f t i n 2 0 2 4 . The digitalization of operation is necessary for the survival of any company. Stopping this development can seriously harm the endurance of the business. Cyber security is still the focus of all companies which have become aware of the fact that the development of technology entails the development of cyber crime as well. Attacks are ever more frequent and sophisticated. According to research conducted by Cybersecurity Ventures, costs of cyber attacks over years are expected to grow exponentially, which means that in 2025, we can expect that USD 10.5 trillion 12 will be spent on them. A term that increasingly appears together with cyber security is cyber resilience. Continuing monitoring of t h e r e s i l i e n c e o f t h e c o m p a n y i s o f g r e a t i m p o r t a n c e i n o r d e r to ensure the continuity of operation. Research says that one i n t w o c o m p a n i e s 1 3 w a s a v i c t i m o f a s u c c e s s f u l c y b e r a t t a c k in the past three years. Artificial intelligence can help cyber security experts through the automation of anomaly monitoring. Artificial intelligence collects, summarizes and analyzes large amounts of data, making experts' job easier. They can direct “Cloud and cyber security still remain the main technology trends in 2024, and are now joined by artificial intelligence. Artificial intelligence will permeate every segment of operation and technology with a view of automation. It will be a key point for more than a half projects in IT, and AI-related projects will be granted additional budgets,“ says Marijan Pongrac, Member of the Management Board of Span in charge of technology." 9 https://www.span.eu/en/solutions-services/business-solutions-development/span-products-solutions/itsm-solution-span- r e s o l u t i o n / 10 https://www.span.eu/en/solutions-services/business-solutions-development/span-products-solutions/personal-data-protector- p d p / 11 https://www.span.eu/en/solutions-services/business-solutions-development/span-products-solutions/dns- c a / their expertise to giving context to situations and specific actions. It is well known that the w o r l d l a c k s s e v e r a l m i l l i o n c y b e r e x p e r t s a n d t h i s i s t h e w a y t o p a r t i a l l y r e s o l v e i t . A k e y t h i n g for the implementation of AI in organizations will be the preparation of a secure environment. For instance, it is necessary to integrate Microsoft Copilot in the existing system, but the existing system has not been made in a way to ensure confidentiality and the protection of data against AI tools. Cyber experts will have to assess the environment, identify things that require adjustment and ensure the protection and confidentiality of data in the cloud. 12 2023 Cybersecurity Almanac: 100 Facts, Figures, Predictions, And Statistics ( c y b e r s e c u r i t y v e n t u r e s .c o m ) 13 Human Risk Review 2023 | SoSafe (sosafe- a w a r e n e s s .c o m ) S P A N A N N U A L R E P O R T 2 0 2 3 4 4 S P A N A N N U A L R E P O R T 2 0 2 3 4 5 It is predicted that the investments of companies in cloud in 2024 will exceed USD 1 trillion for the first time 14 . One of the greatest values of cloud is that it is easily accessible and enables the selection of a wide range of services in IaaS, PaaS and SaaS service models. W i t h c l o u d , c o m p a n i e s c a n f o c u s o n b u s i n e s s o p e r a t i o n and goal achievement, and entrust technical details of implementation and maintenance of complex services to dedicated experts. Encryption, authentication and disaster recovery will be increasingly demanded services in the cloud due to ever more frequent cyber threats. Cloud, inter alia, has a great role in ensuring the availability of AI to the public. AI models use great amounts of data the processing of which “Cloud is no longer a tool to save time and money; rather, it enables innovation, agility, and greater success of a company. Therefore, it is not surprising that an increase of 9% 15 in the number of companies that will implement multicloud in 2024 can be expected.“, emphasizes Marijan Pongrac, Member o f t h e M a n a g e m e n t B o a r d responsible for technology. To apply the new Directive, it is crucial that each EU Member State enacts its law no later than by 17 October 2024 . 16 In order to be as prepared as possible for the NIS2 Directive, companies will have to change their existing policies and security practice. Therefore, before the final deadline for law amendments, it is important to assess risks and carry out the necessary training for raising cybersecurity awareness , and verify the effectiveness of security measures the r e q u i r e s g r e a t c o m p u t e r p o w e r . M o s t c o m p a n i e s d o n o t h a v e a v a i l a b l e r e s o u r c e s t o l a u n c h such programs, but when AI is accessed as a service available through a platform in the cloud, everybody can use the benefits of the new technologies. In order to increase cyber resilience, the European Union has adopted Directive NIS2 . It wants to achieve a high EU-wide common level of cyber security. Concerning the 2016 NIS Directive, Directive NIS2 significantly increases the field of application to a large number of companies and organizations that have not been covered so far. EU Member States have a deadline by 17 October 2024 to draft and adopt local laws to transpose the provisions of the Directive into their national legislations. The Directive NIS2 will also be important for international companies doing business with the EU Member States. For the above reasons, a high demand for management and harmonization services i s e x p e c t e d i n o r d e r t o e n s u r e r e a d i n e s s f o r t h e a p p l i c a t i o n o f t h e D i r e c t i v e N I S 2 . S p a n a l s o anticipated this and in the past period, it invested in enhanced employment of cyber security experts so that it can provide high quality services to customers in their complying with the Directive NIS2. company is currently implementing. The introduction of the Directive led to holding an education for the users, named NIS2 Directive in practice . During the education, the users had the opportunity to get even more familiar with the Directive. They learnt what the t i m e f r a m e s f o r t h e i n t r o d u c t i o n a n d a p p l i c a t i o n a r e , g o t e x p l a n a t i o n s o f s p e c i f i c s r e l a t e d t o t h e key and important entities and were introduced with the role of the National CERT. The readiness of cyber experts, their expertise and know-how is what will contribute to the implementation and enforcement of the Directive in every company to a great extent. In Croatia, the share of ICT experts among employees is below the EU average. The need for such personnel is great and over time, it will continue to increase, which is why Croatia should strengthen its capacities in the area of the education of ICT experts, especially those related to the cybersecurity area. These are the highlights from the recently published Digital Decade , the first report of the European Commission on the technological development 1.3.4. Impact of the NIS2 Directive on the business community NIS2 Directive was adopted as an update of the 2016 NIS Directive to increase the total level of cybersecurity in the E u r o p e a n U n i o n . N I S 2 D i r e c t i v e w i l l r e l a t e t o k e y s e r v i c e operators and digital service providers, though in a much wider scope - it includes ten mandatory cybersecurity measures, such as incident handling, supply chain security, access control, asset management, education, in Europe. The highlights from the report have special weight when we take into account the ever increasing number of cyber attacks, posing a great risk for the survival of a large number of companies, as well as for the whole economy and society, if adequate protection and experts do not exist. and assessing the effectiveness of measures. The wish is to prevent cyber attacks in supply chains, which have become increasingly common in recent years, and increase the level of cybersecurity at the European Union level. Span employs more than 200 cybersecurity specialists who protect large systems and re-solve real cyber challenges on a daily basis. Their expertise will be available to companies in n e e d o f a s s i s t a n c e c o n c e r n i n g t h e i m p l e m e n t a t i o n o f t h e N I S 2 D i r e c t i v e . F u r t h e r m o r e , S p a n Cyber Security Center continuously carries out training customized for all the employees from 14 Cloud Adoption and Opportunities Will Continue to Expand Leading to a $1 Trillion Market in 2024, According to IDC | Business W i r e 15 The 10 Biggest Cloud Computing Trends In 2024 Everyone Must Be Ready For Now ( f o r b e s .c o m ) 16 Croatian Cyber Security Act (Official Gazette No. 14/2024) entered into force on 15 February 2024 ( https://www.span . e u / e n / i n s i g h t s / c y b e r - s e c u r i t y - a c t - a p p l i c a t i o n - o f - t h e - n i s 2 - d i r e c t i v e - i n - c r o a t i a / ) S P A N A N N U A L R E P O R T 2 0 2 3 4 6 S P A N A N N U A L R E P O R T 2 0 2 3 4 7 the private and public sectors. Their goal is to create defense abilities on the level of the whole o r g a n i z a t i o n b y m e a n s o f p r o v i d i n g a d e q u a t e t r a i n i n g o f a l l e m p l o y e e p r o f i l e s , w h i c h d o e s not only include the education of the employees dedicated to cybersecurity, but also the ICT employees and all other employees in the organization, including the leading employees and the top-level management. T h e n e e d f o r e d u c a t i o n i n t h e a r e a o f c y b e r s e c u r i t y i s i n d i s p e n s a b l e , w h i c h i s confirmed by data. This way, by raising awareness and increasing knowledge, it is possible to improve the level of cybersecurity in both the company and one's private life. 1.3.5. The Group Business Strategy The business strategy of the Group is growth based on new technologies, solutions and markets. We design, perform and maintain safe information systems of high availability, directed at a significant increase of productivity of our customers. Operating management services ensure 24x7 data integrity and overall cyber security. We base business systems and solutions on platforms of leading global providers of Cloud technologies – Microsoft, Amazon and Google. We boast experience and expertise by which we ensure scalability, reliability, and cyber security of our solutions. To additionally increase the productivity of our users, we implement artificial intelligence systems integrated in personal productivity tools. W e p a y s p e c i a l a t t e n t i o n t o r e s p o n s i b l e a n d s u s t a i n a b l e o p e r a t i o n , c o r p o r a t e management, environmental impact and the wellbeing of the society and our employees. S P A N A N N U A L R E P O R T 2 0 2 3 4 9 2.1.1.1. 30 years of Span In Span, we started to write our history in 1993, when it was officially established as a limited liability company. The exact date when the Agreement on the Establishment of the Company was signed was 23 March 1993, and Span's small software shop was opened in Tesla St. in Zagreb in J u n e o f t h e s a m e y e a r . B a c k t h e n , N i k o l a D u j m o v i ć h a d a v i s i o n t h a t S p a n should follow the path of software, not hardware. That vision and faith in success, together with arduous work and sacrifice, have taken Span to what it is today – a leading Croatian IT company with more than 850 employees that offers high quality services and solutions to global and regional customers. Span entered a new developmental phase of operations in 2021, and went public on the Zagreb Stock Exchange as the first domestic IT company in the past 18 years. There is no organization that has existed in the market for 30 years and has not experienced a series of memorable events, tense moments, tectonic upheavals, and crucial crossroads, and Span is not an exception. Our 30th birthday was a perfect occasion to look back, summarize impressions and launch the shooting of a documentary film about the 30 years of Span. Thus, “ Random Acc3ss Mem0ry “ was gradually created through recollecting and talking about various themes and moments that have rendered Span as the company it is today, and have made Span employees people that can really take pride in what they have created in these thirty years. A story of what Span means to Span employees. A story about people, our most important r e s o u r c e , a n d t h e u n i q u e S p a n a t m o s p h e r e t h a t m a k e s o u r c o m p a n y s u c h a p l e a s a n t workplace. That is a success story that has been worked on for thirty years. We celebrated our birthday twice. First time, we invited our customers and partners to join us in celebrating this jubilee birthday in September, and then all Span employees from the whole Group gathered and celebrated in December. 2. K e y f e a t u r e s of the period 2.1. K e y e v e n t s i n 2 0 2 3 2 . 1 . 1 . C o r p o r a t e e v e n t s S P A N A N N U A L R E P O R T 2 0 2 3 5 0 S P A N A N N U A L R E P O R T 2 0 2 3 5 1 2.1.1.2. Acquisitions, establishments and dissolutions of companies 2.1.1.2.1. The acquisition On 31 March 2023, we signed an agreement on the acquisition of 100% share in GT Tarkvara , Tallinn, Estonia. The estimated value of the transaction amounted to EUR 11,377,457.00 with a part of the purchase and sale price that depends on the operating results of GT Tarkvara in 2023 and 2024 being subject to adjustment. GT Tarkvara is a leading 2.1.1.2.2. Establishing a Span company with the registered office in Georgia On 8 September 2023, the LEPL National Agency of Public Registry issued a decision on the registration of the incorporation of the company under the name Span Limited Liability Company, Tbilisi, Vake District, Nikoloz Kipshidze Street, N12B, Apartment 51, Georgia, ID: 405645734. The founder and sole member of the company is Span d.d. Markets of Eastern Europe and Central Asia are our strategic of GT Tarkvara, Estonia’s largest Microsoft partner Estonian company for licensing and managing software assets with more than 25 years of experience. Our latest acquisition was realized only a year after the acquisition of the domestic software company Ekobit. focus, which we additionally confirm by establishing this company, alongside our already existing affiliated companies in Ukraine, Moldova, and Azerbaijan. Back when TOV Span in Ukraine was established, we received Microsoft Licensing Solution Provider status for Georgia and Moldova. After registering the company in Moldova, The acquisition of GT Tarkvara confirms our strategic course to further growth and expansion to new markets. The Baltic and Scandinavian countries are extremely digitally advanced and show a growing need for additional expertise in the area of Cloud and Cyber Security, where we are internationally recognizable. “With this acquisition, Span has entered the market of Estonia, one of the most digitally developed we wanted to start registration in Georgia as well, but the COVID-19 pandemic, the Russian aggression against Ukraine and threats to Georgia required special caution. During the year, we have made quality contacts and secured everything necessary to enter the Georgian market. At the same time, Microsoft is consolidating LSP partners in many markets, including Georgia, so this is the optimal moment to enter the market as an experienced medium-sized partner on a global scale. “Span and GT Tarkvara are leading Microsoft partners which have joined their long-term know-how and experience within this takeover. I am countries in Europe. The expertise and market position of GT Tarkvara, in combination with our advanced cloud and cyber security services, are a perfect foundation for further growth and development of Span’s operation in that part of Europe,” said Nikola Dujmović, the founder and President of the Management Board of Span. 2.1.1.2.3. Decision of the Swiss AG Board of Directors on the dissolution of the company 2.1.1.3. Changes in the Supervisory Board Span Swiss AG, with the registered office in Zug, Switzerland, was established in 2019 and is 100% owned by Span d.d. The company has been inactive since its foundation, as the planned business activities did not even begin due to the coronavirus pandemic. To end the long period of non-operation and in line with the provisions of Swiss legislation, Board of Directors of Span Swiss AG made a decision on the dissolution of the company on 13 November 2023. The resignation of Jasmin Kotur and Zvonimir Banek took effect on 27 April 2023. At the inaugural meeting of the Supervisory Board held on that s a m e d a y , M r . A n t e M a n d i ć w a s a p p o i n t e d a s t h e n e w P r e s i d e n t o f t h e Supervisory Board by unanimous decision. The meeting of the Supervisory Board was held after the meeting happy that our existing customers will now have access to advanced cloud and cyber security services based on Span’s long-term experience in operation with large, global companies,” said Taivo Remmelgas, the owner and member of the Management Board of GT Tarkvara. GT Tarkvara is a reliable partner to the largest companies in the software industry, like Microsoft, Adobe, Veritas, Citrix, of the General Assembly of the Company that took place on 14th June 2023, where Ivana Šoljan and Mirjana Marinković 17 were elected members of the Company’s Supervisory Board. When submitting proposals for new members of the Supervisory Board, it was the intention of the Company to comply with the provisions of the Code of Corporate Governance of the Zagreb Stock Exchange d.o.o. and the Croatian Financial Services Supervisory Agency on the independence of Supervisory Board members and the composition of the Supervisory Board, which includes members of different genders, ages, profiles and experiences. Symantec, VMWare, and others. It has recorded a continuing revenue growth over years, and is focused on projects related to digital transformation, cloud and cyber security . In addition to the private sector, they are also strongly positioned in the public and educational sector. 17 The Members of the Company’s Supervisory Board are elected for the period from the adoption of the Decision of the G e n e r a l A s s e m b l y u n t i l t h e e x p i r y o f t h e t e r m o f o t h e r m e m b e r s o f t h e C o m p a n y ’s S u p e r v i s o r y B o a r d , i.e. 3 0 S e p t e m b e r 2 0 2 4 S P A N A N N U A L R E P O R T 2 0 2 3 5 2 S P A N A N N U A L R E P O R T 2 0 2 3 5 3 2.1.1.4. General Assembly of Span d.d. Invitation to the General Assembly of Span d.d . was announced on 3 May 2023. Based on the provisions of the Capital Market Act and Rules of the Zagreb Stock Exchange, a regular meeting of the General Assembly of the Company was held on 14 June 2023. 2.1.1.8. Resignation of a Member of the Management Board of Span d.d. Member of the Management Board of the Company Antonija Kapović, submitted her resignation on 15 December 2023. The resignation was submitted for personal reasons and became effective on 31 December 2023. Antonija Kapović's duties will be taken over by a Member of the Management Board, Dragan The full contents of the decisions is available on the following link: General Assembly of Span d.d . Marković, until the expiry of the mandate of this composition of the Management Board. 2.1.1.5. D e c i s i o n o n t h e utilization of profit and payment of dividend The meeting of the Supervisory Board of the Company was held on 28 April 2023, during which the Management Board proposed adopting a Decision on the utilization of profits and payment of dividend in the amount of HRK 10.00 / EUR 1.33 per share. The dividend was paid 2.1.1.9. Employees’ representative in the Supervisory Board of Span d.d. elected Pursuant to Article 164, paragraph 3 of the Labour Act (NN 93/14, 127/17, 98/19, 151/22, 64/23), the employees of the Company, voting in free and direct elections for the employees' representative in the Supervisory Board of the Company, elected Mrs. Barbara Gradečak as the employees’ representative with the term of to shareholders of the Company who were registered as shareholders of the Company in the Central Depository and Clearing Company (SKDD) on 20 June 2023 (record date). The date from which the share of the Company will be traded without dividend payment right is 19 June 2023 (ex date). The claim for dividend payment was due on 3 July 2023 (payment date) in line with the proposal, and dividend was paid from the Company’s profit realized in 2022 18 . 2.1.1.1 0 . Acquisitions and disposals of own s h a r e s office of 4 years, starting on 29 December 2023. On 31 December 2022, the share capital of the Company consisted of 1,960,000 shares with the nominal value of HRK 10, and the Company held 20,029 own shares. Acquisitions and disposals of own shares over the year: 2.1.1.6. I m p l e m e n t a t i o n of the registration of share capital adjustment Based on the Decision of the General Assembly of the Company of 14 June 2023, in line with the Law on the Introduction of the Euro as the Official Currency in the Republic of Croatia (Official Gazette 57/22, 88/22) the Commercial Court in Zagreb on 29 September implemented and on 30 September 2023 published the registration of the share capital adjustment in line with the Companies Act (Official Gazette 111/93, 34/99, 121/99, 52/00, 1 1 8 / 0 3 , 1 0 7 / 0 7 , 1 4 6 / 0 8 , 1 3 7 / 0 9 , 1 2 5 / 1 1 , 1 5 2 / 1 1 , 1 1 1 / 1 2 , 6 8 / 1 3 , 1 1 0 / 1 5 , 4 0 / 1 9 , 3 4 / 2 2 , 1 1 4 / 2 2 , 1 8 / 2 3 ) . T h e Company's share capital was adjusted to the Euro and was increased from EUR 2,601,367.04 by the amount of EUR 1,318,632.96 to EUR 3,920,000.00, with the increase of the individual nominal amount of common shares with the stock symbol SPAN-R-A from EUR 1.33 by EUR 0.67 to EUR 2.00. Accordingly, the Articles of Association of the Company have been also amended. 2.1.1.7. ESOP – allocation of additional shares Pursuant to Article 474 of the Capital Market Act, on 12 October 2023, the Company released 4,178 own shares, in line with the terms and conditions announced in the Prospectus regarding the public offering and listing of shares on the regulated market , which refers to the allocation of Additional Shares that the Issuer will allocate to an individual Employee in accordance with the ESOP program . Prior to the said release, Span d.d. owned 20,076 own shares, representing 1.0243% of the share capital, and after the release, it owns a total of 15,898 shares, representing 0.8111% of the share capital. 18 In the business year that ended on 31 December 2022, Span Group made net consolidated profit in the amount of HRK 50,536,506.14, and net profit of Span d.d. was HRK 41,944,428.10 After the noted acquisitions and disposals, on 31 December 2023, the Company held 15,673 shares, which was 0.7996% of the share capital of the Company 19 . 19 The share capital of the Company amounts to EUR 3,920,000.00 and is divided into 1,960,000 shares with the nominal value of EUR 2, under the security code SPANR-A and the ISIN code HRSPANRA0007 ( https://eho.zse.hr/obavijesti-izdavatelja/ v i e w / 5 1 6 5 1 ) D a t e C o r p o r a t e e v e n t P u r p o s e N u m b e r of s h a r e s Number of shares after c o r p o r a t e e v e n t % of share capital before c o r p o r a t e e v e n t % of share capital after c o r p o r a t e e v e n t 30 March 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 6 , 4 1 5 1 3 , 6 1 4 1 . 0 2 1 9 % 0 . 6 9 4 6 % 6 April 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 7 0 1 3 , 5 4 4 0 . 6 9 4 6 % 0 . 6 9 1 0 % 28 April 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 3 . 4 1 1 1 6 , 9 5 5 0 . 6 9 1 0 % 0 . 8 6 5 1 % 2 1 J u n e 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 4 . 6 1 5 1 2 , 3 4 0 0 . 8 6 5 1 % 0 . 6 2 9 6 % 3 July 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 2 . 9 1 1 1 5 , 2 5 1 0 . 6 2 9 6 % 0 . 7 7 8 1 % 4 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 1 0 0 1 5 , 3 5 1 0 . 7 7 8 1 % 0 . 7 8 3 2 % 8 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 4 . 4 1 9 1 9 , 7 7 0 0 . 7 8 3 2 % 1 . 0 0 8 7 % 9 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 6 0 1 9 , 8 3 0 1 . 0 0 8 7 % 1 . 0 1 1 7 % 10 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 5 0 0 2 0 , 3 3 0 1 . 0 1 1 7 % 1 . 0 3 7 2 % 14 September 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 2 5 4 2 0 , 0 7 6 1 . 0 3 7 2 % 1 . 0 2 4 3 % 12 October 2 0 2 3 Disposal of own s h a r e s ESOP - allocation of additional shares 4 . 1 7 8 1 5 , 8 9 8 1 . 0 2 4 3 % 0 . 8 1 1 1 % 1 3 D e c e m b e r 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 2 2 5 1 5 , 6 7 3 0 . 8 1 1 1 % 0 . 7 9 9 6 % A s o f 3 1 D e c e m b e r 2 0 2 3 1 5 , 6 7 3 0 . 7 9 9 6 % S P A N A N N U A L R E P O R T 2 0 2 3 5 4 S P A N A N N U A L R E P O R T 2 0 2 3 5 5 2.1.2. Business events and achievements During 2023, we continued to provide solutions of excellent quality to our customers. We expanded our team and improved internal processes and services that will be available in 2024. The Project Management Department grew by 34% in 2023, and to be able to ensure our colleagues the simplest possible onboarding and monitoring of their development, we developed a new onboarding system and released it in the internal Learning Management 2.1.2.1. Software Asset Management and Licensing Span is a leading Microsoft partner for the provision of licensing, technical support and consultancy services. Licensing and software asset management services are based on a set of procedures and best practice, which are instrumental in cost optimization and licence managing. Analysing the overall operation of users, we identify the actual needs for adequate S y s t e m . T h e P r o j e c t M a n a g e m e n t D e p a r t m e n t m a n a g e s p r o j e c t s o n t h e l e v e l o f t h e w h o l e Span Group, which is confirmed by the percentage of implemented projects, more than 60%, under the competence of the Project Management Department. Most projects implemented in 2023 related to migration or consolidation of data f r o m o n - p r e m i s e s s e r v i c e s t o c l o u d . T h e s c o p e o f t h o s e p r o j e c t s i n c l u d e d w o r k i n s e v e r a l countries, ensuring compliance, security and efficiency, and reducing costs, complexity and software and optimize its use. In this way, we strive to make savings and reduce IT risks, and become a long-term consultant of users when it comes to their software asset management. During 2023, by hiring new employees, we further enhanced our teams for technical support related to delivery and license management, and software asset management. Most projects and the renewal of user contracts in 2023 continued the trend of the transition of users to cloud. Optimizations were made for the existing cloud users in accordance with the needs of the business. Span’s Software Asset Management services are not dependent on a vendor, and special expertise is connected to Microsoft solutions. Late last year, Microsoft made a significant shift towards AI-based solutions a n d i s s u e d a p r o d u c t , C o p i l o t f o r M 3 6 5 , w h i c h g e n e r a t e d g r e a t i n t e r e s t a m o n g u s e r s . W e accompanied it by offering a whole portfolio of services that will enable users the preparation of the environment and optimum application. As of this year, SAP optimization and negotiations f o r l i c e n s i n g t h e n e w s e r v i c e a r e a v a i l a b l e i n o u r p o r t f o l i o . I n t h a t a r e a , w e a l s o e s t a b l i s h e d a new partnership with Voquz Labs. We are continuing to develop the existing portfolio of services and license selling. potential risks. We also started to prepare for the implementation of Microsoft AI solutions for customers, such as Microsoft Copilot, Unified Endpoint Management and Data Governance. The Cloud Services department deals with providing support to users when it comes to adopting, migration and production of solutions based on public, private and hybrid cloud, using IaaS and PaaS service models. In 2023, within the department, we formed two new teams – Cloud Security and Private and Hybrid Cloud. The Cloud Security Team was established at the very start of the year so as to enhance security competences in the area of cloud security. Services provided by the department include analysis and production of reports on the current status of the user environment in cloud in terms of security, and implementation of security solutions specializing in protection of data, applications and identity in cloud. The Private and Hybrid Cloud Team is assigned with implementation of solutions primarily intended for data and application hosting in the customer's data center, but supporting all the characteristics and features of solutions in the cloud. Thus, we geared up for a trend where corporations do not exclusively use private data centers, or exclusively public clouds, but rather hybrid solutions that provide flexibility. Projects based on the Microsoft Azure platform were most prevalent in 2023. We continuously monitor technological development in order to be able to offer our customers the best services that are in line with the best practice at any time. In addition, w e c o n t i n u e d t o i n v e s t r e s o u r c e s i n A W S a n d G o o g l e C l o u d P l a t f o r m . T h e m o s t s i g n i f i c a n t project we implemented and which did not involve the Microsoft platform related to analysis and migration of the existing on-premises environment into Google Cloud Platform, using IaaS and PaaS solutions. 2.1.2.2. Infrastructure Services, Cloud & Cyber Security In the Infrastructure Services, Cloud & Cyber Security segment, we provide users with complete solutions, which include the design and development of information systems, taking care of security and cloud s e r v i c e s . The Solution Consulting Services (SCS) As in the prior year, we continued to make analysis and plans for the migration of existing on-premises environments into cloud, so we launched such a project for a large regional bank. A positive trend of the increasing use of public cloud as well as the platform for migration of department gathers experts who possess specific knowledge and skills in the areas of project management, architecture of solutions and solution engineering. Our focus is on providing top-level services in shaping, planning, adopting and implementing projects related to Modern Workplace and Modern Desktop solutions, SAP Basis and on-premises technology. existing and development of new applications was recorded with Croatian banks. Thus, during 2023, we started a cooperation on migration projects f o r t w o b a n k s i n C r o a t i a , a n d w e a r e c o n t i n u o u s l y S P A N A N N U A L R E P O R T 2 0 2 3 5 6 S P A N A N N U A L R E P O R T 2 0 2 3 5 7 working with the third one on the implementation of new business solutions based on technology in the public cloud. The Cyber Security department focuses on creating, designing and delivering security solutions. With already available Span services such as the Security Operations Centre (SOC), s o l u t i o n s i n t h e a r e a o f o f f e n s i v e , d e f e n s i v e , a n d p r o a c t i v e c y b e r s e c u r i t y w e r e i n t r o d u c e d . In 2023, we presented two new services in the market, “Threat Hunting“ and “Red Teaming“. T h r e a t H u n t i n g i s a r e p e t i t i v e a n d p r o a c t i v e p r o t e c t i o n m e a s u r e t h a t d e t e c t s t h r e a t s f r o m t h e environment, and Red Teaming is an offensive service whose goal is to perceive and report studied user’s weaknesses. Due to the increase in workload, we continued to employ cyber security experts this year as well. We noticed an increased demand in the market in the areas of risk management and compliance. During the year, our Red Team intensively provided its services in the regional and international markets, which resulted in an increased number of customers, and thus a 45% increase in the number of reported incidents. We are continuously working on improving o u r s e c u r i t y o p e r a t i o n s c e n t e r , w h i c h h a s b e e n r e c o g n i z e d b y c u s t o m e r s , w h o s e n u m b e r s c o n t i n u e t o g r o w , a n d o u r w i s h i s t o s t a n d a r d i z e a n d a u t o m a t i z e S O C s e r v i c e s . During the year, we took part in resolving a series of security incidents and are proud of the fact that all those incidents were resolved without major consequences for the operation of our customers. We are also proud of the conducted PEN tests with local and international c u s t o m e r s , w h e r e w e s h o w e d a h i g h l e v e l o f e x p e r t i s e a n d s e t h i g h s t a n d a r d s f o r t h e i r i m p l e m e n t a t i o n . Moreover, our Information Security Team assisted customers during the whole year in improving the level of security and compliance. We placed a special focus on preparing for the implementation of the incoming NIS2 Directive and DORA regulation. business cooperation with Ekobit, a company we acquired in 2022, is becoming more and more intense through cooperating on projects and learning programs. We develop applications in Microsoft technologies: C#.NET, with Angular as a f r o n t e n d . O n - p r e m i s e i n s t a l l a t i o n s a r e a l m o s t c o m p l e t e l y o v e r s h a d o w e d b y d e p l o y m e n t s i n Azure, as well as by intensive use of Azure as a development platform. We also launched the D e v S e c O p s p r o c e s s t h r o u g h c o o p e r a t i o n w i t h M E N D a n d p r o c u r e m e n t o f l i c e n s e s t h a t h a v e enabled us to implement security testing in the existing DevOps processes by means of an a u t o m a t e d p r o c e s s . M o r e o v e r , w e a r e a l s o w o r k i n g o n t h e d e v e l o p m e n t o f c o m p e t e n c e s f o r the implementation of mobile applications using React Native technology, which enables c o n c u r r e n t d e v e l o p m e n t f o r i O S a n d A n d r o i d m o b i l e p l a t f o r m s u s i n g t h e s a m e s o u r c e c o d e . Furthermore, we started development in containerization environments, which provide us with a simulated environment that is the same for all engineers. The projects we implemented in 2023 mostly related to foreign customers, but some o f t h e m w e r e a l s o r e l a t e d t o t h e i m p r o v e m e n t o f S p a n ' s o p e r a t i o n . T h u s , f o r e x a m p l e , t h e Asset Management Tool that was developed for the largest world's restaurant chain reached installation in 99.25% restaurants, or, more precisely, in 41,400 restaurants in 93 markets. In the same restaurant chain, a solution for the collaboration of employees was developed and installed in the United States and most European countries. Within the Data Platform program, we developed two portals, CustomerVoice and Data Platform Portal, in a large restaurant chain for coffee and beverages. Both portals are used to collect the experience of users with a view to improving operation. One of the projects that certainly marked last year was PassSport, a startup which enabled us to develop new skills for the implementation of mobile applications, as well as new modern 2.1.2.3. Software & Business Solutions Development This business segment includes the development of own IT solutions, i.e. software platforms, software solutions, software products and Microsoft business solutions. The Software Solutions (S2) department deals with the development of software solutions for customers, and development of software products and business platforms. a r c h i t e c t u r e f o r t h e i r d e v e l o p m e n t . We upgraded the existing solution span.zone with a new product, Licence Zone, which ensured the replacement of the existing Cloudmore p o r t a l a n d b e t t e r m o n i t o r i n g o f t h e n e e d s A decrease in market demand for software development services was felt in 2023. For example, the hitherto stable and active Scandinavian market reduced investments in new products and solutions and turned to savings, which consequently led to decreasing demands from that m a r k e t . Partners selling technological solutions in those countries show nervousness due to slowing growth and reduced need for new digital solutions. The existing solutions are amortized and there is more support for already delivered solutions than the production of new ones. In 2023, we reinforced the Software Solutions department with Data Processing and Identity management teams and solutions. There are two crucial reasons for that – every user portal requires authentication, and identity is the first level. For that reason, we want to approach digital identity and authorization by means of a specialized team. In addition, of customers and licenses they use. Replacement will be completed next year, and the goal is achieving savings and opening multicloud sales of licenses (AWS and Google Cloud license). I n 2 0 2 3 , r e s t r u c t u r i n g w a s c a r r i e d o u t i n E k o b i t b y m e a n s o f i n t r o d u c i n g t e a m a n d team leaders. A Quality Assurance team (software testing) was also formed, and all those who carry out tests were unified, so that they would have equal guidelines for technology and career development. Besides, the Business Analyst roles were separated from the classical development role, and this was implemented on an analysis project for a large international customer. A s t h i s i s t h e f i r s t s p l i t i n t o t e a m s , i t i s i m p o r t a n t t h a t t e a m l e a d e r s t a k e r e s p o n s i b i l i t y a n d m a n a g e t h e m . A c o n t i n u o u s d e v e l o p m e n t o f t e c h n i c a l a n d s o f t s k i l l s i s c r u c i a l , a s i s g o a l S P A N A N N U A L R E P O R T 2 0 2 3 5 8 S P A N A N N U A L R E P O R T 2 0 2 3 5 9 setting and valuing team members – all this in line with career path. The manner of work was reshaped during 2023 from agency to project type, and even though at first sight it might seem s i m p l e , i t r e q u i r e s a c h a n g e i n t h e a t t i t u d e a n d w a y o f w o r k o f a l l e m p l o y e e s . As Ekobit has been relying on Span to a greater extent, as required, we are joining team resources to ensure the delivery of certain services or solutions on an excellent level. Therefore, Ekobit's premises in Zagreb Tower were cancelled, and teams were joined at the premises of Span. Significant savings have thus been made, and the hybrid model of work l e a d i n g C r o a t i a n h o t e l c h a i n s a n d a l e a d e r i n t o u r i s t a c c o m m o d a t i o n g e n e r a l l y s e l e c t e d S p a n f o r t h e i m p l e m e n t a t i o n o f t h e C R M s y s t e m f o r d a t a u n i f i c a t i o n o n c u s t o m e r s a n d m a n a g e m e n t of all guest relations including the loyalty platform, processes and automation of marketing c o m m u n i c a t i o n . I n t h e s a m e y e a r , w e c o n t i n u e d t o i m p l e m e n t t h e C R M s y s t e m f o r t h e c o n t a c t center of an insurance company in Croatia, and launched a CRM project in a leading production company in the energy sector. a l l o w s f o r t h e m a x i m u m u t i l i z a t i o n o f t h e e x i s t i n g p r e m i s e s . I n a d d i t i o n , w e a r e o r g a n i z i n g meetups in four cities – Zagreb, Varaždin, Osijek and Rijeka, in joint cooperation, all this with the purpose of connecting with the local community. One of the projects in 2023 that is worth emphasizing is the development of BDX as an anonymization solution. Although the project started as the development of BDX as a product, it was concluded that instead of a generic BDX solution, a solution that adjusts to the specific needs of the customer is a better direction. With this approach, BDX maximized 2.1.2.4. Service Center Management and Technical Support The Service Center Management and Technical Support segment achieved significant success in 2023, following the latest technology trends. Our goal is to continuously provide superior customer support by means of implementing the latest technology solutions while f o c u s i n g o n t h e l a t e s t M i c r o s o f t t e c h n o l o g i e s , i n c l u d i n g the Azure cloud platform and related services. its p r o f i t a b i l i t y . In 2023, Ekobit retained its large customers and, together with Span teams, worked on diverse products such as span.zone and Licence Zone, as well as the PassSport platform. In the future, we strive to consolidate resources, turn to more profitable models of work, and develop domain knowledge in Ekobit. We believe domain knowledge will be crucial for providing added value on the labor market in the long run. Simple items will be assisted by AI, and domain knowledge will be required for the description and understanding of the issues, which is what the company is preparing for. The Enterprise Business Solutions department develops solutions on the Microsoft Business Applications platform with the focus on Microsoft Dynamics 365 and Microsoft Power platforms. At the start of 2023, our Delivery Department, which saw strong development d u r i n g 2 0 2 2 a n d i s k e y i n t h e s o l u t i o n d e v e l o p m e n t a n d d e l i v e r y , w a s d i v i d e d i n t o t h r e e teams. The newly renamed Business Applications Department now consists of Functional Consultants, Data and Development team. During 2023, Microsoft continued to strongly invest in and develop the Business Applications Platform, constantly improving it with new functionalities. The greatest emphasis w a s o n f u n c t i o n a l i t i e s a n d a p p l i c a t i o n o f A I i n s p e c i f i c b u s i n e s s p r o c e s s e s . W i t h o m n i p r e s e n t AI, the greatest development focus was in the domain of omnichannel communication, integrated Teams telephony and real-time marketing automation. Based on our large experience and capacity to provide services, this year we became the holders of the Microsoft Business Application Partner status, which confirms the expertise in the delivery of solutions through Dynamics 365 and Power platform. Projects we implemented in 2023 only confirm that. Thus, we continued to implement the CRM and Marketing Automation System for a global pharmaceutical company in several markets. We also produced a tablet application on the Power Platform for the creation and administration of customer's orders. The application itself is deeply integrated with several systems, including the ERP and CRM systems. We successfully started projects with one of the leading car companies, where we implemented a system for the management of car pools and leasing. Moreover, one of the In 2023, we successfully resolved more than 202,000 customer incidents, providing fast and effective response to our customers. This result confirmed our team's commitment to providing superior services. In addition, we got an exceptionally high score from our customers – t h e a v e r a g e s a t i s f a c t i o n s c o r e w a s 4.9 5 o u t o f 5. T h i s s c o r e i s t h e r e s u l t o f t h e a n a l y s i s o f 2,220 responses to randomly sent polls which we carried out in order to continuously improve the quality of our support. Dominating technologies in our business segment arose from the operation of the Microsoft Azure ecosystem, even though competencies for all cloud service providers are acquired within Span support. Cloud technologies provided a stable infrastructure a n d o p t i m i z a t i o n t o o l s t o o u r m a n y c u s t o m e r s , a n d i n 2 0 2 3 , w e f o c u s e d o n s e c u r i t y a n d optimization challenges as well as projects for our users. The internal integration of AI tools within the Service Center Management and Technical Support enabled the optimization of internal processes, which will be a major focus in the following year. Those tools provided us a deeper insight in the performance of the system and identification of potential problems before they impact customer e x p e r i e n c e . In 2023, we accomplished excellent results in resolving customer requests, achieving high customer satisfaction scores. The focus on employees and certification additionally enhanced our department and improved the quality of our s e r v i c e s . S P A N A N N U A L R E P O R T 2 0 2 3 61 2.1.2.5. International operations We received Microsoft Partner of the Year 2023 award for the second year in a row as confirmation of our effort and delivery of superior solutions to our customers. Slovenia Span Slovenia has operated for almost 10 years, and in 2023, we achieved growth in all business segments, with Solution Consulting services Azerbaijan The market development strategy in Azerbaijan is directed at ranking at the first place. This segment plays a crucial role in ensuring a stable growth and helps establish independence from fluctuations in licensing services. Due to a higher amount of work in the areas of Solution Consulting and sales support, in 2023, we employed four new colleagues. We are continuously monitoring changes in the preferences of our customers and market trends. A growth in demand for services related to security – especially in the areas of Endpoint Detection and Response (EDR) and eXtended Detection and Response (XDR) is noticeable. The increased focus on security solutions confirms the growth of awareness regarding risks brought about by cyber attacks, and of how much investment in cyber security will be important for the future of any business. Along with cyber security, artificial intelligence (AI) is also witnessing a growing trend. Business entities from various sectors are showing increasing interest in the use of AI technologies with the purpose of improving the operational effectiveness, decision-making processes and the overall results. A series of implemented projects in 2023 related to the implementation of the Azure Landing Zone, the purpose of which was to establish solid foundations for the implementation of the Azure solutions. In this way, we have significantly improved our cloud service portfolio, enabling our customers effective, secure and adjusted solutions. In 2023, we recorded a zero employee turnover rate, proving a high level of satisfaction within our team. This success shows our commitment to developing a positive and team environment at work that values the growth and progress of every individual. Satisfied adjusting the portfolio of products and services to the growing needs of customers in that market. Coordinated marketing activities increased the awareness of the Span brand and enhanced our position between competitors and customers, with the main f o c u s o n t h e f i n a n c i a l s e c t o r ( F S I ) , t e l e c o m m u n i c a t i o n s (T e l C o ) a n d f a s t - m o v i n g c o n s u m e r goods (FMCG). A large number of companies in Azerbaijan are undergoing the process of digital transformation, which consequently leads to an even greater demand for services in the area of cloud and security, software asset management, and infrastructure services. Piracy is still present, but a significant progress in the legalization of the use of software has been achieved. For that reason, an increased need for services in the Software Asset Management segment is expected in the following years. The number of projects in the public sector in Azerbaijan is further increasing. The goal is to increase productivity, transparency and security of public e n t i t i e s . We continue to invest in the knowledge of our experts so that we can continue to provide services and solutions at an excellent level, with the focus on cloud and cyber security. The number of our projects is on the rise, and in 2023 we are especially proud of the first penetration test conducted with a customer in the finance sector and a project of t h e i m p l e m e n t a t i o n o f M i c r o s o f t 3 6 5 l i c e n s e s , w i t h t h e c o n t i n u a t i o n o f c o n s u l t i n g s e r v i c e s provision for customers in the FMCG industry. employees do not only contribute to a stable and experienced team, but maintain our constant effort in encouraging the personal and professional development of each of them. Moldova Span's affiliated company in Moldova has operated for two years and in that period we have been committed to our positioning in the market Ukraine The population and economy of Ukraine in 2023 adjusted to life and work in war conditions. The trend of the relocation of operations to safer and appealing to new customers. In 2023, most of our customers came from the public and financial sectors, and when we speak of the size of our customers, most often, they were large companies. areas was still present, which created conditions for new employment. A part of the Ukrainian population returned from forced migrations, and commercial, production and agricultural companies expanded alternative export routes. The companies dealing with service activities expanded their operations to neighboring markets. All this resulted in a positive impact on the Ukrainian GDP. T h e a f o r e m e n t i o n e d f a c t o r s a l s o p o s i t i v e l y i n f l u e n c e d t h e I T i n d u s t r y . I n c r e a s e d investments into cloud and information security were also observed. It was in the area of information security that we implemented numerous projects in 2023, and some of them were i m p l e m e n t a t i o n o f s o l u t i o n s l i k e M i c r o s o f t E n t r a , D e f e n d e r , P u r v i e w , I n t u n e , A z u r e M o n i t o r , Backup, Site Recovery and Azure Networking Services. Microsoft remained the leading technology provider in the cloud for Ukrainian customers via the Azure platform, and we offered implementation services. Owing to the increased demand for IT services, our number of employees increased by 30%. The increase of the number of employees was followed by the increase of the number of new customers. Cloud and cyber security, infrastructure services and services of the Security and Operations Center (SOC) are often demanded in our market. The projects we want to emphasize relate to the banking sector. For one of the largest banks in the market, we conducted the Microsoft Exchange ActiveSync protocol, which ensures communication between mobile devices and servers with the purpose of synchronizing emails, calendars, c o n t a c t s , a n d a l i k e . W e i m p l e m e n t e d i n f r a s t r u c t u r e I T A u d i t a n d m i g r a t i o n o f T e a m s t o c l o u d . Moreover, for another bank, we are preparing one of the largest Microsoft Enterprise contracts, w h i c h w i l l c o v e r a l l c u s t o m e r d e v i c e s a n d s e r v e r s , a l o n g w i t h A z u r e s u b s c r i p t i o n s . W e a r e h a p p y w i t h t h e a c h i e v e m e n t s a n d c o o p e r a t i o n s w e h a v e h a d i n t h e p a s t t w o years. Our customers recognize the expertise we boast and they see us not only as a provider of solutions, but as a long-term partner. S P A N A N N U A L R E P O R T 2 0 2 3 6 0 S P A N A N N U A L R E P O R T 2 0 2 3 6 2 S P A N A N N U A L R E P O R T 2 0 2 3 6 3 Estonia GT Tarkvara is a leading Estonian licensing and software asset management company with more than 25 years of experience. In addition, we are the main provider of Microsoft services and solutions to 2.1.3. Awards, recognitions and achievements the Estonian Government. In 2023, we became a member of Span Group, by which we have significantly expanded business opportunities in the Baltic and Scandinavian markets and increased the service portfolio. This business move has also reinforced the partnership relation with Microsoft, which means an access to new technologies, partnership offers and new 2.1.3.1. Awards, recognitions and achievements related to the share business opportunities. We are established in the market in the Software Asset Management and Licensing s e g m e n t , a n d n o w w e a l s o o f f e r s e r v i c e s i n t h e a r e a o f c y b e r s e c u r i t y a n d A I s o l u t i o n s a n d business applications. 2.1.3.1.1. Listing into CROBEX10 ® and CROBEX10tr ® Based on the data on share trading from 1 September 2022 to 28 February 2023, our share was included among the 10 most liquid shares on the Zagreb Stock Exchange. Those results enabled our share the entry within the CROBEX10® and CROBEX10tr® indices. Remote and hybrid work are the new normal. The coronavirus pandemic speeded up t h e p r o c e s s o f d i g i t a l t r a n s f o r m a t i o n , w h i c h i s w h y i t i s n o t s u r p r i s i n g t h a t a h i g h d e m a n d f o r cyber security solutions, penetration testing and cyber resilience is noticeable. Along with t h i s , d a t a m a n a g e m e n t a n d d a t a a n a l y s i s a r e h i g h o n t h e p r i o r i t y l i s t o f c u s t o m e r s . I n 2 0 2 3 , w e r e a l i z e d l o n g - t e r m b u s i n e s s c o o p e r a t i o n i n t h e p u b l i c s e c t o r s o f t h e C z e c h R e p u b l i c , L i t h u a n i a a n d E s t o n i a . W e a r e e s p e c i a l l y p r o u d o f a p r o j e c t w e i m p l e m e n t e d i n c o o p e r a t i o n with Microsoft, which related to ensuring a high level of cyber security regarding parliamentary elections in Estonia. Furthermore, we implemented identity and access management projects as well as system management projects for the largest operator of the electromagnetic network in Estonia. More than 660,000 Span’s shares worth EUR 22 million have been traded in a year and a half. A growth of the share of almost 113% was recorded, and the number of shareholders increased to more than 1,700 from the initial 1,200 20 . “I am proud that we managed to enter CROBEX10® and CROBEX10tr® in such a short time. The liquidity of Span’s share was one of the main goals in the IPO. We are happy that we continue to be interesting to investors, t h a t i n t e r e s t d o e s n o t w a n e , and this is confirmed with Georgia Span established its company in Georgia in September this year. As Georgia lacks specializing providers of IT services, we strategically the datum that our share is traded almost on a daily basis,” positioned ourselves as experts with international experience. Interest in services and solutions in the area of cyber and information security is perceptible. Advisory services in the area of public cloud infrastructure, management of documents and automation are high on the l i s t o f n e e d s , s o w e a r e a c t i v e l y r e s e a r c h i n g o p p o r t u n i t i e s f o r t h e p r o v i s i o n o f t h o s e s e r v i c e s . Despite the fact that in 2023 we had operated in this market for only three months, we implemented projects we take special pride in. We implemented Dynatrace infrastructure assessment for the largest bank in Georgia, and a pilot project within which we are presenting Microsoft security products is under way. In this way we are proving our commitment to improving cyber security measures in the region, and the initial engagement in the market laid strong foundations for a future growth. M o v e m e n t o f t h e S p a n s h a r e p r i c e i n t h e p e r i o d 1.9.2 0 2 2 – 2 8 .2.2 0 2 3 said Nikola Dujmović, the founder and President of the Management Board of Span. 20 On 31 December 2023, the number of Span’s shareholders is greater than 2,0 0 0 The price of the share increased by 31.4% in the observed period S P A N A N N U A L R E P O R T 2 0 2 3 6 4 S P A N A N N U A L R E P O R T 2 0 2 3 6 5 2.1.3.1.2. Enlisting in the Frontier Markets Small Cap Index 21 The largest global provider of share indices, MSCI, published its regular revision of the Frontier Market Index in August of 2023 and enlisted our share in the MSCI Frontier Market Small Cap Index . The index Let's recall that we have already been honored by the Zagreb Stock Exchange, back in 2021. At that time, we received an award for our contribution to the capital market for the “I am proud that Span's stock is performing well. From the beginning, our goal has been to increase the trading activity of our stock, analyzes shares from 28 countries, 22 and now, along with ours, it boasts 12 shares from the Croatian market. The shares included in this index receive increased visibility and become the focus of global investors. 23 In the observed period of 2023, 466,700 shares were traded, and the turnover made with the share was EUR 25,301,207.10. successful completion of the IPO and the positive impact it had on the overall capital market in C r o a t i a . and this award in the category of stocks with the highest increase in trading volume confirms that we are succeeding in that. I am pleased that the interest in our stock remains strong, and that we continue to be attractive to investors. We will continue to develop quality and transparent relationships with all our shareholders, who now number more than two thousand,” said Nikola Dujmović, President of the Management Board of Span. 2.1.3.1.3. Zagreb Stock Exchange award for the stock with the highest increase in trading volume Zagreb Stock Exchange Awards were presented for the twelfth year in a row. In selecting the best performers, the Awards Committee considered o b j e c t i v e a n d s t a t i s t i c a l c r i t e r i a , a s w e l l a s t h e o v e r a l l contribution to the education and development of the domestic capital market. The award for the stock with the highest increase in trading volume compared to the previous year was won by Span. In the 11 months of 2023, 561,371 shares of Span were traded, marking a 70 percent increase compared to the same period last year . The total value of transactions amounted to almost EUR 30 million. 2.1.3.2.1. M i c r o s o f t Partner of the Year 2023 in Croatia and Ukraine At the end of June, we were awarded as Microsoft Partner of the Year 202 3 for Croatia and Ukraine . This award honors the best partners for demonstrating excellence in their work and delivering solutions based on Microsoft technologies. 21 h t t p s : / / w w w .m s c i .c o m / e q b / f m / M S C I _ A u g 2 3 _ F M _ S C _ P u b l i c L i s t .p d f 22 https://www.msci.com/documents/10199/0348be0f-4cf8-478c-be64- f f 2 e 5 4 5 a 9 b 3 6 23 https://icam.hr/blog/veliki-uspjeh-top-hrvatskih- k o m p a n i j a / 2 . 1 . 3 . 2 . A w a r d s , r e c o g n i t i o n s a n d achievements in operations S P A N A N N U A L R E P O R T 2 0 2 3 6 6 S P A N A N N U A L R E P O R T 2 0 2 3 6 7 Microsoft’s Partner of the Year is granted to companies that have successfully conceived, developed and implemented solutions using Microsoft technologies. The award is bestowed in several categories, and winners are selected among more than 4,200 nominated companies from more than 100 countries worldwide. We have been awarded for providing superb services and solutions in Croatia and Ukraine. “This recognition is the result of our long-term relationship based on mutual trust and the quality work of our experts who always find the best way to improve the business of our users. There are more than 850 employees in Span today, and the desire for knowledge and constant improvement is our greatest strength,” said Nikola Dujmović, President of the Management Board of Span. and achieving new ones result in occasional changes in the total number of advanced specializations. We continuously invest in the certification of people and preparation for audits in order to fulfill the technological plan for the next period. “Congratulations to the winners and finalists of the 2023 Microsoft Partner of the Year Awards!” said Nicole Dezen, Chief Partner Officer and Corporate Vice President of Global Partner Solutions at Microsoft. “Innovative new Microsoft Cloud t e c h n o l o g y s o l u t i o n s a n d s e r v i c e s t h a t p o s i t i v e l y i m p a c t e d t h e d i g i t a l t r a n s f o r m a t i o n o f t h e i r u s e r s a r e t h i s y e a r ’s w i n n e r s .“ 2.1.3.2.3. Microsoft Advanced Specializations Microsoft Advanced Specializations are a guarantee of excellence and are awarded to the most professional Microsoft partners. We are proud to announce that we acquired Low Code Application Development 2.1.3.2.2. Span becomes the holder of all six Microsoft S o l u t i o n P a r t n e r S t a t u s e s We have become the holders of all 6 Microsoft Solution Partner Statuses . Microsoft has categorized areas where his partners can prove great experience and abilities in providing s e r v i c e s , a n d t h o s e a r e a s a r e B u s i n e s s A p p l i c a t i o n s , D a t a and AI, Digital and App Innovation, Infrastructure, Security, and Modern Work. The sixth Partner Solution Status that has Advanced Specialization . T h e m a r k e t of tools for low code application development is growing very fast, especially in the past complemented our collection relates to the area of Business Applications with the focus on the delivery of solutions through Dynamics 365 and Power platforms . couple of years. Using the Microsoft low code Microsoft continuously improves its partner program by introducing new, merging the existing ones and revoking individual partner programs. Advanced specializations and Solution Partner Statuses are interconnected in technological entities. Transition periods of the renewal of the existing statuses “Our path to this achievement was marked with investing in the knowledge and skills of our employees, who are our greatest power. By obtaining this Microsoft Solution Partner Status we have proven once again that we are continuously working on providing the best services and solutions for our customers,“ said Mihaela Trbojević, Product Marketing Director of Span. application development platform, which includes Microsoft Power Apps and Microsoft Power Automate, we help users quickly develop adjusted and flexible low code business solutions that integrate already existing systems and data with the purpose of initiating innovations and effectiveness across organizations. The Microsoft Low Code Application Development Specialization demonstrates out tested knowledge, valuable experience and recorded success in providing support to customers who apply Microsoft Low Code solutions. S P A N A N N U A L R E P O R T 2 0 2 3 6 8 S P A N A N N U A L R E P O R T 2 0 2 3 6 9 Microsoft uses advanced specializations to identify best partners who will respond to specific needs of users and we are proud to be a part of that collective. We are 2.1.3.2.6. Span CyberGRX Benchmarking For our customers, especially international ones, the way we manage our information security is becoming ever more important given the services we provide to them. Therefore, we are receiving an increasing number of diverse inquiries where we answer questions about our business processes (employment, awarding the right to access, incident management, etc.) 2.1.3.2.4. Hewlett Packard Enterprise Gold Partner Status also proud that this specialization reflects Span’s long-term commitment to achieving excellent results and justification for the trust of our customers. We are proud to have been successfully renewing the Hewlett Packard Enterprise Gold Partner status for many years now, and 2023 is not an exception. This is new evidence of our dedication and excellence in the area of hybrid cloud with tested quality products and services of the IT and technical solutions related to data protection. To minimize the number of various questionnaires with identical or very similar questions, last year, we completed a questionnaire created by CyberGRX. CyberGRX is dedicated to transforming third-party cyber risk management for companies around the world. Span underwent an assessment by its providers through the CyberGRX digital platform in 2023 as well, and received high ratings for its information security management maturity. CyberGRX is utilized worldwide by companies that, like Span, provide services to global enterprises, to assess their business process maturity and security measures. We want our users to understand that we prioritize the security of both our data and theirs, proving that we infrastructure. The demonstration of our expertise in the HPE hybrid cloud portfolio and completion of the training program and certification for HPE hybrid solutions are a confirmation of the high level are a dependable strategic partner. Our users can access the CyberGRX platform to see for themselves that Span is their loyal ally that genuinely values security. of knowledge of Span’s experts. Thus, our focus on helping users by implementing demanding and complex HPE solutions so that they could respond faster to unpredictable business requirements got 2.1.3.2.7. Seventh ISO certificate Implementation of ISO standards is an important factor for increasing competitiveness in the international market, so we are rejoiced at the fact that in its operation, Span applies as many as seven of them. Our latest certificate is for ISO 22301 , the international standard that provides additional recognition. 2.1.3.2.5. Saviynt – Fastest transaction in 2022 In 2022, Span became a partner of reputable Saviynt, a global leader in the area of smart solutions related to identity management, and we have already won their award. In London, at the conference of Saviynt’s partners and customers, we were awarded for the Fastest a framework for the establishment, implementation, maintenance and improvement of the business continuity management system. ISO 22301 allows us to better Transaction in 2022 , or, for an agreement signed in the fastest way. With Saviynt tools and platform, we work on the implementation of solutions in the area of identity, access and supervision, and this award is another confirmation that Saviynt made a good decision when they gave us their trust. manage risks and emergencies and ensures the continuation of business even i n u n p r e d i c t a b l e s i t u a t i o n s – a n d , a s w e a l l k n o w , u n f o r t u n a t e c i r c u m s t a n c e s h a p p e n more often than we could have imagined a few years ago. It is a valuable tool for Span because it promotes systematic thinking and continuous improvement and strengthens relationships with s t a k e h o l d e r s . S P A N A N N U A L R E P O R T 2 0 2 3 7 0 S P A N A N N U A L R E P O R T 2 0 2 3 7 1 2.1.3.2.8. Croatia Grand Prix Security 2023 In September, we were awarded Croatia Grand Prix Security 2023 in the media promotion of security for our campaign “SAFETY NET – bitka za sigurnost“ (Battle for Security) , which we carried out in cooperation with the Split–Dalmatia Police Administration, DUMP Association of Young Programmers, Radio Split, and Split–Dalmatia retention and well-being, including leaving and returning and HR strategic counseling. Span’s result in all categories was above 80%, and what makes us especially happy is the result of the maximum 100% in County Security Committee. The goals of the campaign were making citizens aware of the real danger of being exposed to criminal acts in the area of cybercrime, which most often involves online and social media scams, and slowing down the negative trend of the increasing number of criminal acts in the area of cybercrime. The campaign was carried out through direct contact with citizens – especially those who are not very good at technology. It was also covered by the media on radio and TV stations, in daily newspapers, and on web portals. the part related to inclusion and well-being of our employees. In the year in which the recertification criteria were made significantly stricter, we achieved a total result of 90%, which is also higher than the average of other certified organizations by 8%. 100 % 75 % 50 % 25 % Results on E m p l o y e e l i f e cycle steps 2.1.3.2.9. TD Synnex Solution Days 2023 A recognition for excellent selling results in the security sector was handed to us at the 0 % Recruiting and employment Onboarding and development Inclusion and inspiration Transformation and growth Retention and well-being Leaving and returning HR strategic counselling TD Synnex Solution Days 2023 – Highway to cloud in Crikvenica. We provide security solutions to our customers and give recommendations for improvement measures to each customer with A l l t h i s i s o n l y a n i n d i c a t o r o f t h e c o n t i n u i n g e f f o r t w e i n v e s t i n a t t r a c t i n g , r e c r u i t i n g , r e t a i n i n g a n d d e v e l o p i n g e m p l o y e e s – i n s h o r t , i n t h e o v e r a l l c a r e f o r e m p l o y e e s . great attention and commitment. For all those reasons, we are grateful and proud that our effort has been recognized, and we consider this occasion another strong impetus for us to continue striding forward. 2.1.3.2.11. SAP S u c c e s s Factors - contract signed In the second quarter we officially started the implementation of the new HR system – SAP Success Factors. SAP SF Enterprise is a solution that is used by more than 9,400 organizations worldwide and brings us the best HR practice that includes process automation, a higher 2.1.3.2.1 0 . CEP r e c e r t i f i c a t i o n We started 2023 with the third successful Employer Partner r e c e r t i f i c a t i o n . With the Certificate Employer Partner (CEP) , the leading level of reporting, and monitoring procedures within Span Group. SAP SF has been granted the Gartner recognition of the leader in the area of cloud HR solutions for the sixth year in a row, for companies with more than 1,000 employees. T h i s r e c o g n i t i o n additionally confirms its value and continuous Croatian consultancy company, Selectio, once again acknowledged the excellent practice of Span and the high quality in the area of human resource management. Our HR processes were evaluated in 7 categories (so-called employee life cycle steps) – from recruiting and employment, onboarding and development through inclusion and inspiration, transformation and growth, innovativeness by which it follows changes in the current dynamic market. Transition from the current software to the new one is driven by the high growth last year and the need for the improvement and optimization of processes that will continue to support Span's development. Besides, the new a p p l i c a t i o n w i l l e n a b l e u s t o c e n t r a l i z e e x i s t i n g p r o c e s s e s a n d p r o c e d u r e s a n d s t a n d a r d i z e them at the level of the whole Span Group. 90 % 8 7 % 1 0 0 % 8 7 % 90 % 83 % 89 % S P A N A N N U A L R E P O R T 2 0 2 3 72 S P A N A N N U A L R E P O R T 2 0 2 3 73 2.1.3.2.12. Volunteering Oscar Award Even though nobody volunteers to get an award but to help and support those in need, sometimes it is nice to see that our effort and initiatives have been recognized. 2.2. Financial indicators for 2023 The latest recognition of our volunteering actions came in the form of the Volunteering Oscar Award , organized by the Volunteers’ Center Zagreb, and Span won it in the Companies category. In the last two years, we have invested a lot in corporate volunteering, finalized the official Policy on Corporate Volunteering , and signed the Charter of Employee Volunteering . We have also done a big volunteering action with O2 project and volunteering projects based on our skills for associations Hrabri telefon and Nismo same . This Volunteering Oscar has crowned our efforts, confirming that we are going in the right direction and giving us a new drive to continue giving back to the community in an even more ambitious and organized manner through numerous similar actions. 2.2.1. Operating Revenue, EBITDA and Net Profit of Span Group EUR 142.8 mil. +30% OPERATING REVENUE YoY EUR 7.1 mil. - 25% EBITDA YoY before one-off i t e m s EUR 5.6 mil. - 39% EBITDA YoY 2.1.3.2.13. Span - ”Health- Friendly Company” Span has always been a company that pays special attention to the health and well-being of its employees. With that in mind, in cooperation with the Croatian Institute of Public Health, in the spring of 2023 we officially started the process of certification and after one-off items EUR 1.2 mil. - 81% NET PROFIT YoY acquiring the right to display the " Health-Friendly Company " title. This title is acquired within the framework of the "Live Healthy" National Program, which was designed and launched by the Ministry of H e a l t h a n d t h e C r o a t i a n I n s t i t u t e of Public Health, and it is given to companies that recognize healthy values and care about improving the health of their employees. The certification process involved organizing various lectures and workshops on topics such as nutrition, physical activity, and mental health, as well as diverse actions and initiatives in which a large number of our employees participated throughout the year. A company that wants to acquire the "Health-Friendly Company" label must meet certain criteria assessed and set by a team of Croatian Institute of Public Health’s experts, which are divided into six areas – nutrition, promotion of physical activity, protection of the health of employees at the workplace, smoking ban, alcohol consumption ban and environmental care. According to the recommendations and guidelines for earning the "Health- Friendly Company" label, last year we set specific goals in the first three areas (because the other three are implied, to a certain extent) and we’re proud to report that we’ve successfully achieved them. 2.2.2. Operating Revenue, EBITDA and Net Profit of Span d.d. after one-off items E U R 9 9 . 6 m i l . O P E R A T I N G R E V E N U E + 9 % Y o Y E U R 3 . 8 m i l . E B I T D A before one-off i t e m s - 5 2 % Y o Y E U R 3 . 3 m i l . E B I T D A after one-off i t e m s - 5 7 % Y o Y E U R 0 . 5 m i l . N E T P R O F I T after one-off i t e m s - 9 2 % Y o Y S P A N A N N U A L R E P O R T 2 0 2 3 7 4 S P A N A N N U A L R E P O R T 2 0 2 3 7 5 2.2.3. Key features of the period – 2023 Profit and Loss Account – s h o r t e n e d Revenues Operating expenses EBITDA The total consolidated revenue increased by EUR 29,191 thousand, or 25% compared to 2022. Operating revenue increased by EUR 32,666 thousand in the observed period. The highest growth was recorded by the Software Asset Management and Licensing segment, mostly as a result of the acquisition of GT Tarkvara. In the same period, Span d.d. recorded an increase of revenue by EUR 8,694 thousand, or 9%. The growth mostly came from the operating revenue, which increased by EUR 8,266 thousand. The strongest growth of revenue was recorded in the Software Asset Management and Licensing segment, amounting to 16%. Total consolidated operating expenses increased by EUR 32,829 thousand, or 31% compared to 2022. The greatest generator of the growth of expenses was the cost of the goods and services sold, following the revenue growth. The increase of personnel expenses was EUR 6,398 thousand, and resulted from the higher number of employees in the segment of IT services with high added value. The average number of employees in the Group in 2023 was 834, whereas in the prior year, the average number of employees in the Group was 704. Other operating expenses of the Group decreased by EUR 1,496 thousand compared to 2022. Total expenses of Span d.d. increased by EUR 13,082 thousa nd, or 16%. The highest growth resulted from the cost of goods and services sold, following the revenue growth. The personnel expenses increased by EUR 4,165 thousand, or 22%. The average number of employees in the Company in the observed period was 626, an increase compared to the prior year when the average number of employees in the Company was 538. Most of the new employees were employed in the segment of IT services with high added value. EBITDA of the Group before one-off items was EUR 7,111 thousand. One-off items of EBITDA of the Group were EUR 1,463 thousand and related to: 1) value adjustment of receivables in Span Slovenia for Studio Moderna; 2) cost of tax and surtaxes on capital gains, resulting from the Share Allocation Plan awarding employees of Ekobit, defined in the purchase and sale agreement; 3) expenses resulting from the acquisition of GT Tarkvara; 4) reserved e x p e n s e s f o r t h e E S O P p r o g r a m f o r t h e a l l o c a t i o n o f s h a r e s t o e m p l o y e e s . A c c o r d i n g t o t h e requirements announced in the Prospectus , Span will award every employee who keeps in their ownership one or more ESOP packages in a period of three years with 25% shares in relation t o t h e n u m b e r o f s h a r e s t h e r e s p e c t i v e e m p l o y e e h o l d s w i t h i n t h e E S O P p a c k a g e . A f t e r t h e e x p i r y o f t h e f i r s t y e a r f r o m t h e d a t e o f t h e p u b l i c a n n o u n c e m e n t o f t h e r e s u l t s , 5 % o f t h e t o t a l number of shares will be allocated, and 10% will be allocated upon the expiry of the second and third years each. EBITDA of the Group after one-off items in the observed period was EUR 5,648 thousand and recorded a 39% decline compared to the same period of the prior year. Span d.d. recorded a fall of EBITDA before one-off items of EUR 4,139 thousand, or 52%, amounting to EUR 3,759 thousand. In the observed period, Span d.d. recorded EBITDA fall after one-off items of EUR 4,388 thousand to EUR 3,339 thousand, a drop of 57%. In 2022, Span d.d. started a new investment cycle by employing experts in the segment of services with added IT value, which led to an increase of salary expenses as the main driver of the fall of EBITDA Span G r o u p I n t h o u s a n d s o f E U R 2 0 2 2 2 0 2 3 ∆ % T o t a l r e v e n u e 1 1 5 , 1 4 0 1 4 4 , 3 3 1 2 5 % Operating r e v e n u e 1 1 0 , 1 7 0 1 4 2 , 8 3 6 3 0 % Other r e v e n u e 4 , 9 7 0 1 , 4 9 6 - 7 0 % T o t a l c o s t s 1 0 5 , 8 5 4 1 3 8 , 6 8 3 3 1 % Costs of goods and services s o l d 6 6 , 7 6 8 9 4 , 6 9 5 4 2 % Personnel e x p e n s e s 2 5 , 7 9 9 3 2 , 1 9 7 2 5 % Other business e x p e n s e s 1 3 , 2 8 8 1 1 , 7 9 1 - 1 1 % E B I T D A b e f o r e o n e - o f f i t e m s 9 , 5 3 3 7 , 1 1 1 - 2 5 % E B I T D A o n e - o f f i t e m s 2 4 7 1 , 4 6 3 4 9 1 % E B I T D A a f t e r o n e - o f f i t e m s 9 , 2 8 5 5 , 6 4 8 - 3 9 % Depreciation and a m o r t i z a t i o n 2 , 5 7 2 3 , 5 5 9 3 8 % E B I T 6 , 7 1 4 2 , 0 8 9 - 6 9 % Net financial r e s u l t ( 2 2 6 ) ( 3 4 3 ) - 5 2 % Profit/loss before taxation before one-off i t e m s 6 , 7 3 4 3 , 2 0 9 - 5 2 % Profit/loss before taxation after one-off i t e m s 6 , 4 8 7 1 , 7 4 6 - 7 3 % C o r p o r a t e t a x ( 2 2 3 ) 4 9 9 3 2 4 % Profit/loss after taxation before one-off i t e m s 6 , 9 5 8 2 , 7 1 0 - 6 1 % Profit/loss after taxation after one-off i t e m s 6 , 7 1 0 1 , 2 4 6 - 8 1 % Span d . d . I n t h o u s a n d s o f E U R 2 0 2 2 2 0 2 3 ∆ % T o t a l r e v e n u e 9 1 , 7 4 0 1 0 0 , 4 3 3 9 % Operating r e v e n u e 9 1 , 2 8 4 9 9 , 5 5 0 9 % Other r e v e n u e 4 5 6 8 8 3 9 4 % T o t a l c o s t s 8 4 , 0 1 2 9 7 , 0 9 4 1 6 % Costs of goods and services s o l d 5 7 , 3 5 1 6 5 , 6 1 8 1 4 % Personnel e x p e n s e s 1 9 , 3 1 1 2 3 , 4 7 6 2 2 % Other business e x p e n s e s 7 , 3 5 0 8 , 0 0 1 9 % E B I T D A b e f o r e o n e - o f f i t e m s 7 , 8 9 8 3 , 7 5 9 - 5 2 % E B I T D A o n e - o f f i t e m s 1 7 1 4 2 0 1 4 6 % E B I T D A a f t e r o n e - o f f i t e m s 7 , 7 2 7 3 , 3 3 9 - 5 7 % Depreciation and a m o r t i z a t i o n 1 , 8 8 2 2 , 3 0 3 2 2 % E B I T 5 , 8 4 5 1 , 0 3 6 - 8 2 % Net financial r e s u l t ( 7 0 5 ) ( 3 7 1 ) 4 7 % Profit/loss before taxation before one-off i t e m s 5 , 3 1 1 1 , 0 8 5 - 8 0 % Profit/loss before taxation after one-off i t e m s 5 , 1 4 1 6 6 5 - 8 7 % C o r p o r a t e t a x ( 4 2 9 ) 2 0 4 1 4 8 % Profit/loss after taxation before one-off i t e m s 5 , 7 4 0 8 8 2 - 8 5 % Profit/loss after taxation after one-off i t e m s 5 , 5 6 9 4 6 1 - 9 2 % S P A N A N N U A L R E P O R T 2 0 2 3 7 6 S P A N A N N U A L R E P O R T 2 0 2 3 7 7 Net profit in 2023. The employment of experts in the area of Cloud and Cyber Security was a realized investment of the Company in the expected trend of growth in the following years. P r o f i t a f t e r t a x a t i o n b e f o r e o n e - o f f i t e m s o f t h e G r o u p d e c r e a s e d b y E U R 4,2 4 8 thousand, to EUR 2,710 thousand. In the observed period, profit after taxation after one-off items of the Group decreased by EUR 5,463 thousand, to EUR 1,246 thousand. This fall was driven by the increase of depreciation and amortization reflecting 1) procurement of the necessary equipment for the work of the increased number of employees in the prior year, and 2) amortization of the long-term intangible assets (allocation of initially recognised goodwill of Ekobit and GT Tarkvara to relevant position of intangible assets in accordance with IFRS 3 Business Combinations, and internally generated intangible assets). Cost of the corporate tax in 2023 mostly reflected the release of the deferred tax assets for both obtained tax reliefs based on the Investment Promotion Act. Span d.d. recorded a fall of profit after taxation before one-off items by EUR 4,859 thousand, to EUR 882 thousand. Span d.d. recorded a fall of profit after taxation after one-off items by EUR 5,108 thousand, to EUR 461 thousand, caused by higher cost of depreciation and amortization and value adjustment of investment into Span Swiss AG in Switzerland in the amount of 100%, or EUR 136 thousand, and Span Germany in the amount of 100%, or EUR 110 thousand. 2.2.4. Revenues by segments The Span Group generates revenues in the following segments: 1. Software Asset Management and Licensing 2. Infrastructure Services, Cloud & Cyber Security 3. Service Center Management and Technical Support 4. Software and Business Solutions Development. Data on revenues by segments of the operation of the Group and Span d.d. for 2022 and 2023 is illustrated below. R e v e n u e s b y s e g m e n t s Span Group In thousands of EUR 2022 2023 ∆% Total operating revenue 110,170 142,836 30% Software Asset Management and Licensing 67,267 99,147 47% Infrastructure Services, Cloud & Cyber Security 16,409 1 4 ,0 5 1 - 1 4 % Service Center Management and Technical Support 1 6 ,9 1 7 19,365 1 4 % Software and Business Solutions Development 9,577 10,273 7% Span d.d. In thousands of EUR 2022 2023 ∆% Total operating revenue 91,284 99,550 9% Software Asset Management and Licensing 55,473 64,268 16% Infrastructure Services, Cloud & Cyber Security 1 4 ,7 0 1 12,677 - 1 4 % Service Center Management and Technical Support 16,262 18,357 1 3 % Software and Business Solutions Development 4,848 4,248 - 1 2 % R e v e n u e s b y s e g m e n t s Span Group 2 0 2 2 Span Group 2 0 2 3 Software Asset Management & Licensing 6 1 % Infrastructure services, Cloud & Cyber Security 1 5 % Service Center Management & Technical Support 1 5 % Software & Business Solutions Development 9 % Software Asset Management & Licensing 6 9 % Infrastructure services, Cloud & Cyber Security 1 0 % Service Center Management & Technical Support 1 4 % Software & Business Solutions Development 7 % S P A N A N N U A L R E P O R T 2 0 2 3 7 8 S P A N A N N U A L R E P O R T 2 0 2 3 7 9 Span d.d. 2 0 2 2 Span d.d. 2 0 2 3 R e v e n u e s b y g e o g r a p h i c m a r k e t s Span Group 2 0 2 2 Span Group 2 0 2 3 Software Asset Management & Licensing 6 1 % Infrastructure services, Cloud & Cyber S e c u r i t y 1 6 % Service Center Management & Technical Support 1 8 % Software & Business Solutions Development 5 % Software Asset Management & Licensing 6 5 % Infrastructure services, Cloud & Cyber S e c u r i t y 1 3 % Service Center Management & Technical Support 1 8 % Software & Business Solutions Development 4 % Croatia 3 2 % U S A 1 9 % Slovenia 1 7 % UK 1 1 % Ukraine 9 % Others 1 2 % Croatia 3 4 % Slovenia 1 5 % U S A 1 1 % UK 9 % Estonia 8 % Others 2 3 % 1. Software Asset Management and Licensing recorded a growth of revenues by 47%. The Group recorded higher revenues compared to 2022, mostly as a result of the investment in new markets in the Baltic region. The share of revenues in the total operating revenues was 69%. 2. Infrastructure Services, Cloud & Cyber Security were lower in the observed period by 14% compared to 2022 when the Group recorded an exceptional growth of projects in the domestic and foreign markets. Expanding operating activities in the area of Cloud and Cyber Security continued to be the focus of operation of the Group. 3. Service Center Management and Technical Support contributed to the continuous growth of revenues through the supervision and management of the IT environment, with the i n c r e a s e o f r e v e n u e s i n t h i s s e g m e n t a m o u n t i n g t o 1 4 % c o m p a r e d t o 2 0 2 2 . 4. Software and Business Solutions Development achieved the most significant growth of 7% in the observed period. The growth of this segment resulted from the focused development of own IT solutions and platforms, as well as the development of specific business solutions for individual key customers, such as CRM, automation and robotization of their business processes. The growth of this segment was additionally enhanced by the acquisition of Ekobit, whose operation is directed to development of software solutions. 2.2.5. Revenues by geographic markets Revenues by geography show the geographic market where goods and services are invoiced. The share of revenues the Group makes in foreign markets accounts for 66% of the total revenues. A significant growth of revenues was recorded by the markets of Croatia (EUR 12,191 thousand) and Estonia (EUR 10,911 thousand). An additional growth in segment “Other” was supported by the growth of revenues in the Baltic and Central Europe markets realized by GT Tarkvara. 45% of revenues of Span d.d. in the observed period related to the Croatian market, which also recorded the highest growth of EUR 10,787 thousand (31%) in the observed period. Span d.d. 2 0 2 2 Span d.d. 2 0 2 3 Croatia 3 8 % USA 2 2 % Slovenia 1 7 % UK 1 4 % Sweden 3 % Others 6 % 2.2.6. Balance Sheet Assets Croatia 4 5 % Slovenia 1 7 % USA 1 5 % UK 1 3 % Sweden 2 % Others 8 % Span d.d. 31.12.2022 31.12.2023 46,467 52,984 17,489 28,870 1,3 4 1 1,1 4 5 1 1 ,3 2 9 15,497 1 4 ,2 1 2 3,792 2,096 3,681 46,467 52,984 29,347 27,082 2,319 2,995 1 1 ,2 0 2 18,093 3,598 4,813 The total value of the assets of the Group was higher by EUR 17,007 thousand amid the increase of long-term assets as a result of the acquisition of the 100% share of GT Tarkvara on 31 March 2023 and the increase of the current assets as a result of 1) growth of receivables; 2) growth of financial assets as a result of short-term fixed deposits in a foreign currency. Span G r o u p I n t h o u s a n d s o f E U R 3 1 . 1 2 . 2 0 2 2 3 1 . 1 2 . 2 0 2 3 A S S E T S 5 5 , 2 5 4 7 2 , 2 6 1 F i x e d a s s e t s 1 6 , 6 1 6 2 3 , 9 2 7 Deferred tax a s s e t s 1 , 6 6 1 1 , 7 2 4 Current a s s e t s 1 5 , 9 4 2 2 9 , 3 5 4 Cash and cash e q u i v a l e n t s 1 8 , 8 1 5 1 3 , 3 3 9 Prepaid expenses and accrued i n c o m e 2 , 2 2 0 3 , 9 1 6 L I A B I L I T I E S 5 5 , 2 5 4 7 2 , 2 6 1 Equity and r e s e r v e s 3 1 , 6 0 6 3 0 , 4 2 3 Long-term l i a b i l i t i e s 2 , 9 0 7 3 , 5 0 9 Current l i a b i l i t i e s 1 6 , 0 5 0 3 2 , 0 1 4 Accrued expenses and deferred r e v e n u e 4 , 6 9 1 6 , 3 1 5 S P A N A N N U A L R E P O R T 2 0 2 3 8 0 S P A N A N N U A L R E P O R T 2 0 2 3 8 1 Cash and cash equivalents A d e c r e a s e i n c a s h c o m p a r e d t o t h e p r i o r p e r i o d p a r t i a l l y r e s u l t e d from the investment activities of the Group in 2023, and partially from financial activities – the payment of dividend and purchase of Deferred tax a s s e t s Deferred tax assets represent income tax return amounts which are recoverable based on future deductions of taxable profit. Deferred tax assets are recognized up to the amount of taxable revenues which are likely Investment in assets own shares. to be achieved. When determining future taxable profit and the amount of taxable revenues which are likely to be achieved in the future, the Group judges and creates estimates based on taxable profit from the previous years and the expected future revenues which are considered to be reasonable in existing circumstances. The Group made an assessment of the usability of tax relief for the estimate of the amount of deferred tax assets, based on the support gained f r o m t h e M i n i s t r y o f E c o n o m y , E n t r e p r e n e u r s h i p a n d C r a f t s . T h e a f o r e m e n t i o n e d f i n a n c i a l support allows Span d.d. to be exempt from paying corporate income tax from 2015 to 2025, f o r 5 0 % o f t h e a m o u n t o f t h e t a x b a s e , u p t o t h e m a x i m u m t h r e s h o l d i n t h e a m o u n t o f t h e t o t a l investment according to the Investment Promotion Law (ZOPI). In December 2021, Span d.d. and Bonsai d.o.o. applied for the use of a new round of support entitled Investment in expansion of the research and development capacity and capacity for delivery of IT solutions project. They received a positive decision on 25 February 2022, based on which the Company accomplished additional 50% relief of the tax rate. Thus, Span d.d. ensured that by 2025, i.e. by the utilization of the maximum threshold of the The presentation also includes investments in assets related to Right-of-use assets and assets generated by the acquisition of the companies Ekobit in 2022 and GT Tarkvara in 2 0 2 3 . investment, it has a corporate income tax rate of 0%. Equity and reserves The total equity of the Group decreased by EUR 1,183 thousand. On June 30th 2023, the company transferred a dividend to the SKDD (Central Depository and Clearing Company) account, in the amount of EUR 2,584 thousand, which was paid to the shareholders on 3 July 2023. The share capital of the Company increased from EUR 2,601 thousand by the amount of EUR 1,319 thousand, to EUR 3,920 thousand, with the increase of the individual nominal amount of regular shares from the amount of EUR 1.33 by the amount of EUR 0.67 to EUR 2.00, in line with the Law on the Introduction of the Euro as the Official Currency in the Republic of Croatia. The presentation also includes investments in assets related to the increase in assets resulting from the merger of the company Infocumulus and the inclusion of the amount related to investment in Right-of-use assets. I n v e s t m e n t s o f S p a n G r o u p i n t a n g i b l e a s s e t s a r e m o s t l y r e l a t e d t o e x p e n s e s f o r t h e procurement and replacement of worn-out computers and other equipment for the work of e m p l o y e e s . I n v e s t m e n t i n I n t a n g i b l e a s s e t s i n p r e p a r a t i o n r e l a t e d t o i n t e r n a l l y g e n e r a t e d intangible assets that resulted from the continuation of the development of software available for further sale/ use. Other intangible assets relate to assets generated by the acquisition of the companies Ekobit in 2022 and GT Tarkvara in 2023, as well as investments in business premises leased by the Company. Long-term and short-term liabilities The total long-term liabilities increased by EUR 601 thousand. Increase of the long-term liabilities resulted from the acquisition of GT Tarkvara. The short-term liabilities increased primarily as a result of 1) liabilities to suppliers 2) acquisition of GT Tarkvara 3) short-term liabilities to banks as a result of the withdrawal of the framework, and 4) liabilities to former owners for the purchase of own shares. Span G r o u p I n t h o u s a n d s o f E U R 2 0 2 2 2 0 2 3 Computer equipment and other e q u i p m e n t 1 , 4 5 2 9 5 8 Tangible asssets in p r e p a r a t i o n - 4 Other intangible a s s e t s 3 , 3 3 5 3 , 2 1 8 Intangible assets in p r e p a r a t i o n 5 6 6 1 , 1 8 8 Right-of-use a s s e t s 1 , 2 2 3 9 6 1 I n v e s t m e n t i n a s s e t s t o t a l 6 , 5 7 6 6 , 3 2 9 Span d . d . I n t h o u s a n d s o f E U R 2 0 2 2 2 0 2 3 Computer equipment and other e q u i p m e n t 9 3 2 5 4 4 Tangible asssets in p r e p a r a t i o n - 1 Other intangible a s s e t s 3 4 4 4 0 6 Intangible assets in p r e p a r a t i o n 4 0 8 1 , 4 7 5 Right-of-use a s s e t s 7 0 3 8 1 0 I n v e s t m e n t i n a s s e t s t o t a l 2 , 3 8 7 3 , 2 3 6 C u r r e n t A s s e t s , C u r r e n t L i a b i l i t i e s a n d W o r k i n g C a p i t a l S p a n G r o u p I n t h o u s a n d s o f E U R 3 1 . 1 2 . 2 0 2 2 3 1 . 1 2 . 2 0 2 3 Current a s s e t s 3 6 , 9 7 7 4 6 , 6 0 9 Current l i a b i l i t i e s 2 0 , 7 4 1 3 8 , 3 2 9 W o r k i n g c a p i t a l 1 6 , 2 3 7 8 , 2 8 0 C u r r e n t l i q u i d i t y r a t i o 1 . 7 8 1 . 2 2 Span d . d . 3 1 . 1 2 . 2 0 2 2 3 1 . 1 2 . 2 0 2 3 2 7 , 6 3 7 2 2 , 9 6 9 1 4 , 8 0 1 2 2 , 9 0 6 1 2 , 8 3 7 6 3 1 . 8 7 1 . 0 0 S P A N A N N U A L R E P O R T 2 0 2 3 8 2 S P A N A N N U A L R E P O R T 2 0 2 3 8 3 Net d e b t Span G r o u p I n t h o u s a n d s o f E U R 3 1 . 1 2 . 2 0 2 2 3 1 . 1 2 . 2 0 2 3 Short-term and long-term bank l o a n s 9 3 7 2 , 1 0 7 Cash and cash e q u i v a l e n t s 1 8 , 8 1 5 1 3 , 3 3 9 Net d e b t ( 1 7 , 8 7 9 ) ( 1 1 , 2 3 2 ) T o t a l e q u i t y 3 1 , 6 0 6 3 0 , 4 2 3 Net debt and total equity r a t i o - - Span d . d . 3 1 . 1 2 . 2 0 2 2 3 1 . 1 2 . 2 0 2 3 9 3 7 2 , 1 0 7 1 4 , 2 1 2 3 , 7 9 2 ( 1 3 , 2 7 6 ) ( 1 , 6 8 5 ) 2 9 , 3 4 7 2 7 , 0 8 2 - - Span G r o u p I n t h o u s a n d s o f E U R 2 0 2 2 2 0 2 3 Net cash from operating a c t i v i t i e s 1 0 , 7 4 6 6 , 0 0 9 Net cash used in investment a c t i v i t i e s - 6 , 2 1 4 - 6 , 8 8 1 Net cash used in financial a c t i v i t i e s - 4 , 2 7 1 - 4 , 6 0 5 Net increase / decrease in cash and cash equivalents 2 6 1 - 5 , 4 7 7 Span d . d . 2 0 2 2 2 0 2 3 7 , 7 6 0 4 , 3 2 4 - 6 , 6 0 8 - 1 0 , 4 9 5 - 3 , 7 8 5 - 4 , 2 5 0 - 2 , 6 3 3 - 1 0 , 4 2 1 T h e c u r r e n t l i q u i d i t y r a t i o p o i n t s t o a h i g h a b i l i t y o f t h e G r o u p t o s e t t l e i t s s h o r t - t e r m l i a b i l i t i e s . 2.2.7. Cash flow The Group generated positive cash flows from business activities. The negative cash flow from investment activities is mostly a consequence of the acquisition of GT Tarkvara and investment in tangible and intangible assets. The negative cash flow from financial activities mostly derives from the payment of dividend, acquisition of shares, and establishing term deposit. TOV Span s t a n d a l o n e In thousands of EUR 2022 2023 ∆% Total revenue 10,007 8,297 - 1 7 % Operating revenue 5,749 7,821 36% Other revenue 4,258 476 - 89% Total costs 10,004 7,618 -24% Costs of goods and services sold 4,876 5,836 20% Personnel expenses 840 1,2 8 1 53% Other business expenses 4,289 502 - 88% EBITDA before one-off items 2 679 29938% One-off items - - - EBITDA 2 679 29938% Depreciation and amortization 29 29 2% EBIT ( 2 6 ) 650 2571% Net financial result 47 28 - 40% Profit/loss before taxation before one-off items 21 678 3158% Profit/loss before taxation 21 678 3158% Corporate t a x 122 - - 1 0 0 % Profit/loss after taxation before one-off items (101) 678 772% Profit/loss after taxation (101) 678 772% C o n t r i b u t i o n o f T O V S p a n i n S p a n G r o u p 2.2.8. Operation of TOV Span Ukraine An individual profit and loss statement of TOV Span for 2022 and 2023, and contribution to the consolidated results of Span Group is provided below. In the observed period, Microsoft further enabled our users in Ukraine to use its products and services free of charge for the period from 1 January 2023 to 31 December 2023. In 2022, other revenue reflects the consequence of the write-off of debts to Microsoft, whereas other operating expenses reflect the provision of the obtained relief to end users. The aforementioned resulted in a decline of other revenues and other operating expenses in 2023. Revenues of TOV Span accounted for 6% of the consolidated revenues of the Span Group in the observed period of 2023. In 2023, the contribution to consolidated EBITDA before one-off items was EUR 610 t h o u s a n d , a n d t h e c o n t r i b u t i o n i n E B I T D A b e f o r e o n e - o f f i t e m s o f t h e G r o u p w a s 9 % . Span G r o u p Contribution of TOV Span in Span G r o u p S h a r e o f T O V S p a n i n Span Group I n t h o u s a n d s o f E U R 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 T o t a l r e v e n u e 1 1 5 , 1 4 0 1 4 4 , 3 3 1 9 , 8 3 6 8 , 2 1 6 9 % 6 % Operating r e v e n u e 1 1 0 , 1 7 0 1 4 2 , 8 3 6 5 , 5 7 8 7 , 7 4 0 5 % 5 % Other r e v e n u e 4 , 9 7 0 1 , 4 9 6 4 , 2 5 8 4 7 6 8 6 % 3 2 % T o t a l c o s t s 1 0 5 , 8 5 4 1 3 8 , 6 8 3 1 0 , 0 0 2 7 , 6 0 6 9 % 5 % Costs of goods and services s o l d 6 6 , 7 6 8 9 4 , 6 9 5 4 , 8 7 6 5 , 8 2 4 7 % 6 % Personnel e x p e n s e s 2 5 , 7 9 9 3 2 , 1 9 7 8 4 0 1 , 2 8 1 3 % 4 % Other business e x p e n s e s 1 3 , 2 8 8 1 1 , 7 9 1 4 , 2 8 7 5 0 2 3 2 % 4 % E B I T D A b e f o r e o n e - o f f i t e m s 9 , 5 3 3 7 , 1 1 1 ( 1 6 6 ) 6 1 0 - 2 % 9 % E B I T D A o n e - o f f i t e m s 2 4 7 1 , 4 6 3 - - - - E B I T D A a f t e r o n e - o f f i t e m s 9 , 2 8 5 5 , 6 4 8 ( 1 6 6 ) 6 1 0 - 2 % 1 1 % Depreciation and a m o r t i z a t i o n 2 , 5 7 2 3 , 5 5 9 2 9 2 9 1 % 1 % E B I T 6 , 7 1 4 2 , 0 8 9 ( 1 9 5 ) 5 8 0 - 3 % 2 8 % Net financial r e s u l t ( 2 2 6 ) ( 3 4 3 ) 4 7 2 8 - 2 1 % - 8 % Profit/loss before taxation before one-off items 6 , 7 3 4 3 , 2 0 9 ( 1 4 8 ) 6 0 9 - 2 % 1 9 % Profit/loss before taxation after one-off items 6 , 4 8 7 1 , 7 4 6 ( 1 4 8 ) 6 0 9 - 2 % 3 5 % C o r p o r a t e t a x ( 2 2 3 ) 4 9 9 1 2 2 - - 5 5 % - Profit/loss after taxation before one-off items 6 , 9 5 8 2 , 7 1 0 ( 2 6 9 ) 6 0 9 - 4 % 2 2 % Profit/loss after taxation after one-off items 6 , 7 1 0 1 , 2 4 6 ( 2 6 9 ) 6 0 9 - 4 % 4 9 % S P A N A N N U A L R E P O R T 2 0 2 3 8 4 S P A N A N N U A L R E P O R T 2 0 2 3 8 5 Nikola Dujmović 3 5 .7 7 % Marijan Pongrac 5.7 2 % Zvonimir Banek 5.5 1 % Raiffeisenbank Austria d.d. / Raiffeisen Voluntary Pension F u n d 5.1 6 % Erste & Steiermärkische Bank d.d. / PBZ CO OMF - Category B 3.3 3 % Privredna Banka Zagreb d.d. 2.5 8 % Damir Bočkal 2.3 7 % Privredna Banka Zagreb d.d. / Generali Jugovzhodna Evropa, D e l n i s k i 2.2 4 % Podravska Banka d.d. 1.8 5 % Erste & Steiermärkische Bank d.d. / PBZ CO OMF - Category A 1.3 3 % 2.3. Information for shareholders The table below shows information on the number of shares held by the Members of the Management Board and the Supervisory Board on 31 December 2023. Management Board 2.3.1. Share capital Based on the Decision of the General Assembly of the Company of 14 June 2023 , in line with the Law on the Introduction of the Euro as the Official Currency in the Republic of Croatia (Official Gazette 57/22, 88/22), the Commercial Court in Zagreb on 29 September implemented and on 30 September 2023 published the registration of the share capital adjustment in line with the Companies Act (Official Gazette 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22, 18/23). The Company's share capital was adjusted to the Euro and was increased from EUR 2,601,367.04 by the amount of EUR 1,318,632.96 to EUR 3,920,000.00 , with the increase of the individual nominal amount of common shares with the stock symbol SPAN-R-A from EUR 1.33 by EUR 0.67 to EUR 2.00 . Accordingly, the Articles of Association of the Company have been also amended. The Company has one type of common shares that do not confer the right to a fixed return. The Company has no losses in 2023 and no carried-forward losses from previous years. 2.3.2. Ownership structure and 10 largest shareholders On 31 December 2023, the largest individual share of 35.77% in the ownership structure was held by Nikola Dujmović, President of the Management Board. The structure of the 10 largest Antonija Kapović has resigned as the Member of the Mangement Board, effective on December 31st, 2 0 2 3 . Supervisory Board Name and surname P o s i t i o n Number of shares % Aron Paulić Member of the Supervisory Board 300 0.02 Barbara Gradečak Member of the Supervisory Board 98 0.01 2.3.3. Share movements and trading volume In 2023, the trading of the share started on 2 January with its price being EUR 35.80. The last day of trading on the Zagreb Stock Exchange was on 29 December 2023, when the price of the share amounted to EUR 50.00, which was a growth of 39.66%. Compared to the price of the share in the Initial Public Offering (HRK 175 / EUR 23.23), the price of the shareholders is as follows: share had increased by 1 1 5 .2 7 % . 23.09.2021 29.12.2023 Increase of SPAN share price since the Initial Public O f f e r i n g 115.27 % 23.23 € 50.00 € Name and s u r n a m e P o s i t i o n Number of s h a r e s % N i k o l a D u j m o v i ć President of the Management B o a r d 7 0 1 , 0 7 2 3 5 . 7 7 % Marijan P o n g r a c Member of the Management B o a r d 1 1 2 , 1 9 8 5 . 7 2 % D r a g a n M a r k o v i ć Member of the Management B o a r d 1 9 , 6 9 8 1 . 0 1 % A n t o n i j a K a p o v i ć * Member of the Management B o a r d 5 , 9 3 9 0 . 3 0 % Saša K r a m a r Member of the Management B o a r d 1 9 , 7 7 8 1 . 0 1 % S P A N A N N U A L R E P O R T 2 0 2 3 8 6 S P A N A N N U A L R E P O R T 2 0 2 3 8 7 The trading volume of the share in t h e o b s e r v e d p e r i o d a m o u n t e d t o EUR 30,790,402.30 . S P A N A N N U A L R E P O R T 2 0 2 3 8 8 S P A N A N N U A L R E P O R T 2 0 2 3 8 9 2.3.4. Share Buy-Back Program T h e C o m p a n y a d o p t e d t h e S h a r e B u y - B a c k P r o g r a m o n t h e meeting of the Management and the Supervisory Board of the Company that took place on 2 December 2022 . The Program is implemented with the purpose of the disposal of shares within the ESOP Program of the Company, remuneration of 2.3.6. Dividend Payment Policy At the meeting of the Management Board of the Company that took place on 25 February 2022, a Dividend Payment Policy of t h e C o m p a n y w a s a d o p t e d . T h e P o l i c y w i l l b e i m p l e m e n t e d i n line with the development plans of the Company, the capital market situation, net profit growth, revenue levels, and other the members of the Management Board, the employees of the Company and affiliated companies, potential acquisition of companies, and for any other purposes that are provided for as such and allowed under the applicable legislation of the Republic of Croatia, in line with the decision of the General A s s e m b l y o f t h e C o m p a n y o n 1 3 J u n e 2 0 2 2 . The Company plans to repurchase treasury shares on the regulated market of the Zagreb Stock Exchange, up to the maximum of 175,000 (one hundred and seventy-five thousand) shares 24 with the amount of funds allocated with the Program in the amount of HRK 87,500,000.00 (eighty-seven million five hundred thousand). The Company is not obliged at any point to purchase its own shares, acting as a purchaser depending on the market conditions. The Program started on 5 December 2022, and will end by 5 December 2024, at the latest. It depends on the market conditions and strategic decisions of the Company, and may be suspended, discontinued, or modified in any way during the Program period. This Program does not regulate the purchase of own shares through organized tender offers at the Zagreb Stock Exchange. relevant factors. When adopting the proposed decision on the payment and the amount of dividend, the Company will pay regard to ensuring successful regular operations, continuing growth on the markets where it already operates, as well as the growth on new markets. In the event the described conditions are met, the Company will pay the shareholders 20 to 50 percent of the consolidated profit in the form of dividend. The proposals of the Management Board and the Supervisory Board of the Company for the payment of dividend will reflect the stated position, but the final decision on the dividend payment, its amount and the method of i t s d i s b u r s e m e n t w i l l b e d e t e r m i n e d b y a d e c i s i o n o f t h e G e n e r a l A s s e m b l y o f t h e C o m p a n y . According to the above-mentioned, a session of the Supervisory Board of the Company took place on 28 April 2023, where the Supervisory Board, together with the Management Board, proposed to the General Assembly the adoption of the decision on the use of profits and dividend payment in the amount of HRK 10.00 / EUR 1.33 per share. The dividend was paid to the shareholders of the Company who were registered as the Company shareholders in Central Depository and Clearing Company d.d. (SKDD), on 20 June 2023 (record date). The date from which the share of the Company was traded without the right to the dividend payment was 19 June 2023 (ex date). The claim for the dividend payment became due 2.3.5. Acquisitions and disposals of In accordance with the above-mentioned Share Buy-Back Program, the Company acquired and disposed of own shares during the year. on 3 July 2023 (payment date). Dividend was paid from the Company profit made in 2022. 25 own shares On 31 December 2022, the Company held 20,029 shares, which represents 1.0219% of the share capital of the Company. After the above-mentioned acquisitions and disposals during the year, on 31 December of 2023, the Company held 15,673 shares, representing 0.7996% of the share capital. 2.3.7. Contracts with affiliated persons During 2023, Span signed three contracts with Bug d.o.o., a company whose Director is the Vice President of the Supervisory Board, Aron Paulić. One contract concerned the realization of an annual media package by which Bug will provide Span with promotional activities in its issues (bug.hr, mreza.bug.hr, magazine Bug, magazine Mreza) in the amount of EUR 21,600.00, whereas the second contract related to the coverage of an annual sponsorship package in the amount of EUR 22,800.00. Both contracts were signed for a period from 1 January to 31 December 2023. The third contract was a contract on the provision of subscription services for Microsoft services through the CSP program, which Span as a Microsoft CSP (Cloud Solution Provider) partner offered to Bug d.o.o. as the customer. The annual value of the contract was EUR 1,497.36. Prava Formula d.o.o., a company whose founder and Director is an affiliated person of the Member of the Management Board Dragan Marković, provided workshops for members of Span Management Academy and Span Learning Hub in the total amount of EUR 21,200.00. The workshops were held during 2023. 24 The price at which treasury shares are acquired must not be above 10% (ten percent), or below 10% (ten percent) of the average market price realised for those shares during the previous day of trading 25 In the business year that ended as at 31 December 2022, the Span Group made net consolidated profit in the amount of HRK 50,536,506.14, and net profit of Span d.d. was HRK 41,944.428.10 D a t e C o r p o r a t e e v e n t P u r p o s e N u m b e r of s h a r e s N u m b e r o f s h a r e s after corporate e v e n t % of share capital before corporate e v e n t % of share capital after corporate e v e n t 30 March 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 6 , 4 1 5 1 3 , 6 1 4 1 . 0 2 1 9 % 0 . 6 9 4 6 % 6 April 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 7 0 1 3 , 5 4 4 0 . 6 9 4 6 % 0 . 6 9 1 0 % 28 April 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 3 . 4 1 1 1 6 , 9 5 5 0 . 6 9 1 0 % 0 . 8 6 5 1 % 2 1 J u n e 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 4 . 6 1 5 1 2 , 3 4 0 0 . 8 6 5 1 % 0 . 6 2 9 6 % 3 July 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 2 . 9 1 1 1 5 , 2 5 1 0 . 6 2 9 6 % 0 . 7 7 8 1 % 4 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 1 0 0 1 5 , 3 5 1 0 . 7 7 8 1 % 0 . 7 8 3 2 % 8 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 4 . 4 1 9 1 9 , 7 7 0 0 . 7 8 3 2 % 1 . 0 0 8 7 % 9 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 6 0 1 9 , 8 3 0 1 . 0 0 8 7 % 1 . 0 1 1 7 % 10 August 2 0 2 3 Acquisition of own s h a r e s Share Buy-Back P r o g r a m 5 0 0 2 0 , 3 3 0 1 . 0 1 1 7 % 1 . 0 3 7 2 % 14 September 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 2 5 4 2 0 , 0 7 6 1 . 0 3 7 2 % 1 . 0 2 4 3 % 12 October 2 0 2 3 Disposal of own s h a r e s ESOP - allocation of additional s h a r e s 4 . 1 7 8 1 5 , 8 9 8 1 . 0 2 4 3 % 0 . 8 1 1 1 % 1 3 D e c e m b e r 2 0 2 3 Disposal of own s h a r e s Share Buy-Back P r o g r a m 2 2 5 1 5 , 6 7 3 0 . 8 1 1 1 % 0 . 7 9 9 6 % A s o f 3 1 D e c e m b e r 2 0 2 3 1 5 , 6 7 3 0 . 7 9 9 6 % S P A N A N N U A L R E P O R T 2 0 2 3 9 0 S P A N A N N U A L R E P O R T 2 0 2 3 9 1 Financial r i s k s Legal r i s k s Risks related t o the o p e r a t i o n • Risk of the loss of key staff a n d r i s k o f t h e l a c k o f s k i l l e d l a b o u r • Risk of exposure to cyber a t t a c k s • Maintenance of the c o n t i n u i t y o f o p e r a t i o n r i s k • Competition r i s k • R i s k r e l a t e d t o r e t a i n i n g t h e current, and finding new clients and risk of concen- tration of key customers • Supplier r i s k • Risk of the business environ- ment and political risk • Risks related to the p r o t e c t i o n o f p e r s o n a l d a t a and intellectual property • Risk of the change of r e g u l a t i o n a n d r e g u l a t o r y r i s k • F o r e i g n c u r r e n c y r i s k • I n t e r e s t r a t e r i s k • Accounts receivable r i s k • L i q u i d i t y r i s k • R i s k o f o v e r - i n d e b t e d n e s s • Risk of the susceptibility of the profitability of the G r o u p , i t s o p e r a t i n g r e s u l t s and working capital to significant fluctuations Span Group specific risks Span also signed a contract with Prava Formula d.o.o. on the provision of subscription services to Microsoft services through the CSP program, which Span as a Microsoft CSP (Cloud Solution Provider) partner provides to Prava Formula d.o.o as a customer. The annual value of the contract was EUR 1,141.20. All the above contracts and affairs had been approved by the Supervisory Board. 2.4. Risks Span has established and maintained a risk management system on the level of the Company in order to connect strategic goals and risks with the operative risks and in this way manage the operations in the best possible way. By late 2022, the Company started the implementation of the risk management system according to ISO 31000 standard. The standard contains recommendations and good practice in the area of risk management and there is no official ISO certificate for it. The Risk Management Policy 26 was defined, applying to all temporary, occasional and permanent employees of Span, depending on defined roles and responsibilities. The Policy specified competences, responsibilities and principles. The risk assessment frequency and reference to the Risk Appetite document were defined. 26 Created on 30 November 2022, and the current version is of 6 November 2 0 2 3 It is specified that Span will accomplish its business goals offering products and services while taking taking into account: • Maintenance and respect of high ethical standards of operation and sustainability (ESG) • Preservation of long-term financial profitability and business sustainability of Span • Protection of interests of customers and ensuring decent treatment by providing high quality services • Ensuring operations in full compliance with the legislation and regulatory requirements • Maintaining the internal control system in order to preserve and maintain continuity and security of operation. Furthermore, a document with the context of the influence of the main shareholders was created, as well as Risk Appetite 27 , and the Risk Management Methodology , elaborated based on the previous Information Security Management System methodology. A significant progress in risk management was achieved in 2023. Through activities of i d e n t i f i c a t i o n , t r a i n i n g a n d e d u c a t i o n , a n d t h e s y s t e m i c a p p l i c a t i o n o f c o n t r o l s , t h e C o m p a n y created an environment that encourages proactivity in facing risks. The goal was to create a transparent risk management system suitable for risk processing in every domain of the operation of Span. Based on the probability of occurrence and the potential reach of negative impacts of t h e o p e r a t i o n s , t h e f i n a n c i a l c o n d i t i o n a n d r e s u l t s o f t h e o p e r a t i o n o f t h e G r o u p , t h e f o l l o w i n g risks were identified: T h e r i s k s w e r e d i s t r i b u t e d b y c a t e g o r i e s d e p e n d i n g o n t h e i r n a t u r e , a n d t h e y c a n be mutually connected. There is a possibility of the occurrence of additional risks that could influence the operations, financial condition and results of the operations of the Group, if they were realized, but they are currently not known or they are not considered key risks at the m o m e n t . 27 On 23 March 2023, the Management Board of the Company adopted the Risk Appetite Statement , which defines appetites for operational, reputation and financial risks and the compliance risk in line with the strategic guidelines S P A N A N N U A L R E P O R T 2 0 2 3 9 2 S P A N A N N U A L R E P O R T 2 0 2 3 9 3 2.4.1. Financial risks Foreign currency risk Span Group operates on an international level and is exposed to the foreign currency risk that arises from changes in the exchange rate of foreign currencies. As of January 1st, 2023, the official currency in the Republic of Croatia is euro and the official parity is 1 EUR = 7.53450 HRK. The most significant risk is the one related to the change in the exchange rate of the US dollar (USD) and the British pound (GBP). The risk is mostly present in relation to the conversion costs; USD - Euro (EUR), Ukrainian Hryvnia (UAH) – USD and GBP – Euro (EUR). Exchange rate changes between the aforementioned currencies, as well as their relationship with the euro, may have an impact on the results operations and future cash flows of Group companies. The company has concluded an agreement on derivative financial instruments for protection against exchange rate risk. More detailed the description can be found in the audit report under note 37 - Financial instruments. Interest rate risk The Group is exposed to interest rate risk because the Company and its subsidiaries a r e d e b i t e d a t f i x e d a n d v a r i a b l e i n t e r e s t r a t e s . T h e G r o u p m a n a g e s t h e s t a t e d r i s k b y maintaining an appropriate borrowing ratio with the fixed and changing interest rate. A more detailed description can be found in the Audit report under Note 37. Financial instruments. Accounts receivable risk (credit risk) Accounts receivable risk (credit risk) is a risk of a customer’s failure to pay, i.e. default by the customer concerning the contracted liabilities, which impacts possible financial loss o f t h e C o m p a n y o r t h e G r o u p . T o r e d u c e t h e a c c o u n t s r e c e i v a b l e r i s k , t h e G r o u p a d o p t e d a policy of operation only with creditworthy customers and obtaining collaterals securing the c o l l e c t i o n . T h e e x p o s u r e o f t h e G r o u p , c r e d i t w o r t h i n e s s o f t h e c u s t o m e r s , a n d o r d e r l i n e s s in meeting the contracted obligations of customers towards the Group is continuously monitored. A more detailed description can be found in the Audit report under Note 37. Financial instruments. Liquidity risk Liquidity means the maintenance of sufficient quantities of cash and working capital and ensuring adequate financial instruments in form of credit lines. The liquidity risk itself relates to a case where the Group cannot meet its due financial liabilities on time due to the lack of its own cash, shortage of available assets on the cash market or impossibility of crediting by financial institutions. The Management Board has responsibility for the liquidity risk management, and it has set up an appropriate framework for the liquidity risk management by which it is guided in the management of the short-term, medium term, and long-term r e q u i r e m e n t s o f t h e G r o u p f o r f u n d i n g a n d l i q u i d i t y . T h e G r o u p m a n a g e s t h e l i q u i d i t y r i s k i n a manner that it maintains adequate reserves and credit lines, constantly oversees the projected a n d a c t u a l c a s h i n f l o w s a n d o u t f l o w s a n d a d j u s t s m a t u r i t y o f t h e f i n a n c i a l a s s e t s a n d f i n a n c i a l liabilities. A more detailed description can be found in the Audit report under Note 37. Financial i n s t r u m e n t s . Risk of over-indebtedness The risk of over-indebtedness is expressed in the too high level of debt that adversely affects the financial stability. The Group monitors its status of over-indebtedness and manages the risk of over-indebtedness through the indicators of the level of indebtedness. Risk of the susceptibility of the profitability of the Group, its operating results and working capital to significant fluctuations The operating results of the Group can be influenced by the fact that the operations on which the Group makes a significant part of its revenues are not contracted for the long term and thus there is no certainty that the Company will make revenues of these jobs in the long run. Customers are not obliged by volume commitment. Revenues of the Group based on license subscription are relatively stable in the short term (excluding the effects of potential foreign currency fluctuations), but in the long run, they can vary due to the pace of the IT industry and market in which the Group operates. However, low margins in relation to license subscription reduce the effects of the concerned revenues on the profitability of the Group. With a strong focus on long-term growth and investments oriented to strengthening the capacities for growth of the Group, the Group expects the profitability and the working capital to vary on quarterly and annual levels. 2.4.2. Legal risks Risks related to the protection of personal data and intellectual property Within their operations, the members of the Group process the personal data of participants (e.g. employees, clients, business partners and third persons, such as job candidates). Obligations concerning processing personal data differ depending on whether the members of the Group process them in the role of the controller or in the role of the processor. G D P R a n d t h e C r o a t i a n A c t o n t h e I m p l e m e n t a t i o n o f t h e G D P R , i.e. n a t i o n a l a n d o t h e r regulations on data protection according to the territorial application for different members of the Group, provide for regulations in accordance with which the members of the Group act in r e l a t i o n t o p e r s o n a l d a t a , a n d c o m p e t e n t b o d i e s , p r i m a r i l y C r o a t i a n P e r s o n a l D a t a P r o t e c t i o n A g e n c y ( A Z O P ) i n C r o a t i a , m o n i t o r t h e c o m p l i a n c e w i t h t h e s a i d r e g u l a t i o n s . The Group encounters different forms of intellectual property of its partners and customers through its operation. There is a risk posed by possible violations of the intellectual property rights specific for the operation of the Group, such as the use of the source code and IT products contrary to the terms and conditions from the license and the use of open source solutions contrary to restrictions set by the clients of the Group. A risk is also posed by potential and successful cyber attacks directed at personal data of clients. The very perception that a threat or violation of personal data has occurred, whether the danger is real or not, can significantly disturb the business reputation and make future operation of the Group difficult. S P A N A N N U A L R E P O R T 2 0 2 3 9 4 S P A N A N N U A L R E P O R T 2 0 2 3 9 5 Risk of change of regulations and regulatory risk Given that the Group does business in the global market, it is subject to the risk of change of tax regulations in a manner that would adversely affect profitability of the operations o f t h e G r o u p . T h i s r i s k i s a l s o r e f l e c t e d t h r o u g h p o s s i b l e c h a n g e s o f t a x r a t e s a s w e l l a s t h e s u b j e c t o f t a x a t i o n . T h e p r e s e n c e o f t h e G r o u p i n d i f f e r e n t j u r i s d i c t i o n s i m p l i e s d i f f e r e n t g l o b a l and regional economic, political, legal, regulatory and operational risks, which instills additional complexity in the operation due to diversity of the rules applied, including regulations g o v e r n i n g t h e a c c e s s t o a n d u s e o f t h e I n t e r n e t , d a t a p r i v a c y a n d I T s e c u r i t y , a l o n g w i t h l a b o r l a w a n d o t h e r i s s u e s i n e a c h j u r i s d i c t i o n w h e r e t h e G r o u p o p e r a t e s . T h e r e i s a r i s k t h a t t h e Group will not be able to detect and/or prevent a breach of regulations, i.e. that the standards of control and risk management applied by the Group will not be implemented efficiently in all affiliated companies. 2.4.3. Risks related to the operation of the Company Risk of the loss of key employees and of the lack of skilled labor The operation of the Group largely depends on retaining the founding company, the management and experts in the area of IT technologies, and the ability of the Group to continue to attract and retain new professional employees required for a successful operation. A d e m a n d f o r I T e x p e r t s h a s i n c r e a s e d , a n d t h e l a b o r m a r k e t f e a t u r e s a c o n s t a n t l a c k a n d i n c r e a s e d t u r n o v e r o f I T e x p e r t s o n a l l l e v e l s o f e x p e r t i s e . T h e r e f o r e , t h e r e i s a r i s k t h a t t h e Group will not be able to respond adequately to the demanding pace of the labor market and t i m e l y e n g a g e t h e r e q u i r e d a d d i t i o n a l e m p l o y e e s o r r e t a i n t h e e x i s t i n g o n e . T h e e x p o s u r e t o increased costs related to attempts to respond adequately to the needs for employment of skilled labor is an additional risk. To maintain the quality of IT employees it employs, the Group organizes training for advancement and obtaining professional certificates required for the performance of specific IT services, demanded by technology partners on the one hand, and customers on the other. Owing to its proactive approach and well-conceived HR initiatives, the Group mitigated this risk with exceptional success during 2023, so the reduction of the turnover rate continued, from 10.47% in 2022 to only 8.15%, with a further stable increase of the number of e m p l o y e e s . T h a t i s p r o o f t h a t t h e M a n a g e m e n t a n d H R o f t h e G r o u p sh o w e d a h i g h a b i l i t y t o attract qualified labor force and retain key personnel. Risk of exposure to cyber attacks The Group, as well as the customers of the Group, are exposed to risks of cyber attacks and security threats. In its operations with customers, the Group is obliged to maintain systemic security, provide security patches and improvements, antivirus measures of protection against a malicious code, and ensure credibility of its own employees who cooperate with the customers of the Group. IT security breaches can lead to setbacks in the provision of services and/or functioning of the system controlled by the Group and to potential endangering o f r e l i a b l e i n f o r m a t i o n . E v e r y y e a r , t h e G r o u p i n c r e a s e s i n v e s t m e n t s i n o r d e r t o b e t t e r p r o t e c t itself against risks of exposure to cyber attacks and security threats. One of the key services the Group provides to its clients are IT solutions related to cyber attacks and threats, which means that the Group has the required expertise to take the required precautions. The Group i m p l e m e n t s e x t e n s i v e s e c u r i t y t r a i n i n g m e a s u r e s a n d t r a i n i n g o f I T s e c u r i t y e x p e r t s a n d a t t h e same time continuously invests in its security capacity. Maintenance of the continuity of operation risk The total operation of the Group depends on the possibility for proper functioning of its own IT infrastructure and ability of the Group to protect it in case of unpredictable events (continuity of operation). Smooth functioning of its own IT systems is a prerequisite for regular o p e r a t i o n a n d t h e f o u n d a t i o n o f t r u s t t h e c u s t o m e r s h a v e i n t h e G r o u p ’s s e r v i c e s . B e s i d e s , technology used by the IT infrastructure is susceptible to difficulties in functioning caused by the human factor, delays in the supply of electricity, systemic errors, telecommunication problems, natural disasters, and similar events that can cause significant obstructions in r e g u l a r o p e r a t i o n o f t h e G r o u p a n d c a u s e v i o l a t i o n s o f t h e a s s u m e d c o n t r a c t u a l o b l i g a t i o n s , i f t h e G r o u p c a n n o t e l i m i n a t e t h e m w i t h i n a r e a s o n a b l e t i m e s p a n . T h e G r o u p u s e s t h e I T infrastructure of renowned global technological companies such as Microsoft Corporation, Cisco Systems, Google and others and has backups of all important data, which is not stored at one location. Furthermore, the Group also uses the IT infrastructure of third persons that it does not control, such as services of operation in Public Cloud, i.e. the operation of the Group is largely dependent on proper functioning of the infrastructure concerned and the connection with customers of the Group. Competition risk Markets in which the Group operates are highly competitive and are characterized by fast changes in technology and frequent introduction of new products and services. Future profitability of the Group significantly depends on the successful improvement of its solutions and implementation of new services, and on efficient interoperability between an i n c r e a s i n g n u m b e r o f o p e r a t i v e s y s t e m s , a p p l i c a t i o n s a n d s o f t w a r e s o l u t i o n s . T h e r e i s n o g u a r a n t e e t h a t t h e f u t u r e e f f o r t o f t h e G r o u p t o b e h a r m o n i z e d w i t h t h e c u r r e n t r e q u i r e m e n t s of the market will be successful. Any belatedness in adopting new technologies, which would result in the lack of competition, would reflect adversely on the business results of the Group. M o r e o v e r , i t i s p o s s i b l e t h a t c o m p e t i t o r c o m p a n i e s w i l l m e e t t h e r e q u i r e m e n t s f o r c h a n g e s i n the IT technologies in the future more efficiently, and in that way jeopardize the profitability of the operation of the Group. Even though the Company is among the leading companies in its industry, there is a risk that some of the current competitors could make a high financial investment and launch an attempt to take over customers or employees of the Group. Given the trends of consolidation in markets where the Group competes, some of the global competitors are also likely to try to access the market. S P A N A N N U A L R E P O R T 2 0 2 3 9 6 S P A N A N N U A L R E P O R T 2 0 2 3 9 7 Risk related to retaining the current and finding new customers and risk of concentration of key customers The operation of the Group depends on its ability to keep and expand the cooperation with the current customers through cross-selling and up-selling, and successfully attracting new customers. Growth of revenues of the Company depends on the growth of sales to the current customers through an increase of the number and types of services rendered, which makes the retaining of the existing customer base especially important. A significant category o f c u s t o m e r s o f t h e G r o u p , a s p e r t h e i r s h a r e i n t h e r e v e n u e s , i s m a d e u p o f c u s t o m e r s o f t h e M i c r o s o f t l i c e n s e s t h a t a r e b y r u l e r e n e w e d a n n u a l l y. H o w e v e r , c u s t o m e r s a r e n o t o b l i g e d t o renew their subscription after the expiry of the contracted duration of a license, therefore we cannot be certain that after the expiry, those same customers will renew the subscription for a l i c e n s e . I n a d d i t i o n , w e a r e e x p o s e d t o t h e r i s k o f t h e c o n c e n t r a t i o n o f k e y c u s t o m e r s . T h e risk is reflected in the concentration of revenue in relation to customers that belong to one business group given that a possibility cannot be ruled out that they can cease to use the services of the Group for any reason, or to continue to use them to a lower extent. Supplier risk Results of the Group largely depend on a possibility of sale of Microsoft program licenses and use of Microsoft solutions of operation in Cloud, which the services the Group renders to their customers are based on to a significant extent. Therefore, global acceptance of Microsoft programs and solutions in relation to operation in Cloud is a significant factor i n t h e b u s i n e s s m o d e l o f t h e G r o u p . E v e n t h o u g h M i c r o s o f t I T s o l u t i o n s a r e w i d e l y p r e v a l e n t , there is no guarantee that they will keep the current market position in the future so the risk of a d j u s t m e n t t o f a s t c h a n g e s i n t e c h n o l o g y o n t h e c o m p e t i t i v e m a r k e t i s a p p l i c a b l e t o M i c r o s o f t itself as well. The authorization of the Group for sales of Microsoft products to customers and the business requirements of the cooperation are related to the status of the provider of services of licensing that is based on a contract that is not exclusive and should be renewed on an annual basis for each geographic area where the Group sells Microsoft products. Successful cooperation of the Group with Microsoft also depends on a successful adjustment to business requirements of cooperation specified by Microsoft, which include various incentives in form of rebates, investments, marketing assets and other payments. The incentives Microsoft offers to its Microsoft LSP (Licensing Solution Provider) partners, including the Group, depend on whether a partner meets certain indicators of success such as the revenue growth in certain areas of products or services, finding new customers, acquiring certain Microsoft competencies and specializations, etc. Business requirements for cooperation are subject to annual changes, so if the Group is not able to adapt to those changes on time, this can result in a significant reduction of the received incentives and adversely affect the profit margins of the Group. The Group, a multiyear Microsoft partner with more than 30 years of successful cooperation, enjoys business trust, but there is no guarantee that the cooperation will continue equally successfully in the future. Finally, concerning Microsoft as a supplier, along with other IT companies whose products are used by the Group, one cannot rule out that the mentioned companies will offer their products and services directly at certain markets or to certain customers. Such a change of the business model of companies that can be considered suppliers of the Group could adversely impact the operation of the Group. Risk of business environment and political risk The risk of the business environment is determined by political, economic and social c o n d i t i o n s i n a c o u n t r y , a n d i n c l u d e s p o l i t i c a l , m a c r o e c o n o m i c a n d e c o n o m i c r i s k s . T h e political risk of a country includes all the risks related to a possibility for political instability, a n d i n i t s e x t r e m e , i n c l u d e s t h e i n t e g r i t y a n d s u r v i v a l o f t h e s t a t e . R i s k s o f t h i s n a t u r e a r e n o t present significantly relating to the Group, apart from the Ukranian market where Russian aggression and the war is still going on. The decline in income in Ukraine in 2023 was fully compensated at other markets and at the end of 2023 revenues in Ukraine make up 6% of the Group's revenues. Span continues with operations in Ukraine, and the individual report on the operations of TOV Span can be found in point 2.2.8. Business overview Ukraine. S P A N A N N U A L R E P O R T 2 0 2 3 9 9 3.1. Human resource excellence Span has been the winner of the Certificate Employer Partner (CEP) for the third year in a row. This once again acknowledged Span’s excellent practice and the high quality in the area of human resource m a n a g e m e n t . In the third year of certification, our HR processes were evaluated in seven key categories, which include all parts of the employee life cycle – from attracting and employment to leaving, and possible returning. Results on Employee life cycle s t e p s Span's result in all categories was above 80%, and what makes us especially happy is a result of the maximum 100% in the part related to the inclusion and well-being of our employees. In the year in which recertification criteria were made significantly stricter, we achieved a total result of 90%, which was also higher than the average of other certified organizations by 8%. All this is only an indicator of the continuing effort we invest in attracting, recruiting, retaining and developing employees – in short, in the overall care of employees. 100 % 75 % 50 % 25 % 0 % Recruiting and employment Onboarding and development Inclusion and inspiration Transformation and growth Retention and well-being Leaving and returning HR strategic counselling 3 . P e o p l e a n d c o m m u n i t y 83 % 8 7 % 8 7 % 89 % 90 % 90 % 1 0 0 % S P A N A N N U A L R E P O R T 2 0 2 3 1 0 0 S P A N A N N U A L R E P O R T 2 0 2 3 1 0 1 3.2. Recruitment, development a n d r e t e n t i o n o f e m p l o y e e s 3.2.1. Recruiting and employing professional employees Successful cooperation and enhancing the relationship with the academic and IT community Span is committed to attracting, developing and retaining superior IT experts, and the key strategy in achieving these goals lies in the successful cooperation with the academic and IT community. Through our longstanding partnership with faculties and students' associations, we show dedication to the development of talents and support educational initiatives in the IT sector. Our cooperation includes a wide range of activities, including visiting lectures, professional workshops and practice, as well as innovative programs such as SpanIT Gym practice. Taking part in 16 visiting lectures and organizing 14 professional workshops in 2023, point to our commitment to sharing knowledge with young talents. Our dedication to sharing knowledge is also shown in our move for establishing e l e c t i v e c o u r s e s ( s o c a l l e d S k i l l s ) i n p r e s t i g i o u s f a c u l t i e s s u c h a s t h e F a c u l t y o f E l e c t r i c a l E n g i n e e r i n g a n d C o m p u t i n g i n Z a g r e b a n d t h e F a c u l t y o f O r g a n i z a t i o n a n d I n f o r m a t i c s i n Varaždin. Within these subjects, our experts participate in shaping future IT experts, providing them with relevant knowledge and skills required for fast development in the industry. Besides, it is important to emphasize that more than 50% of students who underwent our SpanIT Gym professional practice in 2023 got an opportunity for employment in Span. We are drawing attention to this because it confirms our long-term commitment to creating professional employees within the organization, thus reducing dependency on external sources. A dose of innovation is always welcome in recruitment strategy, as shown by Span’s first participation and victory in the esports competition Good Game Zagreb 2023 . During the weekend of the competition, Span attracted more than 80 new followers by means of social networks, whereas posts related to Good Game reached more than 21,000 people. Our strategy for cooperation with the academic IT community acknowledges our dedication to the development of IT talents, accomplishing a two-way communication with potential employees, which also helps us to ensure competitive advantage and sustainability in the growing world of information technology. Furthermore, with all these a c t i v i t i e s , w e a r e h e l p i n g t h e a c a d e m i c community to create educational programs adjusted to the needs of the f u t u r e . S P A N A N N U A L R E P O R T 2 0 2 3 1 0 2 S P A N A N N U A L R E P O R T 2 0 2 3 1 0 3 Key indicators for employees and operations of Span Group 4) Age structure of employees 1) Overview of employees over years 34 % 40 % 21 % 5 % 2 0 2 0 Span d.d. 2021 Span G r o u p 18 - 2 9 30 - 39 40 - 59 50 + 2022 5) Gender structure of employees of the Span Group 2023 The number of employees in Span recorded a growth of 6% compared to 2022, F (30%) M (70%) whereas the number of employees at the level of the whole Group increased by 8% 2) Share of employees by country C r o a t i a 9 0 .8 7 % U k r a i n e 4.2 8 % S l o v e n i a 3.0 0 % O t h e r 1.8 5 % 6) Average age of the Span Group 7) Average work experience 3) Overview of employees by business segment At the moment, 30% of women work in Span, which is an increase by 1% compared to the prior year. According to Eurostat data, it is also higher by 12% than the Croatian average of women employed in IT 28 . Software Asset Management and L i c e n s i n g I n f r a s t r u c t u r e Services, Cloud & Cyber Security Service Center Management and S u p p o r t Software and Business Solutions D e v e l o p m e n t M a n a g i n g a n d C o r p o r a t e F u n c t i o n s 2 8 h t t p s : / / e c .e u r o p a .e u / e u r o s t a t / s t a t i s t i c s - e x p l a i n e d / i n d e x .p h p ? t i t l e = I C T _ s p e c i a l i s t s _ i n _ e m p l o y m e n t # I C T _ s p e c i a l i s t s _ b y _ s e x 6 % 15 % 15 % 3 2 % 3 2 % 3 4 y e a r s 4 . 7 y e a r s 5 2 2 4 1 7 5 7 4 4 6 9 8 0 2 6 0 8 8 6 5 6 4 4 S P A N A N N U A L R E P O R T 2 0 2 3 1 0 4 S P A N A N N U A L R E P O R T 2 0 2 3 1 0 5 Furthermore, the proportion of employed women and men in Span is better when compared to the rest of the market because, according to data from Eurostat, 18% women on average are represented in IT organizations 29 . employees and perception of their future in the organization. In the third year of the program, we recognized 15 new talents , who will be ready to take new positions after this program. 2 0 2 0 2021 2022 2023 Establishing an internal education system One of Span’s long-term goals is certainly increasing the share of women in IT positions. Year by year, we are gradually accomplishing that goal, and one of the cooperations that particularly contribute to it is the one with Algebra University College. We continued this cooperation in 2023 as well, and owing to the Work in Tech project, 17 female attendees completed their professional practice in Span . 3.2.2. D e v e l o p m e n t o f t e c h n o l o g i c a l and leadership capacities Span Management Academy 2023 The development of managerial skills, retaining and motivating employees, promoting the culture of transfer of knowledge and excellence in leadership, and filling existing and future k e y p o s i t i o n s i n t h e o r g a n i z a t i o n i n a f a s t e r a n d b e t t e r w a y a r e s o m e o f t h e m a i n g o a l s w e wanted to achieve with the establishment of the internal management academy. Within this nine-month structured development program, the attendees acquire skills for development of competencies in line with the strategic needs and goals of Span. This year, we successfully closed the second and launched the third generation of our Span Management Academy program. In the second generation of students, who completed the program in June, out of 27 attendees, as many as 93% assumed leadership positions, whereas a positive change in satisfaction was observed with the attendees of the Span Management Academy in the segments “relation to the organization“ and “experience of perspective.“ In the said segments, the highest increase was also visible in the questions that examined the proactivity of Within the training and development of employees, in early 2023 we launched an internal education system, Span Learning Hub as a response to the needs of the management and employees for more education that would develop skills useful in their daily work. Training covers topics from business areas and the development of the so-called soft skills. Thus, during 2023, we conducted educations in security awareness, leading m e e t i n g s , t i m e m a n a g e m e n t , p r o j e c t m a n a g e m e n t , a s s e r t i v e c o m m u n i c a t i o n a n d f e e d b a c k , divisions overview, training for understanding and accepting differences, and by the end of the year, we recognized a need for another topic, mentoring in onboarding, and implemented it. The feedback of the attendees and managers is exceptionally positive so we are continuing with the same topics in 2024, while monitoring the needs of our employees and organization with the purpose of expanding the topics we cover. In the first year of the program, 75% of the total number of employees of Span attended the t r a i n i n g . Career development and advancement One of our strategic goals in 2023 was the improvement of technological and leadership capacities in Span, so we elaborated new career paths and positions. In cooperation with managers, responsibilities and roles were defined and solid foundations for the future development of our employees were laid. 2 9 h t t p s : / / e c .e u r o p a .e u / e u r o s t a t / s t a t i s t i c s - e x p l a i n e d / i n d e x .p h p ? t i t l e = I C T _ s p e c i a l i s t s _ i n _ e m p l o y m e n t # I C T _ s p e c i a l i s t s _ b y _ s e x 2 2 % 3 5 % 3 4 % 3 6 % 6 4 % 6 5 % 6 6 % 7 8 % S P A N A N N U A L R E P O R T 2 0 2 3 1 0 6 S P A N A N N U A L R E P O R T 2 0 2 3 1 0 7 B y u s i n g t h i s a p p r o a c h , w e w a n t e d t o s t r e n g t h e n t h e i n t e r n a l c o h e s i o n a n d e f f i c i e n c y of the teams, be more transparent and provide perspective and clearer guidance for the advancement of employees that would positively influence their satisfaction and retention, and reinforce the foundations for the long-term success of the organization. What we would like to especially point out is the share of women in managerial positions . Thus, 33.33% of managerial positions in Span are performed by women, which is an increase by 3.33% compared to 2022. In accordance with the provisions of the Corporate Governance Code of the Zagreb Stock Exchange, guidelines of the Croatian Financial Services Supervisory Agency and EU directives on representation of women in management boards, in 2023, we added three new female members to the Supervisory Board. One of them was selected by election as a representative of employees, whereas the others were nominated formally. The development of technological capacities certainly implies a high percentage of certified employees . In 2023, the share of certified employees of Span d.d. was 70% . Compared to 2022, another 52 people were certified and 321 more certificates were passed. Year 2021 2022 2023 Number of certified e m p l o y e e s 341 397 449 Number of acquired certificates 2349 2475 2796 E m p l o y e e s t r u c t u r e o f S p a n G r o u p a c c o r d i n g t o t h e d e g r e e o f e d u c a t i o n 47.63% 3.2.3. R e t e n t i o n o f e m p l o y e e s – engagement, remuneration and retention Well-being, health and life balance Taking into account the specifics of our job, in which life balance issues are decisive, in Span we are continuously working on creating a working experience that ensures a good work- l i f e b a l a n c e , w h i c h i s k e y i n e n s u r i n g p e r s o n a l w e l l - b e i n g a n d s a t i s f a c t i o n . For that reason, last spring, in cooperation with the Croatian Institute of Public Health, we started the process of certification and acquisition of the right to display the title “ Health- Friendly Company .“ More than 15 such initiatives were conducted within our LifeSpan program in 2023, where we explored various topics – from healthy diet to the importance of movement and physical exercise at the workplace, to workshops with parents and the importance of mental health. On Women's Day, an educational lecture for women on the importance of self- examination and prevention of breast cancer was organized, whereas in November, we conducted a similar initiative for men, focusing on their health. This year again Span took part in the largest business race, B2Run, and our most recognizable initiative, Fit Happens , saw more than 250 employees of Span Group summing up steps and taking part in raising awareness and encouraging healthy habits. High School Bachelor’s D e g r e e M a s t e r ’s D e g r e e D o c t o r a t e With the aforementioned, we showed that we really are a company that continuously invests in the health and well-being of its employees, and we acquired our official recognition and certificate in early June. Span is now officially a “Health-Friendly Company,” and new numerous initiatives are ahead of us. 2 7 . 0 5 % 2 5 . 2 0 % 0 . 1 2 % 3 3 . 3 3 % S P A N A N N U A L R E P O R T 2 0 2 3 1 0 8 S P A N A N N U A L R E P O R T 2 0 2 3 1 0 9 3.3. Improvement of internal business procedures Implementation of SAP Success Factors To be able to successfully continue to support the future development of the organization, in late 2023, we successfully introduced SAP SuccessFactors , a sophisticated cloud-based solution for HRM 30 . The goal of the transition to this system was to improve our existing information system of human resource management and adjust ourselves to the best practice, with a special focus on the greater centralization of data and enhanced protection of employees' personal data. In the first phase of the implementation, we focused on the Employee Central m o d u l e , o f f e r i n g a c o m p r e h e n s i v e s o l u t i o n f o r b a s i c H R f u n c t i o n s . W e p l a n t o c o n t i n u e t h i s t r a n s f o r m a t i o n b y i m p l e m e n t i n g a m o d u l e f o r m o n i t o r i n g a n d m a n a g i n g e m p l o y e e s ' performance (Performance & Goals), and creating, monitoring and managing training and development of employees (Learning Management System). The implementation of the said modules not only reflects our commitment to improving HR processes, but contributes to creating an ever more agile and effective working environment in the long run. Successful onboarding One of the key steps in onboarding optimization is the implementation of the so-called Onboarding Success tool. This tool was conceived as a questionnaire by which superiors evaluate four key areas of employment of new employees, encompassing orientation a n d e d u c a t i o n , i n t e g r a t i o n a n d c o o p e r a t i o n , d e v e l o p m e n t o f s k i l l s a n d i n d e p e n d e n c e a n d performance. The implementation of this tool enables us to systematically measure and improve the effectiveness of the process of onboarding of new employees, and leads to a faster achievement of full work performance and reduction of the time required for their integration i n t o t h e t e a m . A d d i t i o n a l l y , w e r e c o g n i z e d t h e i m p o r t a n c e o f p r e p a r i n g n e w l e a d e r s a n d m a n a g e r s a n d i m p l e m e n t e d a s p e c i f i c o n b o a r d i n g p r o g r a m f o r t h e m a s w e l l . T h e g o a l o f t h i s program is to ensure that new leaders fully understand the key aspects of their role, including processes such as employment, Performance Evaluation interviews, system of compensations and benefits and other key elements pertaining to their new function. Safe working environment The foundations for protection against discrimination and protection of dignity of our employees have been incorporated in Span's key internal documents – Rules of Procedure, the Whistleblower Protection Procedure and Code of Business Conduct. To adjust internal documents and processes with the latest amendments to the Labor Act and to improve and additionally emphasize the importance of a safe working environment, we decided to adopt a specialized Rulebook on procedures and measures for the protection of employees' dignity . One big novelty introduced with this Rulebook was the appointment of new Commissioners for the protection of employees' dignity. To ensure equal, secure and unbiased environment for the employees, we decided to entrust the role of the commissioners to external law professionals, i.e. to a third, neutral party. Our goal is to continue to promote equality, respect and understanding of employees b y m a k i n g t h e s e c h a n g e s , a n d e n s u r e a z e r o t o l e r a n c e t o a n y k i n d o f d i s c r i m i n a t i o n , harassment and abuse at the workplace. This important step clearly shows the intention of the company to continue to positively influence the society by planning the development of specialized policies that encourage diversity, inclusivity and equality of opportunities. 3.4. Encouraging positive changes – results of the organizational climate survey An employee satisfaction and organizational climate survey is a tool we use in order to gather information about the satisfaction of employees concerning their conditions, leadership, and working environment. We regularly collect this information, leading us to create a better and more comfortable working environment, better conditions and everything our employees need to be more satisfied and happier in Span. The climate survey conducted this year showed the most significant increase of satisfaction in the aspects of management, image and organizational climate. The increase of s a t i s f a c t i o n i n t h e a s p e c t s c o n c e r n i n g t h e o r g a n i z a t i o n a n d m a n a g e m e n t i s t h e c o n f i r m a t i o n of our employees’ trust in Span and people leading it. Furthermore, positive shifts compared to last year were visible concerning the issue of leaves and work-life balance. This growth made us especially happy because it shows that the effort and investment in benefits and initiatives undertaken to positively influence our employees' health and well-being really paid off. Finally, we would like to refer to the results of the survey in the area of employee proactivity . Proactivity is one of the key characteristics of success of both individuals and organizations. In this area, our survey results this year recorded one of the largest increases. Proactivity has a positive influence on innovation, efficiency and satisfaction of clients, it strengthens team work and organizational adaptability, which is crucial for our long-term success and competitiveness in the market. Retention of employees in the strategic focus Retention of expert employees and a stable turnover rate was and remained one of the key strategic HR goals in 2023. 30 Human Resourse M a n a g e m e n t S P A N A N N U A L R E P O R T 2 0 2 3 1 1 0 Despite the dynamic environment marked with significant economic, social and geopolitical changes, we have recorded the lowest turnover rate for the second year in a row, both at the level of Span ( 7.83% ), and at the level of the Group ( 8.15% ). Employee turnover rate of the Span Group 2 0 % 4. Sustainability in Span 15.84% 1 5 % 1 0 % 5 % 2018 2019 2020 2021 2022 8.15% 2023 3.5. Brand and Communications A n e w B r a n d a n d C o m m u n i c a t i o n s d e p a r t m e n t w a s e s t a b l i s h e d i n t h e f i r s t q u a r t e r o f 2023 to enable the unification of all Span’s teams dealing with communications and to create a central place that takes care of the Span brand and its development. Within the department, there are marketing communications, public relations, internal communications and digital production, which report to the Member of the Management Board responsible for Marketing and Sales concerning their plans, tasks and results. The scope of the responsibility of the department includes taking care of the Span brand and its reputation, the creation and implementation of a series of activities in the area of external and internal communications and taking care of Span’s promotional activities. A digital production team also works within the department, serving as support for all communications activities in the form of producing graphic, photograph and video materials. The department also takes care of the continuous implementation of two major projects – Span TV, internal television b r o a d c a s t o n c e a m o n t h , a n d S p a n o p t i c , a p o d c a s t i n t e n d e d f o r t h e p u b l i c , r e l e a s e d t h r o u g h YouTube channel. Given the intensive expansion of the company in the past years, during 2023 we started a project of revising Span’s brand strategy. Our goal is to determine what Span is today and define the strategic guidelines for the future. The project includes research of Span within all the target groups (employees, customers, investors), and according to the results of that research, we will define new brand values, personality, promise and brand essence. 1 4 . 8 9 % 1 3 . 0 4 % 1 1 . 9 0 % 1 0 . 4 7 % S P A N A N N U A L R E P O R T 2 0 2 3 1 1 2 S P A N A N N U A L R E P O R T 2 0 2 3 1 1 3 4.1. Corporate Social Responsibility During 2023 as well, Span tried to contribute to corporate social responsibility through numerous c o o p e r a t i o n s , p r o j e c t s a n d a c t i v i t i e s . W e c o n t i n u e d to organize now traditional voluntary blood donation in cooperation with the Croatian Institute for Transfusion Medicine , in which as many as 82 Span We also supported the campaign “ Kindle equality ,“ aimed at spreading awareness of the importance of combating gender biases, and a part of the project “Equality IN – Stereotypes OUT,“ intended to contribute to equality among male and employees took part. For the first time, we organized a voluntary blood sampling action for blood typing and informing the donors in cooperation with Ana Rukavina Foundation . During 2023, our employees held three donor actions, two traditional ones for the needs of the Mali Zmaj association and one for the needs of the Pediatric Clinic KBC Zagreb . With all the above, in 2023, we supported as many as 37 different civil society organizations, initiatives and projects through Span's socially responsible program focused on children and youth, STEM areas, sports without institutional and organized funding , and green initiatives . In addition to taking care of gender equality and equal opportunities, we continued to support the Softball Club Span , which achieved enviable results in 2023. The club has been accomplishing good results since its establishment, it is an active member of the Zagreb and Croatian softball association a n d i s c o n s i s t e n t l y a t t h e t o p o f t h e d o m e s t i c and European softball scene. This year, they triumphed at the Croatian Championship, Croatian Cup and the Zagreb Championship. female students. Aware of the importance of i n t e g r a t i n g c r i t e r i a f o r s u s t a i n a b i l i t y i n t o operations, and additionally encouraged by new directives and regulations on reporting, in 2023, we drafted the first Sustainability Strategy . With this, w e l a i d t h e f o u n d a t i o n s f o r t h e f u t u r e assessment of risks arising from the 4.2. Sustainability Report for 2022 When we started working on our first Sustainability Report last year, numerous perspectives of the world in which we operate today opened to us. Those were not only challenges and risks global trends pose to us, but also opportunities to be more responsible in our work, a n d t o d e v e l o p o u r o p e r a t i o n u s i n g j u s t t h e o p p o r t u n i t i e s this challenging world is offering us. issues of sustainability and adaptation of b u s i n e s s p r o c e s s e s , t a k i n g i n t o a c c o u n t the environmental and social processes. During 2023, we continued with the education initiative ESGym , used to introduce sustainability topics to Span’s employees through various formats. This time, we i n t r o d u c e d b a s i c s u s t a i n a b i l i t y topics and notions, their differences and importance for the future of operation and the company as a whole through a series of short videos. Our Sustainability Report for 2022 , entitled “Securing sustainability: Protecting our digital and environmental future,“ contains the assessment of the influence of the organization on the economy, society and the environment. Along with internal assessments, the results of the research implemented among 270 relevant stakeholders were also the basis for this report. Accordingly, topics and influences we report about were defined. Following the idea that influences arising from the fundamental operation are most significant, influences in the area of cyber security, privacy and data protection, provision of reliable solutions for customers, and creating relations of trust with customers are the most important ones for Span. In the area of cyber security, we undertook a series of activities in order to deliver quality solutions for defense against cyber threats and raise the awareness about this topic in the public. Therefore, 2022 was marked with the establishment of Span Cyber Security Center and development of advanced solutions for customers in this segment. S E C U R I N G S U S T A I N A B I L I T Y : PROTECTING OUR DIGITAL AND ENVIRONMENTAL FUTURE 2 0 2 2 S u s t a i n a b i l i t y R e p o r t S P A N A N N U A L R E P O R T 2 0 2 3 1 1 4 S P A N A N N U A L R E P O R T 2 0 2 3 1 1 5 Areas of positive influence on employees, providing opportunities for advancement and cherishing the culture of respect and diversity turned out to be exceptionally important. Moreover, we report about responsibility in our own operations, emphasizing the issues of risk m a n a g e m e n t , e t h i c a l o p e r a t i o n , f i n a n c i a l s u s t a i n a b i l i t y , r e s p o n s i b i l i t y i n w o r k w i t h s u p p l i e r s , t a k i n g c a r e o f o u r o w n e n v i r o n m e n t a l f o o t p r i n t , a n d s o c i a l e n g a g e m e n t . W e p l a c e g r e a t f o c u s on gender balance as well. In that segment, one of the goals is increasing the share of women in IT positions. in the corporate volunteering programs feel comfortable, that their rights are respected and their health and security are protected. We also took part in the 6th National Conference on Employee Volunteering organized by the Volunteers' Center Zagreb under the title 4.3. C o r p o r a t e volunteering in Span Span has taken numerous steps in the past several y e a r s s o t h a t w e c a n e l e v a t e o u r c o r p o r a t e v o l u n t e e r i n g on an even more advanced, effective and organized level. The steps we made include the development and i m p l e m e n t a t i o n o f t w o t y p e s o f c o r p o r a t e v o l u n t e e r i n g – volunteering based on skills and volunteering actions. Two cooperations we had with the Hrabri telefon association in 2022 a n d N i s m o s a m e a s s o c i a t i o n i n 2 0 2 3 , in the form of volunteering based on s k i l l s , l a i d t h e f o u n d a t i o n s f o r a l l f u t u r e projects and cooperation of that kind. Using our expertise, know-how and technology at our disposal, we improve the work of associations and contribute t o t h e d e v e l o p m e n t o f t h e c i v i l s o c i e t y i n C r o a t i a . “Contribution to the community through socially responsible business.” T h e c o n f e r e n c e a l s o p r e s e n t e d a n i n i t i a t i v e t o s i g n t h e C h a r t e r o f E m p l o y e e V o l u n t e e r i n g , w h i c h a p p l i e s t o a l l p r i v a t e a n d p u b l i c o r g a n i z a t i o n s a n d i s i n t e n d e d t o encourage the introduction of a more systematic approach to volunteering by defining volunteering rules, creating a suitable environment for volunteering, and adopting volunteering s t a n d a r d s . S p a n w a s a l s o o n e o f t h e s i g n a t o r i e s o f t h e C h a r t e r i n 2 0 2 3 . Together with these two projects, we also realized two volunteering actions; in cooperation with the Project O2 in March, we engaged in afforestation, and in December, in cooperation with the Volunteers' Center Zagreb and the Medveščak Home for the Elderly, we arranged the joint areas of the home. As many as 67 Span employees participated in 632 voluntary hours of voluntary activities. As our voluntary initiatives began to grow in number, the need arose to make them more official. Therefore, in October, we adopted the official Policy on Corporate Volunteering in Span . This Policy now more clearly defines what corporate volunteering is and what i t e n t a i l s , s o t h a t a l l e m p l o y e e s i n v o l v e d For the end of the year, the recognition for all our effort and investment in the development of corporate volunteering came in the form of the Volunteering Oscar in the organization of the Volunteers' Center Zagreb, which Span won in the category of companies. This Volunteering Oscar is sort of a crown for our endeavors, an affirmation that we are moving in the right direction and a n e w encouragement to continue returning to the community in an even more ambitious and organized manner through numerous similar actions. S P A N A N N U A L R E P O R T 2 0 2 3 1 1 6 S P A N A N N U A L R E P O R T 2 0 2 3 1 1 7 4.4. Memberships in UN Global Compact and HRPSOR In 2023, Span became a part of the UN Global Compact , the world's largest initiative for sustainable development and corporate sustainability, and a member of the Croatian Business Council for Sustainable Development 4.5. RTL helps children Span’s cooperation with the charity association " RTL helps children " (RTL pomaže djeci) has now developed into a long- standing tradition. So, in 2023, we implemented two projects t o g e t h e r . The first project included Ludbreško sunce , an ( HR PSOR ). The inclusion of Span in the initiatives and organizations that actively promote and encourage the business sector towards accomplishing the goals of the sustainable development and achieving corporate sustainability is essential because it gives us an opportunity to contribute as a company to raising the awareness about sustainable development and encourages us to continue making improvements in this regard. The inclusion in the membership of the Croatian Business Council for Sustainable Development opened the opportunity for us to take part in the training program “ Workplace Inclusion Champion “ (WIC), held from March to September for representatives of Croatian companies. Four female employees of Span participated in the educational program, which was co-created with organizations in Slovenia and Romania with the support of the European Commission. The goal of the program is enhancing companies in the area of inclusion, equality and diversity. Policy on Diversity and Inclusion In addition to acquiring new knowledge and raising the capacity of Span in topics r e l a t e d t o i n c l u s i o n , e q u a l i t y a n d d i v e r s i t y , t h e a f o r e m e n t i o n e d W I C p r o g r a m e n a b l e d u s t o draft the Policy on Diversity and Inclusion under the mentorship of Darija Mateljak, a partner and Director in the consultancy company Hauska & Partner. For the purpose of drafting the Policy, we launched the SpanVoices program dedicated to the topics of equality, diversity and inclusion, or simply said – what it means to be yourself in Span! In order to conduct an analysis o f t h e e x i s t i n g s i t u a t i o n a n d n e e d s , w e c a r r i e d o u t t h e S p a n S p e a k s O u t s u r v e y i n o r d e r t o learn what Span employees think about it. All obtained data was used as the foundation for the creation of the Policy on Diversity and Inclusion and the related Action Plan. association for individuals with mental challenges, which has been active for almost thirty years. One of its main goals is to improve the quality of life for people with developmental difficulties while also providing assistance to their families. What initially began as informal socializing back in 1996 when the association was f o u n d e d h a s e v o l v e d i n t o a d a y c e n t e r w h e r e t h e y n o w s e r v e t h r e e m e a l s a d a y t o o v e r a hundred users. Thanks to the support of “RTL pomaže djeci" and Span, the association has a c q u i r e d a n e w p r o f e s s i o n a l k i t c h e n f o r i t s d a y c e n t e r . I n a d d i t i o n t o p r o v i d i n g d a i l y a n d h a l f - day stay, the association regularly operates through an active office of a speech therapist and a defectologist, a small school for children with developmental difficulties, supported living arrangements, and numerous other activities. The second project was directed at the Day Rehabilitation Center Veruda – Pula , which has been doing big things for little patients with motor disabilities since 2000. As part of the “Window to the World” project, we ensured the Quha ZONO instrument, which scans changes i n t h e p o s i t i o n o f t h e h e a d o r t h e a i r f l o w f r o m t h e n o s t r i l s o r m o u t h a n d t u r n s t h e m i n t o p r e c i s e commands on the screen of the communicator, serving to control the environment and the computer / communicator. The project aims to provide support to children with severe motor difficulties so that they can communicate, read, write and control the environment with the help of the instrument. A large number of little beneficiaries of the Center Veruda – Pula are aware of their surroundings and understand everything, but they cannot adequately express themselves, and this is where assistive technology comes into play. As many as 60 u s e r s o f t h e C e n t e r w i l l b e n e f i t directly from this device. S P A N A N N U A L R E P O R T 2 0 2 3 1 1 8 4.6. Green Span Calculation of the carbon footprint of Span d.d., continuation of cooperation with Humana Nova We performed our activities in the area of sustainable operations through the calculation of emissions of greenhouse gasses for Span d.d. and the related offices in Zagreb, Osijek and Rijeka. The calculation was made for Scope 1 and Scope 2, and a related strategy and action plan for reducing Span’s emissions were created. Furthermore, we continued our cooperation with the Humana Nova Social Cooperative, with which we carry out the collection of textile waste during the whole year. 5. Processes and technology S P A N A N N U A L R E P O R T 2 0 2 3 1 2 0 S P A N A N N U A L R E P O R T 2 0 2 3 1 2 1 2 0 0 5 2 0 1 0 2 0 1 5 2020 ‘21 ‘22 ‘ 2 3 Q u a l i t y ISO 9 0 0 1 ISO 9 0 0 1 ISO 9 0 0 1 ISO 9 0 0 1 ISO 9 0 0 1 Information s e c u r i t y I S O 2 7 0 0 1 I S O 2 7 0 0 1 I S O 2 7 0 0 1 I S O 2 7 0 0 1 IT services m a n a g e m e n t ISO 2 0 0 0 0 ISO 2 0 0 0 0 ISO 2 0 0 0 0 ISO 2 0 0 0 0 E n v i r o n m e n t ISO 1 4 0 0 1 E n e r g y ISO 5 0 0 0 1 R i s k ISO 3 1 0 0 0 C o m p l i a n c e ISO 3 7 0 0 1 5.1. ISO standards We started 2023 with six certified management systems compliant with the ISO standards: • ISO 9001 – Quality management system (QMS) • ISO/IEC 27001 – Information security management system (ISMS) • ISO/IEC 20000 – Service management system (SMS) • ISO 14001 – Environmental management system (EMS) • ISO 50001 – Energy management system (EnMS) • ISO 37001 – Anti-bribery management system (ABMS) In January 2023, we successfully completed a control audit for our anti-bribery management system according to ISO 37001. At the beginning of March, we successfully performed external re-certification audits for ISO 9001 (Quality management system) and ISO/ IEC 27001 (Information security management system). In March, we additionally certified the new business continuity system according to ISO 22301 , which is a very important progress in supporting our key business processes. We continue to maintain the existing management systems and implement new ones. We finished the year with seven certificates : ISO 9001 (Quality management): Maintaining the strong system of quality management since 2006, we continue to support and improve our dedication to providing exceptional products/services, ensuring satisfaction of customers and continuous i m p r o v e m e n t . ISO 27001 (Information security management): Since 2011, our practice of information security management has developed, complying with the latest standards so that we can s e c u r e i n t e g r i t y , r e l i a b i l i t y a n d a v a i l a b i l i t y o f d a t a . T h i s e x p e r i e n c e w i l l h e l p u s a d j u s t t o t h e NIS2 initiative in the following years, and we are developing competencies for assisting our customers in the adjustment. ISO 20000 (Service management system): With the certificate obtained in 2012, our service management practice has consistently met the international standards, ensuring the effective delivery of services. ISO 14001 (Environmental management) and ISO 50001 (Energy management): Obtained in 2021, these certifications emphasize our commitment to environmentally sustainable practice and energy effectiveness, contributing to a greener future. ISO 37001 (Anti-bribery management): Implemented in 2022, this certification strengthens our dedication to operations in an ethical and transparent manner, preventing bribery and corruption. In line with ISO 14001 and ISO 50001, this system significantly helps us comply with the ESG initiative, one of a few strong regulatory guidelines in the next few years. ISO 22301 (Business continuity management): We successfully implemented and certified this system in early 2023. Our business continuity management system ensures resilience to disruptions, preserving key business processes and trust of the customers. Implementation of ISO 31000 Recommendations: During 2022 and 2023, Span d.d. implemented ISO 31000 Recommendations, improving our risk management practice. This integration ensures a proactive approach to recognition, assessment and mitigation of risks in all business functions. By adopting these systems, we have enabled: • Risk and opportunity management. • Improving the quality of our products/services. • Better organization of internal processes. • Adequate protection of information in accordance with their sensitivity. • Managing the environmental impact and energy efficiency. • Compliance with best global practice. • Independent proof of the strategic focus on the structure of our processes. As we are always strongly committed to excellence, the proactive maintenance of o u r m a n a g e m e n t s y s t e m s r e f l e c t s o u r o r i e n t a t i o n t o c o n t i n u o u s i m p r o v e m e n t , e n s u r i n g t h e highest standards of quality, security, responsibility to the environment and total operational r e s i l i e n c e . Business C o n t i n u i t y ISO 2 2 3 0 1 S P A N A N N U A L R E P O R T 2 0 2 3 1 2 2 S P A N A N N U A L R E P O R T 2 0 2 3 1 2 3 5.2. Partnerships In 2023, Span realized all six Solutions Partner for Microsoft Cloud platform statuses , which prove our deep professional ability in the delivery of technology scenarios for all Microsoft cloud areas. S p a n i s s p e c i f i c a l l y d i s t i n g u i s h e d a s a M i c r o s o f t S e c u r i t y S o l u t i o n P a r t n e r , w i t h a l l four advanced specializations in the area of security in cloud. Microsoft recognized Span as a valuable partner in the market of Central and East Europe and granted it two awards Partner of the Year for 2023, for Croatia and Ukraine . This was the first time Span received two awards in one year. Microsoft award Partner of the Year is bestowed to companies that successfully conceived, developed and implemented solutions using Microsoft technologies. The award is granted in several categories, and the winners are selected among more than 4,200 nominated companies, from more than 100 countries worldwide. Span was awarded for the provision of superior services and solutions in Croatia and Ukraine. We continually develop our 5.3. C o d e of Business C o n d u c t Span is one of the leading Croatian IT companies. We have devoted 30 years to software development, and service and system integration. Our work is guided by the principles and standards mentioned in the Code of Business Conduct , which we adhere to in all our interactions with customers, partners, employees and the wider public. We have achieved our position on the market based competencies in the MPN (Microsoft Partner Network) ecosystem of independent suppliers of software and service providers, integrating our solutions and portfolio of services with Microsoft, while focusing on artificial intelligence and cyber security technologies. TD Synnex awarded Span with recognition for excellent sales results in the security sector within the “Solution Days 2023 – Highway to cloud” event. The recognition is a proof of Span's focus on solutions in the cyber security segment. In London, at the conference of Saviynt partners and customers, Span was awarded f o r t h e “F a s t e s t t r a n s a c t i o n i n 2 0 2 2 ”. T h i s a w a r d i s p r o o f t h a t S p a n i s o r i e n t e d t o p r o v i d i n g assistance to customers in implementing solutions in the area of identity management with Saviynt tools. Our comprehensive list of competencies is a result of continuous improvement, research and practical experience. o n s o l i d p r o f e s s i o n a l a n d e t h i c a l f o u n d a t i o n s , a n d a r e r e s o l v e d t o m a k e a l l f u t u r e b u s i n e s s decisions in accordance with all legal requirements and moral principles. We, therefore, expect all our employees and partners to commit to honest business practices and behavior in accordance with our core values. We are growing according to all business parameters year after year. Span Group is currently employing over 850 people and constantly increasing the number of its employees. M o r e t h a n 4 0 0 o f o u r e m p l o y e e s h a v e b e e n a w a r d e d o n e o r m o r e p r o f e s s i o n a l c e r t i f i c a t e s . T h u s , t h e C o d e o f B u s i n e s s C o n d u c t i s a n e x p r e s s i o n o f S p a n v a l u e s t h a t r e f l e c t s t h e principles and policies that govern our business, and provides concrete guidelines for employee and partner behavior. We believe that strong corporate governance requires transparency and trust of all s t a k e h o l d e r s . T h e r e f o r e , o u r g o v e r n a n c e p r i n c i p l e s , i n a d d i t i o n t o c o m p l i a n c e w i t h r u l e s a n d regulations, emphasize the need for socially responsible business conduct and the application o f o u r c o r e v a l u e s i n r e l a t i o n s h i p s w i t h p a r t n e r s , e m p l o y e e s , a n d c u s t o m e r s . Our Code applies to Span and all its affiliated companies (Span Group), all our for six solution areas status for EU/EFTA/Ukraine/ Azerbaijan + BS and CIS Google Cloud Partner Select Consulting Partner Certified Microsoft Cloud Services Provider employees and business partners, including users, suppliers, consultants, external associates, shareholders and other business partners appropriately associated with Span in accordance with local legal requirements and regulations. Certified Gold P a r t n e r D y n a t r a c e M a s t e r P a r t n e r S P A N A N N U A L R E P O R T 2 0 2 3 1 2 4 6. Statements on responsibility for compiling the report for the observed period The financial statements of Span d.d. and Span Group for the period that ended on 31 December 2023, are shown to be fair and truthful in accordance with International Financial Reporting Standards which have been consistently applied in relation to the previous years. All materially significant transactions were accordingly recorded in the accounting records, which were the basis of the financial statements. They provide a true and complete overview of the assets and liabilities, the financial position and operations of Span d.d. and Span Group. Nikola Dujmović President of the Management Board, Span d.d. 7. Audited Financial Statements of Span Group and Span d.d.