Annual Report (ESEF) • Apr 24, 2025
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All rights reserved. Texts, parts of texts and graphic images are protected by copyrights. Use of this data is possible only with prior consent. Publisher AD Plastik d.d. Matoševa 8, 21210 Solin Publisher’s Representative Josip Divić Management Board Member for Finance, Controlling, Accounting and IT Editor Lori Vitaljić Graphic design Gingola d.o.o. Edition 10 IMPRESSUM This document does not represent the official publication format of the Annual Report. All information contained herein refers to December 31, 2024. www.adplastik.hr 3 CONTENT A Introduction 5 B Management Report 15 Sustainability Report 54 C Index and Opinion 166 D Auditor’s Report and Financial Statements 181 www.adplastik.hr 4 INTRODUCTION A brief overview 6 Letter from the President of the Management Board 8 About AD Plastik Group 10 Vision, Mission, Key values 11 Production sites 12 Corporate matrix 13 Company history 14 A www.adplastik.hr 5 5048 OPERATING REVENUE (EUR million) 152.44 EBITDA (EUR million) 13.41 EBITDA MARGIN 8.80% NET PROFIT (EUR million) 2.13 EMPLOYEES AS OF DECEMBER 31, 2024 1,802 PRODUCTION SITES 8 COUNTRIES 5 2024 2023 2024 2023 +17.9% +86.0% NEW DEALS (EUR million) 54.8 A BRIEF OVERVIEW 5028 www.adplastik.hr 6 5028 87.63 ESG SCORE 2023. 89% B 73 464 POINTS ALL EUROPEAN PRODUCTION SITES SHARE OF WOMEN 2024 vs 2023 TOTAL EMPLOYEES 50.1% MANAGEMENT 39.3% HIGHEST LEVEL OF MANAGEMENT 40.0% ELECTRICITY -2.1% WATER CONSUMPTION -7.3% WATER DISCHARGE -7.4% RECYCLED MATERIAL SHARE +46.0% WASTE RECYCLING +101.5% INJURY RATE -22.3% 50505050 61613939 60604040 ∆ C www.adplastik.hr 7 LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD We have had a year of steady growth, strategic breakthroughs and clear evi- dence of resilience in a challenging busi- ness environment. We have successfully consolidated our position as a reliable and responsible partner in the global automo- tive supply chain and achieved strong op- erational and financial progress. It was a year of serial activation of a large number of projects and a milestone in terms of financial stabilization and mar- ket positioning. The Group’s operating revenue increased by 17.9 percent and amounted to EUR 152.44 million. EBIT- DA more than doubled and reached EUR 13.41 million, while we ended the year with a net profit of EUR 2.13 million. All key financial indicators recorded growth, and more importantly – confirmed the correctness of strategic decisions and op- erational discipline. During the reporting period, new deals worth EUR 54.8 million were sealed, and the beginning of 2025 was marked by the conclusion of a significant contract worth EUR 126.8 million with a new customer in the European market. In addition, the total value of newly contracted projects in the last two years exceeds EUR 370 million, which confirms the continuity of growth and the long-term sustainability of our business model. In the world of the automotive indus- try, where change is the only constant, technological developments, regulatory frameworks and changes in market pref- erences are redefining mobility. Our timely recognition of trends and investments in value-added projects ensure our compet- itive advantage. Our teams successfully responded to complex customer demands in the reporting year, while developing products that combine functionality, aes- thetics and sustainability. Expectations about the rapid growth of electric vehicle sales have proven to be overoptimistic, and the pronounced de- cline in demand in key European mar- kets is a clear indicator of changing pur- chasing habits. One thing is certain - the automotive industry in Europe is facing a period of adjustment, in which innova- tions, market demands and new business models will shape its future. This dynamic www.adplastik.hr 8 value. By strengthening the culture of inclusiveness, diversity and profes- sional development, we are building an organization ready for the challenges of tomorrow. Looking ahead, we are focused on the commercialization of existing projects and a stronger positioning in the seg- ment of innovative, high-quality com- ponents for electric and hybrid vehicles. We are convinced that this dynamic will have a positive effect on our financial results and enable further strengthen- ing of our position on the market. I thank you for your trust, support and contribution to our success. We con- tinue to build the future together - re- sponsibly, courageously and with a clear vision. Marinko Došen President of the Management Board Our focus on decarbonization, circular economy and responsible human re- source management reflects our com- mitment to sustainability, making us a leader in positive changes in the auto- motive industry. Through our business, we prove that responsible business and business success go hand in hand because the future belongs to those who build it with vision and integrity. The AD Plastik Group is not just a busi- ness system – it is a network of peo- ple, ideas and knowledge that together create the company’s recognition and success. Although people are an im- portant part of the sustainability strat- egy, their role goes far beyond report- ing frameworks. They are the basis of development and the key to every de- cision - from product design to the im- plementation of the most advanced technologies. Through their expertise, experience and ability to adapt to dy- namic market changes, our employees shape the future of the company. This is precisely why investing in employ- ees is not just an obligation, but a stra- tegic decision that brings long-term brings challenges, but also opportuni- ties that AD Plastik Group recognizes in a timely manner. We are ready for further growth, strengthening our competitive posi- tion and creating sustainable value for all stakeholders. We are focused on strengthening operational efficiency, optimizing costs, more efficient capac- ity utilization and reducing debt, which will allow us to have even greater flexi- bility in future operations. Sustainability is an integral part of our strategy, and the ESG result of the AD Plastik Group confirms our commit- ment to integrating environmental, so- cial and governance principles into all aspects of our business. We are con- tinuously reducing our impact on the environment – water and electricity consumption has been reduced, waste recycling has doubled, and the share of recycled materials has increased significantly. At the same time, the re- duction in injuries at work testifies to our commitment to health, safety and responsibility. www.adplastik.hr 9 ABOUT AD PLASTIK GROUP For more than 35 years, it has been shaping the future of mobility, holding a leading position in the development and production of interior and exterior automotive components in Croatia and ranking among the most prominent in Eastern Europe. Its strong commitment to technological innovation and uncompromis- ing quality standards makes it a reliable partner to the world’s leading automobile manufacturers—from the vision of the first sketches to top-quality products on the roads. Every year, more than ten million precisely manufactured parts leave AD Plastik Group’s production facilities, making their way into vehicles in over twenty countries across five continents. Business operations are focused on developing solutions that support safer and more ad- aptable mobility while also setting standards for a sustainable future. By applying innovative materials, the latest technologies, digitaliza- tion, and robotics, challenges and demands of the increasingly dy- namic automotive industry are successfully met. The greatest strength of the company lies in the people— their knowledge, experience, and passion are embedded in every product, making them a symbol of excellence and dedication. Quality, reliability, and competitiveness are not just the values, they are the foundation of suc- cess in the demanding automotive market. Dedicated to creating innovative solutions of the highest standards of quality and safety, with a vision for sustain- able and secure mobility, AD Plastik Group continues to lead the transformation of the automotive industry, lay- ing the foundation for a better and safer world. 5 CONTINENTS 20 COUNTRIES 10 MILLION PARTS www.adplastik.hr 10 TOGETHERNESS Close cooperation and sup- port at all levels are based on trust and taking respon- sibility. By sharing ideas and knowledge, respecting mul- ticulturalism, diversity and equality a better environ- ment is created every day. INTEGRITY To be an example that oth- ers will gladly follow, doing what is being promoted and informing about what is be- ing done. Relationship with all stakeholders is based on trust, open and honest com- munication. RESPECT Long-term business and partnership relations with all stakeholders are based on fairness and respect. Recognisability for excellence in the development and production of automotive components and business relationships based on trust and partnership. Creating added value in the automotive market, taking care of safe and sustainable mobility, the satis- faction of all stakeholders and the preservation of the planet. Taking care about the sustainable future of the company, employees, community and the planet. Dedication to the development and delivery of the highest qual- ity automotive components, thereby contributing to the pos- itive changes in safe, custom- ized and sustainable mobility. Creating innovative solutions by understanding the needs of its customers and end users and operating in harmony with its environment. EXCELLENCE The highest standards of quality, safety and sustainability are the premise for the vision realiza- tion. Through constant training and the possibility of personal and business development as well as growth of each individ- ual, the aim is to strive for the best way of working. Constant exploring of areas of growth and innovation is the best response to challenges, and the passion invested in products makes them better and better. RESPONSIBILITY Responsibility for the quali- ty and safety of our products, for which dedication and thor- oughness are basic standards. Showing our dedication by committing to the success- ful realization of results and creation of the added value, through a positive impact on society. VISION MISSION KEY VALUES VISION, MISSION, KEY VALUES www.adplastik.hr 11 AD Plastik d.d. Matoševa 8, Solin, Croatia (505) Euro Auto Plastic Systems S.R.L. Mioveni, Romania AD Plastik, Zagreb I, Croatia (514) AD Plastik, Zagreb II, Croatia (104) AD Plastik Tisza Kft. Tiszaújváros, Hungary (278) AD Plastik d.o.o. Novo Mesto, Slovenia (2) ADP d.o.o. Mladenovac, Republic of Serbia (172) ZAO AD Plastik Kaluga * Kaluga, Russian Federation (17) * AD Plastik Kaluga has stopped production operations AO AD Plastik Togliatti Vintai, Samara, Russian Federation (210) PRODUCTION SITES AD PLASTIK GROUP (1,802) PRODUCTION HEADQUARTERS AFFILIATED COMPANY ■ Figures in parentheses beside each site represent the number of employees at that specific site. ■ In accordance with ESRS, the company does not provide data related to ZAO AD Plastik Kaluga and AD Plastik d.o.o. in the Sustainability Report. www.adplastik.hr 12 AD Plastik d.d. Solin Croatia 100% AO AD Plastik Togliatti Vintai, Samara Russian Federation 100% ZAO AD Plastik Kaluga Kaluga Russian Federation 100% ADP d.o.o. Mladenovac, Republic of Serbia 100% AD Plastik Tisza Kft. Tiszaújváros, Hungary 100% AD Plastik d.o.o. Novo Mesto Slovenia CORPORATE MATRIX 50% Euro Auto Plastic Systems S.R.L. Mioveni Romania www.adplastik.hr 13 1992 1995 2012 2017 1952 1994 2002 2014 2018 continued operations under the name Autodijelovi production sites in Zagreb and Vintai, Russia production sites in Mladenovac, Serbia and Kaluga, Russia new robotized interior painting line in Zagreb establishment of Jugoplastika an original predecessor official name change into AD Plastik production site in Romania - JV company Euro APS new robotized painting line in Zagreb production site in Tiszaújváros, Hungary COMPANY HISTORY www.adplastik.hr 14 MANAGEMENT REPORT About the Integrated Report 16 Ownership structure 18 Overview of markets and customers 20 Technologies 21 Key products 22 Quality management 24 Business activities 26 Risks and opportunities 34 Financial indicators 43 Sustainability report 54 Strategic Sustainability Goals 56 Principles of the UN Global Compact 58 Stakeholders 59 Corporate governance 62 Environmental Information 88 Information on Social Matters 128 Business Conduct 155 B www.adplastik.hr 15 ABOUT THE INTEGRATED REPORT This is the eighth Integrated Annual Report of AD Plastik Group, which contains all important information about the business operations for the period from January 1 to December 31, 2024, or as of December 31, 2024. All financial and non-financial indicators are presented, with the business and calendar years aligned. The Integrated Report includes reports on business oper- ations, a sustainability report, and annual financial report, providing a detailed insight into all aspects of sustainability, business operations, and management. Sustainable business practices have been systematically monitored and reported since 2012, and this is the first sustainability report aligned with ESRS, including the principle of double materiality, partial coverage of the value chain, and compliance with the regula- tory requirements of EU Directive 2013/34/EU and Delegated Regulation 2023/2772. The Integrated Annual Report is published on the company’s website, the Zagreb Stock Exchange, and the UN Global Com- pact, and is also available upon request in electronic or print- ed form. It is reported on an annual cycle, and the Group’s In- tegrated Annual Report for 2023 was published on April 24, 2024, while the publication of this report is planned for April 24, 2025, as announced in the Events Calendar published at the end of 2024 on the company’s website and the Zagreb Stock Exchange. www.adplastik.hr 16 Sustainability report and Scope of Consolidation The Sustainability Report is prepared on a consolidated ba- sis and follows the scope of consolidation of the financial statements, with the exception of two plants. The plant in Kaluga is not included as it ceased production operations in 2022 and currently employs 17 people in maintenance roles, with no material impact on operations or sustainability. The company in Slovenia only includes an administrative office with two employees, without production activities or material impact on sustainability factors. The financial indicators of these plants are included in the Group’s financial statements but are excluded from the sustainability report. EURO Auto Plastic Systems s.r.l. is considered an affiliated company, as managerial control is held by the partner Faure- cia Automotive Holdings s.a.s., and is therefore not included in the Sustainability Report. The Sustainability Report includes the Group’s own opera- tions and part of the key segments of the value chain. The re- port is prepared in accordance with the ESRS and is based on the principle of double materiality, covering material impacts, risks, and opportunities identified in the assessment process. Information about the value chain is partially available due to limited access to data and the complexity of their collection. Therefore, the company therefore makes use of the option for exemption during the first three years of reporting, in accord- ance with the transitional provisions of the ESRS. Nevertheless, the possibility of improving data collection, particularly from lower levels of the value chain, has been ex- plored, and it has been noted that some suppliers are already being assessed for sustainable practices through specialized agencies. Sustainability has undoubtedly been of significant importance within the automotive industry for a long time, and all participants in the value chain are subject to regular checks and B2B reporting, which will contribute to data avail- ability and increased transparency in the future. To ensure gradual improvement in data quality, additional de- velopment of the information collection system is planned for the upcoming reporting periods. The first steps have already been taken through the update of the annual supplier ques- tionnaire, which is aligned with the new sustainability require- ments. It is expected that over time, the scope and accuracy of the collected data will increase, making the reporting even more detailed and reliable. No indicators with a very high level of measurement uncertainty were identified in this reporting period. Estimates and assumptions were used, for example, in calculating greenhouse gas emissions (based on energy consumption and emission factors), in assessing energy savings (based on technical data of equipment), and in de- termining the share of recycled materials, but their level of uncer- tainty does not significantly affect the reliability of the information presented. Disclosure exemptions due to business confidentiality and contractual obligations The possibility of exemption of certain information considered to be business secrets and intellectual property has been utilized. This ap- plies to specific products and business relationships with custom- ers, where information about the components we produce for cer- tain car manufacturers has not been disclosed due to confidentiality agreements and protection of market competitiveness. Additionally, information regarding upcoming events and negotiations with cus- tomers has not been disclosed due to contractual obligations to pro- tect strategic business interests. Standards for the period of impact, risk, and opportunity assessments The definition of time periods according to the ESRS has been ap- plied, where the short-term period is defined as one year (reporting period), the medium-term as up to five years, and the long-term as more than five years. However, within strategic financial planning, the medium-term is currently considered to be three years, while an- ything beyond that is regarded as long-term. In the future, gradual alignment with ESRS is planned to ensure greater comparability and consistency of data in sustainability report. The option to refer to other information sources has been used to avoid data repetition and ensure clarity in reporting. Referenc- es within the report are used for specific indicators to ensure con- sistency, while external sources are applied for policies, codes, and strategic documents that are regularly updated. All data available through references are clearly marked, along with the location of the document or link. Independent Audit of the Sustainability Report The Sustainability Report is subject to an independent audit in ac- cordance with the Directive on Corporate Sustainability Reporting and the Delegated Regulation setting out European sustainability re- porting standards. The audit is conducted by the independent pro- fessional body KPMG, and their opinion can be found on page 185 of this report. www.adplastik.hr 17 33 99 30 99 19 99 13 99 99 99 Small shareholders 33.2% AO HAK 30.0% Pension funds 19.1% Management, employees and ex-employees 12.9% Other institutional investors 4.0% Treasury shares 0.8% OWNERSHIP STRUCTURE As of December 31, 2024 the company owned 35,008 shares, i.e. 0.8 percent of the share capital. www.adplastik.hr 18 30+0+11+0+5+0+2+0+2+0+2+0+1+0+1+0+1+0+1 Shareholder Number of shares Share 1. AO Holding Avtokomponenty 1,259,875 30.0% 2. Privredna banka Zagreb d.d. / Raiffeisen MPF category B 454,939 10.8% 3. Raiffeisenbank Austria d.d. / Raiffeisen voluntary pension fund 205,458 4.9% 4. Erste & Steiermarkische bank d.d. / PBZ CO MPF - category B 77,441 1.8% 5. Katija Klepo 67,633 1.6% 6. OTP banka d.d. / OTP Index fund - OIF with a public offering 63,508 1.5% 7. Privredna banka Zagreb d.d. / Raiffeisen OMF category A 43,538 1.0% 8. Ivica Tolić 40,881 1.0% 9. Josip Boban 40,000 1.0% 10. AD Plastik d.d. 35,008 0.8% 2,288,281 54.5% 10 LARGEST SHAREHOLDERS The ten largest shareholders hold 54.5 percent of the company’s shares, and compared to the previous year, the composition was maintained identically, with minor changes in the ranking. PBZ CO MPF category B reduced the number of its shares by 37,758, while OTP index fund - OIF with a public offering increased its position by 12,252 shares. AD Plastik d.d. released 3,420 shares as employee excellence awards. www.adplastik.hr 19 FORD AVTOVAZ Belgium Czech Rep. France Serbia Slovakia Slovenia Spain Sweden Great Britain Poland Romania Russia Italy Hungary Germany South Korea Taiwan VIETNAM * India EGYPT * Turkey Morocco Brazil Mexico USA * Argentina OVERVIEW OF MARKETS AND CUSTOMERS STELLANTIS RENAULT GROUPVOLKSWAGEN GROUP HELLA TOGG SUZUKI SIGNIFICANT MARKETS SIGNIFICANT CUSTOMERS * new markets compared to the previous report www.adplastik.hr 20 TECHNOLOGIES Technological advancement, digitalization, robotization, as well as research into new materials and processes, are key factors that ensure product safety and quality in the automotive indus- try, as well as within the AD Plastik Group. Continuous improve- ment of production processes, their monitoring, and optimization are an integral part of daily operations. The presence of certain technologies is adapted to the demands of the market and cus- tomers, as well as to broader technological trends in the industry. The most important technologies in the Group’s portfolio are in- jection moulding, present at all production sites, and painting, which is carried out in Zagreb. The Zagreb factory is equipped with two modernized and robotized painting lines, ensuring high quality, repeatability, and process efficiency. In the production facilities in Solin and Vintai, extrusion is also used, while blow molding technology is used in Mladenovac and Tiszaújváros, with thermoforming present only in Vintai. During the reporting period, thermoforming technology in Mladenovac was discontinued due to a strategic focus on technologies with greater market potential and customer interest. The primary fo- cus is now on injection molding as the key technology that ena- bles greater design flexibility, production efficiency, and better adaptation to the demands of the modern automotive industry. Although the primary activity of AD Plastik Group is the produc- tion of automotive components, it also offers additional servic- es to its customers that enhance the value of the final product. Among these is the assembly of automotive parts, which allows the delivery of fully assembled components ready for integra- tion into vehicles. This involves complex processes that require a high level of expertise, and often automation. Therefore, further optimization, improvements in delivery, and collaboration with logistics partners for remote destinations are among the prior- ities for future development. Advanced processing techniques, such as ultrasonic and vibra- tion welding, hot stamping, automated gluing, final laser pro- cessing, and automated product quality control, also add value to the manufacturing processes. SIGNIFICANT TECHNOLOGIES INJECTION MOULDING All sites PAINTING Zagreb www.adplastik.hr 21 KEY PRODUCTS EXTERIOR COMPONENTS SIGNIFICANT PRODUCTS (no changes compared to previous periods) ■ Front and Rear Bumpers ■ Front Grille and Air Ducts ■ Fender Protectors and Rocker Claddings ■ Spoilers ■ Rear Door Trim (tailgate) ■ License Plate Light Holders ■ Underbody Covers and Battery Covers ■ Deflectors, Cooling Fan Motor Brackets ■ Air Distribution Ducts www.adplastik.hr 22 KEY PRODUCTS INTERIOR COMPONENTS ■ Door Panels ■ Central Console ■ Instrument Panel and related parts ■ Grab Handles ■ Glass Run Channels ■ Small injection-moulded components www.adplastik.hr 23 QUALITY MANAGEMENT S U S T A I N A B I L I T Y G O A L S I N F O R M A T I O N S E C U R I T Y M A N A G E M E N T A N D Q U A L I T Y S Y S T E M S U S T A I N A B I L I T Y I M P A C T S I N T E G R A T E D Q U A L I T Y M A N A G E M E N T S Y S T E M O F A D P L A S T I K G R O U P ISO 50001 ISO 45001 ISO 14001 ISO 27001 IATF 16949 TISAX Stakeholder engagement Product and process quality is the fundamental premise of competitiveness in the automotive industry. The qual- ity management system is aligned with international- ly recognized standards, is subject to regular audits and involves continuous improvements to ensure customer satisfaction, full compliance with regulatory requirements and excellence in all aspects of business. The quality management policy clearly defines the princi- ples, responsibilities and objectives of the organization in terms of an integrated approach to quality improvement. www.adplastik.hr 24 CERTIFICATES AD Plastik Group has established a robust integrated quality management system that encompasses internationally recognized standards. AD Plastik Tisza in Hungary implemented the TISAX standard for the first time in 2024, further enhancing the information security management framework in line with industry requirements. Specific area of continuous improvement Applied standards Quality management in the automotive industry IATF 16949 (all production sites) Environmental management ISO 14001 (all production sites) Occupational health and safety management ISO 45001 (Croatia and Serbia) Energy management ISO 50001 (Croatia and Serbia) Information security management ISO 27001 (Croatia and Serbia) Information security in the automotive sector TISAX ® (Croatia and Hungary) AUDITS AND RECERTIFICATION During the reporting period, all necessary recerti- fication and surveillance audits were conducted at the Group level, with independent certification bod- ies confirming the high effectiveness of the quality management system. At the plant AD Plastik Togliatti, recertification was successfully carried out again by the certifi- cation body DQS after a pause, renewing the certif- icates for environmental management and quality management. CUSTOMER SUPERVISION In addition to external certification audits, customers conduct regular evaluations and supervision of production processes to ensure consist- ency in quality and compliance with their requirements. During the re- porting period, 16 customer audits were conducted in Solin and Zagreb, along with one in Hungary, all of which were rated satisfactory with no critical non-conformities. These results and positive customer feedback further confirm the high level of product and production process quality within AD Plastik Group. Through a systematic approach and continuous improvements, the company ensures long-term business sustainability and excellence in all aspects of quality. www.adplastik.hr 25 RESEARCH AND DEVELOPMENT ENGINEERING EXCELLENCE IN THE SERVICE OF PROGRESS BUSINESS ACTIVITIES The observed year brought significant progress in research and development activities, further strengthening AD Plastik Group’s position as a reliable partner in the automotive industry. www.adplastik.hr 26 All key projects for global automo- bile manufacturers were successfully completed, either as a development and production partner (Full Service Supplier - FSS) or as a supplier ac- cording to customer specifications (Build to Print - BTP). In the electric vehicle segment, devel- opment activities on key exterior com- ponents were completed, optimizing vehicle weight and energy efficiency. In the SUV and crossover segments, complex engineering and production adaptations were made on exteri- or and interior parts, in line with the strictest safety and design standards. Spoilers for multiple vehicle models and aesthetically designed roof rails for a vehicle from the Stellantis group were successfully developed. A sig- nificant breakthrough was achieved through the use of PMMA materi- al in the production of the roof rail, an environmentally friendly visible component that ensures durability, UV resistance, and recyclability. This in- novation further enhances durability, aesthetic and perceived quality, while reducing vehicle weight and energy consumption. This technological ad- vancement was officially presented to the public by Stellantis, confirming the quality, innovation, and sustainability of AD Plastik Group’s solutions. As part of one of the major projects, special emphasis was placed on the application of pad printing in two-tone printing with a protective lacquer layer, achieving durability, wear resistance, and a reduction in the need for addi- tional manufacturing processes. This technology allows for precise applica- tion on complex surfaces, high quali- ty, flexibility, and resistance to external conditions and intensive use. Addition- ally, the assembly of clips was carried out using automated robotic stations, ensuring a high level of repeatability and energy-efficient production. The company’s projects have also en- compassed the premium vehicle seg- ment, with a focus on developing so- phisticated interior components that combine aesthetics and functionality. Sealing new deals on the development of key exterior components further con- firms the company’s position as one of the leading suppliers in the industry in this part of Europe. Looking ahead, the commitment re- mains focused on innovation, the ap- plication of sustainable materials and reducing the carbon footprint. The de- velopment of advanced polymers and the integration of smart polymers with electronic components will contribute to the evolution of connected and au- tonomous vehicles. Talent develop- ment and process optimization remain key to long-term success and adapting to industry changes. www.adplastik.hr 27 THE PATH TO NEW MARKETS AND BUSINESS OPPORTUNITIES SALES AND MARKET The automotive industry remains one of the most important economic sectors of the European Union, generating more than 7.5 percent of GDP and providing 13.2 million jobs. www.adplastik.hr 28 AD Plastik Group does not offer products or services whose sale is prohibited in any market. Regulatory pressures, including the implementation of Euro 7 standards, are further shaping the market by increasing pro- duction costs and requiring adjustments to vehicle models. In addition, the volatility of energy and raw material prices, as well as challenges in supply chains, complicate planning and pro- duction optimization. The industry continues to search for the optimal direction in the development of powertrains. Rather than full electrification, manufacturers are increasingly investing in hybrid variants in re- sponse to customer preferences and regulatory requirements. The automotive industry employs 10.3 percent of all workers in manufacturing, and with EUR 72.8 billion invested in research and development, it accounts for 33 percent of total Europe- an investment in innovation. Despite macroeconomic challeng- es and regulatory changes, the industry continues to adapt to market demands. In 2024, the European automotive market saw modest growth of 0.8 percent, with a total of 10.6 million new vehicle registra- tions. Spain experienced a growth of 7.1 percent, while France (-3.2 percent), Germany (-1 percent), and Italy (-0.5 percent) re- corded a sales decline, reflecting economic uncertainties and shifts in customer preferences. Demand is shifting – hybrid vehicles are experiencing strong growth, while sales of battery electric vehicles (BEVs) are slowing down. BEVs now account for 13.6 percent of the market, represent- ing a decline of 5.9 percent compared to the previous year, while hybrid sales increased by 20.9 percent, accounting for 30.9 per- cent of the European market share. Thus the hybrids have strongly approached gasoline vehicles, which still hold the largest share at 33.3 percent, with significant potential to truly take the lead. The share of diesel vehicles has decreased to 11.9 percent, and plug-in hybrid electric vehicles (PHEV) account for 7.1 percent. Market Leaders The Volkswagen Group maintained its leading position in the European market with a 26.7 percent market share, rep- resenting a 3.2 percent increase compared to the previous year. Škoda, Cupra, and Porsche recorded sales growth, while Audi experienced a decline. Stellantis remains the second-largest manufacturer in Europe, but its market share dropped from 17.8 percent to 16.4 percent, due to the total sales decline of 7.2 percent. The Renault Group slightly in- creased its market share from 10.9 percent to 11.0 percent, with a sales growth of 1.3 percent. Business Results And Strategic Development In 2024, AD Plastik Group sealed EUR 54.8 million worth of new deals with customers Stellantis, Ford, and SMP Automo- tive. These projects have a planned duration of four to twelve years, ensuring the stability of the portfolio. In addition to ex- panding operations in the European market, product deliver- ies to new markets in Egypt and Vietnam, have begun, while spare parts are being shipped to Texas, USA. Key customers remain Stellantis, the Renault Group, Ford, Su- zuki, and the VW Group, including Audi, Bentley, and Hella. The start of serial production for new models of Alfa Romeo, Citroën, Dacia, and Suzuki marked the previous year, while de- lays in the production of several Stellantis models until the first quarter of 2025 impacted production capacity planning. Adaptation and Optimization AD Plastik Group continues to optimize production capaci- ties in Solin, ensuring long-term operational efficiency and adaptability to the needs of key customers. In addition to ex- panding the portfolio of contracted projects, active efforts are being made to explore cooperation with new customers in the European market, while adapting to industry trends and regulatory requirements. The automotive industry in 2024 remained dynamic and challenging, but through strategic adaptation, investments in innovation, and resource optimization, AD Plastik Group continued to lay the foundation for long-term sustainability and competitiveness. Petrol ...............................33.3% Hybrids (HEV) ..................30.9% Battery (BEV) ...................13.6% Diesel ...............................11.9% Electric hybrids (PHEV) .....7.1% The others..........................3.2% 3+ 7+ 12+ 14+ 31+ 33 www.adplastik.hr 29 PROCESS OPTIMIZATION AS THE KEY TO STABILITY PRODUCTION The reporting period brought numerous challenges in production operations, with significant fluctuations in orders and market volatility. AD Plastik Group successfully managed complex production processes by combining the industrialization of new projects with the optimization of serial production. www.adplastik.hr 30 ■ Industrialization of nine new projects, despite customer-driven shifts in planned deadlines, which greatly increases the complexity of production process manage- ment ■ Adaptation of serial production in conditions of order volatility and extended pur- chasing deadlines, with ordering materials up to six months in advance ■ Completion of serial production of several major projects, inventory planning and minimization of losses in conditions of market instability ■ Optimizing production and cost efficiency, despite more complex processes and higher customer standards ■ Introducing automation and digitalization, including robotic assembly lines that improve repeatability and manufacturing precision ■ Managing complex projects, including trial and validation work orders, with in- creased demands on the painting process ■ Maintaining a high level of competitiveness, despite global market challenges and workforce turnover ■ Reducing environmental impact, through more energy-efficient processes and material optimization KEY HIGHLIGHTS Special emphasis has been placed on adapting flexible production to changing mar- ket conditions, ensuring high quality standards and competitiveness in the global supply chain. Sustainability remains a priority through waste reduction, optimiza- tion of energy consumption, and material recycling. This approach enables continuous growth, enhanced competitiveness, and long- term business stability in line with AD Plastik Group’s goals. www.adplastik.hr 31 SMART ROUTES AND OPTIMIZED RESOURCES FOR BETTER DELIVERY LOGISTICS Market volatility also had a significant impact on supply chains in the automotive industry, but effective management of complex logistical challenges ensured timely deliveries, inventory optimization, and minimization of losses during the observed period. www.adplastik.hr 32 ■ Industrialization of new projects with management of logistics flows and optimization of distribution, with certain project timelines being re- scheduled shortly before the start of serial production ■ More complex logistics flows, including cooperation with logistics part- ners and deliveries via customer collection points ■ Impact of natural disasters, primarily floods in Spain, which briefly pre- vented the smooth continuation of production and delivery of goods ■ Maintaining a high logistics rating according to customer ratings ■ Improvement of cooperation with logistics partners and optimization of transport costs ■ Starting serial production of new projects and support in cost and qual- ity optimization ■ Reducing the ecological footprint through the improvement of transport routes and more efficient use of resources KEY HIGHLIGHTS AD Plastik Group continues to strengthen logistics processes and the network of logistics partners, improve the supply chain and optimize costs, ensuring stability and competitiveness in the global environment. www.adplastik.hr 33 The risks and opportunities that AD Plastik Group recognizes in its business are influenced by external and internal factors. Timely identification, monitoring and management of risks affects busi- ness results, but also the environment and climate change. Continuous improvement in the field of risk management is the basis of successful management of the entire business. While the company’s influence on external factors is limited, internal ones are influenced by the constant development of business policies and procedures. RISK MANAGEMENT AD Plastik Group identifies, analyzes and monitors key business risks, including envi- ronmental, social and governance (ESG) risks. Through the Risk and Opportunity Manage- ment procedure, a methodology has been defined for identifying, analyzing and man- aging business process risks, which ensures the achievement of planned results and min- imizing negative consequences. The risk list is regularly updated and reflects interactions with both internal and external factors affect- ing business operations. However, there is currently no centralized stra- tegic risk management system that encom- passes market, geopolitical, financial and ESG risks in a structured manner. In practice, these risks are managed through reactive measures and assessments carried out as needed. In order to ensure long-term business resil- ience, it is planned to gradually strengthen the strategic risk management system through: ■ development of a system for regular moni- toring of strategic risks, including system- atic assessments and risk mitigation strat- egies ■ introduction of tools for risk and opportuni- ty analysis in business planning ■ strengthening transparency through harmo- nization of reporting with ESRS and better analysis of the impact of sustainability on business processes and financial results ■ digitalization of monitoring of key risk indi- cators RISKS AND OPPORTUNITIES TYPES OF RISKS STRATEGIC RISKS Market risk Business environment risk Competitive risk Risk of dependency on a single customer Technological risk Regulatory risk OPERATIONAL RISKS Risk of supply disruption Risk of labor shortage Risk of non-fulfillment of contractual obligations Cyber risk Risk of infectious diseases FINANCIAL RISKS Currency risk Interest rate risk Price risk Credit risk Liquidity risk SUSTAINABILITY RISKS Climate risk Reputational risk www.adplastik.hr 34 Strategic risks include challenges that can potentially threaten the company’s long-term business goals. They include changes in the market, technological innovation, political instability, regulatory changes and changes in the business environment. In 2024, special attention was paid to the challenges related to the electrification of vehicles, the geopolitical situation, growing competi- tion and regulatory requirements, especially those related to sustainability. Fluctuations in demand and changing trends in the automotive industry, such as the shift to electric vehicles and hybrid models, can af- fect business. The transition to environmentally friendly technologies requires product and ser- vice strategy adjustments by both car manu- facturers and their suppliers. Inflation and ris- ing prices of key raw materials can also further threaten profitability, and the emergence of low- cost Chinese manufacturers in the European market is further increasing pressure on mar- gins, but also opening up new opportunities. Instabilities in the countries of operation, in- cluding macroeconomic conditions, inflation, and social tensions, can affect operational and financial stability. Diversifying produc- tion across multiple countries helps mitigate risk, but it requires continuous adaptation of business practices. This risk is particularly pronounced in the context of operations in the Russian market. MANAGEMENT ■ Focus on diversification of the product portfolio ■ Monitoring global and regional trends, including the entry of new manu- facturers into the EU market ■ Close collaboration with customers to align prices with market changes SUSTAINABILITY: The development of products with a lower carbon footprint contributes to long-term compliance with ESG requirements and investor expectations. MANAGEMENT ■ Regular monitoring of macroeconomic indicators and adjustment of oper- ational strategies ■ Focus on stable European markets, while reducing exposure to risky region SUSTAINABILITY: Business diversification ensures the company’s resil- ience to external influences. STRATEGIC RISKS COMPETITION RISK BUSINESS ENVIRONMENT RISK MARKET RISK The increasing number of suppliers in the au- tomotive industry and technological advance- ments by competitors reduce profitability and market share. Price, quality, and innovation re- main key factors of competitiveness, while low prices from Chinese manufacturers further in- tensify pressure on the European market. MANAGEMENT ■ Investments in technologies and innovations to reduce production costs ■ Development of tailored solutions in collaboration with key customers ■ Focus on high quality standards and sustainability as a competitive advantage SUSTAINABILITY: The implementation of sustainable practices in produc- tion attracts environmentally conscious customers and investors. www.adplastik.hr 35 The historical dependence on a single cus- tomer has been reduced through customer portfolio diversification. However, the con- solidation of manufacturers in the automo- tive industry limits the potential for further diversification. Lag in technological development reduc- es competitiveness and makes it difficult to meet the requirements for new vehicles, while environmental standards demand in- vestment in technologies with a lower car- bon footprint. Changes in the legislative and regulatory framework, such as fiscal regulations, la- bor laws, and sustainability requirements, can have a material impact on business op- erations. Particularly challenging are the requirements related to reducing green- house gas emissions and compliance with ESG standards. Given the Group’s exposure to the Russian market, material regulatory risks arise from sanctions and Russian coun- ter-sanctions, as well as their consequenc- es. While these measures have not yet led to changes in the Group’s business model, they have completely transformed the automotive industry in Russia and significantly compli- cated operations for subsidiaries. MANAGEMENT ■ Sealing deals with new customers and those with a smaller share of the Group’s revenue ■ Developing long-term relationships with multiple partners to ensure rev- enue stability SUSTAINABILITY: Focus on manufacturers who integrate sustainability into their business models contributes to the long-term success of the AD Plastik Group. MANAGEMENT ■ Continuous investments in new technologies, with a focus on automation, energy efficiency, and reducing carbon footprint ■ Development of products tailored to environmental standards that en- hance competitiveness ■ Monitoring technological trends reduces the risk of regulatory non-com- pliance and increases energy efficiency SUSTAINABILITY: The Group’s key technologies are not direct environmen- tal pollutants, thus minimizing the risk of non-compli- ance with increasingly stringent environmental protec- tion regulations. MANAGEMENT ■ Monitoring legislative changes in all countries of operation ■ Proactive planning and operational adjustments to meet new sustaina- bility standards ■ Collaboration with industry associations to advocate for more favorable regulatory frameworks SUSTAINABILITY: Special attention is given to regulations requiring CO 2 emission reductions and increased energy efficiency. The development of products with a lower carbon foot- print and potential investments in renewable energy sources are aligned with these requirements. RISK OF DEPENDENCE ON A SINGLE CUSTOMER TECHNOLOGICAL RISK REGULATORY RISKS www.adplastik.hr 36 Operational risks relate to internal processes, resource management, and external factors that may disrupt the company’s daily operations. In 2024, particular focus was placed on challenges related to supply chains, workforce, and cybersecurity. Instabilities in supply chains caused by ge- opolitical conflicts, sanctions, and market shifts, including raw material shortages and logistical challenges, can disrupt production continuity. For example, floods in Spain dur- ing 2024 affected the company’s partners, causing minor delivery delays. The shortage of skilled workers, especial- ly in production facilities in Croatia and Europe, poses a challenge to maintaining operational efficiency and production ca- pacity. The ramp-up of production for new projects in 2024 required additional work- force and specialized skills, which, due to la- bor shortages in the domestic market, were addressed through the employment of for- eign workers. MANAGEMENT ■ Diversification of suppliers and securing multiple sources of supply ■ Maintaining safety stock of key materials to prevent disruptions ■ Developing crisis protocols and flexible supply chain plans SUSTAINABILITY: Logistics optimization contributes to more sustainable operations. MANAGEMENT ■ Increasing the company’s attractiveness as an employer and detailed planning of hiring needs ■ Education and retraining of employees for specific production processes ■ Collaboration with recruitment agencies and attracting labor from regions with an excess of qualified workers SUSTAINABILITY: By developing internal training programs and practicing in- clusive hiring, AD Plastik Group contributes to social sus- tainability and the long-term development of the workforce. OPERATIONAL RISKS RISK OF SUPPLY DISRUPTION RISK OF LABOR SHORTAGES www.adplastik.hr 37 Delays in production or delivery, caused by disruptions in supply chains, human re- sources, or external factors, can negatively impact a company’s reputation and custom- er relationships. In this process, the compa- ny is exposed to risks of potential non-ful- fillment of contractual obligations toward customers, primarily due to suppliers’ failure to meet their contractual obligations or pro- duction and delivery stoppages caused by unforeseen circumstances. Despite numer- ous challenges during the reporting period, AD Plastik Group has fulfilled all contractual obligations to its customers and suppliers. The increased number of cyberattacks and security threats poses a risk to the integrity of data, business processes, and confiden- tial information about clients and partners. Pandemics and other infectious diseas- es can cause disruptions in the operation of production facilities, affect employee health, and reduce business efficiency. The emergence of the coronavirus has demon- strated how significant an impact it can have and has necessitated adjustments to work protocols. MANAGEMENT ■ Strict project management and deadline control through enhanced pro- duction monitoring systems ■ Continuous supplier evaluation by tracking delivery quality and stability, as well as ensuring stock availability when needed ■ Increasing transparency and proactive communication with customers, with regular customer audits at the Group’s sites ■ Optimizing production processes to reduce vulnerability to disruptions SUSTAINABILITY: Increasing efficiency contributes to the reliability and sus- tainability of delivery. MANAGEMENT ■ Investment in advanced cybersecurity systems and regular updating of security protocols ■ Employee training on the importance of information security and attack prevention ■ Regular testing of security systems and IT infrastructure audits SUSTAINABILITY: The application of digital technologies in a secure and sustainable manner enables long-term data protection and business optimization. MANAGEMENT ■ Implementation of health and safety measures in accordance with the recommendations of health authorities ■ Development of crisis management plans for pandemic situations with regular annual evaluations ■ Flexibility in work organization, including remote work options for admin- istrative departments SUSTAINABILITY: Taking care of the health and safety of employees contrib- utes to the company’s social responsibility and resilience to external disruptions. RISK OF NON-FULFILMENT OF CONTRACTUAL OBLIGATIONS CYBER RISKS RISK OF INFECTIOUS DISEASES www.adplastik.hr 38 Financial risks encompass challenges that can jeopardize the company’s financial stability, such as significant exchange rate fluctuations, rising interest rates, delays in receivables collection, and similar issues. In 2024, special focus has been dedicated to market trends, changes in the Russian ruble exchange rate, interest rate developments, and maintaining the company’s liquidity. Management of these risks is centralized and carried out by the finance department within the parent company, which oversees activities in both domestic and international financial markets and consolidates the cash flows of the Group’s members. Currency risk has been significantly reduced with Croatia’s transition to the euro. However, interna- tional operations and the fact that some Group members are located outside the EU or do not use the euro as their official currency still pose certain currency risks. The Group is exposed to exchange rate fluctuations of EUR/RUB, EUR/HUF, EUR/RSD, and EUR/LEI, which can impact financial results, es- pecially due to market volatility and geopolitical in- fluences. In 2024, the most significant negative impact on the Group’s financial results came from the deprecia- tion of the ruble against the euro. However, thanks to agreed mechanisms with customers, significant exchange rate fluctuations of the ruble are adjusted through sales prices adaptations, thereby reducing the negative financial impact. The rise in interest rates can increase fi- nancing costs, reducing profitability and limiting the availability of capital for in- vestments. Although interest rates began to decline in 2024, the repayment of older loans with lower (fixed) interest rates and new borrowings at higher interest rates led to an increase in financing costs. MANAGEMENT ■ Balancing open foreign exchange positions for each currency within the balance sheet positions ■ Adjusting sales prices for euro-denominated components with chang- es in the euro exchange rate relative to the sales currency, ensuring the protection of profitability ■ Regular monitoring of currency markets and conducting analyses to maintain flexibility in managing exchange rate risks SUSTAINABILITY: Stable currency risk management enables sustain- able growth and reduces the company’s vulnerabil- ity to changes in the global economic environment. Established price adjustment mechanisms ensure business resilience to long-term macroeconomic shifts, while continuous risk assessment allows for timely decisions that support financial stability. MANAGEMENT ■ Negotiating more favorable borrowing terms, including variable interest rates in high-interest rate conditions and fixed rates in low-interest rate conditions ■ Refinancing existing debt obligations in line with market conditions, aiming to optimize financing costs ■ Transferring part of investments into long-term project assets to the customer SUSTAINABILITY: Reducing financial costs allows for resource allocation to sus- tainable projects and eases pressure on operating margins. FINANCIAL RISKS CURRENCY RISK INTEREST RATE RISK * Additional information on the management of this risk is available in the notes to the financial statements on pages 235 and 295. www.adplastik.hr 39 Changes in raw material and energy prices can significantly impact production costs and the company’s profitability. During the reporting period, strong inflationary pres- sures continued, primarily affecting servic- es and labor costs. The risk of non-payment by customers can lead to cash flow issues and reduce the company’s liquidity. AD Plastik Group col- laborates with reputable customers who are financially stable companies, thereby mini- mizing the collection risk and ensuring re- ceivables are realized within agreed terms. The credit risk related to loans granted is under the company’s control, as these loans are provided to subsidiary companies, where the parent company is the sole owner. Failure to meet obligations to creditors in a timely manner may jeopardize the compa- ny’s operations. Therefore, AD Plastik Group maintains optimal cash balances, with avail- able credit lines in place. Liquidity risk can increase in conditions of rising inflation and reduced access to financing. MANAGEMENT ■ Long-term contracts with suppliers to stabilize raw material costs ■ Passing increased costs onto customers in accordance with contractual clauses SUSTAINABILITY: Increased use of recycled materials and optimization of energy efficiency reduce costs and improve environmen- tal responsibility. MANAGEMENT ■ Sealing deals with customers who have high financial ratings ■ Monitoring receivable due dates and taking timely action in case of delays SUSTAINABILITY: Stable credit risk management enables better cash flow planning and reduces financial risks. MANAGEMENT ■ Proactive cash flow management through regular planning on a monthly, quarterly, and annual basis ■ Securing additional credit lines and reserves to ensure the availability of necessary financial resources ■ Increasing flexibility in payment and collection terms to optimize cash flows during periods of intensive investments SUSTAINABILITY: Stable liquidity management enables the company to maintain long-term financial stability and finance sustain- able projects, while reducing reliance on expensive short- term financing sources. PRICE RISK CREDIT RISK LIQUIDITY RISK * Additional information on the management of this risk is available in the notes to the financial statements on pages 236 and 295. www.adplastik.hr 40 Sustainability risks are related to challenges concerning the environmental, social, and governance aspects of business. These risks are becoming increasingly significant due to heightened regulatory requirements, investor expectations, and changes in consumer preferences. In 2024, the focus was placed on climate risks and risks associated with the company’s reputation. Climate risks are becoming increasingly significant, not only due to regulatory re- quirements but also because of changes in customer preferences, who expect prod- ucts with a lower carbon footprint. EU reg- ulations bring additional costs but also op- portunities for market differentiation. The rise in extreme weather conditions, such as the floods in Spain in 2024 that impacted one of the key suppliers, highlights the im- portance of adapting business strategies. AD Plastik Group is responding to these challenges by developing environmentally friendly products, collaborating with sup- pliers to implement sustainable practices, and continuously monitoring regulatory changes to remain competitive in the Eu- ropean market. Reputational risk is becoming increasing- ly significant due to growing market and regulatory expectations regarding sus- tainability, and it can impact access to markets, securing new contracts, and at- tracting investors. In addition to the per- ception of being linked to the Russian market, reputational challenges include failure to meet ESG requirements, such as compliance with EU regulations on emis- sions and sustainability, as well as trans- parency in reporting sustainable practice. MANAGEMENT ■ Implementing measures to reduce CO 2 emissions at production sites ■ Collaborating with suppliers who implement sustainable practices and reduce their own environmental footprint ■ Potential investments in energy efficiency and the use of renewable energy sources ■ Increasing the share of new materials with a lower carbon footprint ■ Regular evaluation of internal procedures, based on frequency and potential im- pact on safety and business operations SUSTAINABILITY: Investments in sustainable practices ensure compliance with EU climate change regulations and enhance the company’s re- silience to climate risks. MANAGEMENT ■ Strengthening transparency through improved reporting in line with ESRS and the EU Taxonomy ■ Active collaboration with customers and regulators to ensure alignment with market expectations ■ Regularly updating sustainability goals in accordance with international stand- ards ■ Conducting regular ESG compliance assessments across the value chain and business operations SUSTAINABILITY: Transparency and proactive management of ESG practices en- sure a long-term market position and reduce the risks of regu- latory penalties and loss of clients. By improving sustainability practices and transparency, the company secures a competi- tive advantage and increases stakeholder trust. SUSTAINABILITY RISKS CLIMATE RISKS REPUTATIONAL RISK www.adplastik.hr 41 Traditionally, the development and production of polymer components for the automotive industry were not considered key factors in reducing carbon footprints. However, with global decarbonization goals in mind, the automotive industry is increas- ingly investing in the development of lighter vehi- cles, which encourages the replacement of metal parts with polymer solutions. This trend presents significant opportunities for AD Plastik Group, par- ticularly in terms of material innovations and in- creasing vehicle energy efficiency. The growing need for more sustainable solutions, together with advancements in electrification, au- tonomous driving, and digital connectivity, are in- creasing the demand for customized polymer com- ponents. This creates opportunities to expand the product portfolio and strengthen collaboration with both existing and new customers. Additionally, the arrival of new manufacturers in the European market, primarily Chinese companies, is changing the competitive dynamics and presenting new opportunities. Their need for local suppliers could create room for collaboration, either through direct component supply or by adapting existing technologies to meet their requirements. Geopolitical stabilization and the potential conclu- sion of conflicts in Europe could further boost eco- nomic growth and strengthen supply chains, reduc- ing business uncertainty. On the other hand, market opportunities are not limited to the automotive in- dustry—developments in new materials, digitaliza- tion of manufacturing processes, and the growing demand for sustainable solutions are opening up opportunities in other sectors such as construction, transportation, and energy. With the advancement of new technologies and materials, digitalization and robotization continue to raise industry standards, delivering better per- formance, greater safety, and improved product quality. In this context, AD Plastik Group has the opportunity to further strenghten its position as an innovative and reliable partner in the market in the coming years. OPPORTUNITIES www.adplastik.hr 42 FINANCIAL INDICATORS FINANCIAL RESULTS FOR 2024 The observed business year brought a continuation of the positive growth and stabilization trend, visible through the presented interim reports throughout the year, confirming the resilience and stra- tegic direction of the AD Plastik Group. The achieved results clearly indicate fur- ther strengthening of market position and the creation of a foundation for sus- tainable growth in the future. The Group’s revenue in 2024 amounted to EUR 152.44 million, representing an 17.9 percent increase compared to the previous year. The parent company’s rev- enue grew by 22.9 percent, reaching EUR 116.03 million. New projects are a key driver of revenue growth and will contrib- ute to strengthening business results in 2025 and the upcoming periods as con- tracted volumes are realized, along with further improvements in capacity utiliza- tion and profitability. The Group’s EBITDA amounted to EUR 13.41 million, representing an 86.03 per- cent increase compared to the previous year. The parent company’s EBITDA grew by 123.15 percent, reaching EUR 7.68 million. The sales of tools made for pro- jects that entered serial production dur- ing the reporting period had a significant impact on the EBITDA growth. The Group’s net profit amounted to EUR 2.13 million, marking significant pro- gress compared to the previous year when a net loss was recorded. At the same time, the parent company’s net profit amounted to EUR 0.40 million, pri- marily due to the impairment of the in- vestment in the subsidiary ADP d.o.o. in Mladenovac. Otherwise, the parent com- pany’s net profit would have been EUR 2.68 million. The replacement of old vehicle models with new ones in the serial production of the Romanian factory affected the results of the affiliated company, which achieved a net profit of EUR 6.18 mil- lion in the reporting year, thus contrib- uting more modestly to the Group’s re- sults compared to the previous year. The results of the parent company were also affected by the decision to pay a lower dividend amount. However, with the full- year production of new models in 2025, a positive impact is expected on capacity utilization and the financial effect of the Romanian company, as well as on the re- sults of the parent company and AD Plas- tik Group. The increased level of indebtedness due to financing project activities and in- vestments, along with a higher average www.adplastik.hr 43 * In addition to the measures defined by International Financial Reporting Standards (IFRS), AD Plastik Group also uses alternative per- formance indicators in its reports. An overview and definition of the indicators used in this document are provided on pages 49 and 50. borrowing cost, affected the growth of interest expenses in 2024. However, strong deleveraging in the last quarter, along with a decline in reference interest rates and the con- tinued trend of debt reduction, will enable lower financing costs in 2025. Project and industrialization activities were extremely im- portant during the observed period and had a significant im- pact on capacities, internal resources, and costs. With re- gard to the projects that will start their serial production in 2025, and whose full contribution to business results will only be realized, operational and financial efficiency will be significantly improved in the coming period. Sales activities remain highly dynamic and strongly focused on the European market, with a steady inflow of new con- tracts. The Group’s achieved results confirm the success- ful direction of the business and open up opportunities for further improvement in profitability. Investments in capac- ity development and optimization continue, while simulta- neously strengthening financial stability and operational ef- ficiency. Despite existing market challenges, with a strong adaptation strategy in place, the company remains on track for sustainable and long-term growth. KEY PERFORMANCE INDICATORS Indicators (in EUR 000) AD Plastik Group AD Plastik d.d. 2023 2024 Index 2023 2024 Index Sales 123,832 147,967 119.49 89,388 111,152 124.35 Other income 5,476 4,476 81.74 5,060 4,877 96.38 Operating expenses 132,371 149,841 113.20 98,301 118,928 120.98 EBITDA 7,210 13,413 186.03 3,440 7,676 223.15 Net profit/loss -1,273 2,133 - 1,040 397 38.17 NFD 45,884 40,345 87.93 43,928 37,598 85.59 EBITDA margin 5.58% 8.80% 322 bps 3.64% 6.62% 297 bps Net profit margin -0.98% 1.40% - 1.10% 0.34% -76 bps ROE -1.26% 2.16% - 1.15% 0.43% -71 bps Capex 8,860 12,907 145.68 7,349 11,348 154.41 www.adplastik.hr 44 NET FINANCIAL RESULT OPERATING EXPENSES The pronounced weakening of the rouble throughout the year, along with its volatility and the weakening of the for- int, resulted in significant exchange rate differences at the Group level, although these were lower than in the previous year. During the reporting period, interest expenses also in- creased significantly, primarily due to the rise in the average interest rate on debt, as well as the level of financial debt throughout the year. A lower dividend from the affiliat- ed company in Romania, increased interest expenses had a significant impact on the financial results of the parent company. Net financial result (in EUR 000) AD Plastik Group AD Plastik d.d. 2023 2024 Index 2023 2024 Index FINANCIAL REVENUE 199 271 136.02 5,337 4,065 76.17 Interest revenue 199 271 136.02 377 595 157.76 Dividends - - - 4,960 3,470 69.97 FINANCIAL EXPENSES 2,349 2,917 124.20 672 1,323 196.96 Negative exchange differences 1,451 1,323 91.16 20 3 14.61 Interest expenses 898 1,595 177.58 652 1,320 202.56 FINANCIAL RESULT -2,150 -2,647 123.11 4,665 2,742 58.77 Operating expenses (in EUR 000) AD Plastik Group AD Plastik d.d. 2023 2024 Index 2023 2024 Index Increase/(decrease)in the value of work in progress and finished products 227 -418 - 85 -41 - Cost of raw material and supplies 66,677 64,871 97.29 45,059 45,904 101.88 Cost of goods sold 7,223 24,229 335.44 11,922 27,850 233.60 Service costs 12,122 11,726 96.73 8,900 8,354 93.87 Staff costs 31,980 34,638 108.31 22,708 24,175 106.46 Depreciation and amortisation 10,273 10,811 105.24 7,293 8,290 113.67 Other operating expenses 3,767 3,960 105.12 2,278 4,155 182.40 Provisions for risks and charges, (net) -136 1 - -136 1 - Impairment of loans and trade receivables 238 23 9.78 192 240 125.00 www.adplastik.hr 45 FINANCIAL POSITION Abbreviated balance sheet (in EUR 000) AD Plastik Group AD Plastik d.d. 31 Dec 2023 31 Dec 2024 Index 31 Dec 2023 31 Dec 2024 Index ASSETS 189,136 180,877 95.63 163,528 157,704 96.44 Long term assets 124,117 123,919 99.84 116,522 115,403 99.04 Current assets 65,019 56,958 87.60 47,006 42,301 89.99 LIABILITIES 90,672 81,970 90.40 72,413 66,159 91.36 Long term liabilities 33,501 20,635 61.60 29,668 17,748 59,82 Current liabilities 57,171 61,335 107.28 42,745 48,411 113.26 CAPITAL 98,464 98,908 100.45 91,115 91,545 100.47 Although investments during the reporting period were sig- nificant, primarily related to new deals, the collection of pay- ments for new projects tools and a positive operating cash flow enabled substantial deleveraging. Activities aimed at optimizing repayment plans and reducing the pressure of short-term financial liabilities, initiated dur- ing 2024, were completed at the beginning of 2025. As a re- sult, the balance sheet as of December 31, 2024, shows an unfavorable ratio of short-term to long-term financial debt. However, through agreements made with creditors, the repay- ment of EUR 9.39 million has been spread over the coming years, although these amounts were initially due to be settled in 2025. This ensures a balanced loan repayment schedule and improves the company’s financial position. The Group’s net financial debt amounted to EUR 40.35 mil- lion, representing a decrease of EUR 5.54 million compared to the end of 2023. At the same time, the parent company’s net financial debt was reduced by EUR 6.33 million, reaching EUR 37.60 million. The NFD/EBITDA ratios for both the Group and the parent company have also significantly improved. At the Group lev- el, this ratio now stands at 3.01, while at the parent company level, it amounts to 4.90. Further improvements are expected through continued deleveraging and profitability growth. The Group’s debt ratio decreased from 0.48 to 0.45 as of De- cember 31, 2024, while in the parent company, it declined from 0.44 to 0.42. www.adplastik.hr 46 The value of realized investments in the reporting year amounted to EUR 12.91 million, which represents an in- crease of 45.7 percent compared to the previous year. Of the total amount of investments, EUR 9.89 million was invested in tangible assets, while the remaining EUR 3.01 million relates to intangible assets. The majority of in- vestments in tangible assets are di- rected towards specific investments and returnable packaging for new projects, while investments in intan- gible assets relate mostly to capi- talized costs of developing new pro- jects. The conclusion of 2024 also ends a significant investment cycle related to new projects, which will result in significantly lower investments in the current and upcoming years. At the same time, the current level of pro- duction capacity utilization allows for further growth in production without the need for significant investments in capacity equipment, which opens up space for increasing operational efficiency and profitability. INVESTMENTS 2024 AFFILIATED COMPANY EAPS AD PLASTIK GROUP WITH THE CONSOLIDATION OF THE CORRESPONDING OWNERSHIP PART IN THE AFFILIATED COMPANIES Positions (in EUR 000) 2023 2024 Index OPERATING REVENUE 177,885 214,967 120.8 OPERATING EXPENSES 175,817 208,575 118.6 Material costs 101,969 126,329 123.9 Staff costs 39,091 43,741 111.9 Amortization 11,173 11,992 107.3 Other costs 23,584 26,513 112.4 FINANCIAL REVENUE 237 286 120.3 FINANCIAL EXPENSES 2,335 2,983 127.8 TOTAL REVENUE 178,122 215,253 120.8 TOTAL EXPENSES 178,152 211,558 118.8 Profit/loss before taxation -30 3,695 - Profit tax 1,244 1,561 125.6 PROFIT/LOSS OF THE PERIOD -1,273 2,133 - EBITDA 13,241 18,384 138.8 In order to present a clearer picture of the business, a compara- ble, shortened, consolidated profit and loss account of AD Plas- tik Group for 2023 and 2024 has been created, with the profit and loss account of the affiliated company Euro Auto Plastic Systems s.r.l. Mioveni, Romania, in which AD Plastik d.d. holds a 50 percent ownership stake. The operating revenue of AD Plastik Group with the consolidated cor- responding ownership part in the affiliated company amounted to EUR 214.97 million, representing an increase of 20.8 percent com- pared to the previous period. EBITDA amounted to EUR 18.38 million. www.adplastik.hr 47 ABBREVIATED P/L AND THE BALANCE SHEET OF THE AFFILIATED COMPANY EAPS Positions (in EUR 000) 2023 2024 Index Operating revenue 100,190 130,250 130.0 Operating expenses -89,928 -122,671 136.4 Net financial result 105 -103 - Profit before taxation 10,367 7,477 72.1 Profit tax -1,649 -1,295 78.5 Profit of the period 8,718 6,183 70.9 Positions (in EUR 000) 31 Dec 2023 31 Dec 2024 Index Long term assets 19,478 19,650 100.9 Current assets 38,767 62,432 161.0 ASSETS 58,245 82,082 140.9 Capital and reserves 21,015 20,264 96.4 Long term liabilities and provisions 1,271 1,194 93.9 Current liabilities 35,959 60,624 168.6 CAPITAL AND LIABILITIES 58,245 82,082 140.9 100% achievement shown EAPS results have been included in the re- sults of AD Plastik Group by the equity meth- od. The operating revenue of this company increased by 30 percent and amounted to EUR 130.25 million. However, due to the pre- viously mentioned transition to the produc- tion of new vehicle models and associated costs, net profit decreased compared to the same period, amounting to EUR 6.18 million. It is expected that the full annual production of the new model, along with high capacity utilization, will have a significant positive im- pact on the profitability of this company in the coming years. During the reporting period, EAPS invest- ments amounted to EUR 4.30 million, primar- ily directed towards the acceptance of new projects and the renewal of the machinery, a process that began in 2023. The majority of EAPS’s revenue comes from the Romanian market, while smaller portions are delivered to markets in Morocco, Brazil, Colombia, Argentina, and Turkey. www.adplastik.hr 48 ALTERNATIVE PERFORMANCE MEASURES In addition to the financial performance measures defined by International Financial Reporting Standards (IFRS), AD Plastik Group also uses certain alternative performance measures in its reports, considering them useful for business performance analysis for investors. Alternative performance measures show comparative periods so that the company’s results can be compared over dif- ferent periods. EBITDA AND EBITDA MARGIN EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) represents the operating profit (operating reve- nue minus operating expenses) increased by amortization of tangible and intangible assets. The company also presents an EBITDA margin that represents a percentage of EBITDA rela- tive to operating revenue. NET PROFIT MARGIN It is calculated by the ratio of realized net profit and operating revenue. The company uses this measure to track its profitability relative to operating revenue. AD Plastik Group (in EUR 000) 31 Dec 2023 31 Dec 2024 Non-bank loans 3,128 2,282 Long-term liabilities to banks 30,367 17,850 Short-term liabilities to banks 16,431 24,475 Cash -4,042 -4,262 Net financial debt 45,884 40,345 AD Plastik d.d. (in EUR 000) 31 Dec 2023 31 Dec 2024 Non-bank loans 2,508 1,904 Long-term liabilities to banks 27,899 16,178 Short-term liabilities to banks 14,546 22,562 Cash -1,025 -3,046 Net financial debt 43,928 37,598 Net debt represents the sum of short-term and long-term liabilities to banks and short-term and long-term loans to non-banking companies, minus cash and cash equivalents. AD Plastik Group uses the ratio of net debt to EBITDA as an NET DEBT AND NET DEBT IN RELATION TO EBITDA indicator of financial stability and the company’s ability to re- pay its financial obligations. When calculating the indicators on a quarterly basis, the EBITDA realized in the last four quar- ters is taken into account. www.adplastik.hr 49 31 Dec 2023 31 Dec 2024 Last price in the period (EUR) 13.7 9.5 Number of shares (000) 4,200 4,200 Market capitalization (in EUR 000) 57,534 39,728 31 Dec 2023 31 Dec 2024 Net profit /loss of the period (000 EUR) -1,273 2,133 Average weigted number of shares (000) 4,159 4,161 EPS (EUR) -0.31 0.51 ROE This measure is used to monitor the realized return on equity. It is calculated on an annual and quarterly basis. When calculating the indi- cators on an annual basis, the ratio is the net profit of the current period and the average val- ue of equity (the average value of equity at the end of the reporting period and equity at the be- ginning of the reporting period). At the quarter- ly level, it is calculated by the ratio of net profit for the last four quarters and the average value of equity (average value of equity at the end of the reporting period and equity at the end of the same period of the previous year). CAPEX Capital investments are indirect cash flow posi- tion and they are related to payments for tangi- ble and intangible assets. This measure is used as an indicator of the use of funds to achieve fu- ture economic flows and ensure the distribution of funds in accordance with the Group’s strategy. INDEBTEDNESS RATIO The indebtedness ratio is the ratio of total lia- bilities to total assets. This measure is used to monitor the company’s financial risk in terms of growth of liabilities in relation to assets. EPS and P/E These measures are used so that investors can analyze the value of the share. Earnings per share (EPS) are calculated by dividing net profit by the weighted average number of shares. The quarterly cal- culation uses the net profit realized in the last four quarters. MARKET CAPITALIZATION Market capitalization is the total market value of the company, and it is calculated as the product of the total number of shares and the last share price on the day of the reporting period. P/E is the ratio of price to earnings per share (EPS). The price repre- sents the share price on the last day of the reporting period, and in the quarterly calculation, net profit represents the realized profit in the last four quarters. www.adplastik.hr 50 ADPL SHARE The reporting period was marked by strong growth in global capital mar- kets, despite geopolitical instabili- ties and risks. For instance, the S&P 500 saw an increase of 23.3 percent, while the Dow Jones Industrial Aver- age rose by 12.9 percent, confirming a positive investment sentiment. However, the movements of indices related to the automotive indus- try were significantly more modest, and in some cases even negative, as reflected in the sharp decline in the share prices of peer companies. Weaker-than-expected sales of new vehicles, along with uncertainties surrounding European electrifica- tion plans, were key factors putting additional pressure on share perfor- mances in this sector. The trend of decreasing interest rates by central banks, which characterized the previous year and is expected to continue in the current year, certainly has a significant impact on market flows and investment decisions. The value of ADPL share on Decem- ber 31, 2024, amounted to EUR 9.5, reflecting a 31 percent decrease compared to the end of 2023. At the same time, the Crobex index grew by 25.9 percent during the same peri- od, further confirming the divergence between the broader market and the specific challenges faced by the auto- motive sector. ADPL 31 Dec 2023 31 Dec 2024 Index Final price (EUR) 13.7 9.5 69.1 Average price (EUR) 14.2 12.4 87.1 The highest price (EUR) 17.2 13.9 80.8 The lowest price (EUR) 10.5 9.4 89.5 Volume 346,352 410,813 118.6 Turnover (EUR) 4,927,042 5,088,190 103.3 Market capitalization (EUR) 57,534,301 39,728,065 69.1 EPS (EUR) -0.3 0.5 - * In addition to the measures defined by International Financial Reporting Standards (IFRS), AD Plastik Group also uses alternative performance indi- cators in its reports. An overview and definition of the indicators used in this document are provided in Appendix 1. The company’s dividend strategy remains unchanged. Taking into account the achieved results, business plans, and oth- er relevant factors, the goal is to continue implementing the policy of paying attractive dividends. Upon fulfilling legal and statutory requirements, it is proposed to pay a dividend of at least fifty percent of the available amount. The specified amount is defined in the Charter, which, along with the Div- idend Payment Policy, is available on the company’s web- site. In making the decision on the proposed use of profits, the company takes into consideration the business circum- stances and ensures the sustainability of operations and the achievement of development goals. DIVIDEND www.adplastik.hr 51 - 31.0 % ADPL + 25.9 % CROBEX SHARE TREND (€) In accordance with the rules of the Zagreb Stock Exchange, the AD Plastik Group published the events calendar for 2025 at the end of 2024, which includes all major events. Any changes or updates shall be published immediately upon occurrence, no later than one week before the event itself. EVENTS CALENDAR 26 Feb 2025 Unaudited Annual Financial Report 2024 6 Mar 2025 Supervisory Board meeting 24 Apr 2025 Audited Integrated Annual Report 2024 29 Apr 2025 Financial Statement for the first quarter of 2025 30 Apr 2025 Presentation of the Integrated Annual Report 2024 and Financial Statement for the first three months of 2025 to interested financial analysts and public representatives 29 May 2025 Supervisory Board meeting 17 July 2025 General Assembly 25 July 2025 Financial Statement for the second quarter of 2025 and Semi-Annual Financial Statement 2025 18 Sep 2025 Supervisory Board meeting 28 Oct 2025 Financial Statement for the third quarter of 2025 and Financial Statement for the nine months of 2025 12 Dec 2025 Supervisory Board meeting 9.0 10.0 11.0 12.0 13.0 14.0 15.0 1,200.0 1,700.0 2,200.0 2,700.0 3,200.0 3,700.0 www.adplastik.hr 52 BUSINESS PLAN FOR 2025 The challenges of electrification and restructuring of the European automotive industry will continue to shape mar- ket opportunities in the coming years. Although a gradual recovery in demand is expected, the industry is facing in- creasing pressures to optimize costs, increase efficiency and comply with regulatory requirements to reduce its car- bon footprint. In this context, AD Plastik Group is directing its strategy towards long-term growth in serial production, increased profitability, optimization of operating capaci- ties and sustainable business. A more significant contribution to revenue from serial pro- duction is expected as early as 2025, with an average an- nual growth rate of 6 percent for its own products over the three-year period, along with a slight increase in total op- erating revenue. This growth will be driven by a gradual increase in production volumes on ongoing projects, as well as the acquisition of new deals that strengthen the company’s position as a supplier of complex exterior and interior components. At the same time, increased capacity utilization and a focus on higher value-added products are expected to have a positive impact on the EBITDA margin, which is expected to be at the level of 12 percent in the next three years. Financial discipline and cost optimization remain key pri- orities, with the average annual CAPEX planned for the next three years at a level of only EUR 5 million per year. This rational investment approach will enable the company to increase operational efficiency without additional finan- cial burden, while at the same time further deleveraging and strengthening financial stability. The company’s stra- tegic focus remains on the development of materials and processes that bring greater profitability and compliance with sustainable mobility trends. The coming period brings opportunities for further trans- formation of the product portfolio, with increased use of advanced polymer materials and technologies that enable vehicle weight reduction and lower CO₂ emissions. At the same time, digitization and optimization of production pro- cesses will further contribute to operational efficiency and strengthen the company’s competitive advantage. Increasing capacity utilization, efficiency and profitability, along with further deleveraging and strengthening the fi- nancial position, are the main goals in the coming period. AD Plastik Group is ready to take advantage of new market trends, continuing to build its position as a strategic part- ner to car manufacturers in Europe. 6 REVENUE GROWTH FROM OWN PRODUCTS ANNUALLY (FOR THE NEXT THREE YEARS) CAPEX 5 mil.€ % EBITDA MARGIN 12 % www.adplastik.hr 53 SUSTAINABILITY REPORT www.adplastik.hr 54 Sustainability reporting is based on the requirements of EU Directive 2022/2464 on cor- porate sustainability reporting and is aligned with the European Sustainability Reporting Standards (ESRS). In order to achieve greater transparency and compliance with national regulations, information is also included according to the Companies Act, the Accounting Act and the Code of Corporate Governance of the Zagreb Stock Exchange. In cases where other standards or reporting frameworks were used, their applied provisions are clearly indicated. www.adplastik.hr 55 STRATEGIC SUSTAINABILITY GOALS NET ZERO CO 2 EMISSIONS 2050 LANDFILL WASTE -80% 2030 2030 +30% 2050 +50% ENERGY EFFICIENCY 100% PRODUCT RECYCLABILITY 2050 +40% ECOLOGICAL MATERIALS 2030 CO 2 EMISSIONS -50% 2030 development of LIGHTER MATERIALS reduction of vehicle weight OPTIMIZATION OF MANUFACTURING PROCESSES increase in energy efficiency increasing MARKET SHARE in the EU EXPANDING INTO MARKETS with high environmental standards increasing the use of RETURNABLE PACKAGING optimization of LOGISTICS AND DISTRIBUTION reduction of CO 2 transport emissions SUSTAINABILITY OF PRODUCTS AND SERVICES MARKET EXPANSION AND LOGISTICS www.adplastik.hr 56 STRATEGIC SUSTAINABILITY GOALS 2030 2040 2050 75% 85% 100% SUSTAINABLE SUPPLIERS by purchasing value EMPLOYEE ENGAGEMENT +20% 2030 increase STAKEHOLDER ENGAGEMENT (ESG strategies) IMPLEMENTATION OF WELL-BEING AND LIFELONG LEARNING PROGRAMS EMPLOYEE SATISFACTION +20% 2030 INJURY-FREE 2030 STAKEHOLDER AND EMPLOYEE ENGAGEMENT SUSTAINABLE VALUE CHAIN PRODUCT COMPLAINTS -20% 2026 OPERATIONAL RISKS -20% 2030 www.adplastik.hr 57 Freedom of association and collective bargaining Avoiding participation in human rights violations Support and respect for internationally recognized human rights Union organizing, collective bargaining and protection of labor interests are actively supported. Company policies prohibit forced and child labor, with strict employment controls. Inclusion and equality are ensured by the Diversity Policy, confirmed by the Diversity Charter and the engagement of the President of the Management Board as their ambassador. The corporate culture promotes responsibility and transparency, with operations based on the Code of Ethics and Code of Business Conduct, and the Human Rights Protection Policy. Fair market conditions are ensured through the Advertising Code and Antitrust Policy, and irregularities are reported through the whistleblower protection system. 10 9 8 7 6 5 4 3 2 1 Suppression of forced and compulsory labor Effective suppression of child labor Suppres- sion of dis- crimination in employment and occupation The anti-corruption policy and ethical business system ensure zero tolerance for all forms of corruption, including extortion and bribery. The business follows the Environmental Policy, ISO 14001 and sustainability strategies, ensuring a systematic approach to environmental challenges. The environmental impact is continuously reduced through plans to reduce CO 2 , optimize production and use of recyclable materials, supporting the circular economy. Preventive approach to environmental challenges Promoting environmental responsibility Development and dissemination of environmentally friendly technologies The fight against corruption, extortion and bribery H U M A N R I G H T S W O R K E N V I R O N M E N T C O R R U P T I O N F I G H T A G A I N S T PRINCIPLES OF THE UN GLOBAL COMPACT The AD Plastik Group has been a proud signatory of the UN Global Compact (UNGC) since 2013, the world’s largest initiative for sustainable and responsible business. As one of the founders of the local UNGC network in Croatia, with the President of the Management Board serving on the Management Committee, it actively contributes to the development of sustainable business practices and the promotion of its principles. UNGC sets high standards that are fully aligned with the company’s long-term goals. Business operations are continuously im- proved in accordance with these values, re- affirming the commitment to responsible growth and a sustainable future. www.adplastik.hr 58 STAKEHOLDERS EMPLOYEES SHAREHOLDERS ACADEMIC COMMUNITY STATE INSTITUTIONS AND LOCAL ADMINISTRATION BODIES LOCAL COMMUNITY SUPPLIERS SUPPLIERS SHAREHOLDERS TRADE UNIONS AND WORKERS’ COUNCIL INVESTORS, BANKS AND ANALYSTS CUSTOMERS (car manufacturers) CUSTOMERS S U S T A I N A B I L I T Y R E P O R T U S E R S A F F E C T E D S T A K E H O L D E R S The AD Plastik Group actively collaborates with its key stake- holders, including customers and suppliers, regulatory bod- ies, and the academic community, to ensure compliance with sustainability standards and improve the environmental per- formance of its products and processes. The collaboration is focused on the development of ecological and recyclable materials, reducing carbon footprint, and improving energy efficiency in vehicles through innovations in research and de- velopment and the optimization of manufacturing processes. More details on the results and achievements during the re- porting period are available in the Research and Development and Production chapters. STAKEHOLDER INTERESTS AND VIEWPOINTS www.adplastik.hr 59 Stakeholders Stakeholder needs and business benefits Communication channels Employees ■ Engaged, capable and motivated employees ■ Occupational safety and health ■ Employment stability and working conditions ■ Career development, education and reward system ■ Lower employee turnover ■ Strengthening organizational culture ■ Focus on sustainable business through reduced environmental impact and ethical working conditions ■ Satisfaction and engagement survey ■ Sustainability survey (new) ■ Education and internal workshops ■ Digital notifications (regular) ■ ADP Mailbox ■ Bulletin boards (production) ■ Intranet ■ Direct communication, meetings, focus groups and email Customers (car manufacturers) ■ Product quality and reliability ■ Collaboration in development projects ■ Innovations in ecological materials and technologies ■ Compliance with sustainability regulations and regulations ■ Delivery accuracy and supply chain efficiency ■ Regular meetings and B2B events (encouraging the use of environmentally friendly materials and technologies) ■ Sustainability survey (new) ■ Regular ESG audits and customer technical audits ■ Sustainability questionnaires for customers ■ B2B portal (satisfaction assessment) Suppliers ■ Long-term cooperation ■ Adherence to sustainability standards, fair payment terms and business ethics ■ Partnership in innovation and efficiency ■ Supply chain stability ■ Reduction of emissions and waste in the supply chain ■ Increased competitiveness through innovation ■ Simplified processes and better quality control ■ Regular meetings and B2B events ■ ESG audits as needed ■ Sustainability survey - ESRS requirements (new) ■ Supplier assessment (questionnaires) ■ Governance platforms (B2B portal) ■ Corporate website Shareholders ■ Stable growth in share value, sustainable income and dividend ■ Transparent financial and ESG reporting and management ■ Long-term business strategy aligned with market trends ■ Financial stability and growth ■ Transparent and regular reporting ■ General Assembly and shareholder meetings ■ Regular announcements on the Zagreb Stock Exchange ■ Investor Day and conferences ■ Direct communication ■ Corporate website AFFECTED STAKEHOLDERS Although the company does not directly influence end us- ers and does not produce components with a direct impact on vehicle safety, its contribution to the industry is reflected in meeting the highest industry standards and customer re- quirements. Adherence to safety and quality standards ena- bles increased reliability and longevity of vehicles, as well as a reduction in their overall environmental footprint. End users do not directly participate in shaping the company’s strategy, but their growing demand for more energy-efficient vehicles encourages further investment in research and the implemen- tation of green technologies. In addition to technological innovations, the business model and strategy are continuously improved to minimize the po- tential negative impacts of products and operations. Trans- parent collaboration with stakeholders ensures timely insight into market trends and regulatory changes, enabling more ef- fective integration of sustainable solutions and optimization of manufacturing processes. This approach not only ensures compliance with regulatory requirements and industry standards but also makes a proac- tive contribution to the development of a sustainable automo- tive industry, reducing negative environmental impacts and contributing to the long-term competitiveness of products. www.adplastik.hr 60 Stakeholders Stakeholder needs and business benefits Communication channels Employees Suppliers Shareholders Unions and Workers’ Council ■ Workers’ rights, job security and compliance with the collective agreement ■ Stable social relations reduce risks and increase employee satisfaction ■ Sustainability through improvement of working conditions and an inclusive work culture ■ Regular meetings and negotiations ■ Collective agreement ■ Internal reporting systems ■ Notice boards (production) ■ Intranet ■ Transparent and regular reporting Investors, banks and analysts ■ Financial stability and creditworthiness of the company ■ Business model sustainability and risk management ■ Compliance with sustainability standards reduces financial risks and enables more favorable financing conditions ■ Meetings with financial institutions ■ Transparent and regular reporting ■ Regular announcements on the Zagreb Stock Exchange ■ Direct communication ■ Investor Day and conferences ■ Corporate website Academic community ■ Cooperation on research, development of new materials and technologies ■ Professional practice enables employment of young talents and access to innovations and scientific research ■ Development of competencies and future employees ■ Partnership in green mobility and circular economy projects ■ University Partnerships, Expert Workshops and Seminars ■ Research Projects ■ Internship and Sustainable Development Programs ■ Joint Research ■ Conferences ■ Career Days ■ Guest Lectures, Visits and Events State institu- tions and local self-govern- ment ■ Compliance with regulations ■ Supporting the legislative framework ■ More favorable business conditions ■ Increasing strategic investments ■ Tax contributions and economic growth ■ Partnerships in development projects ■ Meetings and consultations ■ Forums and conferences ■ Participation in industry and regulatory bodies ■ Transparent communication about business Local community ■ Employment and economic impact ■ Social responsibility and environmental impact ■ Involvement in the community reinforces a positive reputation ■ Investments in energy efficiency projects and reduction of the ecological footprint ■ Sponsorships and Donations and Sustainability Initiatives ■ Employee Volunteer Programs ■ Transparent and Regular Sustainability Reporting ■ Direct Collaboration and Direct Collaboration ■ Corporate Website ■ Business Social Media SUSTAINABILITY REPORT USERS www.adplastik.hr 61 CORPORATE GOVERNANCE GOVERNANCE STRUCTURE The corporate governance structure is based on a dualistic system, which includes the Management Board and the Supervisory Board. Together with the General Assembly and the Audit Committee, they form the four key functions of the company. This ensures effec- tive decision-making and oversight of the company’s operations. AUDIT COMMITTEE REMUNERATION COMMITTEE APPOINTMENT COMMITTEE GENERAL ASSEMBLY MANAGEMENT BOARD GENERAL ASSEMBLY Shareholders exercise their rights at the General Assembly, where decisions are made on key issues such as the election and removing from the office of members of the Supervisory Board, appropriation of profit, granting clearance to Management Board and Supervisory Board members, appointment of auditors, amendments to the Charter, increase or decrease of share capital and other important issues provid- ed by law. At the regular General Assembly held on July 18, 2024, in Solin, 2,555,921 votes were present or represented, account- ing for 60.86 percent of the company’s share capital. The Assembly discussed the Integrated Annual Report of the AD Plastik Group for 2023 and the Supervi- sory Board’s assessment report. Deci- sions were adopted regarding the use of profits, the appointment of auditors for 2024, and reports on the remuneration of management bodies. Amendments to the Management Board’s Remuneration Poli- cy were also approved, and a decision was made regarding the election of a member of the Supervisory Board. SUPERVISORY BOARD www.adplastik.hr 62 SUPERVISORY BOARD The Supervisory Board oversees the company’s opera- tions, provides strategic guidance, and ensures the pro- tection of shareholders’ interests, in accordance with the Charter. The Supervisory Board consists of seven members, four of whom are appointed by the General Assembly, one by the Workers’ Council and two by the joint-stock company Holding Avtokomponenty, Saint Petersburg, Russia. Their term of office lasts four years and they can be reappointed. To ensure expertise and diversity, the Profile of the Su- pervisory Board was adopted in 2021, tailored to the business model and strategy of the AD Plastik Group. During the reporting period, four regular meetings were held in accordance with the Events Calendar. All mem- bers attended three of the meetings, while one member was absent from one. Decisions were made in accord- ance with the Rules of Procedure of the Supervisory Board, which is available on the company’s website. According to the aforementioned Rules of Procedure, any member who notices a conflict of interest, either with themselves or others, is required to immediate- ly report it to the other members of the Supervisory Board. If there is suspicion of an undisclosed conflict of interest, it should be reported to the President of the Supervisory Board. In case of suspicion regarding the President ‘s conflict of interest, the Vice President must be notified. The Supervisory Board keeps a record of all notifica- tions regarding conflicts of interest. MEMBERS OF THE SUPERVISORY BOARD Ivica Tolić, President ■ term of office from August 25, 2024 to August 25, 2028 ■ elected by the General Assembly ■ 40,881 ADPL shares ■ independent member - in accordance with the Zagreb Stock Exchange Code Bože Plazibat, Vice President ■ term of office from February 1, 2023 to February 1, 2027 ■ elected by the General Assembly ■ independent member - in accordance with the Zagreb Stock Ex- change Code Igor Anatolyevich Solomatin, member ■ term of office from July 25, 2023 to July 25, 2027 ■ elected by the General Assembly Katija Klepo, member ■ term of office from December 4, 2024 to December 4, 2028 ■ 67,633 ADPL shares ■ appointed by the shareholder AO Holding Avtokomponenty Alina Viktorovna Koretskaya, member ■ term of office from July 21, 2024 to July 21, 2028 ■ appointed by the shareholder AO Holding Avtokomponenty Andjelka Čulo, member ■ term of office from May 15, 2024 to May 15, 2028 ■ appointed by the Workers’ Council - employee representative Ivka Bogdan, member ■ term of office from February 1, 2023 to February 1, 2027 ■ elected by the General Assembly ■ 20,000 ADPL shares ■ independent member - in accordance with the Zagreb Stock Exchange Code www.adplastik.hr 63 Members Gender Average age 3 4 43% 57% 63 4 3 57% 43% 2024 2023 2024 2023 2024 4310057100 4310057100 63 ■ Men ■ Women Three members of the Superviso- ry Board are independent mem- bers in accordance with the rules of the Zagreb Stock Exchange. In accordance with the Stock Exchange Rules, the President of the Supervisory Board performs their role as an independ- ent member, ensuring objectivity and impartiality in their work. Furthermore, one member of the Supervisory Board has been elected as a representative of the employees, allowing for the integration of employees’ perspectives into the man- agement processes. Given their professional experience, two members of the Su- pervisory Board have significant expertise in accounting and financial management, while four members possess direct experience in the automotive sector gained through previ- ous work in the company. This combination of expertise and The company’s Supervisory Board has established three committees as advisory bodies, which, through their work, enable more efficient decision-making. practical knowledge ensures high-quality oversight of opera- tions and the making of informed and responsible decisions. SUPERVISORY BOARD COMMITTEES AUDIT COMMITTEE The Audit Committee monitors the financial reporting process, accounting policies, and provides recommendations on the en- gagement and effectiveness of the external auditor. The com- pany meets the Zagreb Stock Exchange requirement that at least one member of the committee must be independent. During 2024, the committee held four meetings, with all mem- bers in attendance. Discussions focused on the annual internal audit plan, reports from internal and external audits, decisions on the use of profits, and the appointment of auditors for 2024. The Audit Committee provided recommendations to the Super- visory Board for the approval of these reports and plans. PRESIDENT ■ Ivica Tolić MEMBERS ■ Bože Plazibat ■ Alina Viktorovna Koretskaya ■ Igor Anatolyevich Solomatin According to the Corporate Governance Code of the Zagreb Stock Exchange, Article 74. 43% INDEPENDENT MEMBERS ■ Men ■ Women Members Gender Average age 3 75% 52 1 25% 75100 75100 52 www.adplastik.hr 64 REMUNERATION COMMITTEE The Remuneration Committee proposes the remuneration policy for the Management Board, compensation for members of the Su- pervisory Board approved by the General Assembly, and the con- tractual terms for the members of the Management Board. In 2024, one meeting was held with all members in attendance, during which the discussion focused on the non-payment of bo- nuses to Management Board members for 2023, a review of the remuneration report, and proposals for amendments to the Remu- neration Policy for the members of the Management Board. APPOINTMENT COMMITTEE The Appointment Committee proposes candidates for the Management Board and the Supervisory Board, taking into account the objectives of the Diversity Policy. In 2024, one meeting was held, with all members in attend- ance, during which members of the Appointment Committee, the Remuneration Committee, and the Audit Committee, as well as one member of the Supervisory Board, were proposed. PRESIDENT ■ Ana Luketin MEMBERS ■ Igor Anatolyevich Solomatin ■ Ivica Tolić PRESIDENT ■ Ivica Tolić MEMBERS ■ Nenad Škomrlj ■ Igor Anatolyevich Solomatin Members Gender Average age 2 67% 59 1 33% 67100 67100 59 Members Gender Average age 3 100% 64 0 0% 100100 100100 64 ■ Men ■ Women ■ Men ■ Women www.adplastik.hr 65 MANAGEMENT BOARD According to the Rules of Procedure of the Management Board, members of the Management Board are required to avoid deci- sions arising from personal interests or the interests of related parties and must not participate in decision-making that could lead to a conflict of interest. If any member of the Management Board notices an existing or potential conflict of interest, either with themselves or anoth- er member, they are obligated to immediately inform the other members of the Management Board and the President of the Supervisory Board. In the event of suspicion that a member has not reported a conflict of interest, this information must be for- warded to the President of the Supervisory Board. To prevent potential conflicts of interest, management con- tracts include clauses prohibiting competition during and af- ter the termination of employment, as well as a confidentiality obligation. He was born in Rijeka where he graduated from the Faculty of Engi- neering and obtained the title of mag. ing. mech. He completed an MBA programme at the Zagreb School of Business, orientation Petro- leum and during his career, he has attended several additional semi- nars and professional training courses in the country and abroad. He began his career at the Croatian petrochemical industry as an in- tern, and from 1997 to 2004 he performed multiple managerial and ex- ecutive functions, including the post of the President of the Manage- ment Board of DINA d.d. Afterwards, as the director of the investment company Coca-Cola Bottling Energy Ltd., he managed the construc- tion of several energy projects in the Republic of Hungary. He was the executive director and member of the Management Board of the company Trast d.d., one of the leading logistics companies in the Republic of Croatia, after which as the President of the Manage- ment Board he managed the project for the operative restructuring of the company Mirna, Rovinj. He came to AD Plastik Group in 2012 as a general director of the company PHR (to- day AD Plastik Togliatti) in Russia. He was appointed President of the Management Board in 2015. He is specialized in change management and crisis management. MARINKO DOŠEN President of the Management Board ■ Management Board President since February 6, 2015 ■ the current term of office from July 21, 2020 to July 21, 2025 ■ 28,324 ADPL shares MANAGEMENT BOARD MEMBERS www.adplastik.hr 66 He graduated from the Faculty of Mechanical Engineering and Naval Architecture in Zagreb, orientation Engines and Motor Vehicles. He be- gan his business career as a construction engineer at the Department of Research & Development at the company Končar EVA in Zagreb. In June 1999, he joined the team of AD Plastik as a construction engi- neer at the Department of Construction. His career within the company advanced quickly. He soonly became a project manager, director of construction, director of development, assistant to the member of the Management Board for commerce and development, and member of the Management Board for commerce and development. During that period he spent significant time in Rus- sia developing the market and launching newly formed companies. From July 2012 to February 2015 he was President of the Management Board of AD Plastik Group, after which he has been work- ing as member of the Management Board. of various market opportunities, he is a member of the supervisory boards of AD Plastik Group’s subsidiary companies in Hungary and Russia, as well as the affil- iated company in Romania. He was born in Imotski, and he earned a master’s degree in eco- nomics at the Faculty of Economics in Split. He started his career as a controlling coordinator in AD Plastik, controlling the business operations of affiliated companies in Romania and Serbia. Subsequently he spent four years in Russia, conducting financial control of the business operations of the subsidiary company AD Plastik Togliatti. Upon his return, he was promoted to the position of finance director and was in charge of managing the cash flows and financial risks of the entire group as well as the treasury management of the parent company. He participated in several due diligence processes and managed in- vestments and relations with investors. Thanks to many years of work experience in the automotive industry and knowledge MLADEN PEROŠ Member of the Management Board for Sales ■ Management Board member since November 9, 2011 ■ the current term of office from July 21, 2020 to July 21, 2025 ■ 25,613 ADPL shares JOSIP DIVIĆ Member of the Management Board for Finance, Controlling, Accounting and IT ■ Management Board member since September 15, 2022 ■ current term of office from September 15, 2022 to July 21, 2025 ■ 645 ADPL shares www.adplastik.hr 67 The representation of women at the highest levels of governance is 40 percent, which meets legal criteria and confirms the company’s com- mitment to gender equality. According to the Companies Act 272 p Although the company implements a succession plan in accordance with the Diversity Policy for the Management Board and the Supervisory Board, and the adopted target of at least 25 percent women in the Management Board, this target has not yet been achieved. However, efforts continue to reach this goal within the defined five-year period. In 2024, there were no appointments of new members to the Management Board, and as a result, the proportion of women in its composition has not increased. The composition of the governing and supervisory bodies reflects a high level of professionalism, diversity, and equality, thereby creating all the prerequisites for effective, responsible, and transparent corpo- rate governance. A balance has been established based on criteria of skills, experience, and competencies, which is evident from the CVs of the members of the Management Board. GENDER STRUCTURE AND AVERAGE AGE OF THE MANAGEMENT BOARD Spol Članovi Members Gender Average age 3 4 100% 100% 51 0 0 0% 0% 2024 2023 2024 2023 2024 100100100100 100100100100 51 GENDER STRUCTURE OF THE HIGHEST LEVELS OF MANAGEMENT (Management and Supervisory Board) GOAL SHARE OF WOMEN IN THE MANAGEMENT BOARD 25% by the end of 2026 40406060 ■ Women ........... 4 (40%) ■ Men ................. 6 (60%) ■ Men ■ Women www.adplastik.hr 68 In the AD Plastik Group’s remuneration system, non-financial effects related to climate aspects are part of the Management Board remu- neration system, but not for other bodies, so no compensation related to climate issues was paid out during the reporting period. Managerial contracts define the rights and obligations of the members of the Management Board in accordance with their function. ■ monthly salary ■ the annual bonus (award) can be paid in accordance with the achieved result in the business year, depending on the degree of fulfillment of cer- tain key business indicators determined by individual managerial con- tracts. One of the criteria for bonus payment is a non-financial goal, de- fined as achieving a positive assessment of the sustainability report by an independent external expert body. The decision on bonus payment is made by the Supervisory Board, having in mind the degree and scope of achieving the objectives. The bonus is paid in company shares or cash. ■ life insurance policy ■ right to use an official vehicle 24 hours a day ■ severance payment in the event of the termination of the term of office, unless the member was repealed prior to the expiry of the term of office caused by their fault or they resigned themselves In 2024, there were no bonus payments to members of the Management Board. Pursuant to the law, data on the remuneration of members of the Manage- ment Board and the Supervisory Board are published as part of the Remu- neration Report previously approved by the General Assembly. Members of the Supervisory Board are entitled to remuneration for their participation in the work of the Supervisory Board and its committees, with the aim of ensuring independence and avoiding conflicts of interest. Their remuneration is not dependent on the company’s performance but is defined as fixed amounts, in ac- cordance with the guidelines of the Corporate Governance Code of the Zagreb Stock Exchange and HANFA. The amount of remuneration depends on the function of each member of the Supervisory Board and remuneration is paid once a quarter. Members who are also part of the Supervisory Board com- mittees are additionally compensated for their involvement, with payments being made after the respective committee meetings. Since 2021, the company has been implementing the Management Board Members’ Remuneration Policy, which was adopted by the Supervisory Board on the propos- al of the Remuneration Committee. After approval by the General As- sembly, the Remuneration Policy for the Management Board mem- bers was publicly disclosed. This Policy establishes a system of remuneration for the Management Board members that promotes transparency, long-term interests, and the ethical and successful im- plementation of the business strat- egy and development of the entire group. The Remuneration Policy ensures a balance between fixed and varia- ble compensation for the members of the Management Board, contrib- uting to transparent and effective management. In 2021 the General Assembly adopted a Decision on the remuneration of Supervisory Board members for a four-year period, which was applied in 2024. This decision is based on the principles of ensuring quality and professional members of the Supervisory Board, in order to achieve the company’s mission and long-term strategy, and for the benefit of all its stake- holders. The decision ensures the transparency of the remuneration of the Supervisory Board members, tak- ing into account external and internal elements, eco- nomic conditions, employee remuneration and best practices. STATEMENT ON THE REMUNERATION POLICY FOR THE MANAGEMENT BOARD MEMBERS STATEMENT ON THE REMUNERATION POLICY FOR SUPERVISORY BOARD MEMBERS www.adplastik.hr 69 Each corporate function has a clearly defined management level that reports directly to the highest governance body. Im- proving common knowledge on all relevant business issues of the company and its sustainable development are integral ele- ments of regular business operations. Management regularly holds consultations with individual stakeholders and is obliged to regularly report on this to the Management Board. Consultations with the Management Board are organized from time to time as needed or requested by individual stakeholders. CORPORATE FUNCTIONS ■ Production Operations CONSULTANTS EXECUTIVE DIRECTORS ■ Controlling and Accounting ■ Legal Affairs ■ Human Resources and Business Organization ■ Strategic Purchasing ■ Production, Logistics, Quality, Occupational Safety and General Affairs ■ Production site Solin ■ Technical Director at Production site Solin ■ Production site Zagreb ■ Production Zagreb ■ ADP Mladenovac ■ AD Plastik Tisza ■ AD Plastik Togliatti ■ Internal Audit ■ Quality ■ Logistics ■ Sales ■ Projects ■ Process Development ■ Product Development ■ Strategic Purchasing of Materials ■ Occupational Safety and General Affairs DIRECTORS www.adplastik.hr 70 SUSTAINABILITY MANAGEMENT AND STRATEGIC INTEGRATION Key factors include reducing CO 2 emissions, increasing ener- gy efficiency, developing environmentally friendly materials, and improving workplace safety. There is active work on diversifying production capacities and technologies, including the digitalization and automation of business processes, in order to increase competitiveness and reduce the ecological footprint. AD Plastik Group implements a business model strategy that aligns with sustainable development and long-term goals of reducing ecological footprint and improving social impact. The business model is based on innovative solutions for the production of automotive components, with particular attention given to the efficiency of manufacturing processes, resource optimization, and sustainability in the value chain. www.adplastik.hr 71 The sustainable value chain includes optimizing pur- chasing, increasing the share of local suppliers, and reducing the ecological impact of production and distribution. At the same time, collaboration with the academic community and research institutions con- tributes to the development of innovative solutions for sustainable mobility. Strategic Purchasing Department, through existing policies, systematically encourages suppliers to re- spect human rights, employee rights, the rights of vulnerable groups, equal opportunities, and other la- bor-related rights. By improving existing sustainable policies, guidelines are set for sustainable supplier management, with the aim of minimizing the nega- tive environmental impact, promoting social respon- sibility, and ensuring economic sustainability. In this context, a comprehensive analytical approach is ap- plied to topics aligned with the ESRS requirements. To achieve a higher standard of sustainability in the value chain, the updated Sustainability Assessment Questionnaire for suppliers has been adopted. This tool enables an analytical approach and ranking of suppliers based on sustainability criteria. It helps ful- fill the goals defined in sustainability policies, with a particular focus on environmental protection, re- spect for human rights, and ethical business prac- tices. Alongside technological innovation, the strategy in- cludes strengthening internal capacities through employee development, the promotion of lifelong learning, and the implementation of programs aimed at well-being and increased engagement. This inte- grated approach ensures the long-term resilience of the business model, enables adaptation to market changes, and positions AD Plastik Group as a key stakeholder in the sustainable transformation of the automotive industry. Strategic framework and decision-making The Management Board and the executives, in collaboration with the Sus- tainability Group, are responsible for implementing the sustainability strate- gy and making key decisions based on the assessment of double materiality. The Sustainability Group identifies significant impacts, risks, and opportuni- ties, conducts a double materiality assessment, and analyzes the views and interests of stakeholders, informing the Management Board. Based on the approved analysis, the Management Board integrates the key findings into strategic decisions and further business activities. The Management Board makes key sustainability decisions based on the double materiality assessment, which: ■ are presented to the Supervisory Board ■ are integrated into the management reward system through sustainability performance ■ affect the financial reports to ensure alignment with sustainable business goals After the strategic goals are defined by the Sustainability Group and ap- proved by the Management Board, they are operationally implemented with- in business areas. Directors and executive directors of business functions are responsible for integrating the sustainability strategy into operational plans and aligning their activities with long-term sustainability goals. Their respon- sibility includes ensuring resources and support for the implementation of sustainability initiatives and overseeing the implementation of action plans within their areas. Their task is to integrate key sustainability indicators into operational pro- cesses, define medium-term and long-term goals, and develop the strategies and policies needed to achieve them. This also includes conducting training and strengthening the specific competencies required for the further devel- opment of sustainable business practices within AD Plastik Group. The company does not have specific incentive programs related to sustain- ability factors for administrative, management, and supervisory bodies, ex- cept for the Management Board, whose variable compensation is also de- pendent on the achievement of non-financial goals (pg.69). www.adplastik.hr 72 Sustainability Group The Sustainability Group by the Management Board, which plays a key role in monitoring regulatory compliance, identi- fying material impacts, risks, and opportunities, and defining strategic goals and action plans. The members of the Group come from various sectors, including quality, development, le- gal affairs, organization, strategic purchasing, technology, oc- cupational safety, general affairs, and sales, ensuring the align- ment of sustainability goals with operational processes. In addition, the directors of subsidiary companies are associ- ate members of the Sustainability Group, which enables broad- er integration of the sustainability strategy across all business units. To further enhance their knowledge and competencies, members of the Sustainability Group participate in various workshops and training sessions on sustainability, and some have successfully completed EKO training on corporate sus- tainability organized by HR BCSD. The Sustainability Group directly reports to the President of the Management Board, while its member, who is also a Manage- ment Board Member for Finance, ensures the connection be- tween sustainability and financial management. The members of the Management Board possess extensive professional expertise, gained through years of experience in an industry that promotes sustainable business practices. Their active participation in various professional associations related to sustainability ensures continuous monitoring of global trends and the application of best practices in business. In 2024, the Code of Business Conduct and Policies and the Sustainability Strategic Goals were updated, and the Sustaina- bility Group was expanded with new members. Monitoring and reporting Based on the decision of the Management Board, quarterly re- porting by the Sustainability Group on progress in achieving sustainability goals has been established. In the next reporting period, the introduction of monthly reporting on sustainability operational activities at the Management Board and executives meetings is planned. Business function directors will report on sustainability topics within their areas of responsibility, thus ensuring accuracy and transparency in tracking sustainability progress. This reporting system will enable continuous adjust- ment of the strategy in line with regulatory, technological, and market changes, ensuring long-term resilience and business transparency. www.adplastik.hr 73 DOUBLE MATERIALITY ANALYSIS The interconnection between the compa- ny’s impacts on the environment and so- ciety and the financial consequences aris- ing from external sustainability factors has been recognized. DOUBLE MATERIALITY ASSESSMENT METHODOLOGY To ensure a comprehensive understanding of key sustainability aspects, a structured dou- ble materiality approach was applied, encom- passing two key components: AD Plastik Group has conducted a double materiality assessment in accordance with European sustainability reporting standards. It developed a methodology that enabled the identification of key impacts, risks, and opportunities, ensuring their integration into strategic management. Impact Materiality an analysis of the effects of business activities, products, and services on the environment and society Financial Materiality assessment of potential risks and opportunities arising from external sustainability impacts FINANCIAL MATERIALITY (outside > in perspective) IMPACT MATERIALITY (inside > out perspective) PLANET AND SOCIETY AD PLASTIK GROUP www.adplastik.hr 74 The assessment was conducted through a systematic analysis of business activities, internal operations, indus- try standards, and internal consultations. The process in- volved interdisciplinary consultations within the company, monitoring key projects and activities during the report- ing period, as well as evaluating operational activities and their impacts. Each member of the Sustainability Group took responsi- bility for a sustainability area that corresponds to their expertise, competencies, and professional qualifications. This ensured a thorough and comprehensive analysis of all topics related to the environment, society, and govern- ance, as well as the application of specialized knowledge. Based on the analysis, impacts were identified for each in- dividual topic, and additional consultations were conduct- ed with internal experts from specific business areas. To ensure the comprehensiveness of the assessment, all of the Group’s sites were included in the analysis, evalu- ating their business activities and the specific context of business operations. Since the Group conducts the same core activities at all sites, uses the same technologies, and applies a unified strategy and corporate policies, no sig- nificant deviations were observed among individual sites, allowing for a consistent and uniform materiality assess- ment at the Group level. ASSESSMENT PROCESS AND MATERIALITY CRITERIA The identification of impacts, risks, and opportunities was conducted based on defined criteria, considering regulatory requirements, the business model, and mar- ket trends. The assessment was aligned with the ESRS guidelines and is based on a combination of qualitative and quantitative indicators, taking into account their sig- nificance for the business, long-term stability, and re- silience of the company. Positive and negative impacts were assessed based on their scale and scope, as well as the possibility of mitigating negative effects. The severi- ty of potential impacts was further considered by evalu- ating the likelihood of their occurrence. Scale the actual severity of impact on the environment or people, taking into account existing mitigation measures Scope how widespread is the impact – the share of sites, employees, or costs Recoverability the assessed ability to remediate the damage in terms of costs and time frame 1 IDENTIFICATION OF IMPACTS, RISKS AND OPPORTUNITIES 3 ASSESSMENT OF FINANCIAL SIGNIFICANCE 2 IMPACT ASSESSMENT 4 IMPACT ASSESSMENT - STAKEHOLDERS S E G SOCIETY GOVERNANCE ENVIRONMENT www.adplastik.hr 75 Each of these criteria was rated on a scale from one to five, and the final severity was calculated as the average of these ratings. If the average rating exceeds a threshold of three, the impact is considered material. This approach ensures an ob- jective and consistent assessment of the severity of negative impacts. When interpreting the values of negative potential impacts on human rights, the severity of the effects takes precedence over the likelihood of their occurrence. When assessing risks, their potential financial impact was analyzed based on the effect on EBITDA. The assessment was conducted across several levels of severity, with risks be- ing categorized according to their relative impact on the busi- ness. To ensure a comprehensive view of the impact of risks, the time horizon of the potential effect was also considered – short-term, medium-term, or long-term. In addition to the financial impact, the likelihood of a risk oc- curring was also assessed, considering the frequency and conditions under which it could occur. The probability was rated on a scale ranging from an unlikely event, which occurs rarely and only under specific circumstances, to those that are highly probable or inevitable. The final risk rating was determined as the average of the fi- nancial impact score and the likelihood of occurrence, ensur- ing an objective and consistent approach to risk assessment and enabling effective decision-making for risk management and mitigation. Although formal customer participation was not achieved, their expectations and sustainability standards have already been integrated into industrial processes. To further enhance the exchange of information, direct consultations, workshops, and targeted interviews are planned, which will strengthen trans- parency and collaboration in the field of sustainability. High sustainability standards within the industry are confirmed through regular assessments ordered by customers from spe- cialized agencies such as EcoVadis, where AD Plastik Group achieved a score of 73/100 in 2024, ranking among the top five percent of suppliers and earning a gold medal. STAKEHOLDER ENGAGEMENT As an important part of the impact significance assessment process, relevant stakeholders such as employees, sharehold- ers, suppliers, and community representatives were involved. Through consultations, presentations, and questionnaires, an exchange of perspectives was facilitated, further enriching the materiality analysis of the impacts. Each group was presented with the impact assessment methodology to provide them with a better understanding of the company’s effects on the environ- ment and society. Among the surveyed stakeholders were small shareholders, banks, and investment funds, while consultations with employ- ees included representatives from different organizational lev- els, ensuring a wide range of relevant insights. Under the com- munity category, respondents from the academic community and public institutions were included, and when identifying key stakeholders in the supply chain, attention was paid to their importance based on turnover, business impact, and their own sustainability reporting obligations. The company has undertaken a series of activities to ensure customer participation in the significance assessment process, including detailed guidelines and consultations; however, a for- mal assessment of the impacts was not carried out. Custom- ers clarified that they already systematically evaluate the sus- tainability of their suppliers through internal assessments and audits, and they do not see the need for additional evaluation. www.adplastik.hr 76 STATEMENT ON DUE DILIGENCE MATERIALITY ANALYSIS Elements of the Due Diligence Process chapter page Incorporating due diligence into management, strategy, and business model Sustainability Management and Strategic Integration 72-74 Collaboration with affected stakeholders in all key steps of the due diligence process Stakeholder Engagement 77 Identification and assessment of harmful impacts Materiality Analysis 78-87 Taking measures to eliminate these negative impacts Materiality Analysis 78-87 Monitoring the effectiveness of these efforts and communicating the results Materiality Analysis 78-87 The data analysis reveals a high level of alignment between the internal assessment of impact materiality and stakeholder percep- tion, with a few noticeable differences indicating varying priorities or perceptions of impact. Climate change has been identified as a highly material topic in both the internal analysis and stakeholder assessment. This shows a clear consensus on the importance of this topic and awareness of its impact on business and sustainability. A similar situation is observed with issues such as pollution, water, circular economy, biodiversity, consumers, and end-users, where internal ratings and stakeholder perceptions are identical. This suggests that these topics are consistently recognized as important, but not critical to business operations. At the same time, there is a noticeable difference in the evaluation of the workforce and business conduct. While the internal assess- ment defines these as highly material, stakeholders have assigned somewhat lower ratings to these topics. This indicates that the organization recognizes a strong internal impact of these issues on business operations, while stakeholders, although consider- ing them important, do not perceive their impact as equally pro- nounced or direct. This difference may arise from the fact that the organization views its workforce and business conduct as areas of greater responsibility, whereas stakeholders, particularly exter- nal ones, consider these topics within a broader industry context. In the case of worker-related topics in the value chain and affected communities, there is full alignment between the internal analysis and stakeholders, with both parties rating them as less material. These topics are currently not recognized as material either inter- nally or externally, suggesting a lower current operational impact. It is evident that there is strong alignment in most of the rat- ings, indicating stability in the understanding of the importance of individual topics between the organization and stakeholders. However, the differences regarding the workforce and business conduct suggest that the organization views these aspects as crucial for internal management and sustainability. The analysis of financial materiality shows that climate change, pollution, water, circular economy, workforce, business con- duct, and consumers are recognized as financially relevant. These topics are linked to regulatory requirements, market ex- pectations, and operational risks, and they can affect business costs, investments, and long-term sustainability. On the other hand, biodiversity and ecosystems are currently not recognized as financially material, while workers in the val- ue chain and affected communities have low financial material- ity. The latter two topics are important from a corporate social responsibility perspective but still do not represent key factors in financial decision-making. In general, the topics with the greatest financial materiality are those directly linked to adaptation costs, regulatory require- ments, and market changes, while environmental and social topics with lower financial materiality ratings have not yet been recognized as factors with a direct impact on financial results. In accordance with the materiality assessment of information, an exemption from disclosure of the expected financial effects has been applied, taking into account the uncertainty of out- comes and the availability of reliable data. www.adplastik.hr 77 Crucial Consumers and end users (S4) Water (E3) Pollution (E2) Workers in the value chain (S2) Affected communities (S3) Climate change (E1) Own workforce (S1) Business conduct (G1) Circular economy (E5) Biodiversity and ecosystems (E4) Minimum Non-material topics Material IMPACT MATERIALITY Minimum FINANCIAL MATERIALITY Material topics Material/Crucial In order to further improve understanding, a materiality ma- trix has been developed to show the relationship between the significance of environmental and social impacts and their fi- nancial consequences for the company’s business. The matrix allows for the strategic prioritization of sustaina- bility and ensures that key topics remain in focus within the company’s strategy. www.adplastik.hr 78 impact goal / expected consequence activities and progress ■ Positive Transition plan to reduce emis- sions and increase energy effi- ciency Reduction in CO 2 emissions by 50% and 50% of energy from renewable sources by 2030 Application to the NRRP and the Modernisation Fund – construc- tion of a photovoltaic power plant, energy consumption optimization, improvement of energy efficiency, and monitoring of Scope 1, 2, and 3 emissions ■ Negative Use of exclusively non-renewable energy sources, difficult data col- lection from Scope 3, emissions of greenhouse gases from Scopes 1 and 2 and their impact on the envi- ronment and climate change Reduction of emissions from Scope 1 and 2 - zero CO 2 emissions by 2050 Modernization of energy systems, increasing energy efficiency, annu- al monitoring of emission reduc- tions ■ Risks Financial and operational exposure due to the transition to a low-car- bon economy Achieving strategic sustainability goals and regulatory challenges Use of subsidies and development of products with a smaller carbon footprint E1 CLIMATE CHANGE ENVIRONMENT MATERIAL IMPACTS Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. material impacts www.adplastik.hr 79 impact goal / expected consequence activities and progress ■ Positive Regular monitoring of emissions that are not included in Scope 1, 2 and 3 Reducing negative environmental impact Replacing certain products with those with a lower environmental impact, reducing emissions and use of substances of concern, and strict control of microplastics at mills ■ Negative The qualitative performance of specific materials containing a proportion of substances of con- cern makes their substitution with alternative solutions more difficult Continuous control and develop- ment of alternative solutions in cooperation with partners IMDS - regular reporting on de- tailed chemical composition of materials and implementation of replacement materials ■ Risks Increased investment costs in the development and research of new materials and additional equip- ment Slowing down the development of new solutions and operating costs can affect competitiveness and financial stability More efficient research and devel- opment and diversification of fund- ing sources E2 POLLUTION ENVIRONMENT Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. material impacts www.adplastik.hr 80 impact goal / expected consequence activities and progress ■ Positive Digital monitoring of water con- sumption, regular analysis and control of wastewater, and effi- cient management and reporting Reducing water consumption by 30% by 2030 Regular monitoring of consump- tion and quality control of dis- charged water ■ Negative Improving infrastructure and man- agement of water systems Reduction of water consumption and constant control of waste water Replacement of the internal infra- structure system at certain sites and digital monitoring of con- sumption ■ Risks High investments in infrastructure systems increase operating costs and affect investment plans Violation of environmental stand- ards and consequently reduced ef- ficiency of production processes Upgrading infrastructure systems improves water quality and safety E3 WATER ENVIRONMENT material impacts Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. www.adplastik.hr 81 impact goal / expected consequence activities and progress ■ Positive The business does not contrib- ute to the introduction of invasive species into new habitats, while emissions from production pro- cesses are strictly controlled by purification and filtration systems to minimize pollution Continuous improvement of en- vironmental impact management through the strengthening of con- trol measures By improving filtration and purifi- cation systems, enhancing trans- port control, and regularly moni- toring environmental indicators, minimal impact on biodiversity and ecosystems is ensured ■ Negative By reducing emissions and making improvements in ESRS areas E1, E2 and E3, negative impacts on biodiversity and ecosystems are reduced Improvement of the management system aimed at achieving sus- tainability goals Through resource optimization, filtration, water management, and education, emissions are reduced and biodiversity is protected ■ Risks Risks to biodiversity are not specifically identified as they are related to standards E1, E2 and E3 E4 BIODIVERSITY AND ECOSYSTEMS ENVIRONMENT material impacts Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. www.adplastik.hr 82 impact goal / expected consequence activities and progress ■ Positive Reducing the ecological footprint through resource optimization and waste management Increase in the share of recycled materials by 30%, eco-friendly materials by 40%, and return- able packaging by 2030, with full product recyclability at end-of-life targeted by 2050 Projects with a higher share of ecological materials, inventory optimization, product develop- ment that can be a secondary raw material ■ Negative The inability to separate complete waste and the use of materials made from non-renewable sourc- es due to their qualitative perfor- mance and the limitations of waste disposal companies Transition to a circular economy - recycle all production waste by 2050 Development of sustainable alter- native materials and improvement of production processes to reduce production waste ■ Risks Price and quality non-competitive- ness of environmentally friendly materials and the high costs of their development Failure to meet environmental standards and consequent reputa- tional and regulatory challenges Contracting new projects with a higher share of ecological mate- rials E5 CIRCULAR ECONOMY material impacts ENVIRONMENT Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. www.adplastik.hr 83 impact goal / expected consequence activities and progress ■ Positive Adequate measures to protect working conditions, health and social security of employees Safe and stable jobs, greater em- ployee engagement, increase the share of training hours by 30% by 2030 New collective agreements signed with better material conditions, all Group employees covered by collective agreements, preventive measures for employee protection and health ■ Negative The inability to fully adjust to inflationary pressures, which exceed the realistic capabilities, create challenges in preserving economic stability and the social standard of employees Monitoring and aligning salaries with industry standards Collective bargaining ■ Potential Increasing job stability and com- petence development improve working conditions, but higher workloads and less flexibility can cause dissatisfaction Increasing employee satisfaction and motivation increases produc- tivity, operational efficiency and long-term competitiveness, while the consequences can be dissat- isfaction and increased turnover Job analysis and systematic train- ing, identifying opportunities for flexible work models ■ Risks Increased turnover due to chang- ing labor market conditions and inflationary pressures can cause labor shortages Reduced operational efficiency, difficulties in maintaining produc- tion continuity, increased costs of hiring and training new workers, and long-term weakened compet- itiveness Improving the working climate, working conditions and employ- ment system S1 OWN WORKFORCE SOCIETY material impacts Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. www.adplastik.hr 84 Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. impact goal / expected consequence activities and progress ■ Positive Secure processes, regulatory compliance and regular testing ensure data protection, product quality and safety Ensure the highest standards of product safety and quality Adopted Advertising and Market Communication Code, improve- ment of communication B2B plat- forms in the value chain ■ Negative Inability to quickly adapt to new customer requirements and regu- lations slow down the adaptation of new information Timely adaptation in accordance with EU regulations Improvement of internal proce- dures ■ Potential Improving DFMEA analysis in- creases end-user safety Absolute end-user security Improved DFMEA analysis ■ Risks Lack of control over confidential data, non-compliance with regu- lations, and insufficient quality of product-related information Legal sanctions, increased oper- ating costs and damage to rep- utation and long-term business relationships Strict implementation of NDA contracts, compliance with regu- lations, regular testing, transpar- ent communication and employee education S4 CONSUMERS AND END USERS SOCIETY material impacts www.adplastik.hr 85 impact goal / expected consequence activities and progress ■ Positive The Code of Business Conduct and Policies ensure ethical and transparent business through clear standards, compliance with regulations, systematic audits and mechanisms for the protec- tion of whistleblowers Sustainable supplier manage- ment, zero tolerance for corrup- tion and violence, protection of human rights, strengthening stakeholder trust, preventing cor- ruption and continuous improve- ment of sustainability indicators Employee education, compli- ance and adherence to prescribed procedures, and regular supplier audits to monitor sustainability standards ■ Potential Promoting sustainability through conferences and professional or- ganizations, optimizing the supply chain through supplier consolida- tion and long-term contracts, and educating employees on anti-cor- ruption practices Sustainable, ethical and transpar- ent business through strength- ening of regulatory initiatives, supply chain optimization and employee education Active participation in professional panels, membership in profession- al organizations, consolidation of suppliers, long-term contracts and training ■ Risks Insufficient whistleblower protec- tion, untimely payments to suppli- ers, and insufficient understand- ing of anti-corruption practices Increased operating costs, legal consequences and reputational challenges Promoting protection mechanisms, optimizing payments and educat- ing employees G1 BUSINESS CONDUCT GOVERNANCE material impacts Strategies and policies Sustainability strategy and goals, Code of Business Conduct and Policies. www.adplastik.hr 86 Unassessed topics In the process of assessing materiality, cer- tain subtopics were not evaluated because they are considered irrelevant to the busi- ness or not applicable in the context of the industry. All other topics were systemat- ically assessed, with some impacts iden- tified as non material, as reflected in the individual analysis of thematic standards. ■ ESRS E3 Marine Resources were not assessed as they are not relevant to the business, while part of this topic related to water was included in the analysis (pg. 104). ■ ESRS E4 Biodiversity and Ecosystems - data on land use change, freshwater and marine resources, and direct ex- ploitation were not assessed as they are not material for the business mod- el and industry context, except from the perspective of their impact on cli- mate change and pollution (pg. 107). The effects on species status, the extent and condition of ecosystems, as well as the impacts of ecosystem services and dependence on those services were not assessed as they are not applicable to the business. Key Recommendations ■ Implement systematic tracking of emissions in the value chain (particu- larly Scope 3). ■ Gradual transition to sustainable ener- gy sources ■ Leverage sustainable innovations to re- duce financial and operational risks ■ Improve control of sustainability crite- ria within the supply chain ■ Improve transparency and digital solu- tions for communication within the val- ue chain ■ Continuous employee education and further development of social policies www.adplastik.hr 87 AD Plastik Group is gradually developing an analysis of phys- ical and transition risks to ensure adequate management and long-term resilience. Currently, there is no formalized resilience analysis, but a climate scenario assessment is planned for 2025 and 2026 to identify long-term challenges and opportuni- ties. The goal is to improve the understanding of climate risks and opportunities, which will enable better strategic planning and the development of adaptation measures. CLIMATE CHANGE E1 RESILIENCE OF THE STRATEGY AND BUSINESS MODEL ENVIRONMENTAL INFORMATION www.adplastik.hr 88 Strengthening the resilience of production sites through vulnerability assessments of climate im- pacts and the implementation of protective infra- structural measures Optimizing energy consumption through digitaliza- tion and improving energy efficiency Diversifying the supply chain to reduce dependence on regions prone to extreme weather events Implementing early warning systems for weather disruptions and crisis plans for unforeseen situa- tions Gradual adjustment of the product portfolio to sustainability require- ments through the development of lightweight and recycled materials, as well as products with lower CO 2 emissions Optimization of the supply chain through the assessment of Scope 3 emissions and collaboration with suppliers to reduce the carbon foot- print Exploration of investment opportunities in sustainable technologies, including circular economy and renewable energy sources for internal operations Assessment of the financial implications of climate change through stress tests and scenario analysis, considering the costs of emission allowances and potential carbon taxes IDENTIFIED PHYSICAL RISKS ■ Extreme weather events, such as floods and heatwaves, can impact production processes, in- crease operational costs, and cause disruptions in the supply chain ■ Changes in resource availability and rising energy prices can have long-term consequences on op- erational efficiency and stability in planning ADAPTATION MEASURES IDENTIFIED TRANSITION RISKS ■ Regulatory risks – stricter EU regulations may increase regulatory obligations and operational costs ■ Market risks – customer and industry expectations for reducing car- bon footprints may impact competitiveness and business opportu- nities ■ Financial risks – investments in decarbonization and renewable en- ergy sources represent significant costs and require careful planning ADAPTATION MEASURES AD Plastik Group recognizes the need for continuous improve- ment in managing climate-related risks and opportunities and will enhance its resilience analysis methods in the coming years, integrating the results into its strategic planning. Currently, it does not have a formalized transition plan for miti- gating climate change, but it is aware of its importance for har- monizing the business model with the goal of climate neutral- ity by 2050. During the reporting period, its development was started in accordance with ESRS requirements, and its com- pletion is planned for 2025. In this context, a climate scenario compatible with limiting global warming to 1.5°C was also con- sidered, as a basis for identifying environmental, social, techno- logical, market and regulatory trends and potential decarboni- zation measures that will be included in the plan, in accordance with the EU taxonomy and the Paris Agreement. During the reporting period, sustainability strategic goals, in- cluding emission reduction, were updated. These updates are not the result of additional internal research but are aligned with binding EU regulations and guidelines, taking into ac- count anticipated regulatory changes, technological devel- opments, and market trends. The emission reduction plan is based on available parameters from the EU framework, and its progress will be regularly monitored and adjusted to meet the latest requirements. For monitoring progress towards achieving target values, 2023 has been set as the baseline year, taking into account external factors such as temperature variations that may af- fect energy consumption and emissions. In the case of signif- icant deviations in future years, a three-year average may be used to ensure a more accurate representation of emission reduction trends. www.adplastik.hr 89 Environmental Protection Policy aligning production and operation- al processes with the best available technologies and techniques to re- duce the environmental footprint Sustainable Supplier Management Policy setting requirements for reducing emissions across the supply chain Energy Management Policy implementing an energy management system according to ISO 50001 stand- ard to improve energy efficiency AD Plastik Group is focused on responsible environmental impact management and continuously develops and imple- ments policies that support climate change mitigation, busi- ness adaptation to climate challenges, and energy efficien- cy. Climate risks are managed through the Code of Business Conduct, environmental protection policies, energy manage- ment policies, and sustainable supplier management. The policies are applied to all operational activities of AD Plastik Group, including production processes, energy effi- ciency, and the supply chain. Special emphasis is placed on reducing emissions within the company’s own operations, while the impact within the supply chain is reduced through requirements for suppliers. These policies are applied to all of the Group’s production sites, while operations outside of production activities are not currently covered by specific cli- mate goals. MITIGATION OF CLIMATE CHANGE As part of the energy transition, AD Plastik Group is develop- ing projects that reduce dependence on fossil fuels, improve energy efficiency, and optimize manufacturing processes. It is adapting to climate change through the development of sustainable materials, with a particular focus on introduc- ing recycled and biodegradable polymers, thereby reducing carbon footprint and dependence on fossil resources. One of the key projects in the upcoming periods is the construc- tion of a photovoltaic power station in Zagreb, which would reduce CO 2 emissions by 300 tons annually. During the re- porting period, two co-financing projects were submitted through the Modernization Fund and the National Recovery and Resilience Plan (NRRP), with a main investment in a photovoltaic power station with a capacity of 1725 kW. The Modernization Fund exclusively co-finances the photovol- taic power station, while the NRRP covers the integration of metering points, a new grinding machine, cooling plant, and climate chamber. Additionally, the replacement of the old boiler with a low-temperature boiler and the moderni- zation of the heating system are planned, which will reduce gas consumption by 36,000 m³ annually and CO 2 emissions by 80 tons annually. These projects reaffirm the company’s commitment to reducing its environmental footprint and in- creasing resilience to climate change. The implementation of measures depends on the availabili- ty of financial resources, with affordable financing playing a crucial role in adapting to market changes and investing in decarbonization. Shareholder and financial institution trust in the sustainability of the strategy can secure better financ- ing conditions and facilitate the realization of the planned measures. The company’s activities related to reducing greenhouse gases and mitigating emissions are financed through alter- native mechanisms (e.g., internal funds or other forms of fi- nancing), and therefore, there is no data available on financ- ing through carbon credits. AD Plastik Group has not yet developed a detailed assess- ment of the financial consequences of climate risks, but it is aware of their impact and has started analyzing potential effects. Physical risks, such as extreme weather events and rising energy prices, may affect operational efficiency and business stability, while transition risks, including strict- er regulations and costs related to decarbonization invest- ments, could increase financial obligations in the coming years. At the same time, opportunities such as energy effi- ciency and the use of renewable energy sources can reduce operational costs and ensure long-term stability. Projects like the photovoltaic power station and the development of recycled materials undoubtedly strengthen the market posi- tion and business sustainability. Since the resilience analysis of the strategy is still in prepa- ration, the quantification of financial consequences will be available in future reports. CLIMATE CHANGE-RELATED POLICIES www.adplastik.hr 90 ENERGY TOTAL ENERGY CONSUMPTION FROM FOSSIL FUELS (MWh) TOTAL ENERGY CONSUMPTION FROM FOSSIL FUELS 2024 (MWh) Site 2023 2024 ∆ Croatia 27,241.7 26,201.3 -3.8% Hungary 4,648.9 4,293.4 -7.6% Serbia 2,880.5 2,401.9 -16.6% Russia 3,062.4 4,152.2 +35.6% TOTAL 37,833.6 37,048.8 -2.1% 76761919 total 37,048.8 ■ Consumption of purchased or acquired electricity, heat, steam, or cooling from fossil sources (Scope 2) ..............................................................28,158.0 (76.0%) ■ Fuel consumption from natural gas (Scope 1) .......................................................6,876.4 (18.6%) ■ Fuel consumption from crude oil and petroleum products (Scope 1).......................2,014.4 (5.4%) Fuel consumption from coal and coal products ............................................................................0 Fuel consumption from other fossil sources .................................................................................0 717112121010 total 37,048.8 ■ Croatia ..............................70.7% ■ Hungary ............................ 11.6% ■ Serbia .................................6.5% ■ Russia ...............................11.2% ENERGY INTENSITY 0.24 MWh/k€ Energy intensity is measured as the ratio of total electricity consumption (MWh) to total revenue (k€). www.adplastik.hr 91 FUEL CONSUMPTION FROM CRUDE OIL AND PETROLEUM PRODUCTS (SCOPE 1) (MWh) FUEL CONSUMPTION FROM NATURAL GAS (SCOPE 1) (MWh) CONSUMPTION OF PURCHASED OR ACQUIRED ELECTRICITY, HEAT, STEAM, OR COOLING FROM FOSSIL SOURCES (SCOPE 2) (MWh) 2023 2024 Total energy consumption from nuclear sources - - Share of energy from nuclear sources in total energy consumption - - Total energy consumption from renewable sources - - Energy consumption for renewable sources including biomass - - Consumption of purchased or acquired electricity, heat, steam, or cooling from fossil sources - - Consumption of energy from renewable sources from own production, except for fuel - - Share of energy from renewable sources in total energy consumption - - TOTAL - - OTHER SOURCES Site 2023 2024 ∆ Croatia 21,047.0 19,630.0 -6.7% Hungary 3,944.0 3,160.0 -19.9% Serbia 2,478.0 2,057.0 -17.0% Russia 2,452.0 3,311.0 +35.0% TOTAL 29,921.0 28,158.0 -5.9% Site 2023 2024 ∆ Croatia 619.8 655.6 +5.8% Hungary 167.5 509.3 +204.1% Serbia 11.1 8.2 -26.0% Russia 544.1 841.2 +54.6% TOTAL 1,342.5 2,014.4 +50.0% Site 2023 2024 ∆ Croatia 5,574.9 5,915.6 +6.1% Hungary 537.4 624.0 +16.1% Serbia 391.4 336.7 -14.0% Russia 66.4 - -100.0% TOTAL 6,570.1 6,876.4 +4.7% www.adplastik.hr 92 EMISSIONS BASED ON MARKET (t CO 2 e) BASED ON SITE (t CO 2 e) Site 2023 2024 ∆ Croatia 47,523.9 77,620.9 +63.3% Hungary 9,359.8 9,209.8 -1.6% Serbia 10,004.1 9,446.6 -5.6% Russia 8,121.7 11,065.9 +36.3% TOTAL 75,009.5 107,343.2 +43.1% Site 2023 2024 ∆ Croatia 48,995.7 79,728.5 +62.7% Hungary 9,359.8 9,209.8 -1.6% Serbia 10,004.1 9,446.6 -5.6% Russia 8,121.7 11,065.9 +36.3% TOTAL 76,481.3 109,450.8 +43.1% During the reporting period, total greenhouse gas emissions did not decrease, despite clearly defined targets. The increase in emissions is a consequence of a larger production volume and improved calculation methodology, which is considered an important step towards more accurate and transparent re- porting. Additionally, for a portion of Scope 3 emissions cal- culated during the reporting period, there is no comparable data available for 2023. Although 2023 has been selected as the baseline year for Scope 1 and 2, alignment with Scope 3 has not yet been ful- ly completed. This is due to the need for additional analysis and data validation from the value chain, as the operational boundary was gradually expanded throughout the year, and Scope 3 was initially not included. In the upcoming period, a recalculation and alignment of the baseline year for Scope 3 is planned, which will ensure greater comparability and con- sistency in reporting. In defining the organizational boundary, the AD Plastik Group applies the operational control approach. Emissions report- ing includes all entities covered by the consolidated financial statements, except for the Kaluga and Slovenia sites, which have limited operational and sustainability relevance. Based on consultations with expert organizations and individu- als, as well as additional training for internal specialists, the cal- culation of emissions for Scope 1, 2, and 3 has been improved. The changes primarily relate to the calculation methodology, and to ensure better comparability, the same methodology has been applied to 2023, resulting in changes in that section as well, which is fur ther explained on the following pages. More information on the scope of reporting can be found on page 17. t CO 2 e 2023 reference year location-based targets 2030 2050 Scope 1 and 2 9,740 √ 4,900 - -50% net zero Scope 1 1,790 √ 900 - Scope 2 7,950 4,000 - Scope 3 64,353.1 × 51,483 - -20% net zero TOTAL EMISSIONS SCOPE 1, 2, 3 0.70 0.72 t CO 2 e/k€ t CO 2 e/k€ INTENSITY INTENSITY Emissions intensity is measured as the ratio of total Scope 1, 2, and 3 emissions (t CO 2 e) to total revenue (k€). www.adplastik.hr 93 9292 9090 85851010 737313131010 ■ Scope 1................2,018.2 (1.8%) ■ Scope 2................8,369.3 (7.7%) ■ Scope 3............99,063.3 (90.5%) Site 2023 2024 ∆ Croatia 1.387.2 1.475.6 +6.4% Hungary 161.2 257.3 +59.6% Serbia 88.9 76.5 -13.9% Russia 152.4 208.8 +37.0% TOTAL 1,789.7 2,018.2 +12.8% This includes the consumption of fuel oil, natural gas for heat- ing, bottled LPG for forklifts, as well as gasoline and diesel for company-owned or leased vehicles, including emissions from official business trips in these vehicles. The calculation is performed by multiplying the quantity of consumed energy (measured in tons, liters, or cubic meters) by the correspond- ing emission factor. Emission factors from DEFRA, which are internationally accepted and regularly updated to ensure accu- racy, were used for the emission calculations. In relation to the report published for the previous period, dif- ferent emission factors were used, so there were changes for 2023 as well. At the same time, the emissions related to busi- ness trips were transferred to Scope 1 for a more precise cal- culation, as the company has data on fuel consumption. SCOPE 1 – Energy Consumption total 2,018.2 ■ Croatia ..............................73.1% ■ Hungary ............................ 12.7% ■ Serbia .................................3.8% ■ Russia ...............................10.3% BASED ON MARKET (t CO 2 e) BASED ON SITE (t CO 2 e) total 109,450.8 ■ Scope 1................2,018.2 (1.9%) ■ Scope 2................6,261.7 (5.8%) ■ Scope 3............99,063.3 (92.3%) GROSS EMISSIONS (t CO 2 e) ■ Higher level ......................83.3% ■ Own business ...................11.3% ■ Lower level .........................2.6% ■ Transportation ....................2.7% total 109,450.8 total 107,343.2 2023 2024 ∆ Higher level 62,251.4 91,217.7 +46.5% Own business 11,740.1 12,324.1 +5.0% Lower level - 2,899.9 - Transportation 2,489.8 3,009.0 -20.9% TOTAL 76,481.3 109,450.8 +43.1% DISTRIBUTION OF EMISSIONS IN THE VALUE CHAIN (т CO 2 e) www.adplastik.hr 94 GROSS LOCATION-BASED EMISSIONS (t CO 2 e) GROSS MARKET-BASED EMISSION (t CO 2 e) Site 2023 2024 ∆ Croatia 4,271.1 4,718.5 +10.5% Hungary 964.8 734.7 -23.9% Serbia 1,553.2 1,379.3 -11.2% Russia 1,160.9 1,536.8 +32.4% TOTAL 7,950.0 8,369.3 +5.3% Site 2023 2024 ∆ Croatia 2,799.2 2,610.9 -6.7% Hungary 964.8 734.7 -23.9% Serbia 1,553.2 1,379.3 -11.2% Russia 1,160.9 1,536.8 +32.4% TOTAL 6,478.2 6,261.7 -3.3% 565616161818 4242121222222424 total 8,369.3 total 6,261.7 ■ Croatia ..............................56.4% ■ Hungary .............................. 8.8% ■ Serbia ...............................16.5% ■ Russia ...............................18.4% ■ Croatia ..............................41.7% ■ Hungary ............................ 11.7% ■ Serbia ...............................22.0% ■ Russia ...............................24.5% Emissions are calculated based on the actual electricity con- sumption, which is provided on the supplier invoices. Con- sumption is multiplied by the location-based emission factor of each country to ensure a more accurate emission calcu- lation. Carbon Database Initiative emission factors for 2023 and 2024 were used. As a result, changes were also made to the 2023 data, since different emission factors were applied in the previous reporting period. Although the total consumption of electricity in 2024 was slightly lower than the previous year, greenhouse gas emis- sions from Scope 2 increased due to higher emission factors for electricity in the countries where we operate. The company requested market-based emission factors from electricity suppliers by site, but received them only for Croa- tia. Accordingly, the total market-based greenhouse gas emis- sions value is not fully accurate. SCOPE 2 – Electricity www.adplastik.hr 95 SCOPE 3 – Other Emissions During the reporting period, the calculation of emissions within Scope 3 was improved and expanded to include additional cat- egories that were not previously covered. For the years 2023 and 2024, emissions were calculated for additional categories that were not previously part of the report, which ensured a more complete presentation of the company’s carbon footprint. At the same time, more precise calculation methodologies for some categories are still in development, and active work is underway to improve them. The goal is to implement calcula- tions in future reporting periods that will include more detailed data on the supply chain, product use, and disposal. Through further collaboration with relevant stakeholders, using industry guidelines, and adapting the methodology, consisten- cy and alignment with best practices in greenhouse gas emis- sions reporting will be ensured. GROSS EMISSIONS (t CO 2 e) 67671616 total 99,063.3 ■ Croatia ..............................74.2% ■ Hungary .............................. 8.3% ■ Serbia .................................8.1% ■ Russia .................................9.4% Site 2023 2024 ∆ Croatia 43,337.5 73,534.4 +69.7% Hungary 8,233.7 8,217.8 -0.2% Serbia 8,362.0 7,990.8 -4.4% Russia 6,808.4 9,320.3 +36.9% TOTAL 66,741.6 99,063.3 +48.4% 2023 2024 ∆ 1. Purchased goods and services 59,281.4 83,790.3 +41.3% 2. Capital goods - 4,254.6 - 3. Fuel- and energy-related activities (not included in Scope 1 and 2) 2,970.0 3,169.6 +6.7% 4. Upstream transportation and distribution 2,489.8 3,009.0 +20.9% 5. Waste generated in operations - 89.9 - 6. Employee business travel 164.0 90.3 -44.9% 7. Employee commuting 1,836.4 1,756.4 -4.4% 8. Leased assets (rental) - 3.2 - 12. End-of-life treatment of sold products - 69.4 - 15. Investments - Euro APS (Croatia) - 2,830.5 - www.adplastik.hr 96 1 Purchased goods and services To ensure the most accurate calculation of emissions, a distinction is made between recycled and non-recycled basic materials, with their quantities calculated according to their specific emission factors. Materials such as wood, cardboard, plastic film, and office paper are included in the calculation, based on the tonnage of material used in packaging. All these indicators are also part of the material flows within the Circular Economy. A combined approach was used to calculate emissions, with the average-data method applied for basic materials and the spend-based method used for other goods and services. For the latter, DEFRA’s emission factors from 2021 were used (spend-based), with inflation rate adjustments, ensuring data relevance and covering a broader range of purchasing. Further improvements in the methodology are planned for the next reporting period to increase accuracy and scope of this segment. Due to data unavailability, emissions from this category for 2023 were partially calculated. 2 Capital Goods Emissions were calculated using the spend-based method, applying DEFRA’s 2021 emission factors, adjusted for inflation rates to ensure data relevance. The data used for the calculation was sourced from financial reports, with capital goods referring to only two categories: buildings and plants & equipment. This approach ensures a more comprehensive representation of the impact of capital investments on the company’s total carbon footprint. Emissions for 2023 have not been calculated. 3 Fuel- and energy-related activities (not included in Scope 1 and 2) Emissions from this category include emissions from the “Well-To-Tank” (WTT) phases and transmission and distribution (T&D) losses for electricity consumed from Scope 2, as well as for fuels used from Scope 1 (fuel oil, natural gas, LPG, gasoline, and diesel). 4 Transport and distribution Emissions were calculated by multiplying the total transport distance, the weight of goods in tons, and the corresponding emission factors, with transport emission factors from the official DEFRA database used, including factors that account for emissions occurring before the fuel combustion (WTT). The analysis was fully conducted for sites in Russia, Serbia, and Hungary, while for the parent company in Croatia, it was partially carried out. In Croatia, data for the 30 largest suppliers (out of a total of 500) were included, considering EXW and DAP delivery terms. The net weight of purchased materials was used, as data on gross weight is currently unavailable, and for materials expressed in different units of measurement, the weight was estimated based on conversion factors. The analysis covers only transportation from first-tier suppliers to Group sites and transportation of finished products to customers, but only in cases where the transportation was organized by the company. Transport organized by customers, as well as internal transportation within production sites in Croatia, are currently excluded due to data unavailability. Unlike previous periods when the weight of goods was not included in the calculation, the emission calculation methodology has been improved, and a more reliable approach based on the actual quantity of goods transported has been introduced. With this calculation, the impact of transport processes in the supply chain on total emissions was quantified for the first time, with the planned further improvement of data collection and reporting methodology, in accordance with international standards and regulatory requirements. EMISSIONS IN THE SUPPLY CHAIN UPSTREAM www.adplastik.hr 97 5 Waste generated in operations Emissions from waste generated during operations were calculated based on data regarding the type, quantity, and disposal method of waste, expressed in tons, and multiplied by the corresponding emission factors. The calculation is made by multiplying the quantity of each type of waste and its associated emission factor, with waste categorized into the following groups: plastics, metals, paper/cardboard, electrical waste, textiles, mineral oils, bricks, wood, and commercial/industrial waste. Emissions were determined depending on the waste treatment method, including recycling, energy recovery through incineration, and landfilling. Emission factors from DEFRA for 2024 were also used for calculation to ensure consistency with internationally recognized standards. Emissions for 2023 have not been calculated. 6 Business Travel Emissions from business travel by plane are based on data provided for each flight ticket by the travel agency organizing the trips. Data for sites outside of Croatia were not available during the reporting period. Emissions from rented vehicles are not included in Scope 3 but are reported under Scope 1. 7 Employee Commuting For employee commuting to and from work, an estimated value is used, based on the employees’ home addresses and their mode of transportation. This estimate is then multiplied by the corresponding emission factor from DEFRA. 8 Upstream Leased Assets Most of the emissions from the use of leased properties, machinery, and vehicles have already been included in the Scope 1 and 2 calculations, based on actual energy and fuel consumption. In this category, emissions were calculated for the warehouse in Krapina, based on electricity consumption. 9 Transport and distribution Emissions from this category, which refer to the transport of products organized by customers or third parties, are not included due to the unavailability of data. 10 Processing of sold products Emissions have not been included in this year’s calculation as precise data on the production processes of customers have not yet been collected. Since the company’s products are further processed, i.e., assembled onto vehicles before final use, it is planned to develop a data collection system in collaboration with customers in the next reporting periods, which will enable accurate calculations in future reporting periods. 11 Use of sold products Emissions have also not been included in this year’s calculation as precise data has not yet been collected. Although the company’s products do not directly consume energy, their mass positively impacts fuel consumption in the vehicles in which they are installed. In the next reporting periods, it is planned to develop an appropriate methodology that will allow for a comprehensive representation. EMISSIONS AFTER PRODUCT DELIVERY DOWNSTREAM www.adplastik.hr 98 12 End-of-life treatment of sold products Emissions have been calculated based on the total quantity of sold products expressed in tons. According to average industry data, it is assumed that 50 percent of the products are recycled, 25 percent are disposed of by incineration, and 25 percent are landfilled at the end of the vehicle’s life cycle. For the calculation, DEFRA emission factors for waste in Scope 3 were used, with the same factor applied as indicated in the tables. Emissions for 2023 have not been calculated. 13 Leased assets Emissions from leases are not separately reported, as emissions from rented spaces have already been included in the calculation of Scope 1 and 2, based on actual energy and fuel consumption. Additionally, the leased space was not in use for most of the year, meaning it was not actively rented, and therefore, there were no material emission sources that would require a separate calculation under this category. 14 Franchises Emissions from this category are not applicable as the company does not operate under a franchise model. 15 Investments Emissions related to investments include emissions from Scope 1 and 2 of the affiliated company Euro APS, calculated proportionally to the 50 percent ownership share, in accordance with the applicable requirements of the ESRS. Data for Scope 3 were not available and will be sought for inclusion in the next reporting period. Since the operational control approach is used to determine reporting boundaries, the guidelines allowing the inclusion of emissions in accordance with the company’s ownership share in this entity were applied in this case. No data is available for 2023. AD Plastik Group does not currently apply the internal carbon price system in its business decisions, and its potential intro- duction will be considered in accordance with future regulato- ry requirements and strategic sustainability goals. There were no biogenic CO 2 emissions because biomass is not used as an energy source nor is it used in processes. During the reporting period, no formal analysis was conduct- ed regarding the expected financial impacts, material physical and transitional climate risks, or potential opportunities. Based on preliminary internal assessments and available data, it was determined that the risks are currently not material to the com- pany’s financial position. However, the importance of a compre- hensive analysis of climate risks and opportunities has been recognized, and preparatory work is underway to establish a methodology and conduct a detailed analysis in the upcoming periods. This will ensure comprehensive and transparent re- porting in future reports, in line with ESRS requirements. In this reporting period, capital and operating expenses related to climate measures were not presented separately, but it is planned to develop a methodology for their monitoring and linking to financial statements in future periods. The Emissions Trading System (EU ETS) does not apply to the company’s operations, and none of its sites fall under the regulatory scope of the ETS. Consequently, there is no requirement to acquire emission allowances, nor is any revenue generated from their sale. www.adplastik.hr 99 E2 POLLUTION Pollution management is crucial for the long-term sustaina- bility of a business, both in terms of compliance with regu- latory requirements and environmental preservation, as well as cost optimization. Key risks and opportunities associat- ed with various forms of pollution have been identified, and management activities are focused on minimizing negative impacts and seizing opportunities to improve business per- formance. The analysis of double materiality has enabled clear identi- fication of material impacts, risks, and opportunities related to pollution. Monitoring VOC emissions from painting lines, emissions from boiler rooms, and cooling systems helps re- duce pollution and ensures compliance with laws. Replacing equipment with more efficient technology reduces pollution but requires higher initial investments. By using IMDS and REACH regulations, the presence of haz- ardous substances is analyzed and reduced, including replac- ing chrome-plated components with more sustainable alter- natives. Microplastics are controlled through filtration and closed cooling systems, while storing plastic materials in en- closed spaces increases operational costs. Pollution of living organisms, food resources, and substanc- es of very high concern has not been given special attention, as they are not relevant to the company’s operations, while soil pollution has been assessed as non-material. However, other factors related to this issue have been deemed materi- al, which was confirmed by stakeholder assessment, further emphasizing the completeness and importance of reporting on pollution. Business activities at all sites have been analyzed using qual- itative assessments and assumptions, and within the Environ- mental Protection Policy, a clear focus has been defined on preventing and controlling air, water, and soil pollution. Spe- cific procedures for reducing negative impacts and replacing harmful substances have been established and are applied at all levels of the business, ensuring consistent environmental protection. Emission monitoring systems are regularly main- tained and supervised, while modernization and implemen- tation of measures help reduce pollution at the source, with action plans enabling rapid intervention in case of incidents. The company systematically applies measures to avoid, re- duce, and control pollution, ensuring the long-term sustaina- bility of its operations. Apart from its own operations, the company implements measures through collaboration with stakeholders in the val- ue chain. The Supplier Management Policy encourages the use of sustainable materials, reduction of hazardous sub- stances, and the application of environmentally friendly tech- nologies. The best available techniques are promoted, along with the gradual elimination of materials with negative ef- fects. Additionally, through a certification system and regular www.adplastik.hr 100 reporting, compliance with relevant standards and regulations is ensured. By continuously op- timizing processes, including emission reduc- tions, the company, together with its value chain, contributes to reducing the ecological footprint and ensuring long-term business sustainability. The target values for pollution management have been set ambitiously – transitioning to water-based paints, coatings, and solvents by 2050, and increasing the share of ecological materials to 40 percent by 2030. These volun- tary values are based on a detailed analysis of business activities and are monitored through regular reporting and comparison with previous results. The goals are set in line with regulatory requirements and best industry practices, with ecological thresholds not being considered. In- stead, the approach is based on compliance with relevant legislation, reducing the environmental footprint, and optimizing operational processes. In accordance with legal regulations, emissions of NO 2 , SO 2 , CO 2 , PM, and VOC are regularly measured. Monitoring systems and regular ser- vicing ensure control over the negative impacts of emissions from thermal processes and the painting line. Cooling substances are used in cooling systems and fire protection systems, with records con- firming regular servicing and maintenance of the systems in collaboration with authorized service providers. REFRIGERANT QUANTITY IN THE EQUIPMENT (t) Site 2023 2024 ∆ Croatia 1.6 1.7 +3.9% Hungary 0.4 0.2 -60.5% Serbia 0.2 0.1 -54.5% Russia 0.4 - -97.3% TOTAL 2.6 2.0 -23.1% Refrigerants (t) 2024 Croatia Hungary Serbia Russia TOTAL R22 0.029 - 0.009 - 0.038 R32 - 0.020 0.004 - 0.024 R407C 0.974 - 0.074 0.011 1.058 R404A 0.004 - - - 0.004 R410A 0.452 0.077 0.004 - 0.534 R417A 0.030 - - - 0.030 R449A 0.009 - - - 0.009 R134A 0.125 - - - 0.125 HCFC-22 - 0.061 - - 0.061 227ea 0.040 - - - 0.040 TOTAL 1.7 0.2 0.1 0.0 2.0 OTHER MATERIAL AIR EMISSIONS (t) Site 2023 2024 ∆ Croatia 13.4 14.9 +11.2% Hungary - 0.2 - Serbia 0.3 0.5 +66.7% Russia 6.2 6.2 - TOTAL 19.9 21.8 +9.5% Emissions (t) 2024 Croatia Hungary Serbia Russia TOTAL NO x 0.8 0.1 0.5 4.9 6.3 SO x - - - - - CO 0.5 0.1 - - 0.6 VOC 13.6 - - 1.2 14.8 PM(10) - - - 0.1 0.1 TOTAL 14.9 0.2 0.5 6.2 21.8 www.adplastik.hr 101 SUBSTANCES OF CONCERN As a manufacturer of plastic components for the automo- tive industry, AD Plastik Group is required to register its products through the International Material Data System (IMDS), a global system for managing material data in the automotive industry. This system enables the collec- tion, analysis, and exchange of information on the chem- ical composition of materials, ensuring full transparency across the entire supply chain. Its purpose is to ensure compliance with regulatory requirements (REACH, ELV, RoHS directives) and facilitate the vehicle recycling pro- cess at the end of its lifecycle. Data in the IMDS system is regularly updated and provid- ed to customers according to their requirements. This tool is crucial for managing material sustainability, contributes to compliance with environmental standards, and enables responsible business practices in the automotive industry. All materials used in production are homologated by the car manufacturer, ensuring their technical and environmental compliance with industry standards. Before being used in production, they undergo detailed checks of chemical and technical specifications, guaranteeing that no substances are prohibited or restricted by applicable regulations. This ensures a high level of quality, safety, and environmental friendliness of the finished products, as well as long-term compliance with industry and legal standards. The company systematically monitors and reports the presence of substances of concern in volatile organic sol- vents used in production processes, and the total VOC emissions from production facilities are shown in the ta- ble on page 101. The main sources of these emissions are paints, coatings, and solvents used in the painting processes in Zagreb. Volatile or- ganic compounds (VOCs) include various chemical substances, such as toluene, benzene, and xylene, which are classified as substances of concern. Their consumption is monitored monthly through logbooks, where individual substances are not recorded; instead, data is collected at the total mass level of volatile organ- ic compounds used. During 2024, a total of 692 tons of paints, coatings, and solvents were consumed in the painting processes, of which 552 tons consisted of volatile organic compounds. To reduce the negative impact of volatile organic compounds, 321.63 tons of volatile or- ganic compounds were burned in the regenerative incinerators of the painting lines exhaust vents in Zagreb. The amount of volatile organic compounds is not measured on the delivered products. Since the company is not a major polluter, internal analysis and implemented pollution management measures indicate that the expected financial consequences of significant risks and oppor- tunities are minimal and do not have a material impact on the company’s financial position, results, and cash flows. Revenue from the sales of products and services that contain or consist of substances of concern relates exclusively to products undergoing a painting process; however, the exact share of such revenue within total revenue is not disclosed. Substances of very high concern have not been identified within the production pro- cess. During the reporting period, there were no incidents, and as such, it is not possible to present operational and capital expens- es related to this factor. The costs for the remediation of polluted sites, or polygons, in 2024 amounted to EUR 27,881. www.adplastik.hr 102 MICROPLASTICS Microplastics have been identified as a material topic by stakeholders due to the specific nature of the business in the production of plastic components for the automotive indus- try. It is important to note that microplastics are not released during the manufacturing process. The production process is based on melting plastic granules and injection molding into a mold cavity within a closed system under high pressure. However, scrapped products are generated during production, which can, in most cases, be reused within the system. To en- able their reuse, they must be ground in a special mill. The grinding process takes place within the mill housing, where rotating blades move around fixed blades, adjusted to the desired size of the granules. At the bottom of the hous- ing, there is a sieve through which smaller particles pass, while larger ones remain in the process until they reach the appropriate size. During grinding, mechanical tearing of the material occurs, resulting in plastic dust that, along with the granules, exits the mill. The dust is separated in a cyclone separator and collected in specially prepared bags, where it is sealed and stored as plastic waste. To reduce the production of plastic dust and improve recy- cling efficiency, regular weighing of the extracted dust is per- formed, and its ratio to the total ground mass is determined. Mill maintenance includes regular cleaning, with blades being replaced or sharpened depending on the quantity and type of material being ground and the duration of the process. The cyclone separator undergoes regular cleaning and filter re- placement, and its adjustment ensures the separation of dust without mixing with the granules. These procedures are de- fined by internal maintenance guidelines, ensuring the effi- ciency of the process and minimizing environmental impact. www.adplastik.hr 103 E3 WATER RESOURCES MANAGEMENT Water is an important natural resource and an integral part of the busi- ness processes used for the operation of AD Plastik Group’s technologi- cal facilities. The company’s operations do not cause a negative impact on local water resources and ecosystems, and all production plants are located outside areas with high water scarcity risks and protected are- as. Water supply is exclusively ensured through local public water sup- ply connections, and consumption is continuously monitored using wa- ter meters at all sites. AD Plastik Group uses a systematic approach to assess material im- pacts, risks, and opportunities through a review of sites and business activities, as well as consultation with affected communities. As part of the double materiality analysis, consultations were held with the com- munities, and since there are no material impacts on marine resourc- es, separate consultation on this topic was not conducted. On the oth- er hand, water was identified as a material topic both internally and by stakeholders, with water consumption being particularly highlighted as an important factor. When assessing impacts, ecological thresholds were not considered, as the company does not have a material impact on overall water consumption and is not located in areas with water scarcity risks. Both positive and negative impacts, both actual and po- tential, have been identified internally. The most impor- tant risks include financial challenges, depletion of local water resources, and high costs of modernizing wastewa- ter and stormwater systems. At the same time, opportu- nities have been recognized, such as improving business sustainability through wastewater treatment systems, increasing transparency by monitoring the quality of dis- charged water, and optimizing consumption through digi- tal tracking systems and online monitoring. The company currently does not have a separate water re- source management policy, but all sites consistently meet legal obligations and hold the appropriate water use per- mits. Responsible and sustainable water use is ensured through regular monitoring of consumption, analysis of discharged water, and infrastructural adjustments. The goal is to reduce water consumption by 30 percent by 2030 through the introduction of more efficient technol- ogies and process optimization, although the company is not legally obligated to do so. www.adplastik.hr 104 TOTAL WATER CONSUMPTION (m 3 ) WATER CONSUMPTION FROM PUBLIC WATER SUPPLY (m 3 ) Site 2023 2024 ∆ Croatia 31,355.0 30,012.0 -4.3% Hungary 2,470.0 2,032.0 -17.7% Serbia 1,717.0 1,871.0 +9.0% Russia 3,601.0 3,390.0 -5.9% TOTAL 39,337.0 37,305.0 -5.2% Site 2023 2024 ∆ Croatia 36,164.0 33,641.0 -7.0% Hungary 2,470.0 2,032.0 -17.7% Serbia 1,717.0 1,871.0 +9.0% Russia 3,601.0 3,390.0 -5.9% TOTAL 43,952.0 40,934.0 -6.9% WATER CONSUMPTION FROM OWN WELL (m 3 ) Site 2023 2024 ∆ Zagreb 4,809.0 3,629.0 -24.5% TOTAL 4,809.0 3,629,0 -24.5% WATER USED IN THE TECHNOLOGICAL PROCESS (m 3 ) Site 2023 2024 ∆ Croatia 11,046.0 11,048.0 0% Hungary 10.0 12.0 +20.0% Serbia 10.7 10.7 0% Russia 670.0 670.0 0% TOTAL 11,736.7 11,740.7 -0.1% 9191 total 40,934.0 ■ Public water supply .......... 91.1% ■ Own well .............................8.9% GOAL 2030 water consumption -30% (2023 43,952.0 m 3 ) INTENSITY m 3 / k€ 0.27 m3 / per employee 23.0 m3 / tons of products 4.1 Water consumption intensity is measured as the ratio of total water consumption (m³) to total revenue (k€). www.adplastik.hr 105 In the production facilities, a recirculating water system is used, where cooling water is reused for cooling in a closed loop. A portion of the water evaporates and is replenished with fresh water, and the cooling systems are emptied and cleaned annually as needed. In Croatia, the amount of water consumed in the technological production process is meas- ured at both sites, while at other sites the amount of techno- logical water is displayed by volume according to the specifi- cations of the cooling systems. Measures to Reduce Negative Impacts and Risks To reduce potential negative effects, a digital consumption monitoring and alert system has been implemented in Croa- tia, enabling immediate response in case of any undesirable consumption fluctuations. Regular wastewater analyses are conducted at all sites to improve resource management effi- ciency, while infrastructure improvements reduce consump- tion and enable better control of water quality. Each investment is considered from the perspective of its po- tential environmental impact, achieving an optimal balance between economic and environmental needs. The company is investing in the modernization of water supply systems to re- duce losses, but the high costs of infrastructure investments can affect investment plans. In addition, wastewater is treated before discharge using sedimentation tanks, grease traps, and separators. The replacement of outdated infrastructure and the introduction of digital monitoring systems allow for the optimi- zation of consumption and the reduction of operational risks. In Hungary, water is purchased directly from MOL, which is re- sponsible for water supply, wastewater management, storm- water drainage systems and compliance with regulatory re- quirements. In the production process, water is used mainly for cooling tools and oil, and is changed within the system once a year, with the discharged water being released into the sewage network also provided by MOL, which is fully compli- ant with applicable regulations. Currently, financial quantification of the expected impacts re- lated to water resources is not carried out, but the information is presented qualitatively in accordance with relevant report- ing standards. TOTAL WATER DISCHARGE (m 3 ) Site 2023 2024 ∆ Croatia 17,806.0 16,681.0 -6.3% Hungary 980.0 2,032.0 +107.3% Serbia 1,717.0 1,871.0 +9.0% Russia 3,601.0 3,390.0 -5.9% TOTAL 24,104.0 23,974.0 -0.5% www.adplastik.hr 106 E4 BIODIVERSITY AND ECOSYSTEMS Biodiversity is extremely important for the stability of ecosystems, and its pres- ervation requires responsible management of natural resources and environ- mental impacts. Although it does not engage in activities that would have a direct negative impact on biodiversity, AD Plastik Group integrates ecological aspects into its business processes to contribute to reducing the overall envi- ronmental footprint. The production sites are not located in protected areas, thus eliminating direct negative impacts on sensitive ecosystems. The company’s activities do not in- clude processes that could disrupt natural habitats or directly threaten specific species, thereby reducing the risk to biodiversity. Despite this, through the double materiality assessment, the potential impact on certain aspects of this topic was analyzed, and certain links with environmen- tal business factors were identified. As part of this assessment, only climate change, pollution, and invasive alien species were evaluated, while the effects on species’ status, the extent and condition of ecosystems, land degradation, desertification, and soil cover were not assessed as they are not applicable to the business. The company does not use resources from natural ecosystems nor is it dependent on ecosystem services in its operational activities; therefore, an impact assessment on these topics was not carried out. Of the assessed factors, climate change and pollution were recognized as material, based on stakeholder evaluation, making the topic of biodiversity relevant for reporting. Climate change affects ecosystems on a global scale, and the company, through its emission reduc- tion measures and energy efficiency efforts, contributes to mitigating its consequences, as further detailed in the section on climate change and pollution. Although the topic of invasive alien species was not assessed as material, potential im- pacts were analyzed and it was concluded that business activities do not involve actions that could lead to their introduction into new habi- tats. Potential risks are exclusively associated with transportation and distribution; however, these are subject to strict controls to prevent any undesirable impact. www.adplastik.hr 107 A formal assessment of the resilience of the strategy and business model in relation to risks and opportu- nities related to biodiversity has not been conducted, as no direct risks that could threaten the sustainabili- ty of the business have been identified. Nevertheless, regulatory requirements and industry guidelines are continuously monitored to ensure long-term compli- ance and responsible management of potential envi- ronmental impacts. Through its business approach, implementation of environmental protection policies, and improvement of technological processes, it ensures the long-term sustainability of its operations without negatively impacting biodiversity, while contributing to global efforts in ecosystem protection and combating cli- mate change. In line with the Environmental Protec- tion Policy, special emphasis is placed on biodiversi- ty conservation, responsible land use, and preventing deforestation, in alignment with EU sustainable de- velopment goals and best practices in the automo- tive industry. Additionally, through the Sustainable Supplier Management Policy, it encourages the adop- tion of measures and the implementation of biodiver- sity protection practices, as well as the prevention of deforestation and ecosystem degradation, ensur- ing sustainable management of natural resources throughout the entire value chain. Currently, no compensatory measures for biodiversi- ty have been established, nor is a mitigation hierarchy applied in the company’s action plans. Also, local and indigenous knowledge or nature-based solutions have not been used in previous initiatives. Target values re- lated to biodiversity and ecosystems have not been defined, and ecological thresholds have not been used in setting goals. However, regulatory requirements and industry guidelines are continuously monitored to en- sure responsible management of potential environ- mental impacts and long-term compliance with best practices. Through existing environmental protection policies and sustainable supplier management, princi- ples of natural resource conservation and responsible land use are integrated, with continuous monitoring of best practices in the industry. The quantification of expected financial consequenc- es related to biodiversity and ecosystems has not been conducted, and currently, there is no relevant data available on potential impacts, dependencies, or key assumptions in this area. www.adplastik.hr 108 The evolution of business today is unthinkable without sus- tainability, especially in the auto industry, where reducing the impact on the environment through more efficient use of re- sources and the application of a circular economy is almost mandatory. As a long-term partner of leading vehicle manu- facturers, AD Plastik Group recognizes the importance of in- novations in sustainable materials, optimization of production processes and increased reuse of raw materials. By integrating circular economy principles into business strategies, the com- pany reduces waste, improves energy efficiency and explores alternative materials with a smaller ecological footprint. In the double materiality assessment, it was evaluated that all defined impacts of this topic are material, including the inflow of resources, outflow of materials, and waste management, which was also confirmed by stakeholders. The main chal- lenges arise from the fact that polymers are mostly made from non-renewable sources, such as petrochemicals, and there is limited potential for separating all scrapped products in mul- ti-component and painted products. An additional risk is posed by the high costs of researching and implementing new mate- rials, which strain resources. On the other hand, positive pro- gress is being made through the systematic monitoring of used materials and the integration of sustainable solutions into new projects, actively reducing the environmental footprint of man- ufacturing processes. Through continuous process improvements, resource efficien- cy is increased, and the negative impact is reduced. The sus- tainability strategy focuses on extending product lifecycles, optimizing recycling processes, and reducing dependence on primary raw materials. The strategy for managing these topics is shaped in response to stakeholder expectations, market trends, and global sus- tainability goals. Circular economy principles are integrated into business processes in accordance with internationally recognized standards ISO 14001 and ISO 50001, with regular performance assessments enabling continuous improvement. Through a systematic approach and close collaboration with suppliers and customers, resource usage is optimized, and the ecological footprint of the business is reduced. In addition, the quality and sustainable supplier management policies, as well as the Code of Business Conduct, ensure the im- plementation of sustainability principles across all aspects of the business. These policies clearly define guidelines for responsi- ble business practices, process improvements, and strengthen- ing partnerships that support long-term sustainability. The envi- ronmental protection policy stipulates the reduction, reuse, and recycling of waste and packaging materials in line with circular economy practices, as well as the optimization of resource use and the increase of recycled materials in production processes. E5 CIRCULAR ECONOMY www.adplastik.hr 109 By 2030, the goal is to reduce the amount of waste sent to land- fills by 80 percent, increase the share of recycled input materi- als in the total amount of polymers by 30 percent, and increase the share of returnable packaging and eco-friendly materials to 40 percent. Additionally, it is planned that at least 50 percent of production waste will be directed towards further use, while the long-term goal is for all products to be 100 percent recyclable by 2050. As part of the RFQ (Request for Quotation) process, during the reporting period, in collaboration with one of the customers, a material containing 25 percent recycled material was proposed and adopted for one component. Similarly, during the development of another product, the cus- tomer was presented with the possibility of forming a fixation directly on the product, using ultrasonic (US) welding technol- ogy, while maintaining high product quality. Based on this, sig- nificant green savings were achieved, including a 8.66% reduc- tion in product weight by eliminating adhesives and reducing energy consumption. Such optimization allows for a more en- vironmentally friendly and energy-efficient production process, to the satisfaction of all stakeholders. In addition to the photovoltaic power station, contracting the certified origin of electricity from renewable sources with sup- pliers is being considered in the medium term as an additional contribution to the integration of sustainable energy sources into the business. In accordance with the updated supplier sus- tainability questionnaire, an assessment of their sustainability is planned, the results of which will be included in the value chain assessment. RESOURCE INFLOWS SHARE OF RECYCLED MATERIAL IN PRODUCTION (t) Site 2023 2024 ∆ Croatia 18.4% 14.8% -19.7% Hungary 0% 43.2% 0% Serbia 23.1% 32.9% +42.3% Russia 18.7% 27.1% +45.2% AD Plastik Group 15.9% 23.2% +46.0% In the reporting year, an analysis of input materials was con- ducted, with a special emphasis on those used in production processes and becoming an integral part of the final prod- ucts. The analysis monitored the share of recycled materials and non-returnable packaging components. The basic materi- als used in all production sites of the Group are thermoplastic organic polymers. They are used in different proportions and combinations, depending on the product specifications. The analysis of the material inflow was conducted based on the official report of the controlling department, taking into ac- count the original basic input materials, the recycled share of the original input materials and the regenerate as a by-prod- uct of the injection molding process. The recycled content rate of materials in the products is presented, with all pro- cessed material considered as recycled material incorporated into the final products. Packaging data was taken from the internal ERP system where packaging was recorded in pieces, so the total quanti- ty was estimated by multiplying the packaging surface area and the average specific density of three-layer cardboard. The same weight estimation methodology was applied for plastic foil, and most of the packaging used is reusable and returnable. www.adplastik.hr 110 The reuse of materials is optimized through a special calcula- tion of the recycled content ratio for each processed material, based on reports of the total amount of raw materials used. The secondary raw material is identified within the Promis system by a special code, which is assigned immediately upon its creation and processing, allowing for the tracking of its integration into final products. The source of information about the certification system used to determine the recycled material content in the base material is the customer’s document, according to which the recycled content ratio is defined in accordance with their standard. A detailed breakdown of ma- terial consumption by cate- gories ensures a systemat- ic assessment of material flows in production, allowing for a better understanding of the impact of used resources and their optimization in line with sustainable business principles. The data for 2023 has been updated to ensure high-quality comparability, as data from previous years was collected using a dif- ferent methodology. This adjustment ensures con- sistency in the analysis and enables more precise track- ing and comparison of trends over time periods. TYPES OF MATERIALS (t) 2023 2024 share of recy- cled material Croatia Basic materials 7,464.3 5,929.6 14.8%Recycled part of basic materials 671.0 369.4 Secondary raw material 703.5 507.5 Hungary Basic materials 1,732.0 1,899.0 43.2%Recycled part of basic materials - 821.0 Secondary raw material - - Serbia Basic materials 737.9 661.1 32.9%Recycled part of basic materials 157.7 185.9 Secondary raw material 13.1 31.8 Russia Basic materials 1,115.0 1,322.4 27.1%Recycled part of basic materials 115.0 - Secondary raw material 93.2 358.5 Total materials used 11,049.2 9,812.1 23.2% Total recycled materials used 1,753.5 2,274.1 Total secondary raw material 809.8 897.8 OFFICE PAPER (t) 2023 2024 ∆ Croatia 9.8 8.3 -15.5% Hungary 2.2 3.8 +72.7% Serbia 0.9 1.0 +11.1% Russia 1.7 1.6 -3.6% TOTAL 14.6 14.7 +0.8% MATERIAL CONSUMPTION BY CATEGORIES TOTAL RECYCLED MATERIALS USED 23.2% by input material type www.adplastik.hr 111 AD Plastik Group’s key products are plastic parts for the interior and exterior of cars, which most- ly consist of basic and auxiliary materials listed in the table Material consumption by catego- ries. The amount of material in the outflow cor- responds to the amount of processed materials in the resource inflow, since all processed mate- rial is ultimately incorporated into the final prod- uct that is delivered directly to customers. There are no internal warehouses that could accumu- late larger quantities of goods and thereby dis- rupt the input-output balance. In cases where AD Plastik Group is a development supplier, the prin- ciples of circularity and sustainability are taken into account during product design, which is de- scribed in more detail on pg. 27. The expected durability of the product is in line with automotive industry standards, with the quality of materials and products being highly regulated by car manufacturers and customers of AD Plastik Group. The average lifespan of polymer products in vehicles corresponds to the lifespan of the vehicles them- selves, which, according to available EU statistics, ranges between 10 and 20 years. All products are designed to allow for disassembly and eventual re- placement. During product validation, tests are con- ducted in authorized laboratories, including testing the forces required for assembly and disassembly. The possibility of repairing polymer parts depends on the type and severity of damage. Currently, the calculation of recycled content rates at the level of individual products is not per- formed, but it is planned to establish a system that will enable more detailed monitoring of this indi- cator in the future. An analysis of the total amount of materials used has determined that the share of recycled material in the inflow is equal to the share of recycled material in the outflow, since all processed material is ultimately incorporated into the final products. This ensures the consistency of material flow and supports the principles of a circular economy within the production process. RESOURCE OUTFLOWS PACKAGING (t) 2023 2024 ∆ Wooden pallets 690.6 469.7 -32.0% Cardboard 231.5 227.2 -1.9% Plastic foil 196.4 273.9 +93.5% 970.8 2023 2024 ∆ WOODEN PALLETS 690.6 469.7 -32.0% Croatia 452.4 324.6 -28.2% Hungary 81.7 50.1 -38.7% Serbia 138.9 77.4 -44.3% Russia 17.6 17.6 0% CARDBOARD 231.5 227.2 -1.9% Croatia 72.1 101.8 +41.2% Hungary 95.5 77.2 -19.2% Serbia 59.1 40.4 -31.6% Russia 4.8 7.8 +62.5% PLASTIC FOIL 196.4 273.9 +39.5% Croatia 60.8 148.4 +144.1% Hungary 25.6 21.5 -16.0% Serbia 77.6 41.9 -46.0% Russia 32.4 62.1 +91.7% AD Plastik Group does not use biological materials. RECYCLED MATERIAL SHARE 21.1% of total input of primary materials and packaging combined www.adplastik.hr 112 Visual and measurable control defective products are separated into special containers Internal recycling defective products are, wherever possible, ground and returned to the production process External disposal in case recycling is not possible, waste is handed over to an authorized waste disposal company, with mandatory documentation as required by law WASTE MANAGEMENT Responsible waste management is one of the basic elements of the circular economy that is integrated into the environ- mental protection strategy of the AD Plastik Group. This com- mits to waste prevention, recycling and reuse of materials, and safe disposal in accordance with regulations. Current waste reduction targets are not set on the basis of scientifically defined environmental thresholds or sectoral al- locations, but are voluntary and arise from internal analyses and operational strategies. The approach is based on optimiz- ing production processes, increasing recycling and reducing waste ending up in landfills, while improving the waste man- agement system. An improvement in the methodology for setting goals is planned through the analysis of ecological thresholds and alignment with national and industry standards in the future. This process will also consider relevant regulatory frame- works and scientific guidelines, including EU circular econo- my goals and sectoral recommendations for waste reduction. Waste is systematically managed in accordance with the ISO 14001 standard, where this is not only the responsibility of the professional services but also of all employees. Internal procedures clearly define waste management processes, with a mandatory regular assessment of the system’s effective- ness on an annual basis. MANAGEMENT OF PRODUCTION WASTE Waste represents a potential loss of resources, materials, and energy, so preventing its generation is an important premise of the business strategy. The primary raw material for pro- duction processes is thermoplastic polymers, which are pro- cessed using injection molding, extrusion, and thermoform- ing technologies, while plastic components are painted on painting lines in Zagreb. STRATEGIC GOALS The process of managing defective products: WASTE FOR LANDFILLS 2030 -80% (2023 321.3 t) 2050 100% WASTE RECYCLED 50% WASTE FOR FURTHER USE 2030 (2023. 46.5%) ACHIEVED IN 2024 www.adplastik.hr 113 Solin due to extraordinary cleanings Zagreb due to the introduction of new projects and frequent trials Vintai due to increased production Waste sorting is based on direct measurements – after the production process is completed, waste is handed over to authorized waste handlers who measure it and provide offi- cial data. Based on these measurements and documentation, the proportions of materials that can be recycled or reused are determined, ensuring consistent and transparent product classification. The amount of waste at the sites directly de- pends on the level of production, the type and quantity of raw material packaging, and additional activities such as extraor- dinary cleanings and the introduction of new products. As a result, the amount of waste increased at certain sites during the reporting period due to the following activities: A significant increase in waste recycling is also a result of the aforementioned activities. Notably, at the factory in Zagreb, the introduction of a new painting technology project led to an increase in the amount of paper and plastic waste, which is systematically recycled. In Solin, the share of recycled waste also increased due to extraordinary cleanings of the site. NON-HAZARDOUS WASTE (t) TOTAL AMOUNT OF WASTE HAZARDOUS WASTE (t) Site 2023 2024 ∆ Croatia 484.1 1,174.3 +142.6% Hungary 231.4 166.5 -28.0% Serbia 122.1 101.2 -17.1% Russia 93.3 143.7 +54.1% TOTAL 930.9 1,585.8 +70.4% Site 2023 (t) 2024 (t) ∆ Croatia 1,293.3 1,823.1 +41.0% Hungary 239.3 173.7 -27.4% Serbia 127.8 101.2 -20.8% Russia 94.4 159.4 +68.9% TOTAL 1,754.7 2,257.3 +28.6% Site 2023 2024 ∆ Croatia 809.1 648.7 -19.8% Hungary 7.9 7.2 -9.2% Serbia 5.7 - -100% Russia 1.1 15.6 +1,321.8% TOTAL 823.9 671.5 -18.5% 70703030 total 2,257.3 ■ Non-hazardous waste ......70.3% ■ Hazardous waste ..............29.7% DIVERTED FROM DISPOSAL (t) Method 2023 2024 ∆ Recycling 791.4 1.594.9 +101.5% Energy recovery 25.3 4.5 -82.2% TOTAL 816.6 1,599.4 +95.9% 71712929 total 2,257.3 ■ Diverted from disposal (for further use) ................70.9% ■ Directed to disposal (unrecycled) ...................... 29.1% WASTE DISPOSAL METHODS www.adplastik.hr 114 Non-hazardous waste quantity Paper and cardboard packaging 410.6 Waste plastic 400.5 Iron and steel 191.8 Decorations and scraps of mixed fabric 122.9 Mixed packaging 112.4 Wooden packaging 23.5 Plastic packaging 19.5 Waste foil 18.0 Waste polyurethane foam, uncontaminated 6.8 Tiles and ceramics 6.1 Waste from polypropylene products 6.1 Waste from uncontaminated packaging boards 4.1 Plastic and rubber 3.6 Paper-cardboard 3.3 Waste from polyethylene foil and polyethylene products 2.8 Fiberglass waste 1.1 Inorganic waste 0.5 TOTAL 1,333.5 DIRECTED TO DISPOSAL (t) Method 2023 2024 ∆ Incineration of waste on land 3.6 303.1 +8,294.7% Disposal of waste in a specially prepared landfill 321.3 192.3 -40.2% Storage of waste before applying any of the disposal procedures 613.1 103.0 -83.2% Physical-chemical treatment of waste - 59.5 - TOTAL 938.1 657.9 -29.9% RECYCLING (t) Non-hazardous waste 2023 2024 ∆ Croatia 379.9 1,159.9 +205.3% Hungary 25.4 29.9 +17.5% Serbia - - - Russia 57.9 143.7 +148.5% TOTAL 463.2 1,333.5 +187.9% Hazardous waste 2023 2024 ∆ Croatia 324.4 261.4 -19.4% Hungary 2.7 - -100% Serbia - - - Russia 1.1 - -100% TOTAL 328.2 261.4 -20.3% 84841616 total 1,594.9 ■ Non-hazardous waste ......83.6% ■ Hazardous waste ..............16.4% www.adplastik.hr 115 PREPARATION FOR REUSE (t) INCINERATION ON LAND (t) Hazardous waste 2023 2024 ∆ Croatia 25.3 4.5 -82.2% Hungary - - - Serbia - - - Russia - - - TOTAL 25.3 4.5 -82.2% Hazardous waste 2023 2024 ∆ Croatia - 303.1 - Hungary 3.6 - -100.0% Serbia - - - Russia - - - TOTAL 3.6 303.1 +8,294.7% Hazardous waste quantity Other solvents and solvent mixtures 208.7 Waste sludge 51.9 Metal packaging containing hazardous solid porous materials, including empty pressure containers 0.6 Discarded equipment containing hazardous components 0.2 Fluorescent tubes and other mercury-containing waste 0.1 Batteries and accumulators - TOTAL 261.4 Hazardous waste quantity Non-chlorinated hydraulic oils 4.5 TOTAL 4.5 AD Plastik Group does not use machines, devices, equipment, or raw materials that contain radioactive substances, and therefore, does not generate radioactive waste. Hazardous waste quantity Paint or varnish sludges containing organic solvents or other hazardous substances 195.6 Packaging containing residues of hazardous substances or contaminated with hazardous substances 60.8 Absorbents, filter materials, wiping cloths and protective clothing contaminated with hazardous substances 38.6 Waste paints and varnishes containing organic solvents or other hazardous substances 8.1 Organic waste containing hazardous substances 0.1 Waste printer toners containing hazardous substances - TOTAL 303.1 www.adplastik.hr 116 Non-hazardous waste quantity Plastic waste 89.8 Municipal waste 46.8 Mixed material waste 17.0 Plastic particles and shavings 7.3 Plastic and rubber 5.3 Bulk waste 1.5 Waste not otherwise specified - TOTAL 167.7 87871313 total 192.3 ■ Non-hazardous waste ......87.2% ■ Hazardous waste ..............12.8% Hazardous waste quantity Garbage and assessments of industrial premises are low-risk 5.7 Assessments from the company's territory 5.7 Non-chlorinated engine, gear and mineral-based lubricating oils 4.4 Containers, polyethylene, contaminated 3.4 Discarded EE equipment 1.7 Hazardous packaging waste 1.1 Absorbents, filter materials, wiping cloths, protective clothing contaminated with hazardous substances 0.7 Waste adhesives and sealants containing organic solvents or other hazardous substances 0.5 Sand contaminated with oil or petroleum products 0.4 Oily plastic 0.3 Leather work shoes that have lost their consumer properties 0.2 Empty fuel bottles 0.2 Workwear made of natural, synthetic, artificial and wool fibers, contaminated with petroleum products 0.1 Waste toners 0.1 Waste wiping material contaminated with oil or petroleum products 0.1 Waste ink containing hazardous substances - TOTAL 24.6 WASTE DISPOSAL AT A SPECIALLY PREPARED LANDFILL (t) Non-hazardous waste 2023 2024 ∆ Croatia 54.1 14.1 -73.9% Hungary 206.0 136.6 -33.7% Serbia 24.4 17.0 -30.3% Russia 35.4 - -100.0% TOTAL 319.9 167.7 -47.6% Hazardous waste 2023 2024 ∆ Croatia 1.2 1.8 +49.2% Hungary 0.3 7.2 +2,657.7% Serbia - - - Russia - 15.6 - TOTAL 1.4 24.6 +1,606.3% www.adplastik.hr 117 Hazardous waste 2023 2024 ∆ Croatia - 59.5 - Hungary - - - Serbia - - - Russia - - - TOTAL - 59.5 - WASTE STORAGE BEFORE APPLICATION OF ANY DISPOSAL PROCEDURE (t) Non-hazardous waste 2023 2024 ∆ Croatia 50.1 0.3 -99.4% Hungary - - - Serbia 97.7 84.2 -13.8% Russia - - - TOTAL 147.8 84.5 -42.8% Hazardous waste 2023 2024 ∆ Croatia 458.3 18.5 -96.0% Hungary 1.3 - -100.0% Serbia 5.7 - -100.0% Russia - - - TOTAL 465.4 18.5 -96.0% PHYSICAL-CHEMICAL WASTE TREATMENT (t) Non-hazardous waste quantity Scrap iron and steel 30.9 Waste plastic 26.3 Cardboard packaging 16.3 Wooden packaging 8.2 Plastic packaging 2.4 Mixture of fats and oils from oil/water separators containing only edible oils and fats 0.3 TOTAL 84.5 Hazardous waste quantity Waste containing oil 8.2 Oily water from oil/water separators 6.4 Sludge from separators 3.2 Oily rags/gloves 0.6 Pressurized packaging 0.2 Packaging containing residues of hazardous substances or contaminated with hazardous substances 0.1 TOTAL 18.5 82821818 total 103.0 ■ Non-hazardous waste ......82.0% ■ Hazardous waste ..............18.0% Hazardous waste quantity Oily water from oil/water separators 25.2 Halogen-free emulsions and machining solutions 22.5 Aqueous liquid waste containing hazardous substances 9.8 Sludge from oil/water separators 2.0 TOTAL 59.5 www.adplastik.hr 118 Solvents used on the paint lines in Zagreb are collected after use and sent to the supplier for recovery. Through this process, 78 percent of the collected solvent is returned to the production cycle, while the remaining part is replenished with the original solvent, thus optimizing consumption and reducing waste. The collection of hazardous sludge in paint shops is an example of efficient waste management. The water collection system allows the collection of residual parti- cles after painting, whereby the contaminated water is treated and reused, thereby reducing the ecological footprint of the process. AD Plastik Group continuously adapts to new waste management requirements with the aim of reducing waste, increasing recyclability, and optimizing resources throughout the entire value chain. Currently, the calculation of expected financial impacts from the effects, risks, and opportunities related to resource use and the circular economy is not being car- ried out, as a methodology has not yet been established to enable reliable quanti- fication of these effects in monetary terms without significant costs or efforts. At present, the qualitative aspects of related risks and opportunities are being ana- lyzed, including identified challenges and potential benefits from increased use of recycled materials, resource optimization, and the transition to more sustainable production processes. Further improvements to the monitoring and analysis sys- tem are planned to allow for more accurate assessment of financial impacts in the future, in line with ESRS requirements. Innovations in waste reduction In order to reduce environmental impact, waste management processes are continu- ously improved: Internal solvent distillation at the Zagreb site, 199.5 tons of solvents were purified and are reused in the painting process Circular economy model in collaboration with partners, since 2017, a model of renting and eco-friendly cleaning of work rags and oil absorbents has been applied Solvent recycling in collaboration with partners since 2018, and in 2024, 209.9 tons of waste organic solvents were purified and returned to the production process 45451818343470701313 2023 2024 45.1% 70.7% ■ Recycling 1.4% 0.2% ■ Energy recovery 0.2% 13.4% ■ Incineration on land 18.3% 8.5% ■ Waste disposal at a specially prepared landfill 35.0% 4.6% ■ Waste storage before disposal 0% 2.6% ■ Physical-chemical waste treatment www.adplastik.hr 119 EU TAXONOMY With the Paris Agreement and the European Green Deal, the European Union has committed to achieving climate neutrality by 2050, alongside a 55 percent reduction in greenhouse gas emissions by 2030 compared to 1990 levels. Various proposals, acts, and policies have been adopted to achieve these ambitious goals, and one of the key measures is the Taxonomy Regulation, which encourages investments in sustainable projects and business operations. It sets a framework, or a unified classification system, for assessing economic activities that can be considered environmentally sustainable. The goal of the EU taxonomy is to reduce greenwashing and promote financing for sustainable business practices. The Taxonomy Regulation and its delegated acts de- fine the criteria for determining which economic ac- tivities are sustainable and make a significant contri- bution to environmental goals. If economic activities are described in the delegated taxonomy acts, they can be qualified as taxonomy-eligible. In this context, the term ineligible economic activity does not refer to activities that are inherently good or bad, but rather to those that are not recognized according to the Tax- onomy Regulation. Economic activities qualify as taxonomy-aligned if they meet four fundamental criteria: ■ they make a significant contribution to at least one of the six en- vironmental objectives defined in Article 9 of the Taxonomy Reg- ulation ■ they do not significantly harm any of the other environmental ob- jectives ■ they are carried out in accordance with minimum safeguards ■ they are aligned with technical verification criteria Pursuant to Article 8 of the Taxonomy Regulation, from 2021 the com- pany has been obliged to report on the appropriate share of turnover, capital investments and operating expenses that originate from as- sets or processes from taxonomy-eligible economic activities. The Commission Delegated Regulation (EU) 2023/2485 has recog- nized the activity of AD Plastik Group, “Manufacture of automotive and mobility components,” as one that can significantly contribute to climate change mitigation. However, the company’s compliance depends on the number of vehicles with alternative drivetrains pro- duced, which is not under the Group’s control. www.adplastik.hr 120 METODOLOGY The assessment of eligibility and compliance with the EU taxonomy was carried out by internal multidisciplinary teams through workshops, interviews, and working meet- ings. Economic activities were evaluated, taxonomy-eligi- ble and ineligible activities were identified and aligned, and the share in revenue, capital, and operational expenses was calculated. Data is presented in euros, and the appli- cation of International Financial Reporting Standards elim- inates double-counting of figures. A summary of the key accounting policies is presented in the “Annual Financial Report” section, within the notes to the consolidated finan- cial statements. CHALLENGES The EU Taxonomy Regulation contains complex formulations, and their interpretation may vary. Although currently available interpretations, estimates and assumptions were used in cal- culating taxonomic indicators in the reporting and compara- tive periods, potential additional information in the future may affect future taxonomy reporting and disclosures. Although the company strictly complies with various acts and regulations related to human rights, workers’ and consumers’ rights, bribery and corruption, taxation and fair competition, subsequent analyses have determined that the criteria for implementing minimum safeguards require a sig- nificantly higher allocation of resources in order to further confirm the above. This leaves room for improvements and adjustments in future reporting periods. MINIMUM SAFEGUARDS For all identified activities, compliance with the minimum safeguards has been ensured. This includes fulfilling obli- gations in the area of human rights and carrying out due diligence processes in accordance with the requirements of ESRS 2. Special attention has been given to matters related to own workforce (S1), consumers and end-users (S4), and business conduct (G1). DO NO SIGNIFICANT HARM (DNSH) During the reporting period, no significant harm to other en- vironmental objectives was recorded, in line with the DNSH criteria set out in the Taxonomy Regulation. All eligible ac- tivities have been assessed as aligned with this requirement. Climate Change Mitigation Climate Change Adaptation Transition to a Circular Economy Protection and Restoration of Biodiversity and Ecosystems Pollution Prevention and Control Sustainable Use and Protection of Water and Marine Resources THE TAXONOMY REGULATION PRESCRIBES SIX ENVIRONMENTAL OBJECTIVES www.adplastik.hr 121 No Activity Activity code 1 Collection and transport of non-hazardous waste in source segregated fractions 5.5 2 Production of components for vehicles and mobility 3.18 REVENUE RECOGNIZED ELIGIBLE ECONOMIC ACTIVITIES The share of revenue from taxonomy-eligible activities is cal- culated as the ratio of revenue from economic activities that meet the taxonomy criteria to the total revenue of the compa- ny. The majority of AD Plastik Group’s revenue comes from its core activities, which are taxonomy-eligible . “Manufacture of automotive and mobility components” constitutes a significant share of the Group’s revenue at 75.4 percent, con- sidering that the Group’s core activity is ful- ly taxonomy non-aligned. Although the busi- ness does not cause significant harm to any of the environmental objectives and is aligned with the minimum safeguards, the lack of evidence of a significant contribution to climate change mitigation classifies it as taxonomy non-aligned. All products of AD Plastik Group are plastic components of vehicle interiors and exteri- ors that are not dependent on the vehicle’s drivetrain. However, according to taxonomy criteria, a significant contribution to climate change mitigation is linked to the type of ve- hicle drivetrain in which the components are installed, which is beyond the company’s con- trol. Although products are already allocat- ed to customers and vehicle types, they are currently not fully linked to their drivetrain. For this reason, this activity is conservative- ly classified as taxonomically non-aligned, despite the fact that a certain part of the components are installed in vehicles with- out exhaust emissions and thus undoubted- ly contribute to reducing the negative impact on the environment. It is important to emphasize that future align- ment of activities will largely depend on the increase in the share of vehicles with alter- native drivetrains and reduced emissions, an area over which the company has limited or no direct influence. ■ Taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) ...........................76.03% ■ Taxonomy ineligible activities .................................... 23.97% 76762424 Environmental objectives Share of taxonomy-aligned total revenue by objective Share of taxonomy-eligible total revenue by objective Climate change mitigation - 76.03% Climate change adaptation - - Sustainable use and protection of water and marine resources - - Transition to a circular economy - - Pollution prevention and control - - Protection and restoration of biodi- versity and ecosystems - - SHARE OF ALIGNED AND ELIGIBLE TOTAL REVENUE BY ENVIRONMENTAL OBJECTIVES Revenue = Revenue from Sales For the reported activities, revenue includes income from the sales of products and from the provision of services. These are disclosed in Note 4 Sales and Note 5 Other in- come of the consolidated financial statements. www.adplastik.hr 122 RECOGNIZED ELIGIBLE ECONOMIC ACTIVITIES A share of 94 percent of eligible economic ac- tivities, the Group’s primary activities, relates to activities that can make a significant con- tribution to the goal of climate change miti- gation. A significant share of these activities results from investments in the moderniza- tion of production processes, the acquisition of energy-efficient machinery and equipment, and the maintenance of non-residential build- ings at all sites. However, although some activities do not cause significant harm to other environmen- tal objectives and are in line with the min- imum safeguards, the non-alignment pri- marily results from the failure to meet the criteria for significant contribution and the lack of certification related to the minimum safeguards. This indicates the scope for fur- ther investments that could ensure a greater contribution to at least one of the six environ- mental objectives in the future and the need to review the certification of the implementa- tion of the minimum safeguards. The share of capital expenditures is calculated in relation to capital in- vestments reported in the cash flow statement, including the acquisition of real estate, plants, equipment, investments in real estate, and intangi- ble assets. The numerator includes those capital expenditures related to taxonomy-aligned activities, while the denominator includes increases in tangible and intangible assets before depreciation and remeasurements, including revaluation and impairments. Additionally, the denominator in- cludes increases in assets arising from business mergers, while changes in fair value are excluded from the calculation. CAPITAL EXPENDITURE (CAPEX) No Activity Activity code 1 Installation, maintenance and repair of energy efficiency equipment 7.3 2 Renovation of existing buildings 7.2 3 Acquisition and ownership of buildings 7.7 4 Manufacture of automotive and mobility components 3.18 ■ Taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) ...........................74.73% ■ Taxonomy ineligible activities .................................... 25.27% 9494 SHARE OF ALIGNED AND ELIGIBLE CAPITAL EXPENDITURES BY ENVIRON- MENTAL OBJECTIVES Capital Expenditures (CapEx) Included are items of property, plant and equipment, as well as costs related to the replacement of parts of cer- tain assets at the time they are incurred, from which fu- ture economic benefits are expected. These are disclosed in Note 17 Property, Plant and Equipment, Note 16 Intan- gible Assets, and Note 18 Right-of-Use Assets in the con- solidated financial statements. Environmental objectives Share of taxonomy-aligned CAPEX by objective Share of taxonomy-eligible CAPEX by objective Climate change mitigation - 15.21% Climate change adaptation - - Sustainable use and protection of water and marine resources - - Transition to a circular economy - 0.27% Pollution prevention and control - - Protection and restoration of biodi- versity and ecosystems - - www.adplastik.hr 123 No Activity Activity code 1 Installation, maintenance and repair of energy efficiency equipment 7.3 2 Collection and transport of non-hazardous waste in source segregated fractions 5.5 3 Transport by motorcycles, cars and light commercial vehicles 6.5 4 Urban and suburban transport, road passenger transport 6.3 5 Renewal of water collection, treatment and supply systems 5.2 6 Acquisition and ownership of buildings 7.8 7 Freight transport services by road 6.6 8 Renovation of existing buildings 7.2 9 Manufacture of automotive and mobility components 3.18 10 Collection and transport of non-hazardous and hazardous waste 2.3 The indicator of operating expenses (Opex) is shown in relation to total operating costs in the statement of comprehensive income, minus depreciation. According to the EU Taxonomy Regulation, the denominator includes direct non-capitalized costs related to re- search and development, building renovation measures, short-term leases related to right-of-use assets according to IFRS 16, main- tenance and repair, and all other operating expenses for the day- to-day servicing of property, plant, and equipment. These activities can be performed by the company itself or by external service pro- viders to whom these tasks have been entrusted. The numerator of operating expenses reflects the costs directly associated with the above-mentioned taxonomy-eligible activities. Double counting has been avoided by preparing data at the consol- idated level, aligning it with the consolidated financial statements, and classifying data by category in such a way that a single data point cannot fall into multiple categories. Categories have also been clearly defined in terms of whether they qualify as aligned, non-aligned, or ineligible activities. OPERATING EXPENSES (OPEX) RECOGNIZED ELIGIBLE ECONOMIC ACTIVITIES Eligible economic activities account for 15.8 percent of total op- erating expenses. It is important to note that the largest share of non-compliant activities stems from the fact that the Group’s pri- mary activity, as well as road freight or passenger transport ser- vices, do not meet the criteria for a significant contribution under the Taxonomy Regulation. Given that these factors are partly be- yond the Group’s control, the possibility of their compliance with the taxonomy requirements is limited. Despite the significant share of eligible economic activities in operating expenses, the non-alignment of activities indicates room for additional investment in projects that will enable a more significant contribution to environmental objectives. This includes investments in technologies and systems that reduce energy consumption by more than 30 percent, the transition to zero-emission vehicles, and the implementation of studies and independent audits to better quantify the impact of individual economic activities on the environment. ■ Taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) ....15.8% ■ Taxonomy ineligible activities ............84.2% 16168484 Environmental objectives Share of tax- onomy-aligned OPEX by ob- jective Share of tax- onomy-eligible OPEX by ob- jective Climate change mitigation - 74.43% Climate change adaptation - - Sustainable use and protection of water and marine resources - - Transition to a circular economy - - Pollution prevention and control - - Protection and restoration of biodi- versity and ecosystems - - SHARE OF ALIGNED AND ELIGIBLE OPERATING EXPENSES BY ENVIRONMENTAL OBJECTIVES www.adplastik.hr 124 SCOPE REVENUE FROM ECONOMIC ACTIVITIES AD Plastik Group’s production sites AD Plastik d.d., Croatia AD Plastik Tisza Kft., Hungary ADP d.o.o., Serbia AO AD Plastik Togliatti, Russia Substantial contribution criteria DNSH criteria ("Does not s i g n i fi c a n t l y h a r m " ) Economic activities (1) Code(s) (2) Absolute revenue (3) Proportion of revenue (4) Climate Change Mitigation (5) Climate Change Adaptation (5) Climate Change Mitigation (7) Climate Change Adaptation (8) Water and Marine Resources (9) Circular Economy (10) Pollution (11) Biodiversity and Ecosystems (12) Minimum safeguards (13) Taxonomy-aligned proportion of reve- nue, year N (14) Taxonomy-aligned proportion of reve- nue, year N-1 (15) Category (enabling activity) (16) Category (transitional activity) (17) Valuta % % % % % O P A. TAXONOMY-ELIGIBLE ACTIVITIES A.1.Taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) Collection and transport of non-hazardous waste in source segregated fractions 5.5 191 0.13% 0.29% O Manufacture of automotive and mobility components 3.18 115,712 75.90% 0 O Revenue from taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) (A) 115,903 76.03% B. TAXONOMY-INELIGIBLE ACTIVITIES Revenue from taxonomy-ineligible activities (B) 36,540 23.97% Total (A + B) 152,443 100.00% www.adplastik.hr 125 CAPITAL EXPENDITURE FROM ECONOMIC ACTIVITIES Substantial contribution criteria DNSH criteria (“Does not s i g n i fi c a n t l y h a r m ” ) Economic activities (1) Code(s) (2) Absolute capital expenditure (3) Proportion of capital expenditure (4) Climate Change Mitigation (5) Climate Change Adaptation (5) Climate Change Mitigation (7) Climate Change Adaptation (8) Water and Marine Resources (9) Circular Economy (10) Pollution (11) Biodiversity and Ecosystems (12) Minimum safeguards (13) Taxonomy-aligned proportion of capital expenditure, year N (14) Taxonomy-aligned proportion of capital expenditure, year N (15) Category (enabling activity) (16) Category (transitional activity) (17) Valuta % % % % % O P A. TAXONOMY-ELIGIBLE ACTIVITIES A.2.Taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) Installation, maintenance and repair of energy efficiency equipment 7.3 14 0.11% 1.92% O Renovation of existing buildings 7.2 485 3.72% 0 P Acquisition and ownership of buildings 7.7 120 0.92% 0 P Manufacture of automotive and mobility components 3.18 9,087 69.69% O Capital expenditures from taxonomy-eligible but environ- mentally unsustainable activities (taxonomy non-aligned) (A) 9,706 74.43% B. TAXONOMY-INELIGIBLE ACTIVITIES Capital expenditure from taxonomy-ineligible activi- ties (B) 0 3,333 25.57% Total (A + B) 13,039 100% www.adplastik.hr 126 OPERATING EXPENSES Substantial contribution criteria DNSH criteria (“Does not s i g n i fi c a n t l y h a r m ” ) Economic activities (1) Code(s) (2) Absolute operating expenses (3) Proportion of operating expenses (4) Climate Change Mitigation (5) Climate Change Adaptation (5) Climate Change Mitigation (7) Climate Change Adaptation (8) Water and Marine Resources (9) Circular Economy (10) Pollution (11) Biodiversity and Ecosystems (12) Minimum safeguards (13) Taxonomy-aligned proportion of operat- ing expenses, year N (14) Taxonomy-aligned proportion of operat- ing expenses, year N (15) Category (enabling activity) (16) Category (transitional activity) (17) Valuta % % % % % O P A. TAXONOMY-ELIGIBLE ACTIVITIES A.2.Taxonomy-eligible but environmentally unsustainable activities (taxonomy non-aligned) Installation, maintenance and repair of energy efficiency equipment 7.3 61 0.35% 0.21% O Collection and transport of non-hazardous waste in source segregated fractions 5.5 111 0.64% Collection and transport of non-hazardous and hazardous waste 2.3 47 0.00 Transport by motorbikes, passenger cars, and light commer- cial vehicles 6.5 136 0.79% 0.09% P Urban, suburban and road passenger transport 6.3 212 1.22% P Renewal of water collection, treatment and supply systems 5.2 13 0.08% P Acquisition and ownership of buildings 7.7 60 0.35% P Freight transport services by road 6.6 94 0.54% P Renovation of existing buildings 7.2 14 0.08% P Manufacture of automotive and mobility components 3.18 1,986 11.46% P Operating expenses from taxonomy-eligible but environ- mentally unsustainable activities (taxonomy non-aligned) (A.2) 2,734 15.78% B. TAXONOMY-INELIGIBLE ACTIVITIES Operating expenses from taxonomy-ineligible activities (B) 0 14,594 84.22% Total (A + B) 17,328 100% www.adplastik.hr 127 EMPLOYEES - THE DRIVING FORCE OF SUCCESS SOCIAL MATTERS S1 OWN WORKFORCE TOTAL NUMBER OF EMPLOYEES 1,783 www.adplastik.hr 128 People are the foundation of the business, the driving force behind every innovation, delivered value, and success. Their expertise, commitment, and energy ensure not only the company’s competitiveness but also its long-term stability and sustainability. Investing in employees is, therefore, an investment in the future – their safety, health, profession- al development, and satisfaction are key priorities for the company. The organizational culture is shaped to encourage inclusivity, excellence, and a sense of belonging, while the supportive work environment is continuously improved to enable employees to grow. Employees are one of the three key areas of the sustainabil- ity strategy, for which the goals were updated during the re- porting period, in line with their needs, rights, and EU regula- tions. The Code of Business Conduct and Policies were also updated and aligned with the highest international stand- ards and legal frameworks. All employees are included in the reporting scope, with agency workers and workers providing cleaning, hospitality, and similar services at the company sites not being consid- ered employees. The report assessed job security, occupational health and safety, employee rights, freedom of association, social di- alogue, skills development and treatment of vulnerable groups as key issues related to the company’s own work- force. Labor shortages and rising employee retention costs are recognized as potential risks, which could impact turno- ver and production stability. Despite continuous efforts to improve workforce stability by increasing the share of indefinite contracts, maintaining regular social dialogue, and improving working conditions, market volatility and rising living costs pose a significant challenge. Given the rise in operational costs and the pres- sure on financial sustainability of the business, increasing wages in line with employee needs is not easy. Nevertheless, the company continues to invest in long-term solutions that ensure competitive working conditions, work-life balance, and opportunities for professional development, recogniz- ing that employee satisfaction is the foundation of stability and successful business operations. There are clearly defined employee protection mechanisms that ensure confidentiality and security in the event of a vi- olation of rights, with zero tolerance for retaliation. Detailed information on procedures for addressing negative impacts and available channels for raising concerns can be found on page 156. Active collaboration with the Workers’ Coun- cil and trade unions ensures that the voice of employees is present in all decisions that affect them, ensuring their in- volvement in shaping the company’s future. Although potential negative impacts are rare and unpredict- able, they are systematically addressed through existing risk management mechanisms. Special attention is given to employees who may be more exposed to risks due to specif- ic working conditions, personal circumstances, or business changes. In such situations, workplace adjustments, addi- tional training, and opportunities for professional develop- ment are provided, aiming to offer support and long-term security. The company is aware that the transition to more sustain- able business practices may bring changes that impact employees. Restructuring and optimization of produc- tion processes sometimes require reskilling or job adjust- ments, but at the same time, they open up opportunities for employment in green industry sectors. To ensure a fair transition and maintain stability in changing conditions, education and training programs are being developed for employees to help them successfully adapt to new market demands. www.adplastik.hr 129 During the reporting period, policies for managing impacts on the company’s own workforce were improved, including policies on human rights protection and ethical employ- ment, diversity and equal opportunities, as well as occu- pational health and safety. These policies are aligned with EU standards, the UN’s Guiding Principles on Business and Human Rights, the International Labour Organization’s Dec- laration, and the OECD guidelines. The policies contribute to managing significant sustainability factors and apply to all employees within the Group, with particular emphasis on vulnerable groups. Employee rights policies have been improved, with a spe- cific focus on the protection of children’s rights and ethi- cal employment. Key changes include strengthening mech- anisms to prevent child labor and human trafficking, as well as aligning internal processes with the highest internation- al standards in the protection of labor and children’s rights. The Code and Policies strictly prohibit forced and child la- bor, as well as human trafficking, with established monitor- ing mechanisms and reporting channels that ensure confi- dentiality and protection for whistleblowers. The company has no operations where there is a high risk of forced labor, compulsory or child labor, either by type of business or geo- graphical areas in which it operates. AD Plastik Group is dedicated to ensuring transparent and fair employment, professional development and equal op- portunities for all employees. Qualifications, skills and ex- perience form the basis for employment, assignment of functions, training and advancement of employees, while continuous work is being done on further improvement of internal policies to ensure an inclusive approach to all can- didates, taking into account possible obstacles in acquiring certain qualifications. Additionally, the commitment to ensuring the payment of wag- es in accordance with the laws of each country of operation has been further emphasized, with an expanded obligation to ensure that wages cover the basic living expenses of employ- ees and their families (living wage), enabling them to live with dignity. The payment of adequate wages, which exceed the le- gally mandated minimum, is defined to provide employees with stability and financial security. The Code and policies are pub- lished on the company’s website and intranet, and each em- ployee receives a copy upon hiring. Employee safety is ensured through the occupational safety management system and the Occupational Health and Safety Policy, which include preventive measures, risk assessments, and regular training, thereby creating a safe and healthy work environment. The Code of Business Conduct and the Diversity and Equal Opportunities Policy prevent any form of discrimi- nation based on gender, age, disability, racial or ethnic origin, religion, and other protected categories, while the company actively promotes inclusivity and equality through training and monitoring mechanisms. Open collaboration with employees is achieved through regular social dialogue, the Workers’ Council, and trade unions, ensur- ing their active involvement in decision-making processes and the protection of their rights and interests. MANAGEMENT POLICIES EMPLOYMENT GOAL SHARE OF WOMEN IN THE LONG TERM 45-50% (2023 52.6%) www.adplastik.hr 130 Collaboration with employees and their representatives is carried out through social dialogue, collective bargaining, and internal communication channels. Employee perspectives are taken into account when making decisions that affect working conditions, professional development, and workplace safety. Regular meetings with the Worker’s Council and trade unions ensure transparency and active employee involvement in deci- sion-making processes. Additionally, a worker representative participates in the Supervisory Board, having direct insight into business decision-making. Alongside formal dialogue methods, individual and group discussions with employees, satisfaction surveys, and systematic assessments of working conditions and their needs are encouraged. Operational responsibility for implementing these processes lies with the Management Board in collaboration with the human re- sources and occupational safety departments. The effectiveness of the collaboration is assessed through employee feedback anal- ysis, collective bargaining outcomes, and monitoring the impact of implemented measures. Special attention is given to the inclusion of vulnerable employee groups, including persons with disabilities, women, and those working in roles with increased safety risks. Their needs are integrated through workplace adjustments, profes- sional development programs, and ensuring equal opportunities. Communication with employees is most intensive and occurs at various levels, including direct consultations and their involve- ment in assessing business impact. To ensure inclusivity and provide all employees with equal access to information, different communication channels are used, tailored to specific needs and potential barriers such as language and cultural differences, gen- der imbalances, or structural challenges within the organization. Internal workshops, surveys, thematic meetings, and the option to anonymously express opinions via the ADP Mailbox are used to gather feedback and encourage dialogue. Regular organiza- tional climate and employee satisfaction surveys are conducted, as well as specific research focused on diversity and inclusion challenges. Employees are regularly informed about the company’s activities and key decisions through the internal newsletter ADP Novosti, bulletin boards, intranet and other digital communication chan- nels. Accessibility of information is also ensured by adapting content to the needs of employees, taking into account different work locations, levels of digital literacy and ability to understand key topics. In cases of potential conflicts of interest within the workforce, social dialogue mechanisms and internal procedures are applied to resolve disagreements, ensuring transparency and fairness in the proceedings. Special attention is also paid to the protection of human rights, including the right to privacy, freedom of expres- sion, and peaceful assembly and protest, and all protection and reporting mechanisms are available to employees in an under- standable and simple manner. This approach creates open and accessible communication that encourages inclusiveness, transparency, and employee partici- pation in shaping the work environment, enabling them to play an active role in business processes and decision-making. In its Human Rights Protection and Ethical Employment Policy, the company commits to respecting internationally recognized hu- man rights in accordance with the UN principles on business and human rights. The policy includes a prohibition of forced and child labor, human trafficking, and discrimination, as well as the promo- tion of freedom of association and collective bargaining. Through the principles of due diligence, the company continuously identi- fies and mitigates risks of adverse impacts across its own oper- ations and value chain. Grievance mechanisms for receiving and resolving issues are available to all stakeholders, with more infor- mation provided on page 156. COLLABORATION WITH EMPLOYEES www.adplastik.hr 131 Occupational Safety eliminate workplace injuries by 2030 through strengthening safety standards and training Employee Health implement well-being programs at all sites by 2030, with a focus on physical and mental health Education and Development 30 hours of training per employee annually by 2030 for lifelong learning and skill devel- opment Talent Development increase talent retention rate by 20 percent and introduce individual career plans by 2030 Engagement and Satisfaction increase employee engagement by 25 per- cent and satisfaction by 20 percent by 2030 through flexible working conditions and social dialogue Diversity and Inclusion achieve 40 percent women in managerial posi- tions by the end of 2025 and increase rep- resentation of underrepresented groups by 15 percent by 2030 Employee involvement in the double materiality assessment Employee input played a significant role in the double materiality as- sessment, with representatives from various employee groups partici- pating through focus groups. In addition to working conditions, health, and safety, employees rated the importance of preventing corruption and bribery, corporate culture, and climate change as particularly high. This confirms a strong level of awareness regarding sustainability and ethical standards within the company. Through the principles of due diligence, the company continuously identifies and mitigates risks of adverse impacts across its own op- erations and value chain. Grievance mechanisms are available to all stakeholders, with more information provided on page 156. Risk management is systematically conducted through assess- ments of impact of business decisions on employees, particu- larly in the context of restructuring and technological changes. The effectiveness of the measures taken is monitored through regular analyses, employee feedback, and tracking key work- force indicators. Goals for improving working conditions and employee development To further improve employee safety, health, professional devel- opment, and satisfaction, specific target values have been de- fined as part of the sustainability strategy: These target values were developed in collaboration with employ- ees and their representatives, and their progress is continuous- ly monitored through surveys, audits, and workforce indicators. www.adplastik.hr 132 EMPLOYMENT STRUCTURE AND DYNAMICS Gender as declared by employees themselves, other categories are not applicable and therefore not listed. The average number of employees annually is calculated by adding the number of employees at the end of each month, from which the average over 12 months is derived. 2023 2024 Country Total employees Men Women Total employees Men Women Croatia 1,120 568 552 1,123 598 525 Hungary 307 120 187 278 112 166 Serbia 202 105 97 172 94 78 Russia 229 87 142 210 85 125 Total 1,858 880 978 1,783 889 894 SHARE OF WOMEN Croatia ........ 46.7% Hungary ...... 59.7% Serbia .........45.3% Russia .........59.5% 60 40 45 100 60 40 47 100 TOTAL EMPLOYEES 50505050 total 1,783 ■ Men ...................................49.9% ■ Women .............................50.1% AVERAGE EMPLOYEES AD PLASTIK GROUP 50.1% 6161111116161212 ■ Croatia ..............................61.1% ■ Hungary ............................ 16.2% ■ Serbia ...............................10.6% ■ Russia ...............................12.1% total 1,803 www.adplastik.hr 133 88881212 636316161111 total 1,783 total 1,783 ■ Permanent employees ........................88.4% ■ Temporary employees ........................11.6% ■ Croatia ..............................63.0% ■ Hungary ............................ 15.6% ■ Serbia .................................9.6% ■ Russia ...............................11.8% The high proportion of permanent employees in the company is a result of the practice where new employees initially receive fixed-term contracts, and after some time, they most common- ly transition to indefinite-term contracts. The additional in- crease in fixed-term contracts in Croatia during 2024 is related to the increased employment of workers from third countries. According to the legislative frameworks of the European Un- ion and their home countries, such contracts are linked to work permits, which currently prevents their conversion into indefi- nite-term contracts. Employees with an uncertain number of working hours are not a recognized category in the company’s operations. 47475353 70703030 total 1,577 (88.4%) total 206 (11.6%) ■ Men ...................................47.2% ■ Women .............................52.8% ■ Men ...................................70.4% ■ Women .............................29.6% EMPLOYEES BY TYPE OF EMPLOYMENT CONTRACT PERMANENT EMPLOYEES TEMPORARY EMPLOYEES 2023 2024 Croatia Hungary Serbia Russia Total Croatia Hungary Serbia Russia Total Permanent employees 996 304 165 229 1,694 931 276 160 210 1,577 Men 483 120 89 87 779 458 112 89 85 744 Women 513 184 76 142 915 473 164 71 125 833 Temporary employees 124 3 37 - 164 192 2 12 - 206 Men 85 - 16 - 101 140 - 5 - 145 Women 39 3 21 - 63 52 2 7 - 61 TOTAL 1,120 307 202 229 1,858 1,123 278 172 210 1,783 www.adplastik.hr 134 TURNOVER RATE BY MONTH 2.2% 1.0% 1.8% 2.6% 2.5% 1.8% 1.9% 2.9% 2.9% 2.4% 2.0% 1.6% 2.0% 2.3% 2.7% 1.9% 2.3% 1.9% 1.5% 1.3% 1.8% 1.7% 1.2% 1.1% 1 2 3 4 5 6 7 8 9 10 11 12 ■ 2024 ■ 2023 21.8% 25.5% 16.1% 5.5% 22.8% 20.6% 22 100 26100 16100 100 23100 21100 ■ Voluntary ■ Involuntary ■ Men ■ Women 1.3% 1.8% 2.0% 1.6% 1.7% 1.4% 1.3% 1.0% 1.6% 1.0% 1.0% 0.8% 0.5% 0.7% 0.3% 0.7% 0.5% 0.2% 0.3% 0.3% 0.7% 0.4% 0.2% 0.9% 1.2% 1.5% 1.0% 1.2% 0.9% 0.9% 0.7% 0.7% 0.6% 0.8% 0.6% 1.1% 1.1% 1.2% 0.9% 1.2% 1.0% 0.6% 0.6% 1.1% 1.1% 1 2 3 4 5 6 7 8 9 10 11 12 The annual turnover rate is calculated by taking the total number of employees who left and dividing it by the average number of employees during the year. The monthly turnover rate is calculated by taking the total num- ber of employees who left during the month and dividing it by the number of employees at the end of that month. It is reported at the end of the reporting period, considering the total number of employees, including both full-time and part-time employees, as well as permanent and temporary employees. www.adplastik.hr 135 RESIGNATIONS 2.5% 3.0% 1.5% 2.2% 1.8% 1.3% 0.7% 2.2% 1.2% 1.3% 1.2% 2.6% 2.3% 2.7% 3.3% 2.0% 3.1% 1.0% 1.7% 0.7% 1.1% 0.7% 1.4% 0.5% 2.0% 1.5% 2.0% 4.0% 0.5% 2.1% 3.8% 1.6% 4.6% 1.1% 0.6% 0.4% 2.7% 2.3% 1.4% 1.8% 2.3% 2.8% 1.4% 1.9% 2.4% 1.4% 1.0% 1 2 3 4 5 6 7 8 9 10 11 12 21.2% 22.7% 24.2% 21.5% 21 100 23100 24100 22100 ■ Croatia ■ Hungary ■ Serbia ■ Russia TURNOVER RATE BY COUNTRY 50505050 65653535 total 393 total 393 ■ Men ......................... 198 (50.4%) ■ Women ................... 195 (49.6%) ■ Permanent employees .............. 256 (65.1%) ■ Temporary employees .............. 137 (34.9%) www.adplastik.hr 136 FULL TIME 50505050 total 1,779 ■ Men ...................................49.9% ■ Women .............................50.1% Only 0.2% of employees work part-time, exclusively by personal choice, adjusting their work obligations to suit individual needs and circumstances. EMPLOYEES BY TYPE OF WORKING HOURS SHARE OF PART-TIME WORK BY SITE WORKING HOURS 9999 ■ Full time work ...................99.8% ■ Part-time work ...................0.2% total 1,783 2023 2024 Croatia Hungary Serbia Russia Total Croatia Hungary Serbia Russia Total Full time work 1,117 306 201 229 1,853 1,121 277 171 210 1,779 Men 566 120 105 87 878 597 112 94 85 888 Women 551 186 96 142 975 524 165 77 125 891 Part-time work 3 1 1 - 5 2 1 1 - 4 Men 2 - - - 2 1 - - - 1 Women 1 1 1 - 3 1 1 1 - 3 TOTAL 1,120 307 202 229 1,858 1,123 278 172 210 1,783 505025252525 ■ Croatia ................................0.2% ■ Serbia ................................. 0.4% ■ Hungary .............................. 0.6% ■ Russia .................................0.0% total share 0.2% www.adplastik.hr 137 All employees of the company are covered by collective agreements, with a separate agreement signed in each coun- try. In Croatia, negotiations were held during the reporting pe- riod, and a new Collective Agreement was signed for one year. In Serbia, the first Collective Agreement was signed for three years. The collective agreements in Hungary and Russia are valid until December 31, 2025. There are no employee representation agreements within the EWC, SE or SCE. The company employs only workers through employment agen- cies (NACE 78), and there are no self-employed individuals. The published data includes the total number of agency workers at the end of the reporting period, with these workers primarily be- ing involved in production due to increased workload. The data clearly shows the allocated agency workers by site, but there are no comparative data for previous periods due to a different methodology used in earlier periods. This method- ology previously included workers from other companies pro- viding services at the company’s sites, who were part of the value chain. WORKERS WHO ARE NOT EMPLOYEES 18188282 total 46 ■ Croatia ..............................13.0% ■ Hungary .............................. 0.0% ■ Serbia .................................0.0% ■ Russia ...............................87.0% SHARE OF EMPLOYEES COVERED BY COLLECTIVE AGREEMENT EEA members Employees C.A. Croatia √ 1,401 100% Hungary Serbia × 382 100% Russia 6 0 0 40 46 13.0% 0.0% 0.0% 87.0% 0 0 0 0 0 NACE 78 * Share Self-employed * NACE 78 - seconded agency workers by site 2023 2024 employees C.A. employees C.A. Croatia 1,120 100% 1,123 100% Hungary 307 100% 278 100% Serbia 202 0% 172 100% Russia 229 100% 210 100% TOTAL 1,858 87.7% 1,783 100% Croatia Hungary Serbia Russia Total 46 40 46 46 40 www.adplastik.hr 138 A fair and inclusive work environment is the foundation of sta- bility and success for the AD Plastik Group. Equal treatment and equal opportunities are integral parts of the company’s corporate culture and values. The company’s policies ensure that every employee has an equal opportunity for professional development, advancement, and a safe working environment. This approach not only contributes to social responsibility but also strengthens the company’s ethical standards, creating an encouraging and productive work atmosphere. DIVERSITY AND EQUAL OPPORTUNITIES FOR ALL AGE DIVERSITY IN MANAGEMENT 2023 2024 18-30 30-50 >50 Total 18-30 30-50 >50 Total Top management Men - 12 12 24 - 11 12 23 Women - 7 4 11 - 5 5 10 Middle management Men 2 32 4 38 4 29 3 36 Women 1 19 11 31 - 19 11 30 Line management Men 4 42 22 68 3 39 21 63 Women 2 21 14 37 3 21 15 39 TOTAL 9 133 67 209 10 124 67 201 SHARE OF WOMEN IN MANAGEMENT POSITIONS 40% by the end of 2025 (2023 37.8%) GOAL Top management ..................30.3% Middle management .............45.5% Line management .................38.2% SHARE OF WOMEN IN MANAGEMENT 61613939 ■ Men ...................................60.7% ■ Women .............................39.3% 39.3% women 30 99 46 100 38 100 www.adplastik.hr 139 GENDER DIVERSITY IN MANAGEMENT 7010069100 5510055100 6210065100 ■ Men ■ Women Top management Middle management Line management 69.7% 68.6% 54.6% 55.1% 61.8% 64.8% 30.3% 31.4% 45.5% 44.9% 38.2% 35.2% 2024. 2023. 2024. 2023. 2024. 2023. AGE DIVERSITY OF EMPLOYEES AGE DIVERSITY OF EMPLOYEES - MEN AGE DIVERSITY OF EMPLOYEES - WOMEN 121256563232 141459592727 101054543636 ■ <30 years ..........................12.1% ■ 30-50 years ......................56.0% ■ >50 years ..........................32.0% ■ <30 years ..........................13.9% ■ 30-50 years ......................58.5% ■ >50 years ..........................27.6% ■ <30 years ..........................10.2% ■ 30-50 years ......................53.5% ■ >50 years ..........................36.4% Average age 44.5 years 2023 2024 <30 30-50 >50 <30 30-50 >50 Men 146 498 236 124 520 245 Women 111 514 353 91 478 325 TOTAL 257 1.012 589 215 998 570 total 889 total 894 To ensure the effectiveness of policies, clear procedures have been established to identify and address irregularities. Employ- ees have access to various channels for anonymously or direct- ly reporting concerns, and each reported case of unequal treat- ment, discrimination, or human rights violations is thoroughly investigated and addressed with appropriate measures. During the reporting period, two complaints were received, and the in- vestigation revealed that these were related to uncertainties regarding work organization and job scope. Therefore, no cas- es requiring corrective actions were recorded, confirming the effectiveness of the existing mechanisms and the company’s commitment to creating a safe and fair work environment. To further enhance inclusivity, regular employee surveys are conducted to identify challenges and opportunities related to equality in the workplace. Through a proactive approach, the company aims to continuously improve the professional devel- opment of all employees, ensuring equal access to opportuni- ties regardless of gender, age, disability, or other factors. More information about management diversity can be found on page 68, where the highest governing bodies are considered the Manage- ment Board and the Supervisory Board, while senior management includes the Management Board, executive directors, and directors. www.adplastik.hr 140 84841111 55554545 ■ Men ...................................54.5% ■ Women .............................45.5% ■ Croatia ..............................84.1% ■ Serbia .................................4.5% ■ Hungary ............................ 11.4% Data is collected based on valid documentation issued by the competent authorities, through which persons with disabilities confirm their status. This includes pension insurance decisions, decisions issued by Institute for Expert Evaluation, Professional Share of people with disabilities in the total number of employ- ees subject to data collection limitations. Rehabilitation and Employment of People with Disabilities, as well as other relevant acts in accordance with the laws of the countries in which the company operates. PERSONS WITH DISABILITIES total share 2.5% total share 2.5% 1,123 278 172 210 1,783 1.8% 0.4% 1.7% - 1.3% 1.5% 0.4% 1.2% - 1.1% 3.3% 0.7% 2.9% - 2.5% There is no comparative period, as reporting is being conducted in this format for the first time. Employees PWD men PWD women Share 100100 20100 96100 100 76100 84 100 20100 68100 100 64100 Croatia Hungary Serbia Russia Total www.adplastik.hr 141 22100 21100 16100 17100 26100 FAIR AND DIGNIFIED SALARY All employees of AD Plastik Group receive appropriate wage in line with applicable reference values. Continuous efforts are made to improve the reward system to ensure fairness and competitiveness of salaries in accordance with industry and market standards. TALENT AND LEADERSHIP DEVELOPMENT One of the significant opportunities for improving equality is mentoring and developing leadership skills in women, preparing them for managerial roles and strengthening their visibility in a sector traditionally dominated by male workers. The perception of the automotive industry as a sector in which men are more represented remains a challenge, which may affect women’s low- er interest in taking on management positions. In order to strengthen gender equality, analyses of pay gaps are continuously conducted and initiatives are developed to increase the number of women in key positions. Special focus is placed on strategic sustainability goals, which include increasing the rep- resentation of women in management positions. The positive impact of these measures is reflected not only in the improvement of work culture and trust among employees, but also in the creation of a more innovative, dynamic and sustain- able organization. GENDER PAY GAP In previous years, the calculation of the gender pay gap was based on different methodologies, which is why earlier reports indicated that no pay gap existed. However, with the imple- mentation of new methodological requirements in line with the ESRS, it has been determined that a gender pay gap does ex- ist, although this can be partially explained by the structure of employees at different levels of responsibility and job complex- ity. Since earlier data is not comparable to the new calculation methods, it is currently not possible to display trends over the past years. However, future reports will monitor the develop- ment of these indicators. The current gender pay gap is: The goal is to reduce the gap and increase the transparency of the remuneration system through a long-term sustainability strategy. The ratio between the compensation of the highest paid person and the median employee compensation is 17.4. AD Plastik Group .......22.1% Croatia ....................... 21.6% Hungary ..................... 16.2% Serbia ........................ 16.5% Russia ........................ 25.9% GENDER EQUALITY AND EQUAL PAY Gender equality and ensuring equal pay for work of equal val- ue are fundamental to a dynamic and fair work environment. By regularly monitoring the gender structure of employees and management, the company ensures balance and equal representation, which enables a diversity of perspectives, im- proves the work atmosphere, and fosters innovation within the organization. The company conducts a gender pay gap analysis and imple- ments measures to reduce it, ensuring that women and men receive equal compensation for the same work. In line with its sustainability strategy, initiatives are being developed to promote greater representation of women in key roles, strengthening their presence in leadership positions and contributing to the creation of a more supportive and inclusive work environment. www.adplastik.hr 142 Continuous investments in employees’ knowledge and com- petencies ensure their adaptability to dynamic industrial changes and contribute to innovation and improvement of business processes. Tracking training hours by gender and employee categories enables an equal distribution of training, thus ensuring equal opportunities for professional develop- ment. At the same time, diverse training programs are tailored to the specific requirements of different work areas, enabling targeted development of key competencies. Systematic assessments of employee performance identi- fy areas for improvement, which enables the adaptation of development programs to individual needs. Annual training plans are structured to provide a clear path for profession- al development, contributing to long-term development and strengthening of expertise. Special potential lies in increasing investment in training and the implementation of hybrid learning models, which ena- ble a more flexible approach to knowledge acquisition. The combination of classic and digital training is adapted to the needs of employees, which further improves the learning ex- perience. Through continuous skills development, employees become better prepared to face challenges, while raising the overall level of work quality. Strategic investments in educa- tion not only strengthen internal expertise, but also increase the company’s competitiveness on the market and strengthen the trust of business partners. Comparative data with previous years is not available because the reporting methodology has changed. TRAINING AND SKILLS DEVELOPMENT SKILLS DEVELOPMENT 20100 24100 22100 173........................ 19.5% 214........................ 23.9% 387 .......................21.7% 889 894 1.783 Number of employees Rated work performance Share of employees with a rating ■ Men ■ Women ■ Total Gender as declared by employees themselves, other categories are not applicable and therefore not listed TRAINING HOURS PER EMPLOYEETRAINING 45455555 59594141 ■ Men ...................................44.7% ■ Women .............................55.3% ■ Men ...................................58.5% ■ Women .............................41.5% total share 21.7% 44.5 hours Total training hours Number of employees Training hours per employee Direct workers Men 34,570 330 104.8 Women 23,377 551 42.4 Indirect workers Men 11,797 559 21.1 Women 9,638 343 28.1 Subtotal Men 46,367 889 52.2 Women 33,015 894 36.9 TOTAL 79,382 1,783 44.5 www.adplastik.hr 143 A safe working environment, health protection and social pro- tection of employees are a strategic priority of the AD Plastik Group. Stable working conditions and comprehensive social protection are key to the long-term sustainability of the busi- ness, employee satisfaction and their productivity and motiva- tion. Therefore, continuous work is being done to identify and eliminate potential risks, ensuring employees’ safety at work. No specific groups of employees have been identified that would be exposed to a higher risk of negative effects, since all processes take place in controlled working conditions with the application of equal standards of protection, safety and profes- sional development for all employees. HEALTH AND SAFETY Country Croatia Hungary Serbia Russia Total Type of employee Permanent employees Temporary employees Workers who are not employees Permanent employees Temporary employees Workers who are not employees Permanent employees Temporary employees Workers who are not employees Permanent employees Temporary employees Workers who are not employees 2023 Employees 996 124 56 304 3 3 165 37 4 229 - 22 1,943 Unemployment √ √ × √ √ × √ √ × √ √ × 1,858 Sick Leave √ √ × √ √ × √ √ × √ √ × 1,858 Maternity Leave √ √ × √ √ × √ √ × √ √ × 1,858 Workplace Accidents √ √ × √ √ × √ √ × √ √ × 1,858 Disability Benefit √ √ × √ √ × √ √ × √ √ × 1,858 Pension √ √ × √ √ × √ √ × √ √ × 1,858 2024 Employees 931 192 6 276 2 - 160 12 - 210 - 40 1,829 Unemployment √ √ × √ √ × √ √ × √ √ × 1,783 Sick Leave √ √ × √ √ × √ √ × √ √ × 1,783 Maternity Leave √ √ × √ √ × √ √ × √ √ × 1,783 Workplace Accidents √ √ × √ √ × √ √ × √ √ × 1,783 Disability Benefit √ √ × √ √ × √ √ × √ √ × 1,783 Pension √ √ × √ √ × √ √ × √ √ × 1,783 www.adplastik.hr 144 All employees enjoy social protection in accordance with appli- cable legislation, including rights in cases of illness, unemploy- ment, workplace injuries, acquired disability, parental leave, and retirement. Workers who are not in direct employment with the company, such as agency workers, receive their rights through the agency that employs them. 2023 2024 ∆ Solin 6 4 -33.3% Zagreb 11 13 +18.2% Tiszaújváros 21 8 -61.9% Mladenovac 8 10 +25.0% Vintai - - - TOTAL 46 35 -23.9% 2023 2024 ∆ Solin - 1 - Zagreb - - - Tiszaújváros - - - Mladenovac - - - Vintai - - - TOTAL - 1 - OCCUPATIONAL DISEASESINJURIES AT WORK There were no worker injuries at the sites involving non-employees. 2023 2024 ∆ Solin 346 254 -26.6% Zagreb 233 146 -37.3% Tiszaújváros 55 147 +167.3% Mladenovac 70 160 +128.6% Vintai - - - TOTAL 704 707 +0.4% LOST WORKING DAYS BY SEVERITY OF INJURY LOST DAYS 51514949 80802020 ■ Due to minor injuries ......... 360 (50.9%) ■ Due to severe injuries ........ 347 (49.1%) ■ Minor injuries ........... 28 (80.0%) ■ Severe injuries ....................... 7 (20.0%) total 707 total 35 2023 2024 ∆ Solin 6.0 4.4 -25.9% Zagreb 10.6 11.0 +4.0% Tiszaújváros 41.4 17.3 -58.1% Mladenovac 22.1 31.6 +43.0% Vintai - - - TOTAL 13.9 10.8 -22.3% (Number of injured workers / total number of hours worked by employees x 1,000,000) INJURIES BY SEVERITY INJURY RATE www.adplastik.hr 145 GOAL INJURY-FREE 2030 There were no fatalities in AD Plastik Group in 2024. FATALITIES All employees are covered by the highest occupational health and safety standards, which are aligned with the relevant legis- lation in each country of operation. They are required to attend basic safety training and work regulations upon hiring, while continuous education and training are provided to ensure a high level of safety awareness and reduce the risks of work- place injuries. Relevant committees and occupational health and safety services regularly monitor and improve the imple- mentation of protective measures. Special attention is given to injury prevention and the reduction of health risks, while providing social benefits and support to employees in various life situations. The goal is to create a work environment free of injuries and risks, particularly in produc- tion processes, through ongoing investments, education, and improvements to safety standards. A certified occupational health and safety management sys- tem according to ISO 45001 has been implemented in Croatia and Mladenovac, ensuring systematic risk management and continuous improvement of working conditions. The system is subject to regular internal audits and external certification, confirming compliance with the highest standards of employee health and safety. By providing support in balancing professional and fami- ly obligations for its employees, the company ensures the right to family leave in accordance with national legislation and collective agreements. Various forms of family leave are available, including maternity, paternity, parental, and car- egiver leave. Maternity leave ensures job protection for employed women during the period immediately before and after childbirth, while paternity leave guarantees fathers or equivalent oth- er parents the right to take time off work upon the birth or adoption of a child to provide care. Parental leave allows for additional child care after maternity leave, in accordance with the regulations of individual countries, while caregiver leave ensures that employees have the right to take time off work to personally care for a family member or a person from the same household who requires significant support due to a serious health condition. All employees are entitled to the mentioned forms of leave, with the duration varying depending on the legislation of the country of operation, ranging from one to three years. Spe- cial attention is given to encouraging fathers to take paren- tal leave, promoting a more equal distribution of family re- sponsibilities. Through the active implementation of these measures, the company creates a stable and supportive work environment, ensuring flexibility and security for em- ployees in balancing their commitments. BALANCING PRIVATE AND WORK LIFE www.adplastik.hr 146 FAMILY LEAVE Croatia Hungary Serbia Russia AD Plastik Group ∑ Total employees 598 525 112 166 94 78 85 125 889 894 1,783 Paternity 14 - 2 - - - - - 16 - 16 Maternity and parental 18 45 - 11 2 - - 12 20 68 88 Care of a family member 19 46 - 1 2 5 - - 21 52 73 Marriage 12 2 - - - - - 1 12 3 15 Newborn child 10 - - - 2 - - - 12 - 12 First day of school 12 5 - - - - - - 12 5 17 Death of a close family member 33 46 9 16 5 2 3 4 50 68 118 Moving 6 10 - - - - - - 6 10 16 Natural disaster 1 - - - - - - - 1 - 1 Voluntary blood donation 33 9 - 1 15 11 - - 48 21 69 Humanitarian, cultural or sports events - - - - - - - - - - - Professional training - 1 - - - - 2 2 2 3 5 Family leave utilization rate 26.4% 31.2% 9.8% 17.5% 27.7% 23.1% 5.9% 15.2% 22.5% 25.7% 24.1% ■ Men ■ Women ■ Total 2023 is not comparable due to different reporting method Croatia Hungary Serbia Russia 26.4% 31.2% 9.8% 17.5% 27.7% 23.1% 5.9% 15.2% Men Women Men Women Men Women Men Women 100% of employees are entitled to family leave SHARE OF FAMILY LEAVE USE 43435757 ■ Men (200) .........................46.5% ■ Women (230) ....................53.5% total share 24.1% 26100 31 100 10100 18 100 28100 23 100 100 15 100 www.adplastik.hr 147 Strategic purchasing consistently encourages suppliers to respect human rights, employee rights, and the rights of vulnerable groups, ensure equal opportunities, and comply with other labor-related rights through existing policies. By updating the Sustainable Supplier Management Policy, the approach to collecting and tracking material sustainability topics in the supply chain was further improved during the reporting period, including labor rights and employee pro- tection. Clear guidelines for sustainable supply chain man- agement were established, aimed at minimizing negative environmental impacts, promoting social responsibility, and ensuring economic sustainability through a detailed analy- sis of topics aligned with ESRS requirements. Although the topic of Workers in the Value Chain was not assessed as material, neither according to the stakeholders’ opinions nor the company’s own evaluation, the importance of systematic data collection and setting clear standards in the supply chain was recognized. In the materiality assessment process, certain factors were identified as material, including job security, working hours, adequate wages, freedom of association, health and safe- ty, measures against violence, diversity, and privacy. How- ever, despite being aware of its responsibility in managing potential risks and impacts on workers in the value chain, the company currently does not have direct data from the value chain. To ensure transparency and responsible busi- ness practices, efforts are being made to improve access to data, and this year the possibility of exemption according to ESRS is being utilized. The positive effects stem from the fact that most suppliers come from the European Union, where they are subject to strict legislative requirements, thus ensuring their reliability and compliance with sustainability standards to a large extent. By introducing the updated Supplier Sustainability Questionnaire, data is collected on the certifications and standards held by suppliers (IATF 16949, ISO 14001, ISO 9001, ISO 27001, and others), allowing for more objective ranking based on sustaina- bility criteria. This process further strengthens transparency in supplier assessment and ensures compliance with established sustainable business policies. S2 VALUE CHAIN www.adplastik.hr 148 On the other hand, the main challenges include the increased need for data analysis across all levels of the value chain and the limited ability to gain insight into lower-tier suppliers, which makes it difficult to fully track their practices. Although surveys are already conducted with first-tier suppliers through the up- dated monitoring system and publicly available data is collect- ed for higher levels of the value chain, challenges in ensuring comprehensive insight into all segments of the supply chain still exist. The confidentiality of contracts between the company and its business partners further limits transparency and the ability to verify data about working conditions. The lack of available data makes it challenging to monitor key aspects such as job securi- ty, working hours, appropriate wages, and overall working condi- tions at deeper levels of the value chain. Additionally, the limited number of suppliers included in the Supplier Portal makes it dif- ficult to fully assess freedom of association and other workers’ rights. However, the planned expansion of the Portal to cover the entire supply chain will enable the inclusion of a larger number of suppliers and improve data transparency in this area. During the reporting period, 100 percent of the suppliers on the Supplier Portal stated that they promote freedom of associa- tion and support workers’ rights. Furthermore, 96 percent of registered suppliers expressed positive responses regarding the introduction of measures against workplace violence and harassment, and the same percentage supports diversity and implements policies that promote inclusion. The management of potential risks, such as human rights vio- lations in lower levels of the supply chain or lack of measures against workplace violence and harassment, is carried out through the supplier database and the mandatory acceptance of the company’s published policies by all suppliers. However, this year, the company was unable to collect detailed data on all aspects of working conditions within the value chain, which complicates drawing conclusions regarding compliance within the value chain. In 2024, the company’s Code of Business Conduct and Pol- icies were updated, with the Sustainable Supplier Manage- ment Policy further clarifying expectations regarding envi- ronmental protection, respect for human and labor rights, and ethical behavior. All suppliers are invited to cooperate and adhere to these standards, and upon entering the Supplier Database, they are directly informed about the sustainabili- ty policies. Through the updated Supplier Sustainability Questionnaire, data is also collected on available channels for workers to ex- press concerns, which will facilitate a better understanding of their rights and working conditions. Given that the first signif- icant analytical data is expected in the medium term, specific indicators and target values have yet to be defined, but solid foundations have been laid for systematic monitoring and fur- ther optimization of the supply chain. Since the issue of Workers in the Value Chain was not identified as material, the company is not obligated to report on specific policies, cooperation procedures, remediation mechanisms, or target values related to this topic. However, the company will continue to monitor relevant aspects of the business, particu- larly in terms of expanding data availability regarding the value chain and improving business transparency with suppliers. GOAL LOCAL SUPPLIERS +10% by 2030 (2023 36% share in procurement value in k€) SUPPLIER ASSESSMENT BY PROCUREMENT VALUE (k€) 2023 2024 assessed share purchase value assessed share purchase value Croatia 95.3% 77,544 88.7% 87,427 Hungary 79.9% 8,198 79.7% 10,287 Serbia 90.3% 9,518 72.5% 13,125 Russia 64.3% 5,679 33.3% 17,077 AD Plastik Group 91.7% 100,939 78.9% 127,916 www.adplastik.hr 149 OTHER GOALS SHARE OF EVALUATED SUPPLIERS WITH ISO 14001 STANDARD 2023 2024 Croatia 33.9% 34.9% Hungary 48.3% 48.1% Serbia 48.4% 37.7% Russia 7.1% 9.5% AD Plastik Group 36.5% 35.9% SUPPLY CHAIN ECOLOGICAL FOOTPRINT 20% by 2040 SUSTAINABLE SUPPLIERS BY PURCHASE VALUE 75% 85% 100% by 2030 2040 2050 35 99 4899 38100 10100 3699 SHARE OF LOCAL SUPPLIERS BY VALUE (k€) 2023 2024 share local import total share Croatia 29.0% 25,908 61,518 87,426 29.6% Hungary 76.4% 7,664 2,623 10,287 74.5% Serbia 37.4% 3,606 9,519 13,125 27.5% Russia 48.6% 1,730 4,016 5,746 30.1% Total 36.5% 38,908 77,676 116,584 33.4% 33336767 ■ Local ................................. 33.4% ■ Import ...............................66.6% www.adplastik.hr 150 S3 AFFECTED COMMUNITIES AD Plastik Group recognizes its responsibility towards communities that are directly or indirectly affected by its business activities. Pro- duction sites and business processes can have environmental, eco- nomic and social impacts on local communities, including residents, local authorities, non-governmental organisations and other rele- vant stakeholders, especially in terms of employment and workforce development. In addition to the immediate surroundings of produc- tion facilities, the company is aware of the impact on communities in the value chain, including suppliers and subcontractors whose op- erations are adapting to growing sustainability requirements. Tak- ing these factors into account, business impacts are monitored and, through dialogue with key stakeholders, potential negative impacts are identified and reduced, contributing to the long-term develop- ment of the communities in which it operates. Affected communities did not prove to be a material topic in the double materiality analysis, both according to internal assessments and according to stakeholders. Although certain positive impacts of business operations on local communities were identified, they were not assessed as material in the reporting context, while the identi- fied risks and opportunities do not have a material financial impact on the business. In the area of economic, social and cultural rights of com- munities, certain positive impacts were identified, including increasing the quality of life through cooperation with local communities and employment of local population, ensuring food supply through local suppliers, responsible use of wa- ter resources and minimizing land conversion, since business operations mainly take place in industrial and already devel- oped sites. Also, employee training on safety protocols and risk management contributes to safety and strengthening trust within communities. Water supply and drainage was assessed as material and cer- tain opportunities were identified in this area, such as regen- eration of local water systems and reuse of treated water for sanitary purposes, which would reduce the consumption of natural resources. At the same time, the costs of investing in water treatment equipment and rehabilitation of sewage and stormwater systems represent a moderate financial burden, but were not assessed as financially material. Since these topics are covered in more detail in the chapter on Water Re- sources Management, they are not considered in this section. www.adplastik.hr 151 Similarly, the impacts related to employee safety and emergency risk management have been assessed as positive for local communities, as regular risk assessments, risk management practices, and em- ployee training contribute to building community trust and improv- ing overall safety. Although this factor was assessed as material, it was not further discussed within this standard, as employee safety is covered in the Employees - The Driving Force of Success chapter. The affected communities are partly covered in the Business Con- duct chapter, which addresses responsible business conduct in re- lation to the community, including ethical standards, collaboration with local stakeholders, and contributions to the development of the communities in which the company operates. Civil and political rights of communities, including freedom of ex- pression, freedom of assembly, and impacts on human rights de- fenders, are not subject to assessment, given that the company operates in regions with well-developed legal systems where such rights are legally protected and regulated, and the company’s activ- ities do not have a direct or significant impact on them. The company also does not operate in areas inhabited by indige- nous peoples, nor are there indications of business operations with- in such areas in its value chain, which is why no assessment has been conducted on issues related to their rights. In its Human Rights Protection and Ethical Employment Policy, AD Plastik Group undertakes to respect international standards, with a special emphasis on protecting the human rights of affected com- munities through the prohibition of all forms of human trafficking and forced labor, preserving the rights of local communities to land, forests and water, respecting the cultural identity and resources of indigenous and minority communities, and ensuring accessi- ble and safe mechanisms for reporting violations of rights, thereby strengthening transparency, accountability and legal protection in accordance with the UN principles on business and human rights. A formal procedure for cooperation with affected communities is not prescribed; instead, this cooperation takes place through ex- isting business processes and initiatives, adapted to the specific needs and circumstances of each community. In accordance with the standards, and since the topic of affect- ed communities has not been identified as material, the company is not obligated to report on specific policies, cooperation proce- dures, remediation mechanisms, or target values related to this topic. Based on the results of the assessment, the company does not recognize the need for additional disclosures or management approaches but will continue to monitor relevant aspects of its op- erations and their potential impacts in line with business strategies and regulatory requirements. www.adplastik.hr 152 S4 CONSUMERS AND END-USERS AD Plastik Group, as a leading supplier of plastic components for the automotive industry, is dedicated to the development and production of innovative solutions that contribute to the safety, sustainability and quality of vehicles used by millions of end users every day. Although the company does not have direct interaction with end consumers, through the value chain and cooperation with vehicle manufacturers there is a material impact on the expe- rience and safety of product users. The needs and expecta- tions of end users are monitored through cooperation with car manufacturers, regulatory bodies and industry associations. Continuous work is being done on improving the impact of products on end users through sustainable solutions, innova- tive materials, and manufacturing processes that support saf- er and more environmentally friendly mobility. This is largely contributed by the application of high-quality standards and internationally certified management systems, which reduce maintenance costs and increase vehicle reliability. The development of lightweight and recyclable materials actively contributes to reducing the carbon footprint of the automotive industry, thus enabling lower energy consumption and higher ve- hicle efficiency. The company maintains transparent and respon- sible supply chain management, ensuring compliance with regu- latory requirements and ethical business principles. Potential risks associated with the use of plastics in cars are identified and analyzed, and significant resources are invest- ed in innovations that support the circular economy and more environmentally friendly solutions. The topic of consumers and end-users has proven to be highly material from both an impact and financial materiality perspective, with the health and safety of end-users identified as extremely important— both internally and by stakeholders. www.adplastik.hr 153 Aware of the potential risks related to data privacy, the Group applies a range of measures to ensure the protection of sensi- tive information. Through the implementation of non-disclo- sure agreements (NDAs) with customers and the enforcement of the Code of Business Conduct, data security is ensured. Additionally, some offers are sent via digital platforms such as GST and CAYOR, which allow for secure data exchange. As an additional measure, the Customer Portal is used for send- ing all offers to ensure controlled and secure information ex- change. However, the challenge of data transfer remains at lower levels of the value chain, where the company lacks di- rect control, which may pose a potential risk. Through the Customer Portal, feedback on products and ser- vices is received, promoting transparency and two-way com- munication, further supported by the regular completion of ESG questionnaires. However, limited access to end-users of vehicles reduces the ability to collect their feedback on prod- uct satisfaction, which is identified as a potential risk. The complexity of regulations and customer requirements, along with their constant changes, can slow down adapta- tion and the updating of information, presenting a challenge in maintaining product relevance and compliance with market standards. At the same time, detailed information is provid- ed already in the quotation phase, including data on materi- als, processes, tools, and packaging, allowing customers to make informed decisions. The calculation of the carbon foot- print per product, which is becoming an increasingly impor- tant sustainability indicator, is currently performed only for a smaller portion of products but will be expanded to cover all products in the medium term. The health and safety of end-users are of particular impor- tance throughout the value chain. By complying with EC reg- ulations in product design, a high level of safety in the event of a crash is achieved, while monitoring the chemical com- position of products reduces the risks of exposure to harm- ful substances. Regular impact resistance tests and material inspections further ensure the quality and safety of products. Improvements to the DFMEA analysis are planned for the me- dium term to further improve these factors. AD Plastik Group does not produce components that directly affect the safety of vehicle passengers, except through the quality and safety of materials that are designed according to customer specifications. At the same time, it does not man- ufacture products intended for children, nor specifically de- signed for their safety, so the impact on child protection is not relevant in the context of business activities. It also does not discriminate against end users, since the products are tech- nically standardized according to customer instructions. The technical quality of the products guarantees safety, but there is no direct impact on their final availability to users. Responsible marketing practices are ensured through the Ad- vertising and Market Communication Code and the Code of Business Conduct, which set high standards for ethical com- munication. Business and product promotion is carried out through responsible channels, without using misleading mes- sages. Transparency of information via IMDS ensures tracea- bility and documented information about the chemical com- position, recycled materials, and sustainability of products. All the measures and initiatives mentioned ensure a high level of compliance with standards and affirm the company’s com- mitment to responsible business practices and protecting the interests of consumers and end-users. Sustainability goals, such as reducing the carbon footprint and developing sus- tainable materials, are shaped in line with industry standards and the requirements of manufacturers who integrate end-us- er feedback. Although end-users are not directly involved in setting goals, their expectations are encompassed through market demands and regulatory frameworks. Performance monitoring is carried out through quality and environmental management systems, and manufacturer feedback is used for further improvements. In this way, the alignment of sustain- able solutions with end-user needs is ensured, even though they do not directly participate in decision-making. www.adplastik.hr 154 INFORMATION ON GOVERNANCE G1 BUSINESS CONDUCT Business conduct has proven to be an exceptionally material topic based on internal assessments and stakeholder opinions during the double materiali- ty analysis. Corporate culture, in particular, was highly rated. Strengthening a corporate culture based on ethical principles and sustainability has been identified as a key impact, as it contributes to improving stakeholder and employee trust, improving cooperation with partners, and supporting the or- ganization’s long-term financial growth. Despite the positive effects, certain risks have also been recognized that could impact the business, such as insufficient protection for whistleblow- ers, which could lead to employee mistrust, reduced reporting of irregulari- ties, reputational damage, and potential legal consequences. In the area of supplier relationship management, delayed payments can cause supply dis- ruptions, damage trust, and lead to increased operational costs due to ur- gent replacements. Additionally, in the context of preventing and detecting corruption and bribery, a lack of understanding of anti-corruption practices among employees increases the risk of misconduct, which could result in le- gal penalties, loss of contracts, and reputational damage. At the same time, opportunities have been identified that can improve busi- ness operations and reduce the aforementioned risks. Further strengthening of a corporate culture based on ethical principles and sustainability will in- crease stakeholder and employee trust, improve cooperation with partners, and contribute to long-term financial growth. Signing long-term contracts with suppliers enhances stability, reduces the risk of price fluctuations, and ensures a reliable supply. The role of the Management Board and the Supervisory Board is described in detail in the Corporate Governance section. www.adplastik.hr 155 ■ Diversity and Equal Opportunity Policy ■ Advertising and Market Communication Code The listed policies represent a clear commitment of the company, and their implementation will be integrated into business processes, internal regulations, and manage- ment systems. Continuous improvements in various man- agement areas are carried out through internal audits and monitoring compliance with international standards. Animal welfare is not recognized as a material topic for the company’s business, but it is still covered by environ- mental protection and sustainable supplier management policies, through adherence to industry standards, ethi- cal guidelines, and best practices for humane treatment of animals. MECHANISMS FOR REPORTING CONCERNS AND IRREGULARITIES A comprehensive whistleblowing system has been estab- lished to ensure transparency, accountability, and pro- tection for all whistleblowers. Reporting mechanisms are defined in the Code of Bussines Conduct, which applies throughout the entire group, and are further detailed in the Rulebook on Whistleblower Protection, which provides a secure and confidential channel for reporting irregularities. These mechanisms include direct reports to supervisors or the legal department, reports via email, as well as anony- mous submissions through the internal system and physical drop boxes available at all business sites. The reporting system is not limited to employees but is also available for suppliers, customers, and other busi- ness partners through a publicly available email address for reporting irregularities. Whistleblowers are guaranteed full protection against any retaliation, in accordance with applicable laws and best practices. Reports are processed confidentially and in accordance with clearly defined internal procedures, and the effectiveness of the mechanisms is monitored through the analysis of received and resolved cases, as well as regular social dialogue with employees and their representatives. The effectiveness of these channels is continuously eval- uated through procedure audits, ensuring their accessi- bility, reliability, and the timely resolution of all reported issues. This approach ensures systematic management of business conduct to capitalize on opportunities, reduce risks, and further strengthen the positive impacts on business perfor- mance. The assessment did not identify significant risks or opportunities in the areas of political engagement, lobbying, or incidents related to business conduct. CORPORATE CULTURE AD Plastik Group bases its operations on high standards of corporate governance, ethics, and sustainability, ensuring long-term growth and development in alignment with the in- terests of its stakeholders. The Code of Business Conduct and corporate policies define the fundamental values and principles of responsible business, and their application encompasses employees and business partners, including suppliers. During the reporting year, the company updated its key cor- porate policies and the Code of Business Conduct to ensure compliance with regulatory requirements, industry standards, and best practices. The Code and policies were published and made available on the Group’s website and intranet, and were provided to all employees and business partners involved to ensure transparency and understanding of their obligations. Corporate Culture Management AD Plastik Group develops a corporate culture based on in- tegrity, ethics, and responsibility, ensuring a high standard of professional behavior. To monitor and improve the cor- porate culture, the following measures are implemented: ■ integration of ethical standards into the human resourc- es management process, hiring, and promotion ■ ensuring independent monitoring and reporting of ethi- cal issues through appropriate internal bodies Updated policies ■ Anti-Corruption Policy ■ Anti-Monopoly Policy ■ Energy Management Policy ■ Sustainable Supplier Management Policy ■ Quality Policy ■ Environmental Protection Policy ■ Employee Health and Safety Protection Policy ■ Human Rights and Ethical Employment Protection Policy ■ Corporate Security Policy www.adplastik.hr 156 During the reporting period, there were no violations of hu- man rights, and no concerns or irregularities were reported through the provided channels, indicating a stable and ethical business environment. WHISTLEBLOWER PROTECTION ■ Internal channels for reporting irregularities ■ All employees have access to information about whistleblower rights ■ The Workers’ Council has appointed individuals for receiving and processing reports, with the prescribed support of profes- sional services, ensuring objective and impartial investigations ■ Measures are taken to protect whistleblowers from retaliation During the reporting period, no reports were received. The Rulebook on Whistleblower Protection is applied in ac- cordance with the national legislation of the Republic of Cro- atia, which transposes the EU Directive. In Hungary, legal re- quirements arising from the implementation of this directive into national legislation are also applied, while in Russia and Serbia, there are no equivalent legal requirements. However, regulatory changes will continue to be monitored, and the ap- plication of best practices for whistleblower protection will be ensured across all business units. PREVENTION OF CORRUPTION AD Plastik Group consistently applies a zero-tolerance policy towards any form of corruption, bribery, and unethical busi- ness practices. The awareness of employees and business partners regarding the importance of ethical business con- duct, the availability of reporting mechanisms, and the proce- dures for preventing risks related to bribery and corruption is continuously strengthened. Existing measures and practices ■ Anti-corruption policy – a binding document for all employees ■ The Internal Order Regulations specify that using internal con- tacts for personal purposes constitutes a violation of the em- ployee’s work duties ■ Whistleblowing mechanisms have been established with con- fidential channels, available to employees and external stake- holders Suspicions of non-compliance with the Company’s Code or policies can be reported verbally, in writing, or anonymously. Verbal reports can be made directly to supervisors or the legal department, written reports can be sent to the email address [email protected], or anonymous reports can be sub- mitted through the ADP Mailbox. The individuals responsible for conducting investigations related to the prevention and detection of corruption and bribery have not been defined. www.adplastik.hr 157 ■ Croatian Chamber of Economy - mandatory member and signatory of the Code of Ethics ■ HR BCSD - Croatian Business Council for Sustainable Development Marinko Došen, President of the Assembly ■ UN Global Compact Croatia Marinko Došen, Member of the Management Committee ■ Assembly of the Croatian Chamber of the Economy Marinko Došen, Member of the Assembly ■ Economic Council of Croatian Chamber of Economy - County Chamber Split Mladen Peroš, Vice President ■ Croatian Exporters Marinko Došen, Vice President ■ Plastic and Rubber Industry Association Mladen Peroš, Member of the Board, Igor Lončar (replacement) ■ Vocational Plastics and Rubber Manufacturing Group of the County Chamber Split Josip Suzan, President ■ Vocational Group for Environmental Protection in the Economy of the CCE - County Chamber Split Jadranka Konta, Member ■ CIPD – the professional body for HR and people development Krešimir Mikulandra ■ Occupational Safety Community Bernarda Huić ■ Association of Metal Processing Industry of the CCE ■ Community for environmental protection in the economy CCE ■ Lider’s Club of Exporters ■ Automotive Cluster Russia ■ Serbian Automotive Cluster ■ Chamber of Commerce and Industry of Serbia ■ Business Club of Mladenovac ■ National Association of Entrepreneurs and Employers Hungary ■ Hungarian Plastics Association ■ Association of Hungarian Automotive Component Manufacturers ■ Hungarian Chamber of Commerce and Industry MEMBERSHIPS IN ASSOCIATIONSA procedure for reporting to management bodies regarding the outcomes, ensuring timely and transparent communica- tion of relevant findings, conclusions, and recommendations has not been established. Activities in implementation and planned measures To further strengthen the system for preventing and detecting corruption, the company has defined the following activities: ■ Implementation of a new round of internal training at all levels on the risks associated with bribery and corruption, legal frameworks and sanctions, and mechanisms for pre- vention, identification, and reporting of corruption risks ■ Analysis of the highest-risk functions within the company regarding corruption and bribery – development of a model for systematic verification of functions The company remains committed to continuously strength- ening internal control mechanisms, ensuring business trans- parency, risk prevention, and the protection of the integrity of business processes. In 2024, no training programs were conducted to combat corruption and bribery, nor were high-risk functions or mem- bers of administrative, managerial, and supervisory bodies covered. Similarly, no reports related to corruption or bribery were re- ceived. POLITICAL ENGAGEMENT AND LOBBYING AD Plastik Group does not materially or financially support political parties, but actively participates in transparent public advocacy of the interests of industry, economy and sustainable development. This is carried out through busi- ness and interest organizations, through which the company promotes dialogue and constructive relations with key so- cial actors. During the reporting period, company representatives partici- pated in relevant conferences, initiatives and in the work of as- sociations of which it is a member, thereby contributing to the formation of industry standards and development policies. There were no cases of non-compliance with laws and regula- tions, nor were there any irregularities recorded in connection with the application of the Code and policies, for which no fi- nancial or other sanctions were imposed. www.adplastik.hr 158 ■ Learning by Doing conference, Istria panel: Who takes the penalty kicks in ESG?, participant: Marinko Došen ■ Women in Business, round table, Croatian Employers’ Association, Zagreb participant: Marinko Došen ■ 19th Convention of Croatian Exporters and “Golden Key” Award ceremony, Mozaik Event Center, Zagreb panel: Export in the environment of geopolitical risks, participant: Marinko Došen ■ 11th Export Conference “Smart People Know What Export Is For”, Kraš Auditorium, Zagreb panel: At the beginning or end of the supply chain, participant: Lidija Škarica ■ 21st HBOR’s Conference on Export Promotion, Zadar panel: Deglobalization in Action: How does the fragmentation of international trade affect Croatian exports, participant: Marinko Došen ■ CCE - Industry Conference: It´s Time for Industry, Zagreb panel: Prospects for strengthening Croatian industry, participant: Marinko Došen ■ Big Plans Day Conference, Hotel Westin Zagreb ■ Golden Marten, Croatian National Theatre Zagreb ■ Challenge of Change Conference, Hotel Lone, Rovinj ■ 16th conference on sustainable development, Zagreb ■ 20th anniversary of Croatian Exporters and the Platinum Key Award, Zagreb ■ Corporate Governance: Standards Shaping Tomorrow, HANFA, Zagreb ■ Zagreb Stock Exchange Awards, Zagreb PARTICIPATION IN CONFERENCES AND BUSINESS EVENTS AD Plastik Group makes its payments to small and medium-sized enterprises, taking into account the contractual and legal deadlines. Of the total number of domestic suppliers in the parent company from the SME group, 37 percent have a contractual payment deadline of up to 30 days from the date of invoice, while for an additional 37 percent this deadline is be- tween 31 and 60 days. The remaining suppliers have contractual payment deadlines longer than 60 days. The average weighted time required to pay SMEs in the parent company is 68 days from the date of in- voice, with 27 percent of liabilities being paid within 30 days, 28 percent in the period from 31 to 60 days, and the rest after 60 days. The average payment delay from the contractual or le- gal due date is 22 days, which is most often affected by later receipts and postings of invoices, lack of support- ing documentation, possible complaints, but also shifts in the cash flow plan. In subsidiaries, most SME suppliers are paid within 30 days of invoice issuance. Payments are made weekly, in accordance with a defined cash flow plan, in order to settle all liabilities within the month of maturity. As of the reporting date, AD Plastik Group has no pending legal proceedings related to late payments to suppliers. SUPPLIER PAYMENTS www.adplastik.hr 159 SPONSORSHIPS ■ Faculty of Economics, Split International Summer School 2024 ■ Faculty of Mechanical Engineering and Naval Architecture, Zagreb Career Days ■ Croatian Chamber of Economy Industrial Conference ■ Penta d.o.o. Challenge of Change ■ Scool d.o.o. Kwizard ■ St. Ilija Metković Boatmen’s Association ■ Bocce club Sućidar ■ Caspera - Association of women affected by malignant diseases ■ Center for Occupational Therapy and Rehabilitation ■ Faculty of Electrical Engineering, Mechanical Engineering and Naval Architecture, University of Split ■ Croatian Football Club Sloga Mravince ■ Croatian Exporters ■ Faculty of Chemistry and Technology - assistance to students for professional travel ■ Football Club Solin ■ Youth Water Polo Club Split ■ Croatian War Veterans Association Kaštela ■ Association of persons with cerebral palsy and polio Rijeka ■ Andrej Gal – Chess Development ■ Donation of Decommissioned Computers – Caritas, Autism Center, Vrbik kindergarten, Josip Vergilij Perić Elementary School, Parasports Association of the City of Split, Handball Club Petason, Supetar Tam- buritza Ensemble, Dalmacijacement Tennis Club, Moment of Time Association DONATIONS DONATIONS AND SPONSORSHIPS www.adplastik.hr 160 REPUBLISHED AND CUSTOMIZED INFORMATION ■ Tables within the report have been marked and explained that do not have comparative periods due to differences in the calculation method or data collection approach ■ Energy – from this year, energy consumption is calculated in MWh, while in previous years it was calculated in GJ, and the 2023 data has been adjusted accordingly to ensure better data comparison ■ Emissions Scope 1 – changes occurred in 2023 primarily due to the use of new emission fac- tors (DEFRA 2023), and part of the business travel emissions previously calculated based on fuel consumption have been moved from Scope 3 to Scope 1 ■ Emissions Scope 2 – changes occurred in the calculation of emissions in 2023, in accordance with ESRS, and different emission factors (DEFRA 2023) were used to align and improve the comparability of the data ■ Emissions Scope 3 – more details are provided in Scope 3 itself, but part of the calculation has been modified using new emission factors (DEFRA 2023), and the comprehensive calculation has been supplemented with emissions that were not previously reported ■ Waste – the amounts and numbers in 2023 have not changed, but unlike the previous year, waste has been separated, diverted from disposal and directed towards disposal ■ The share of women in management positions in 2023 had an error in the calculation, which has been corrected, so instead of the published 40.4 percent in 2023, their share was 37.8 per- cent ■ The methodology for reporting on training and skills development has been changed, so there is no possibility of comparing periods ■ The method of reporting on family leave has been adjusted to ESRS, so it is not possible to compare with the previous period ■ The method of reporting on employees who are not our own workforce has been changed and aligned with ESRS and is therefore not comparable with the previous period ■ The shares of estimated suppliers by purchase value in 2023 have been slightly changed, ex- clusively for Russia, due to subsequently collected data ■ Data for water consumption, water in technological processes and discharged water for 2023 in Croatia and for water in technological processes in Serbia have been changed because an incorrect calculation was detected Modifications and adjustments to the 2023 data have been included to ensure alignment with ESRS re- quirements and are not within the scope of KPMG’s audit. www.adplastik.hr 161 Disclosure Requirement Description Data Point Sustainable Finance Disclosure Regulation Pillar III Benchmark Regu- lations European Climate Law Page or materiality ESRS 2 GOV-1 Gender diversity in the Management Board 21 (d) Indicator No. 13 from Ta- ble 1 of Annex I Commission Dele- gated Regulation (EU) 2020/1816, Annex II 68 ESRS 2 GOV-1 Percentage of Manage- ment Board members who are independent 21 (c) Delegated Regula- tion (EU) 2020/1816, Annex II 64 ESRS 2 GOV-4 Statement on due dil- igence 30 Indicator No. 10 from Ta- ble 3 of Annex I 77 ESRS 2 SBM-1 Involvement in activities related to fossil fuels and energy 40 (d) i Indicator No. 4 from Table 1 of Annex I Regulation (EU) No. 575/2013, Article 449a Commission Implement- ing Regulation (EU) 2022/2453, Table 1: Qualitative information on environmental risk and Table 2: Qualitative information on social risk Delegated Regula- tion (EU) 2020/1816, Annex II non- material ESRS 2 SBM-1 Involvement in activities related to the production of chemicals 40 (d) ii Indicator No. 9 from Table 2 of Annex I Delegated Regula- tion (EU) 2020/1816, Annex II non- material ESRS 2 SBM-1 Involvement in activities related to controversial weapons 40 (d) iii Indicator No. 14 from Ta- ble 1 of Annex I non- material ESRS E1-1 Transition plan to achieve climate neutrali- ty by 2050 14 Regulation (EU) 2021/1119, Arti- cle 2(1) non- material ESRS E1-1 Companies excluded from Paris Agreement benchmarks 16 (g) Article 449a Regulation (EU) No. 575/2013; Commission Implementing Regula- tion (EU) 2022/2453, Template 1: Banking book – Climate change transition risk: Credit quality of exposures by sector, emissions, and residual maturity Delegated Regula- tion (EU) 2020/1818, Article 12(1), points (d) to (g), and Article 12(2) non- material ESRS E1-4 Greenhouse gas emis- sion reduction targets 34 Indicator No. 4 from Table 2 of Annex I Article 449a of Regula- tion (EU) No. 575/2013 Delegated Regula- tion (EU) 2020/1818, Article 6 93 ESRS E1-5 Energy consumption from fossil sources bro- ken down by source 38 Indicator No. 5 from Table 1 and Indicator No. 5 from Table 2 of Annex I 91 ESRS E1-5 Energy intensity related to activities in sectors with significant climate impact 40-43 Indicator No. 6 from Table 1 of Annex I 91 LIST OF DATA IN THE INTERSECTORAL AND THEMATIC STANDARDS ARISING FROM OTHER EU REGULATIONS www.adplastik.hr 162 Disclosure Requirement Description Data Point Sustainable Finance Disclosure Regulation Pillar III Benchmark Regu- lations European Climate Law Page or materiality ESRS E1-6 Gross greenhouse gas emissions from Scope 1, 2, and 3, and total emissions 44 Indicators No. 1 and 2 from Table 1 of Annex I Article 449a Regulation (EU) No. 575/2013; Commission Implementing Regula- tion (EU) 2022/2453, Template 1: Banking book – Climate change transition risk: Credit quality of exposures by sector, emissions, and residual maturity Delegated Regula- tion (EU) 2020/1818, Article 5(1), Article 6, and Article 8(1) 93-96 ESRS E1-6 Gross greenhouse gas emissions intensity 53-55 Indicator No. 3 from Table 1 of Annex I Regulation (EU) No. 575/2013, Article 449a; Commission Implement- ing Regulation (EU) 2022/2453, Template 3: Banking book – Climate change transition risk: Alignment metrics Delegated Regula- tion (EU) 2020/1818, Article 8(1) 93 ESRS E1-7 Greenhouse gas remov- als and carbon credits 56 Regulation (EU) 2021/1119, Arti- cle 2(1) non- material ESRS E1-9 Exposure of the refer- ence portfolio to physi- cal climate-related risks 66 Delegated Regula- tion (EU) 2020/1818, Delegated Regula- tion (EU) 2020/1816, Annex II non- material ESRS E1-9 Breakdown of monetary amounts by acute and chronic physical risk 66 (a) Regulation (EU) No. 575/2013, Article 449a; Commission Imple- menting Regulation (EU) 2022/2453, points 46 and 47; Template 5: Banking book – Physical climate risk: Exposures subject to physical risk non- material ESRS E1-9 Location of significant assets exposed to mate- rial physical risk 66 (c) Regulation (EU) No. 575/2013, Article 449a; Commission Imple- menting Regulation (EU) 2022/2453, points 46 and 47; Template 5: Banking book – Physical climate risk: Exposures subject to physical risk non- material ESRS E1-9 Breakdown of the carry- ing amount of company properties by energy efficiency classes 67 (c) Regulation (EU) No. 575/2013, Article 449a; Commission Implement- ing Regulation (EU) 2022/2453, point 34; Template 2: Banking book – Climate change transition risk: Loans collateralised by immov- able property – Energy efficiency of collateral non- material ESRS E1-9 Degree of portfolio expo- sure to opportunities re- lated to climate change 69 Delegated Regula- tion (EU) 2020/1818, Annex II non- material ESRS E2-4 Quantity of each pollut- ant listed in Annex II of the E-PRTR Regulation (European Pollutant Release and Transfer Register) released into air, water, and soil 28 Annex I, indicator no. 8 Ta- ble 1, Annex I, indicator no. 2 Table 2, Annex I, indica- tor no. 1 Table 2, Annex I, indi cator no. 3 Table 2 101 ESRS E3-1 Water and marine re- sources 9 Indicator No. 7 from Table 2 of Annex I non- material www.adplastik.hr 163 Disclosure Requirement Description Data Point Sustainable Finance Disclosure Regulation Pillar III Benchmark Regu- lations European Climate Law Page or materiality ESRS E3-1 Specific policy 13 Indicator No. 8 from Table 2 of Annex I non- material ESRS E3-1 Sustainable oceans and seas 14 Indicator No. 12 from Ta- ble 2 of Annex I non- material ESRS E3-4 Total volume of recycled and reused water 28 (c) Indicator No. 6.2. from Ta- ble 2 of Annex I non- material ESRS E3-4 Total water consumption in m³ per net revenue from own operations 29 Indicator No. 6.1. from Ta- ble 2 of Annex I 105 ESRS 2-IRO 1 E4 16 (a) i Indicator No. 7 from Table 1 of Annex I non- material ESRS 2-IRO 1 E4 16 (b) Indicator No. 10 from Ta- ble 2 of Annex I non- material ESRS 2-IRO 1 E4 16 (c) Indicator No. 14 from Ta- ble 2 of Annex I non- material ESRS E4-2 Sustainable land/ag- ricultural practices or policies 24 (b) Indicator No. 11 from Ta- ble 2 of Annex I non- material ESRS E4-2 Sustainable ocean/sea practices or policies 24 (c) Indicator No. 12 from Ta- ble 2 of Annex I non- material ESRS E4-2 Policies addressing de- forestation 24 (d) Indicator No. 15 from Ta- ble 2 of Annex I non- material ESRS E5-5 Hazardous and radioac- tive waste 39 Indicator No. 9 from Table 1 of Annex I 114 ESRS 2-SBM3-S1 Risk of forced labor 14 (f) Indicator No. 13 from Ta- ble 3 of Annex I non- material ESRS 2-SBM3-S1 Risk of child labor 14 (g) Indicator No. 12 from Ta- ble 3 of Annex I non- material ESRS S1-1 Human rights policy commitments 20 Indicator No. 9 from Table 3 and Indicator No. 11 from Table 1 of Annex I 131 ESRS S1-1 Due diligence policies on matters covered by ILO Core Conventions 1 to 8 21 Delegated Regula- tion (EU) 2020/1816, Annex II 131 ESRS S1-1 Procedures and meas- ures to prevent human trafficking 22 Indicator No. 11 from Ta- ble 3 of Annex I 130 ESRS S1-1 Occupational accident prevention policy or management system 23 Indicator No. 1 from Table 3 of Annex I 144-146 ESRS S1-3 Grievance mechanism 32 (c) Indicator No. 5 from Table 3 of Annex I 131, 140 ESRS S1-14 Number of fatalities, and number and rate of oc- cupational accidents 88 (b) and (c) Indicator No. 2 from Table 3 of Annex I Delegated Regula- tion (EU) 2020/1816, Annex II 145, 146 ESRS S1-14 Number of days lost due to injuries, accidents, fatalities, or illness 88 (e) Indicator No. 3 from Table 3 of Annex I 145 ESRS S1-16 Unadjusted gender pay gap 97 (a) Indicator No. 12 from Ta- ble 1 of Annex I Delegated Regula- tion (EU) 2020/1816, Annex II 142 ESRS S1-16 Excessive pay ratio between executives and employees 97 (b) Indicator No. 8 from Table 3 of Annex I 142 ESRS S1-17 Incidents of discrimi- nation 103 (a) Indicator No. 7 from Table 3 of Annex I 140 www.adplastik.hr 164 Disclosure Requirement Description Data Point Sustainable Finance Disclosure Regulation Pillar III Benchmark Regu- lations European Climate Law Page or materiality ESRS S1-17 Non-compliance with the UN Guiding Princi- ples on Business and Human Rights and OECD Guidelines 104 (a) Indicator No. 10 from Ta- ble 1 and Indicator No. 14 from Table 3 of Annex I Delegated Regula- tion (EU) 2020/1816 and Commission Delegated Regula- tion (EU) 2020/1818, Annex II, Article 12(1) 157 ESRS 2-SBM3-S2 High risk of child labour or forced labour in the value chain 11 (b) Indicators No. 12 and 13 from Table 3 of Annex I non- material ESRS S2-1 Human rights policy commitments 17 Indicator No. 9 from Table 3 and Indicator No. 11 from Table 1 of Annex I 149 ESRS S2-1 Policies relating to work- ers in the value chain 18 Indicators No. 11 and 4 from Table 3 of Annex I 149 ESRS S2-1 Non-compliance with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines 19 Indicator No. 10 from Ta- ble 1 of Annex I Delegated Regula- tion (EU) 2020/1816 and Commission Delegated Regula- tion (EU) 2020/1818, Annex II, Article 12(1) non- material ESRS S2-1 Due diligence policies on issues covered by ILO Core Conventions 1 to 8 19 Delegated Regula- tion (EU) 2020/1816, Annex II non- material ESRS S2-4 Human rights issues and incidents related to high- er and lower tiers of the value chain 36 Indicator No. 14 from Ta- ble 3 of Annex I non- material ESRS S3-1 Commitments in the area of human rights protection policy 16 Indicator No. 9 from Table 3 of Annex I and Indica- tor No. 11 from Table 1 of Annex I 152 ESRS S3-1 Non-compliance with the UN Guiding Principles on Business and Human Rights, ILO principles, and OECD Guidelines 17 Indicator No. 10 from Ta- ble 1 of Annex I Delegated Regula- tion (EU) 2020/1816 and Delegated Regulation (EU) 2020/1818, Annex II, Article 12(1) 152 ESRS S3-4 Human rights issues and related incidents 36 Indicator No. 14 from Ta- ble 3 of Annex I non- material ESRS S4-1 Policies related to con- sumers and end users 16 Indicator No. 9 from Table 3 and Indicator No. 11 from Table 1 of Annex I non- material ESRS S4-1 Non-compliance with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines 17 Indicator No. 10 from Ta- ble 1 of Annex I Delegated Regula- tion (EU) 2020/1816 and Delegated Regulation (EU) 2020/1818, Annex II, Article 12(1) non- material ESRS S4-4 Human rights issues and related incidents 35 Indicator No. 14 from Ta- ble 3 of Annex I non- material ESRS G1-1 United Nations Conven- tion against Corruption 10 (b) Indicator No. 15 from Ta- ble 3 of Annex I 157 ESRS G1-1 Whistleblower protection 10 (d) Indicator No. 6 from Table 3 of Annex I 157 ESRS G1-4 Fines for violations of anti-corruption and an- ti-bribery regulations 24 (a) Indicator No. 17 from Ta- ble 3 of Annex I Commission Dele- gated Regulation (EU) 2020/1816, Annex II 158 ESRS G1-4 Anti-corruption and an- ti-bribery standards 24 (b) Indicator No. 16 from Ta- ble 3 of Annex I 157 www.adplastik.hr 165 INDEX AND OPINION ESRS Contents 167 ESG Indicators 170 Independent Auditor’s Limited Assurance Report 176 Report on the Application of the Corporate Governance Code 180 C www.adplastik.hr 166 ESRS CONTENTS DISCLOSURE REQUIREMENT Page General Announcements Basics BP-1 General basis for preparing sustainability report 16, 17, 148 BP-2 Disclosures in special circumstances 16, 17, 24, 25, 55, 148, 161 Management GOV-1 The role of administrative, management and supervisory bodies 62-75, 155 GOV-2 Information provided to the administrative, management and supervisory bodies of companies and the sustainability factors addressed by these bodies 70-73, 77 GOV-3 Inclusion of sustainability-related results in incentive programs 69, 72 GOV-4 Statement on due diligence 77 GOV-5 Risk management and internal controls over sustainability reporting 71-78 Strategy SBM-1 Strategy, business model and value chain 12, 18- 33, 56-61, 71-77, 148-150 SBM-2 Stakeholder interests and perspectives 29, 59-61, 76, 148, 149 SBM-3 Significant impacts, risks and opportunities and their interaction with strategy and business model 41, 72, 77-86, 89, 107, 129, 130, 148, 151-155 Impact, risk and opportunity management IRO-1 Description of the process for identifying and assessing significant impacts, risks and opportunities 71-76 IRO-2 ESRS disclosure requirements included in the corporate sustainability report 74, 75, 76, 77, 87, 162-165 Information about the environment E1 Climate change E1-1 Climate Change Mitigation Transition Plan 89 E1-2 Policies related to climate change mitigation and adaptation 90 E1-3 Measures and resources related to climate policies 89 E1-4 Targets related to climate change mitigation and adaptation 56, 93 E1-5 Energy consumption and energy mix 91, 92 E1-6 Gross greenhouse gas emissions from scopes 1, 2, 3 and total greenhouse gas emissions 93-99 E1-7 Greenhouse gas removal and mitigation projects financed by carbon credits 90 E1-8 Internal carbon pricing 99 E1-9 Expected financial consequences of significant physical and transition risks and potential cli- mate-related opportunities 99 E2 Environment E2-1 Pollution-related policies 100 E2-2 Pollution-related measures and resources 100 E2-3 Pollution-related targets 101 E2-4 Air, water and soil pollution 101 E2-5 Substances of concern and substances of very high concern 102 E2-6 Expected financial consequences of pollution-related impacts, risks and opportunities 102 E3 Water and marine resources www.adplastik.hr 167 DISCLOSURE REQUIREMENT Page E3-1 Policies for water and marine resources 104 E3-2 Measures and resources related to water and marine resources 106 E3-3 Targets related to water and marine resources 104 E3-4 Water consumption 105, 106 E3-5 Expected financial consequences of impacts, risks and opportunities related to water and marine resources 106 E4 Biodiversity and ecosystems E4-1 Transition plan and biodiversity and ecosystem issues in strategy and business model 89, 107 E4-2 Biodiversity and ecosystem policies 108 E4-3 Measures and resources for biodiversity and ecosystems 108 E4-4 Targets related to biodiversity and ecosystems 108 E4-5 Performance indicators related to biodiversity and ecosystem change 107 E4-6 Expected financial consequences of risks and opportunities related to biodiversity and ecosystems 108 E5 Resource use and circular economy E5-1 Policies related to resource use and circular economy 109 E5-2 Measures and resources related to resource use and circular economy 110 E5-3 Targets related to resource use and circular economy 110 E5-4 Inflow of resources 110,111 E5-5 Outflow of resources 112 E5-6 Expected financial consequences of impacts, risks and opportunities related to resource use and circular economy 119 Information on social issues S1 Own workforce S1-1 Policies related to own workforce 130 S1-2 Procedures for engaging with own workers and workers’ representatives on impacts 131 S1-3 Procedures for remediation of negative impacts and channels through which own workers can raise concerns 156, 157 S1-4 Taking action for significant impacts on own workforce, approaches to mitigating significant risks and realising significant opportunities related to own workforce and effectiveness of these measures 130, 131 S1-5 Targets related to managing significant negative impacts, fostering positive impacts and managing significant risks and opportunities 132, 139, 146 S1-6 Characteristics of company employees 133-137 S1-7 Characteristics of company non-employed workers 138 S1-8 Collective bargaining coverage and social dialogue 138 S1-9 Diversity indicators 139, 140 S1-10 Adequate wages 142 S1-11 Social protection 144 S1-12 Persons with disabilities 141 S1-13 Training and skills development indicators 143 S1-14 Health and safety indicators 145, 146 S1-15 Work-life balance indicators 146, 147 S1-16 Compensation indicators (pay gap and total compensation) 142 S1-17 Cases, complaints and serious impacts related to human rights 140,157 www.adplastik.hr 168 DISCLOSURE REQUIREMENT Page S2 Workers in the value chain S2-1 Policies related to workers in the value chain 148, 149 S2-2 Procedures for engaging with workers in the value chain on impacts 149 S2-3 Procedures for remediating negative impacts and channels through which workers in the value chain can raise concerns 156 S2-4 Taking action for significant impacts on workers in the value chain, approaches to managing sig- nificant risks and realizing significant opportunities related to workers in the value chain, and the effectiveness of that action 149 S2-5 Targets for managing significant negative impacts, fostering positive impacts, and managing signifi- cant risks and opportunities 149, 150 S3 Affected communities S3-1 Policies for affected communities 152 S3-2 Procedures for engaging with affected communities on impacts 152 S3-3 Procedures for remediating adverse impacts and channels through which affected communities can raise concerns 152, 156 S3-4 Taking action for significant impacts on affected communities, approaches to managing significant risks and realizing significant opportunities associated with affected communities, and the effec- tiveness of these measures 151 S3-5 Targets for managing significant adverse impacts, fostering positive impacts, and managing signifi- cant risks and opportunities 151 S4 Consumers and end users S4-1 Consumer and end-user policies 154 S4-2 Procedures for engaging with consumers and end-users on impacts 153, 154 S4-3 Procedures for redressing negative impacts and channels through which consumers and end-users can raise concerns 156 S4-4 Taking action for significant impacts on consumers and end-users, approaches to managing sig- nificant risks and realizing significant opportunities related to consumers and end-users, and the effectiveness of those measures 153, 154 S4-5 Targets for managing significant negative impacts, fostering positive impacts, and managing signifi- cant risks and opportunities 153, 154 Management information G1 Business Conduct G1-1 Business conduct policies and corporate culture 156 G1-2 Supplier relationship management 148, 149,155, 156 G1-3 Prevention and detection of corruption and bribery 157,158 G1-4 Confirmed cases of corruption or bribery 158 G1-5 Political influence and lobbying 158 G1-6 Payment practices 159 www.adplastik.hr 169 ESG INDICATORS Environmental Unit 2023 2024 GHG Scope 1 & 2 Location-Based Thousand Metric Tonnes CO 2 e 9.74 10.39 GHG Scope 1 Thousand Metric Tonnes CO 2 e 1.79 2.02 GHG Scope 2 Location-Based Thousand Metric Tonnes CO 2 e 7.95 8.37 GHG Scope 3 Thousand Metric Tonnes CO 2 e 59.43 76.03 Scope 3 Business Travel Emissions Thousand Metric Tonnes 0.16 0.09 Scope 3 Employee Commuting Emissions Thousand Metric Tonnes CO 2 e 0.38 0.36 Scope 3 Dwnstrm Transprttn and Distrbtn Emissions Thousand Metric Tonnes CO 2 e 2.49 1.31 Scope 3 Emissions Other Thousand Metric Tonnes CO 2 e 51.31 69.12 CO 2 Scope 1 & 2 Location-Based Thousand Metric Tonnes 9.74 10.39 CO 2 Scope 1 Thousand Metric Tonnes 1.79 2.02 CO 2 Scope 2 Location-Based Thousand Metric Tonnes 7.95 8.37 Carbon per Unit of Production Metric Tonnes/Unit of Production 1 1 Methane (CH 4 ) Scope 1 Thousand Metric Tonnes CO 2 e 0 0 ODS Emissions Thousand Metric Tonnes 0 0 Nitrous Oxide (N 2 O) Scope 1 Thousand Metric Tonnes 0 0 Sulfur Hexafluoride (SF 6 ) Scope 1 Thousand Metric Tonnes 0 0 Methane (CH 4 ) Scope 1 in CO 2 Equivalent Thousand Metric Tonnes CO 2 e 0 0 Nitrous Oxide (N 2 O) Scope 1 in CO 2 Equivalent Thousand Metric Tonnes CO 2 e 0 0 Hydrofluorocarbon (HFC)Scope 1 in CO 2 Equivalent Thousand Metric Tonnes CO 2 e 0 0 Perfluorocarbon (PFC)Scope 1 in CO 2 Equivalent Thousand Metric Tonnes CO 2 e 0 0 Sulfur Hexafluoride (SF 6 ) Scope 1 CO 2 Equivalent Thousand Metric Tonnes CO 2 e 0 0 Emissions Reduction Initiatives Y/N Y Y Climate Change Policy (1) Y/N Y Y Risks of Climate Change Discussed Y/N Y Y Total Energy Consumption Thousand Megawatt Hours 37.83 37.05 Renewable Energy Use Thousand Megawatt Hours 0 0 Energy Efficiency Policy (1) Y/N Y Y Electricity Used Thousand Megawatt Hours 29.92 28.16 Fuel Used - Coal/Lignite Thousand Metric Tonnes 0 0 Fuel Used - Natural Gas Thousand Cubic Meters 709.47 742.54 Fuel Used - Crude Oil/Diesel Thousand Cubic Meters 0.12 0.14 Self Generated Renewable Electricity Thousand Megawatt Hours 0 0 Energy Per Unit of Production Megawatt Hours/Unit of Production 0 0 Percentage Electricity of Total Energy Consumed Percentage 79.00 76.00 ISO 14001 Certified Sites Count 4 5 Environmental Quality Management Policy (1) Y/N Y Y Investments in Operational Sustainability Million Euro Alignment with GRI Standards/ESRS Y/N Y Y Verification Type Y/N Y Y Number of Sites Count 8 8 Pct Sites Certified Percentage 85.71 100.00 Nitrogen Oxide Emissions Thousand Metric Tonnes 0 0 Sulphur Dioxide Emissions Thousand Metric Tonnes 0 0 VOC Emissions Thousand Metric Tonnes 0.01 0.01 www.adplastik.hr 170 Environmental Unit 2023 2024 Carbon Monoxide Emissions Thousand Metric Tonnes 0 0 Particulate Emissions Thousand Metric Tonnes 0 0 Sulphur Oxide Emissions Thousand Metric Tonnes 0 0 Total Water Use Thousand Cubic Meters 44 41 Discharges to Water Thousand Metric Tonnes 24.10 23.97 Hazardous Waste Thousand Metric Tonnes 0.82 0.67 Total Waste Thousand Metric Tonnes 1.75 2.26 Waste Recycled Thousand Metric Tonnes 0.79 1.59 Paper Consumption Thousand Metric Tonnes 0.01458 0.01470 Raw Materials Used Thousand Metric Tonnes 11.05 9.81 Number of Environmental Fines Count 0 0 Amount of Environmental Fines Million Euro 0 0 Waste Reduction Policy (1) Y/N Y Y Total Water Discharged Thousand Cubic Meters 24.10 23.97 Water per Unit of Production Liters/Unit of Production 4.06 4.10 Environmental Accounting Cost Million Euro Biodiversity Policy (1) Y/N Y Y Waste Sent to Landfills Thousand Metric Tonnes 0.32 0.19 Process Water Thousand Cubic Meters 11.74 11.74 Groundwater Withdrawals Thousand Cubic Meters 4.81 3.63 Municipal Water Thousand Cubic Meters 39.34 37.29 Chemical Oxygen Demand of Discharges Metric Tonnes 0 0 Biological Oxygen Demand of Discharges Metric Tonnes 0 0 Cooling Water Inflow Thousand Cubic Meters 11.74 11.74 Water Policy (1) Y/N Y Y Total Water Withdrawal Thousand Cubic Meters 44.15 40.92 Water Stress Exposure Percentage Percentage 0 0 Percentage of Hazardous Waste Percentage 46.95 29.75 Number of Environmental Incidents Count 0 0 Hazardous Waste Recycled Thousand Metric Tonnes 0.33 0.26 Percentage of Hazardous Waste Recycled Percentage 18.70 11.60 Percentage of Waste Recycled Percentage 45.10 70.65 Hazardous Waste Management Policy (1) Y/N Y Y Wastewater Management Policy (1) Y/N Y Y Amount of Waste Incinerated Thousand Metric Tonnes 0 0 Waste Used for Energy Thousand Metric Tonnes 0.03 0.00 Number of Significant Spills Count 0 0 Number of Significant Environmental Fines Count 0 0 Amount of Significant Environmental Fines Million Euro 0 0 Water Consumption Thousand Cubic Meters 44.15 40.92 Pct Recycled Materials Percentage 15.87% 23.18% Environmental Supply Chain Management (2) Y/N Y Y Sustainable Packaging Y/N Y Y www.adplastik.hr 171 Social Unit 2023 2024 Political Donations Million Euro 0 0 Business Ethics Policy (1) Y/N Y Y Anti-Bribery Ethics Policy (1) Y/N Y Y Intellectual Property Rights Protection Policy (1) Y/N Y Y Number of Corruption Legal Cases Count 0 0 Amount of Anti - Competition Fines Million Euro 0 0 Political Involvement Policy (1) Y/N Y Y Number of Fines for Anti - Competition Count 0 0 Anti - Competition Policy (1) Y/N Y Y Number of Fines For Bribery And Corruption Count 0 0 Amount Of Fines For Bribery And Corruption Million Euro 0 0 Percentage of Company Facilities Non-Compliance Percentage 0 0 Cybersecurity Risk Management Y/N Y Y Number of Fines for Marketing and Labeling Count 0 0 Amount of Fines for Marketing and Labeling Million Euro 0 0 Community Spending Million Euro 0.21 0.19 Human Rights Policy (1) Y/N Y Y Quality Assurance and Recall Policy (1) Y/N Y Y Consumer Data Protection Policy (1) Y/N Y Y Critical Materials Policy (1) Y/N Y Y Product Data Security Policy (1) Y/N Y Y Data Security Risks Discussed Y/N Y Y Executive with Responsibility for Data Security Y/N Y Y Human Rights Remediation Process Y/N Y Y Customer Satisfaction Survey Conducted Y/N Y Y UN Global Compact Signatory Y/N Y Y Number of Employees - CSR Count 1,860 1,783 Employee Turnover Pct Percentage 25.50 21.76 Pct Employees Unionized Percentage 87.70 100.00 Pct Women in Management Percentage 40.38 38.00 Pct Women in Workforce Percentage 52.63 50.14 Workforce Accidents - Employees Count 46 35 Lost Time from Accidents Hours 5,632.00 5,656.00 Fatalities - Contractors Count 0 0 Fatalities - Employees Count 0 0 Fatalities - Total Count 0 0 Health and Safety Policy (1) Y/N Y Y Equal Opportunity Policy (1) Y/N Y Y Training Policy (1) Y/N Y Y Employee Average Age Years 44 45 Pct Disabled in Workforce Percentage 2.20 2.47 Lost Time Incident Rate - Employees Lost Time Incidents/200,000 Hours Worked or 100 Full Time Employees 2.78 2.16 Employee CSR Training Y/N Y Y www.adplastik.hr 172 Social Unit 2023 2024 Employee Training Cost Million Euro 0.10 0.10 Fatalities - Third Party Count 0 0 Total Recordable Incident Rate - Employees Recordable Incidents/200,000 Hours Worked or 100 Full Time Employees 2.78 2.16 Employee Protection / Whistle Blower Policy (1) Y/N Y Y Total Hours Spent by Firm - Employee Training Hours 47,261 79,382 Number of Part-Time Employees Count 5 4 Number of Temporary Employees Count 164 206 Number of Contractors Count 85 46 Total Accidents - Contractors Count 0 0 Lost Time Incident Rate - Contractors Lost Time Incidents Contractors/200,000 Hours Worked or 100 Contractors 0 0 Total Recordable Incident Rate - Contractors Recordable Incidents Contractors/200,000 Hours Worked or 100 Contractors 0 0 Policy Against Child Labor (1) Y/N Y Y Voluntary Turnover Pct Percentage 17.10 16.17 Involuntary Turnover Pct Percentage 6.40 5.58 Pct Women in Middle and or Other Management Percentage 44.93 45.45 Average Employee Training Hours Hours 25.10 44.50 Contractors in Total Workforce Count 85 46 Total Workforce Count 1,945 1,829 Total Recordable Incident Rate - Workforce Recordable Incidents/200,000 Hours Worked or 100 Em- ployees & Contractors 2.53 1.98 Lost Time Incident Rate - Workforce Lost Time Incidents/200,000 Hours Worked or Employ- ees & Contractors 2.78 2.16 Company Diversity Target Indicator Y/N Y Y Number of Suppliers Audited Count 682.00 713.00 Number of Supplier Audits Conducted Count 682.00 713.00 Social Supply Chain Management (2) Y/N Y y Number Supplier Facilities Audited Count 4 3 Sustain Sup Guidelines Encomp ESG Area Pub Disclsd Y/N Y y Percentage of Suppliers in Non-Compliance Percentage 0 0 Percentage Suppliers Audited Percentage 25.96 32.00 Number of Suppliers in Non Compliance Count 0 0 Number of Suppliers Count 2,627 2,228 Number of Critical Suppliers Count 0 0 www.adplastik.hr 173 Governance Unit 2023 2024 Auditor Ratification Y/N Y y Auditor Employed Duration Years 4 5 Auditor Ratification Number of Votes - FOR Count 2.60 2.60 Auditor Ratification Number of Votes - AGAINST Count 0 0 Auditor Ratification Support Level Percentage 100 100 Supervisory Board Size Count 7 7 Supervisory Board Independent Members Count 3 3 Pct of Supervisory Board Independent Members Percentage 42.85 42.85 Term of Office Duration in the Supervisory Board Years 4 4 Supervisory Board Meetings for the Year Count 4 4 Supervisory Board Meeting Attendance Percentage 100.00 96.43 Share of Women in the Supervisory Board Percentage 42.86 57.00 Supervisory Board Average Age Years 62 62 Supervisory Board Age Limit Years N N CEO Duality Y/N N N Audit Committee Meetings Count 4 4 Classified Management System Y/N Y Y Unitary or Two Tier Board System Nominal (1-2) 2 2 Members of the Management Board Count 4 3 Former Management Board President in the Supervisory Bord Y/N N N Female President or Equivalent Y/N N N Members of the Supervisory Board Count 7 7 Percentage of Non-Executive Members in the Supervisory Board Percentage 100.00 100.00 Term of Office Duration of the Management Bord Members Years 5 5 Supervisory Board Members Attending Less than 75% of the Meetings Count 0 0 Women in the Supervisory Board Count 3 4 Employee Representative in the Supervisory Board Count 1 1 The Youngest Supervisory Board Member Years 34 35 The Oldest Supervisory Board Member Years 72 73 Supervisory Board Members Age Range Years 38 38 Management Board Average Age Years 50 51 Independent Members Attendance at the Supervisory Board Meetings Percentage 100.00 100.00 Size of Audit Committee Count 4 4 Independent Members in the Audit Committee Count 2 2 Pct of Independent Members in the Audit Committee Percentage 50.00 50.00 Independent Audit Committee President Y/N Y Y Supervisory Board Members in the Audit Committee Count 4 4 Audit Committee Meeting Attendance Percentage 100.00 100.00 Size of Remuneration Committee Count 3 3 Independent Members in the Remuneration Committee Count 1 1 Pct of Independent Members in the Remuneration Committee Percentage 33.33 33.33 Independent Remuneration Committee President Y/N N N Supervisory Board Members in the Remuneration Committee Count 2 2 Remuneration Committee Meetings Count 2 1 www.adplastik.hr 174 (1) The policies are available at the following link: https://e87qx58u4hr.exactdn.com/wp-content/uploads/2025/02/ADP-Kodeks-EN-web.pdf (2) Details are available at the following link: https://www.adplastik.hr/en/about-us/purchasing Governance Unit 2023 2024 Remuneration Committee Meeting Attendance Percentage 100.00 100.00 Size of Appointment Committee Count 3 3 Independent Members in the Appointment Committee Count 1 1 Pct of Independent Members in the Appointment Committee Percentage 33.33 33.33 Independent Appointment Committee President Y/N Y Y Supervisory Board Members in the Appointment Committee Count 2 2 Appointment Committee Meetings Count 1 1 Appointment Committee Meeting Attendance Percentage 100.00 100.00 Executive Director with Responsibility for CSR Y/N Y Y Audit Financial Expert Y/N Y Y Company conducts Supervisory Board evaluations Y/N Y N Management Board Compensation Linked to ESG Y/N Y Y Say On Pay Provision Y/N Y Y Frequency of Say on Pay Votes Years 4 4 Chg of Ctrl Benefits/Golden Parachute Agreements Y/N N N Say on Pay Number of Votes FOR Count 2.58 2.60 Say on Pay Number of Votes AGAINST Count 0.03 0.00 Say on Pay Support Level Percentage 99.02 100.00 Company Has Executive Share Ownership Guidelines Y/N N N Management Share Ownership Guidelines Y/N N N Comp Discloses Management Board President or Equivalent Pay Ratio Flg Y/N Y Y Management Board President Pay Ratio Average Employee Compensation Reporting Currency 14.08 17.40 Management Board President or Equivalent Appointed from Within Y/N Y Y Female Management Board Member or Equivalent Y/N N N Women Management Board Members Count 0 0 Unequal Voting Rights Y/N N N Unequal Voting Rights Shares Issued Y/N N N Controlled Company Y/N N N www.adplastik.hr 175 Independent Auditor’s Limited Assurance Report on the Sustainability Report dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 1 To the Shareholders of AD Plastik d.d. Limited assurance conclusion We have performed a limited assurance engagement on whether the consolidated Sustainability Report of AD Plastik d.d. (“the Company”) and its subsidiaries (collectively, “the Group”), included in the Sustainability Report section of the Group’s Management Report as of and for the year ended 31 December 2024 (“the Sustainability Report”), has been prepared in accordance with the Croatian Accounting Law (Official Gazette 85/24,145/24) (“the Accounting Law”). Based on the procedures performed and evidence obtained, nothing has come to our attention to cause us to believe that the Group’s Sustainability Report as of and for the year ended 31 December 2024 is not prepared, in all material respects, in accordance with the Accounting Law, including: • Compliance with the European Sustainability Reporting Standards (“ESRS”), including that the process carried out by the Group to identify the information reported in the Sustainability Report (“the Process”) is in accordance with the description set out in the Double materiality analysis section thereof; and • Compliance of the disclosures in the EU Taxonomy section of the Sustainability Report with the reporting requirements of Article 8 of Regulation (EU) 2020/852 (“the Taxonomy Regulation”). Our conclusion on the Sustainability Report does not extend to any other information that accompanies or contains the Sustainability Report and our limited assurance report thereon, nor to any information within the Sustainability Report not in scope of our assurance engagement. We have not performed any assurance procedures as part of this engagement with respect to such other information. However, we audited the Company’s separate and the Group’s consolidated financial statements as of and for the year ended 31 December 2024 prepared in accordance with International Financial Reporting Standards as adopted by the European Union, forming part of the other information, and our auditor’s reports thereon are also included with the other information. Basis for conclusion We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board (IAASB). Our responsibilities under this standard are further described in the “Our responsibilities” section of our report. We have complied with the independence and other ethical requirements of the International Code of Ethics of Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA code), together with the ethical requirements that are relevant to our assurance engagements on the Sustainability Reports in Croatia. Our firm applies International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, issued by the IAASB. This standard requires the firm to design, implement and operate a system of quality management, including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Other matter – Comparative information Our assurance engagement does not extend to comparative information in respect of earlier periods. Our conclusion is not modified in respect of this matter. Independent Auditor’s Limited Assurance Report on the Sustainability Report dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 1 To the Shareholders of AD Plastik d.d. Limited assurance conclusion We have performed a limited assurance engagement on whether the consolidated Sustainability Report of AD Plastik d.d. (“the Company”) and its subsidiaries (collectively, “the Group”), included in the Sustainability Report section of the Group’s Management Report as of and for the year ended 31 December 2024 (“the Sustainability Report”), has been prepared in accordance with the Croatian Accounting Law (Official Gazette 85/24,145/24) (“the Accounting Law”). Based on the procedures performed and evidence obtained, nothing has come to our attention to cause us to believe that the Group’s Sustainability Report as of and for the year ended 31 December 2024 is not prepared, in all material respects, in accordance with the Accounting Law, including: • Compliance with the European Sustainability Reporting Standards (“ESRS”), including that the process carried out by the Group to identify the information reported in the Sustainability Report (“the Process”) is in accordance with the description set out in the Double materiality analysis section thereof; and • Compliance of the disclosures in the EU Taxonomy section of the Sustainability Report with the reporting requirements of Article 8 of Regulation (EU) 2020/852 (“the Taxonomy Regulation”). Our conclusion on the Sustainability Report does not extend to any other information that accompanies or contains the Sustainability Report and our limited assurance report thereon, nor to any information within the Sustainability Report not in scope of our assurance engagement. We have not performed any assurance procedures as part of this engagement with respect to such other information. However, we audited the Company’s separate and the Group’s consolidated financial statements as of and for the year ended 31 December 2024 prepared in accordance with International Financial Reporting Standards as adopted by the European Union, forming part of the other information, and our auditor’s reports thereon are also included with the other information. Basis for conclusion We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board (IAASB). Our responsibilities under this standard are further described in the “Our responsibilities” section of our report. We have complied with the independence and other ethical requirements of the International Code of Ethics of Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA code), together with the ethical requirements that are relevant to our assurance engagements on the Sustainability Reports in Croatia. Our firm applies International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, issued by the IAASB. This standard requires the firm to design, implement and operate a system of quality management, including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Other matter – Comparative information Our assurance engagement does not extend to comparative information in respect of earlier periods. Our conclusion is not modified in respect of this matter. www.adplastik.hr 176 Independent Auditor’s Limited Assurance Report on the Sustainability Report (continued) dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 2 Responsibilities for the Sustainability Report The Management of the Company is responsible for designing, implementing and maintaining a process to identify the information reported in the Sustainability Report in accordance with the ESRS and for disclosing this Process in the Double materiality analysis section of the Sustainability Report. This responsibility includes: • Understanding the context in which the Group’s activities and business relationships take place and developing an understanding of its affected stakeholders; • Identifying the actual and potential impacts (both negative and positive) related to sustainability matters, as well as risks and opportunities that affect, or could reasonably be expected to affect, the Group’s financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium-, or long-term; • Assessing the materiality of the identified impacts, risks and opportunities related to sustainability matters by selecting and applying appropriate thresholds; and • Developing methodologies and making assumptions that are reasonable in the circumstances. The Management of the Company is further responsible for the preparation of the Sustainability Report in accordance with the Accounting Law, including: • Compliance with the ESRS; • Preparing the disclosures in the EU taxonomy section of the Sustainability Report, in compliance with Article 8 of the Taxonomy Regulation; • Designing, implementing and maintaining such internal controls that the Management of the Company determines are necessary to enable the preparation of the Sustainability Report such that it is free from material misstatement, whether due to fraud or error; and • Selecting and applying appropriate sustainability reporting methods and making assumptions and estimates about individual sustainability disclosures that are reasonable in the circumstances. Those charged with governance are responsible for overseeing the reporting process for the Group’s Sustainability Report. Inherent limitations in preparing the Sustainability Report There are inherent limitations regarding the measurement or evaluation of the sustainability matters presented in the Sustainability Report subject to limited assurance, which have been set out below: • As described in the About the Integrated Report, greenhouse gas emissions quantification is subject to inherent uncertainty as a result of both scientific and estimation uncertainty. • In reporting forward-looking information in accordance with the ESRS, the Management is required to prepare the forward-looking information on the basis of disclosed assumptions about events that may occur in the future and possible future actions by the Group. The actual outcome is likely to be different since anticipated events frequently do not occur as expected. • In determining the disclosures in the Sustainability Report, the Management interprets undefined legal and other terms. Undefined legal and other terms may be interpreted differently, including the legal conformity of their interpretation and, accordingly, are subject to uncertainties. Independent Auditor’s Limited Assurance Report on the Sustainability Report (continued) dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 2 Responsibilities for the Sustainability Report The Management of the Company is responsible for designing, implementing and maintaining a process to identify the information reported in the Sustainability Report in accordance with the ESRS and for disclosing this Process in the Double materiality analysis section of the Sustainability Report. This responsibility includes: • Understanding the context in which the Group’s activities and business relationships take place and developing an understanding of its affected stakeholders; • Identifying the actual and potential impacts (both negative and positive) related to sustainability matters, as well as risks and opportunities that affect, or could reasonably be expected to affect, the Group’s financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium-, or long-term; • Assessing the materiality of the identified impacts, risks and opportunities related to sustainability matters by selecting and applying appropriate thresholds; and • Developing methodologies and making assumptions that are reasonable in the circumstances. The Management of the Company is further responsible for the preparation of the Sustainability Report in accordance with the Accounting Law, including: • Compliance with the ESRS; • Preparing the disclosures in the EU taxonomy section of the Sustainability Report, in compliance with Article 8 of the Taxonomy Regulation; • Designing, implementing and maintaining such internal controls that the Management of the Company determines are necessary to enable the preparation of the Sustainability Report such that it is free from material misstatement, whether due to fraud or error; and • Selecting and applying appropriate sustainability reporting methods and making assumptions and estimates about individual sustainability disclosures that are reasonable in the circumstances. Those charged with governance are responsible for overseeing the reporting process for the Group’s Sustainability Report. Inherent limitations in preparing the Sustainability Report There are inherent limitations regarding the measurement or evaluation of the sustainability matters presented in the Sustainability Report subject to limited assurance, which have been set out below: • As described in the About the Integrated Report, greenhouse gas emissions quantification is subject to inherent uncertainty as a result of both scientific and estimation uncertainty. • In reporting forward-looking information in accordance with the ESRS, the Management is required to prepare the forward-looking information on the basis of disclosed assumptions about events that may occur in the future and possible future actions by the Group. The actual outcome is likely to be different since anticipated events frequently do not occur as expected. • In determining the disclosures in the Sustainability Report, the Management interprets undefined legal and other terms. Undefined legal and other terms may be interpreted differently, including the legal conformity of their interpretation and, accordingly, are subject to uncertainties. www.adplastik.hr 177 Independent Auditor’s Limited Assurance Report on the Sustainability Report (continued) dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 3 Our responsibilities Our objectives are to plan and perform the assurance engagement to obtain limited assurance about whether the Sustainability Report is free from material misstatement, whether due to fraud or error, and reporting our limited assurance conclusion to the Company’s shareholders. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence decisions of users taken on the basis of the Sustainability Report as a whole. Our responsibilities in relation to the Process for reporting the Sustainability Report, include: • Obtaining an understanding of the Process but not for the purpose of providing a conclusion on the effectiveness of the Process, including the outcome of the Process; and • Designing and performing procedures to evaluate whether the Process is consistent with the Group’s description of its Process, as disclosed in the Double materiality analysis section. Our other responsibilities in respect of the Sustainability Report include: • Obtaining an understanding of the Group’s control environment, processes and information systems relevant to the preparation of the Sustainability Report but not evaluating the design of particular control activities, obtaining evidence about their implementation or testing their operating effectiveness; • Identifying disclosures where material misstatements are likely to arise, whether due to fraud or error; and • Designing and performing procedures focused on disclosures in the Sustainability Report where material misstatements are likely to arise. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Summary of the work we performed as the basis for our conclusion A limited assurance engagement involves performing procedures to obtain evidence about the Sustainability Report. We designed and performed our procedures to obtain evidence about the Sustainability Report that is sufficient and appropriate to provide a basis for our conclusion. The nature, timing and extent of our procedures depended on our understanding of the Sustainability Report and other engagement circumstances, including the identification of disclosures where material misstatements are likely to arise, whether due to fraud or error, in the Sustainability Report. We exercised professional judgment and maintained professional skepticism throughout the engagement. In conducting our limited assurance engagement, with respect to the Process, the procedures we performed included: • Obtaining an understanding of the Process by: o performing inquiries to understand the sources of the information used by management (including stakeholder engagement, business plans and strategy documents); and o inspecting the Group’s internal documentation of its Process. • Evaluating whether the evidence obtained from our procedures about the Process was consistent with the description of the Process set out in the Double materiality analysis section. Independent Auditor’s Limited Assurance Report on the Sustainability Report (continued) dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 3 Our responsibilities Our objectives are to plan and perform the assurance engagement to obtain limited assurance about whether the Sustainability Report is free from material misstatement, whether due to fraud or error, and reporting our limited assurance conclusion to the Company’s shareholders. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence decisions of users taken on the basis of the Sustainability Report as a whole. Our responsibilities in relation to the Process for reporting the Sustainability Report, include: • Obtaining an understanding of the Process but not for the purpose of providing a conclusion on the effectiveness of the Process, including the outcome of the Process; and • Designing and performing procedures to evaluate whether the Process is consistent with the Group’s description of its Process, as disclosed in the Double materiality analysis section. Our other responsibilities in respect of the Sustainability Report include: • Obtaining an understanding of the Group’s control environment, processes and information systems relevant to the preparation of the Sustainability Report but not evaluating the design of particular control activities, obtaining evidence about their implementation or testing their operating effectiveness; • Identifying disclosures where material misstatements are likely to arise, whether due to fraud or error; and • Designing and performing procedures focused on disclosures in the Sustainability Report where material misstatements are likely to arise. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Summary of the work we performed as the basis for our conclusion A limited assurance engagement involves performing procedures to obtain evidence about the Sustainability Report. We designed and performed our procedures to obtain evidence about the Sustainability Report that is sufficient and appropriate to provide a basis for our conclusion. The nature, timing and extent of our procedures depended on our understanding of the Sustainability Report and other engagement circumstances, including the identification of disclosures where material misstatements are likely to arise, whether due to fraud or error, in the Sustainability Report. We exercised professional judgment and maintained professional skepticism throughout the engagement. In conducting our limited assurance engagement, with respect to the Process, the procedures we performed included: • Obtaining an understanding of the Process by: o performing inquiries to understand the sources of the information used by management (including stakeholder engagement, business plans and strategy documents); and o inspecting the Group’s internal documentation of its Process. • Evaluating whether the evidence obtained from our procedures about the Process was consistent with the description of the Process set out in the Double materiality analysis section. www.adplastik.hr 178 Independent Auditor’s Limited Assurance Report on the Sustainability Report (continued) dŚŝƐǀĞƌƐŝŽŶŽĨŽƵƌůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚŝƐĂƚƌĂŶƐůĂƚŝŽŶĨƌŽŵƚŚĞŽƌŝŐŝŶĂů͕ǁŚŝĐŚǁĂƐƉƌĞƉĂƌĞĚŝŶƌŽĂƚŝĂŶůĂŶŐƵĂŐĞ͘ůů ƉŽƐƐŝďůĞĐĂƌĞŚĂƐďĞĞŶƚĂŬĞŶƚŽ ĞŶƐƵƌĞƚŚĂƚƚŚĞƚƌĂŶƐůĂƚŝŽŶŝƐĂŶĂĐĐƵƌĂƚĞƌĞƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞŽƌŝŐŝŶĂů͘,ŽǁĞǀĞƌ͕ŝŶĂůůŵĂƚƚĞƌƐŽĨŝŶƚĞƌƉƌĞƚĂƚŝŽŶŽĨŝŶĨŽƌŵĂƚŝŽŶ͕ǀŝĞǁƐŽƌŽƉŝŶŝŽŶƐ͕ƚŚĞŽƌŝŐŝŶĂů ůĂŶŐƵĂŐĞǀĞƌƐŝŽŶŽĨŽƵƌĂƵĚŝƚƌĞƉŽƌƚƚĂŬĞƐƉƌĞĐĞĚĞŶĐĞŽǀĞƌƚŚŝƐƚƌĂŶƐůĂƚŝŽŶ͘ 4 Summary of the work we performed as the basis for our conclusion (continued) In conducting our limited assurance engagement with respect to the Sustainability Report, the procedures we performed included: • Obtaining an understanding of the Group’s reporting processes relevant to the preparation of its Sustainability Report by performing inquiries of the relevant personnel and inspecting the Group’s internal documentary evidence; • Evaluating whether material information identified by the Process is included in the Sustainability Report; • Evaluating whether the structure and the presentation of the Sustainability Report is in accordance with the ESRS; • Performing inquiries of relevant personnel and analytical procedures on selected disclosures in the Sustainability Report; • Performing substantive assurance procedures on a sample basis on selected disclosures in the Sustainability Report; • Obtaining evidence on the methods, assumptions and data for developing material estimates and forward-looking information and on how these methods were applied; • Obtaining an understanding of the process to identify taxonomy-eligible and taxonomy-aligned economic activities and the corresponding disclosures in the Sustainability Report; • Evaluating whether the standardized reporting templates required by the Taxonomy Regulation were appropriately used to present the key performance indicators; • Assessing whether the taxonomy disclosures are reconciled, where relevant, with the Group’s consolidated financial statements; and • Performing substantive assurance procedures on selected taxonomy disclosures. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. KPMG Croatia d.o.o. za reviziju 24 April 2025 Croatian Certified Auditors Eurotower, 17th floor Ivana Lučića 2a 10000 Zagreb Croatia www.adplastik.hr 179 REPORT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE Shareholders exercise their rights via the General Assembly which is competent for making decisions on the following issues: ■ election and removing from the office of members of the Su- pervisory Board ■ appropriation of profit ■ granting clearance to Management Board members ■ appointment of auditors ■ amendments to the Charter ■ increase or decrease of share capital and ■ other issues that are within its authority as prescribed by law Activities of the General Assembly are regulated by the Compa- nies Act and the Rules of Procedure of the General Assembly published on the company’s website. Data on members of the Management Board and Supervisory Board is listed on pages 66 and 67 of this report. In accordance with the Companies Act and the Company Charter, the Man- agement Board makes decisions at its meetings. In 2024, 43 meetings of the Management Board were held, in line with good corporate practices. In accordance with the Act and the Rules of Procedure of the Supervisory Board, the company has three committees that support its work by preparing decisions and overseeing their implementation - the Audit Committee, the Re- muneration Committee, and the Appointment Committee. The Diversity Policy of the AD Plastik Group is applied to the company’s governing bodies and ensures diversity in the com- position of the Management Board and the Supervisory Board, with particular attention given to professional competencies, skills, age, gender, and education, which contributes to better quality decision-making. A detailed overview can be found on page 63, 64 and 68 of this report. The average age of the members of the Supervisory Board is 63 years, and their age range is diverse, from 35 to 73 years. Josip Divić member of the Management Board Mladen Peroš member of the Management Board Marinko Došen president of the Management Board In accordance with the rules of the Zagreb Stock Exchange, the Management Board of AD Plastik Group declares that it applies the Corporate Governance Code, published on the official web- site of the Zagreb Stock Exchange (www.zse.hr). The company operates in accordance with good practices and the majority of the recommendations of the Corporate Govern- ance Code. Minor deviations, explanations, and additional align- ments can be found in the Annual Compliance Questionnaire for 2024, which is published on the websites of both the Zagreb Stock Exchange and the company simultaneously with the Inte- grated Annual Report. Internal control is carried out by the controlling and internal au- dit departments, with Controlling reporting to the Management Board, while Internal Audit reports to the Audit Committee and the Management Board. Internal audit is an independent function that supports man- agement in achieving the company’s objectives through a sys- tematic and professionally grounded approach to oversight, as well as an assessment of the effectiveness of risk management, control systems, and corporate governance. The findings and recommendations of internal audit aim to enable management to improve processes, proactively manage risks, or reduce them to an acceptable level. Ten significant direct and indirect shareholders are listed on page 19 of this report. The company does not have securities holders with special control rights, nor those with voting rights restricted to a certain percentage or number of votes. Addition- ally, there are no special rules regarding the appointment and dismissal of members of the Management Board, nor their pow- ers. The Charter stipulates that two members of the Supervi- sory Board are appointed by the joint-stock company Holding Avtokomponenty from St. Petersburg, Russia. On July 14, 2022, the General Assembly gave authorization to the Management Board to acquire its own shares on behalf of the company for a period of five years. As of December 31, 2024, the company held 35,008 of its own shares. www.adplastik.hr 180 AUDITOR’S REPORT AND FINANCIAL STATEMENTS Consolidated financial statements of AD Plastik Group 182 Separate financial statements of AD Plastik d.d. 240 D The Supervisory Board has not yet considered and approved the financial statements, but will decide on this at the meeting planned for May 2025. www.adplastik.hr 181 AD PLASTIK D.D., SOLIN AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 Responsibility of The Management Board for the consolidated financial statements 184 Independent Auditor´s Report 185 Consolidated statement of comprehensive income 194 Consolidated statement of financial position 196 Consolidated statement of changes in shareholders’ equity 198 Consolidated statement of cash flows 200 Notes to the consolidated financial statements 202 www.adplastik.hr 182 www.adplastik.hr 183 Pursuant to the Accounting Act of the Republic of Croatia, the Management Board is responsible for ensuring that consolidated financial statements are prepared for each financial year in accordance with International Financial Reporting Standards (“the IF- RSs”), as adopted in the European Union, which give a true and fair view of the financial position and results of operations of AD Plastik d.d., Solin and its subsidiaries (“the Group”) for that period. After making enquiries, the Management Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board continues to adopt the going concern basis in preparing the financial statements. In preparing those financial statements, the Management Board is responsible for: ■ selecting and then consistently applying suitable accounting policies; ■ making reasonable and prudent judgements and estimates; ■ following applicable accounting standards and disclosing and explaining any material departure in the consolidated financial statements; ■ preparing the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Group and its’ compliance with the Croatian Accounting Act. The above stated responsibility includes the responsibility for accuracy of the Management Report, which is an integral part of consolidated financial statements and submission of financial statements in unique XBRL electronic reporting format (ESEF) prescribed by regulatory technical standards developed by ESMA (European Securities and Markets Authority) and adopted by the European Commission. The Man- agement Board is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the preven- tion and detection of embezzlement and other irregularities. Signed on behalf of the Management Board For AD Plastik d.d., Solin by: RESPONSIBILITY OF THE MANAGEMENT BOARD FOR THE CONSOLIDATED FINANCIAL STATEMENTS AD Plastik d.d. Matoševa 8, 21210 Solin, Republic of Croatia 24 April 2025 Josip Divić Member of Management Board Mladen Peroš Member of Management Board Marinko Došen President of the Management Board www.adplastik.hr 184 Independent Auditors’ ZĞƉŽƌƚƚŽƚŚĞƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ KƉŝŶŝŽŶ tĞŚĂǀĞĂƵĚŝƚĞĚƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨWůĂƐƚŝŬĚ͘Ě͘(“the Company”) and its subsidiaries (“the Group”), which ĐŽŵƉƌŝƐĞƚŚĞĐŽŶƐŽůŝĚĂƚĞĚƐƚĂƚĞŵĞŶƚŽĨĨŝŶĂŶĐŝĂůƉŽƐŝƚŝŽŶŽĨƚŚĞ'ƌŽƵƉĂƐĂƚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ĂŶĚƚŚĞĐŽŶƐŽůŝĚĂƚĞĚƐƚĂƚĞŵĞŶƚƐ ŽĨĐŽŵƉƌĞŚĞŶƐŝǀĞŝŶĐŽŵĞ͕ĐĂƐŚĨůŽǁƐĂŶĚĐŚĂŶŐĞƐŝŶshareholders’ ĞƋƵŝƚLJĨŽƌƚŚĞLJĞĂƌƚŚĞŶĞŶĚĞĚ͕ĂŶĚŶŽƚĞƐ͕ĐŽŵƉƌŝƐŝŶŐŵĂƚĞƌŝĂů ĂĐĐŽƵŶƚŝŶŐƉŽůŝĐŝĞƐĂŶĚŽƚŚĞƌĞdžƉůĂŶĂƚŽƌLJŝŶĨŽƌŵĂƚŝŽŶ;ŚĞƌĞŝŶĂĨƚĞƌ“the financial statements”). /ŶŽƵƌŽƉŝŶŝŽŶ͕ƚŚĞĂĐĐŽŵƉĂŶLJŝŶŐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŐŝǀĞĂƚƌƵĞĂŶĚĨĂŝƌǀŝĞǁŽĨƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƉŽƐŝƚŝŽŶŽĨƚŚĞ'ƌŽƵƉ ĂƐĂƚϯϭĞĐĞŵďĞƌϮϬϮϰĂŶĚŽĨŝƚƐĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƉĞƌĨŽƌŵĂŶĐĞĂŶĚŝƚƐĐŽŶƐŽůŝĚĂƚĞĚĐĂƐŚĨůŽǁƐĨŽƌƚŚĞLJĞĂƌƚŚĞŶĞŶĚĞĚŝŶ accordance with International Financial Reporting Standards as adopted by the European Union (“EU IFRS”). ĂƐŝƐĨŽƌKƉŝŶŝŽŶ tĞĐŽŶĚƵĐƚĞĚŽƵƌĂƵĚŝƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚƐŽŶƵĚŝƚŝŶŐ͘KƵƌƌĞƐƉŽŶƐŝďŝůŝƚŝĞƐƵŶĚĞƌƚŚŽƐĞƐƚĂŶĚĂƌĚƐĂƌĞ ĨƵƌƚŚĞƌĚĞƐĐƌŝďĞĚŝŶƚŚĞAuditors’ Responsibilities for the Audit of the Financial StatementsƐĞĐƚŝŽŶŽĨŽƵƌƌĞƉŽƌƚ͘tĞĂƌĞ ŝŶĚĞƉĞŶĚĞŶƚŽĨƚŚĞ'ƌŽƵƉŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞĞƚŚŝĐĂůƌĞƋƵŝƌĞŵĞŶƚƐƚŚĂƚĂƌĞƌĞůĞǀĂŶƚƚŽŽƵƌĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶ ƌŽĂƚŝĂĂŶĚǁĞŚĂǀĞĨƵůĨŝůůĞĚŽƵƌŽƚŚĞƌĞƚŚŝĐĂůƌĞƐƉŽŶƐŝďŝůŝƚŝĞƐŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞƐĞƌĞƋƵŝƌĞŵĞŶƚƐ͘tĞďĞůŝĞǀĞƚŚĂƚƚŚĞĂƵĚŝƚ ĞǀŝĚĞŶĐĞǁĞŚĂǀĞŽďƚĂŝŶĞĚŝƐƐƵĨĨŝĐŝĞŶƚĂŶĚĂƉƉƌŽƉƌŝĂƚĞƚŽƉƌŽǀŝĚĞĂďĂƐŝƐĨŽƌŽƵƌŽƉŝŶŝŽŶ͘ 185 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ <ĞLJĂƵĚŝƚŵĂƚƚĞƌƐĂƌĞƚŚŽƐĞŵĂƚƚĞƌƐƚŚĂƚ͕ŝŶŽƵƌƉƌŽĨĞƐƐŝŽŶĂůũƵĚŐŵĞŶƚ͕ǁĞƌĞŽĨŵŽƐƚƐŝŐŶŝĨŝĐĂŶĐĞŝŶŽƵƌĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞĐƵƌƌĞŶƚƉĞƌŝŽĚ͘dŚĞƐĞŵĂƚƚĞƌƐǁĞƌĞĂĚĚƌĞƐƐĞĚŝŶƚŚĞĐŽŶƚĞdžƚŽĨŽƵƌĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƐĂǁŚŽůĞ͕ ĂŶĚŝŶĨŽƌŵŝŶŐŽƵƌŽƉŝŶŝŽŶƚŚĞƌĞŽŶ͕ĂŶĚǁĞĚŽŶŽƚƉƌŽǀŝĚĞĂƐĞƉĂƌĂƚĞŽƉŝŶŝŽŶŽŶƚŚĞƐĞŵĂƚƚĞƌƐ͘ ZsEhZK'E/d/KE ZĞǀĞŶƵĞŝŶϮϬϮϰ͗hZϭϰϳ͕ϵϲϳƚŚŽƵƐĂŶĚ;ϮϬϮϯ͗hZϭϮϯ͕ϴϯϮƚŚŽƵƐĂŶĚͿ͘ƐĂƚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ƚƌĂĚĞƌĞĐĞŝǀĂďůĞƐ͗hZϮϱ͕ϬϰϱƚŚŽƵƐĂŶĚ͖ ĂĐĐƌƵĞĚƌĞǀĞŶƵĞ͗hZϰϯϮƚŚŽƵƐĂŶĚ;ϯϭĞĐĞŵďĞƌϮϬϮϯ͗ƚƌĂĚĞƌĞĐĞŝǀĂďůĞƐ͗hZϮϭ͕ϱϯϰƚŚŽƵƐĂŶĚ͖ĂĐĐƌƵĞĚƌĞǀĞŶƵĞ͗hZϰϬϯƚŚŽƵƐĂŶĚͿ͘ WůĞĂƐĞƌĞĨĞƌƚŽƚŚĞEŽƚĞϮ͘ϰZĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶŽĨ^ŝŐŶŝĨŝĐĂŶƚĂĐĐŽƵŶƚŝŶŐƉŽůŝĐŝĞƐĂŶĚEŽƚĞϰ^ĞŐŵĞŶƚŝŶĨŽƌŵĂƚŝŽŶŝŶƚŚĞĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐ͘ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ ZĞǀĞŶƵĞŝƐĂŶŝŵƉŽƌƚĂŶƚŵĞƚƌŝĐƵƐĞĚƚŽĞǀĂůƵĂƚĞƚŚĞĨŝŶĂŶĐŝĂů ƉĞƌĨŽƌŵĂŶĐĞŽĨƚŚĞ'ƌŽƵƉ͘/ŶƚŚĞLJĞĂƌĞŶĚĞĚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ŝƚƐ ƉƌŝŶĐŝƉĂůƌĞǀĞŶƵĞƐƚƌĞĂŵƐŝŶĐůƵĚĞĚƐĂůĞƐŽĨĐĂƌƉĂƌƚƐĂŶĚŽĨ ĐƵƐƚŽŵŝnjĞĚƚŽŽůƐĚĞǀĞůŽƉĞĚďLJƚŚĞ'ƌŽƵƉ͘ƐĚŝƐĐƵƐƐĞĚŝŶEŽƚĞϮ͘ϰ͕ ƌĞǀĞŶƵĞŝƐƌĞĐŽŐŶŝnjĞĚǁŚĞŶĐŽŶƚƌŽůŽǀĞƌƚŚĞŐŽŽĚƐŝƐƚƌĂŶƐĨĞƌƌĞĚƚŽ ƚŚĞĐƵƐƚŽŵĞƌ͘ ƉƉůŝĐĂƚŝŽŶŽĨƚŚĞƌĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶƉƌŝŶĐŝƉůĞƐŽĨƚŚĞƌĞůĞǀĂŶƚ ĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐƐƚĂŶĚĂƌĚ͕/&Z^ϭϱZĞǀĞŶƵĞĨƌŽŵŽŶƚƌĂĐƚƐǁŝƚŚ ƵƐƚŽŵĞƌƐ(“the Standard”), is complex and requires making significant assumptions and judgment. In the Group’s case, ƉĂƌƚŝĐƵůĂƌĐŽŵƉůĞdžŝƚLJŝƐĂƐƐŽĐŝĂƚĞĚǁŝƚŚƚŚĞĨŽůůŽǁŝŶŐĂƐƉĞĐƚƐ͗ — ĞƚĞƌŵŝŶĂƚŝŽŶŽĨǁŚĞƚŚĞƌĂĐƵƐƚŽŵĞƌĐŽŶƚƌĂĐƚĞdžŝƐƚƐƌĞƋƵŝƌĞƐ ƚŚĞ'ƌŽƵƉƚŽĂƐƐĞƐƐǁŚĞƚŚĞƌŽŶĞĚŽĐƵŵĞŶƚŽƌĂĐŽŵďŝŶĂƚŝŽŶ ŽĨĚŽĐƵŵĞŶƚƐ͕ŝŶĐůƵĚŝŶŐŐĞŶĞƌĂůƚĞƌŵƐŽĨďƵƐŝŶĞƐƐ͕ŶŽŵŝŶĂƚŝŽŶ ůĞƚƚĞƌ͕ĂŐƌĞĞŵĞŶƚǁŝƚŚĐƵƐƚŽŵĞƌĂŶĚƉƵƌĐŚĂƐĞŽƌĚĞƌƐ͕ĐƌĞĂƚĞ ĞŶĨŽƌĐĞĂďůĞƌŝŐŚƚƐĂŶĚŽďůŝŐĂƚŝŽŶƐŽĨƚŚĞƉĂƌƚŝĞƐƚŽƚŚĞ ĂƌƌĂŶŐĞŵĞŶƚ͘ — 'ŽŽĚƐǁŝƚŚĚŝĨĨĞƌĞŶƚƌĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶƉĂƚƚĞƌŶƐ͕ƐƵĐŚĂƐ ƐƉĂƌĞƉĂƌƚƐĂŶĚƚŽŽůŝŶŐ͕ŵĂLJďĞƐŽůĚĂƐƉĂƌƚŽĨŽŶĞĐŽŶƚƌĂĐƚŽƌ ƐĞǀĞƌĂůĐŽŶƚƌĂĐƚƐĂĐĐŽƵŶƚĞĚĨŽƌĂƐŽŶĞĂƌƌĂŶŐĞŵĞŶƚ͘dŚĞ 'ƌŽƵƉĂƉƉůŝĞƐƐŝŐŶŝĨŝĐĂŶƚũƵĚŐŵĞŶƚŝŶŝĚĞŶƚŝĨLJŝŶŐĐŽŶƚƌĂĐƚƐ ǁŚŝĐŚƌĞƋƵŝƌĞƚŽďĞĐŽŵďŝŶĞĚĂŶĚĂĐĐŽƵŶƚĞĚĨŽƌĂƐŽŶĞ ĂƌƌĂŶŐĞŵĞŶƚ͕ĂŶĚŝŶŝĚĞŶƚŝĨLJŝŶŐƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶƐ ƚŚĞƌĞŝŶ͘ KƵƌĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐŝŶƚŚŝƐĂƌĞĂŝŶĐůƵĚĞĚĂŵŽŶŐŽƚŚĞƌƐ͗ ⎯ ƐƐĞƐƐŝŶŐƚŚĞĂĐĐŽƵŶƚŝŶŐƉŽůŝĐLJĨŽƌƌĞĐŽŐŶŝƚŝŽŶŽĨƌĞǀĞŶƵĞĂŶĚŝƚƐ ĐŽŵƉůŝĂŶĐĞǁŝƚŚƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞ^ƚĂŶĚĂƌĚ͖ ⎯ hƉĚĂƚŝŶŐŽƵƌƵŶĚĞƌƐƚĂŶĚŝŶŐŽĨƚŚĞ'ƌŽƵƉ’s revenue recognition ƉƌŽĐĞƐƐ͕ĂŶĚƚĞƐƚŝŶŐƚŚĞĚĞƐŝŐŶĂŶĚŝŵƉůĞŵĞŶƚĂƚŝŽŶŽĨƐĞůĞĐƚĞĚ ŝŶƚĞƌŶĂůĐŽŶƚƌŽůƐǁŝƚŚŝŶ͖ ⎯ &ŽƌĂƐĂŵƉůĞŽĨƐĂůĞƐƚƌĂŶƐĂĐƚŝŽŶƐŝŶƚŚĞĐƵƌƌĞŶƚLJĞĂƌ͕ŝŶƐƉĞĐƚŝŶŐ ƵŶĚĞƌůLJŝŶŐĐŽŶƚƌĂĐƚƵĂůƉƌŽǀŝƐŝŽŶƐĂŶĚŵĂŬŝŶŐŝŶƋƵŝƌŝĞƐŽĨƌĞůĞǀĂŶƚ ƐĂůĞƐĂŶĚĨŝŶĂŶĐĞƉĞƌƐŽŶŶĞů͕ŝŶŽƌĚĞƌƚŽĐŚĂůůĞŶŐĞ͗ o dŚĞĞdžŝƐƚĞŶĐĞŽĨĂĐƵƐƚŽŵĞƌĐŽŶƚƌĂĐƚ͕ďLJƌĞĨĞƌĞŶĐĞƚŽƚŚĞ ƌĞůĞǀĂŶƚĐƌŝƚĞƌŝĂŽĨƚŚĞ^ƚĂŶĚĂƌĚ͕ŝŶĐůƵĚŝŶŐ͕ĂŵŽŶŐŽƚŚĞƌƚŚŝŶŐƐ͕ those relating to the parties’ commitment to their obligations ĂŶĚƉƌŽďĂďŝůŝƚLJŽĨĐŽůůĞĐƚŝŶŐƚŚĞĐŽŶƐŝĚĞƌĂƚŝŽŶĚƵĞ͖ o /ĚĞŶƚŝĨŝĐĂƚŝŽŶŽĨƚŚĞĐŽŶƚƌĂĐƚƐǁŚŝĐŚƌĞƋƵŝƌĞƚŽďĞĂĐĐŽƵŶƚĞĚ ĨŽƌŽŶĂĐŽŵďŝŶĞĚďĂƐŝƐĂŶĚŽĨƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶƐǁŝƚŚŝŶ ƚŚŽƐĞĐŽŶƚƌĂĐƚƐ͕ďLJĂŵŽŶŐŽƚŚĞƌƚŚŝŶŐƐ͕ĂƐƐĞƐƐŵĞŶƚŽĨǁŚĞƚŚĞƌ ƚŚĞŐŽŽĚƐĂŶĚƐĞƌǀŝĐĞƐŝŶƚŚĞĂƌƌĂŶŐĞŵĞŶƚƐĂƌĞĚŝƐƚŝŶĐƚĂŶĚ ĂůƐŽǁŚĞƚŚĞƌĂŶLJƐƵďƐĞƋƵĞŶƚĐŚĂŶŐĞƐƚŽƚŚĞĐŽŶƚƌĂĐƚƉƌŝĐĞ ĂƌŝƐŝŶŐĨƌŽŵƚŚĞůĞĂƌŶŝŶŐĐƵƌǀĞƌĞƐƵůƚŝŶƚŚĞƌĞĚƵĐĞĚƉƌŝĐĞ representing the parts’ standͲĂůŽŶĞƐĞůůŝŶŐƉƌŝĐĞ͖ o /ŶƐƉĞĐƚŝŶŐƵŶĚĞƌůLJŝŶŐĐŽŶƚƌĂĐƚƐǁŝƚŚĐƵƐƚŽŵĞƌƐĨŽƌƚŽŽůŝŶŐ ƐĂůĞƐƚƌĂŶƐĂĐƚŝŽŶƐƚŽŝĚĞŶƚŝĨLJĂŶLJůĞĂƐĞĐŽŵƉŽŶĞŶƚĞŵďĞĚĚĞĚ ǁŝƚŚŝŶƚŚŽƐĞĐŽŶƚƌĂĐƚƐ͕ŵĂŝŶůLJďLJĞǀĂůƵĂƚŝŶŐŽǁŶĞƌƐŚŝƉƌŝŐŚƚƐ͕ ƚŚĞƉĂƌƚLJĚŝƌĞĐƚŝŶŐƚŚĞƵƐĞŽĨƚŚĞƚŽŽůĂŶĚǁŚĞƚŚĞƌƚŚĞƌĞŝƐĂ ƐĞƉĂƌĂƚĞƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶŝŶƌĞůĂƚŝŽŶƚŽƚŚĞƐĂůĞŽĨĐĂƌ ƉĂƌƚƐ͘ 186 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ;ĐŽŶƚŝŶƵĞĚͿ ZsEhZK'E/d/KE;ĐŽŶƚŝŶƵĞĚͿ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ — DĂŶLJĐŽŶƚƌĂĐƚƐǁŝƚŚĐƵƐƚŽŵĞƌƐĞŶƚŝƚůĞĐƵƐƚŽŵĞƌƐƚŽƉƌŝĐĞ ƌĞĚƵĐƚŝŽŶƐĂĨƚĞƌĂĐĞƌƚĂŝŶƉĞƌŝŽĚŽĨƉƵƌĐŚĂƐĞŽƌĚĞƌƐ;ĂƐĂ result of expected reduction in the Group’s costs along its ůĞĂƌŶŝŶŐĐƵƌǀĞͿ͘:ƵĚŐĞŵĞŶƚŝƐƌĞƋƵŝƌĞĚƚŽĚĞƚĞƌŵŝŶĞǁŚĞƚŚĞƌ ƐƵĐŚ‘efficiency savings’ƉƌŽǀŝĚĞĐƵƐƚŽŵĞƌƐǁŝƚŚŵĂƚĞƌŝĂů ƌŝŐŚƚƐƚŽďĞĂĐĐŽƵŶƚĞĚĨŽƌĂƐƐĞƉĂƌĂƚĞƉĞƌĨŽƌŵĂŶĐĞ ŽďůŝŐĂƚŝŽŶƐ͘ — dŽŽůŝŶŐĂƌƌĂŶŐĞŵĞŶƚƐĂƌĞƚLJƉŝĐĂůůLJĐŽŶƚƌĂĐƚƐŽƌĨƌĂŵĞǁŽƌŬ ĂŐƌĞĞŵĞŶƚƐďĞƚǁĞĞŶƚŚĞ'ƌŽƵƉĂŶĚŝƚƐĐƵƐƚŽŵĞƌƐĨŽƌƚŚĞƐĂůĞ ŽĨƚŽŽůƐƚŽďĞƵƐĞĚŝŶƚŚĞƉƌŽĚƵĐƚŝŽŶŽĨĐƵƐƚŽŵŝnjĞĚƉĂƌƚƐĨŽƌĂ ŐŝǀĞŶĐƵƐƚŽŵĞƌ͘^ŝŶĐĞƐƵĐŚƚŽŽůŝŶŐĂƌƌĂŶŐĞŵĞŶƚƐŵĂLJǀĂƌLJ ǁŝƚŚƌĞƐƉĞĐƚƚŽƚƌĂŶƐĨĞƌŽĨĚĞǀĞůŽƉŵĞŶƚĂĐƚŝǀŝƚŝĞƐĂŶĚ ŽǁŶĞƌƐŚŝƉ͕ĐĂƌĞĨƵůĂƐƐĞƐƐŵĞŶƚƚŽĚĞƚĞƌŵŝŶĞǁŚĞƚŚĞƌ͕ĂŵŽŶŐ ŽƚŚĞƌƚŚŝŶŐƐ͕ĂŶĂƌƌĂŶŐĞŵĞŶƚŝƐĂƐĂůĞ͕ĂůĞĂƐĞŽƌĚĞǀĞůŽƉŵĞŶƚ ŽĨŝƚƐŽǁŶĞƋƵŝƉŵĞŶƚ͕ǁŚĞƚŚĞƌŝƚĐŽŶƚĂŝŶƐĂůĞĂƐĞĂŶĚǁŚĞƚŚĞƌ ŝƚŝƐĂƐĞƉĂƌĂƚĞƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶĨƌŽŵƚŚĞƐĂůĞŽĨĐĂƌ ƉĂƌƚƐ͘ /ŶƚŚĞǁĂŬĞŽĨƚŚĞĂďŽǀĞĨĂĐƚŽƌƐ͕ǁĞĐŽŶƐŝĚĞƌĞĚƌĞǀĞŶƵĞ ƌĞĐŽŐŶŝƚŝŽŶƚŽďĞĂƐƐŽĐŝĂƚĞĚǁŝƚŚĂƐŝŐŶŝĨŝĐĂŶƚƌŝƐŬŽĨŵĂƚĞƌŝĂů ŵŝƐƐƚĂƚĞŵĞŶƚŝŶƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘dŚĞƌĞĨŽƌĞ͕ ƚŚĞĂƌĞĂƌĞƋƵŝƌĞĚŽƵƌŝŶĐƌĞĂƐĞĚĂƚƚĞŶƚŝŽŶŝŶƚŚĞĂƵĚŝƚĂŶĚĂƐƐƵĐŚ ǁĂƐĚĞƚĞƌŵŝŶĞĚƚŽďĞĂŬĞLJĂƵĚŝƚŵĂƚƚĞƌ͘ ⎯ &ŽƌĂƐĂŵƉůĞŽĨƐĂůĞƐƚƌĂŶƐĂĐƚŝŽŶƐƐĞůĞĐƚĞĚĂƐƉĂƌƚŽĨƚŚĞƉƌĞĐĞĚŝŶŐ ƉƌŽĐĞĚƵƌĞ͕ĐŚĂůůĞŶŐŝŶŐƚŚĞƚŝŵŝŶŐŽĨƚŚĞƚƌĂŶƐĨĞƌŽĨĐŽŶƚƌŽů͕ƚŚĞ ƌĞƐƵůƚŝŶŐƉĂƚƚĞƌŶŽĨƌĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶĂŶĚƌĞǀĞŶƵĞĂŵŽƵŶƚƐ͕ďLJ ƌĞĨĞƌĞŶĐĞƚŽƐĂůĞƐŝŶǀŽŝĐĞƐ͕ŝŶǀĞŶƚŽƌLJĂŶĚƐŚŝƉƉŝŶŐĚŽĐƵŵĞŶƚƐ͕ ĐƵƐƚŽŵĞƌĂĐĐĞƉƚĂŶĐĞĨŽƌŵƐĂŶĚŽƚŚĞƌĚŽĐƵŵĞŶƚƐĂƐĂƉƉƌŽƉƌŝĂƚĞ͖ ⎯ &ŽƌĂƐĂŵƉůĞŽĨŝŶǀŽŝĐĞƐ͕ŽďƚĂŝŶŝŶŐĐŽŶĨŝƌŵĂƚŝŽŶƐŽĨƚŚĞĂŵŽƵŶƚƐ ƌĞĐĞŝǀĂďůĞŽƵƚƐƚĂŶĚŝŶŐĂƐĂƚƚŚĞƌĞƉŽƌƚŝŶŐĚĂƚĞ͕ĂŶĚĞǀĂůƵĂƚŝŶŐĂŶLJ ĚŝĨĨĞƌĞŶĐĞƐďĞƚǁĞĞŶƚŚĞĂŵŽƵŶƚƐĐŽŶĨŝƌŵĞĚĂŶĚƚŚĞ'ƌŽƵƉƐ’s records, ďLJŝŶƐƉĞĐƚŝŶŐƚŚĞƵŶĚĞƌůLJŝŶŐĚŽĐƵŵĞŶƚĂƚŝŽŶƐƵĐŚĂƐĐŽŶƚƌĂĐƚƐ͕ ŝŶǀŽŝĐĞƐ͕ƐŚŝƉƉŝŶŐĚŽĐƵŵĞŶƚƐ͕ĐƵƐƚŽŵĞƌĂĐĐĞƉƚĂŶĐĞĨŽƌŵƐĂŶĚ ƉĂLJŵĞŶƚƐŵĂĚĞďLJĐƵƐƚŽŵĞƌƐ͖ ⎯ /ŶƐƉĞĐƚŝŶŐũŽƵƌŶĂůĞŶƚƌŝĞƐƉŽƐƚĞĚƚŽƌĞǀĞŶƵĞĂĐĐŽƵŶƚƐĨŽĐƵƐŝŶŐŽŶ ƵŶƵƐƵĂůĂŶĚŝƌƌĞŐƵůĂƌŝƚĞŵƐ͖ ⎯ Examining whether the Group’s revenue recognitionͲƌĞůĂƚĞĚ ĚŝƐĐůŽƐƵƌĞƐŝŶƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƉƉƌŽƉƌŝĂƚĞůLJĂĚĚƌĞƐƐƚŚĞ ƌĞůĞǀĂŶƚƋƵĂŶƚŝƚĂƚŝǀĞĂŶĚƋƵĂůŝƚĂƚŝǀĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞĂƉƉůŝĐĂďůĞ ĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĨƌĂŵĞǁŽƌŬ͘ 187 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ;ĐŽŶƚŝŶƵĞĚͿ 'K/E'KEZE WůĞĂƐĞƌĞĨĞƌƚŽŶŽƚĞƐϮ͘ϮĂƐŝƐŽĨƉƌĞƉĂƌĂƚŝŽŶĂŶĚϯƌŝƚŝĐĂůĂĐĐŽƵŶƚŝŶŐũƵĚŐŵĞŶƚƐĂŶĚŬĞLJƐŽƵƌĐĞƐŽĨĞƐƚŝŵĂƚŝŽŶƵŶĐĞƌƚĂŝŶƚLJ͕ŐŽŝŶŐĐŽŶĐĞƌŶ ĂƐƐƵŵƉƚŝŽŶƐĞĐƚŝŽŶ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ The Group’s financial statements are prepared on a going concern ďĂƐŝƐ͘KŶƚŚĞƌĞƉŽƌƚŝŶŐĚĂƚĞƚŚĞ'ƌŽƵƉŚĂĚŶĞŐĂƚŝǀĞŶĞƚǁŽƌŬŝŶŐ ĐĂƉŝƚĂů͘ The Group’s going concern assessment is based on the cash ĨůŽǁƐ ĨŽƌĞĐĂƐƚ͕ǁŚŝĐŚ͕ĂĐĐŽƌĚŝŶŐƚŽƚŚĞŵĂŶĂŐĞŵĞŶƚΖƐĂƐƐĞƐƐŵĞŶƚ͕ ƐƵƉƉŽƌƚƚŚĞĐůĂŝŵƚŚĂƚƚŚĞ'ƌŽƵƉǁŝůůŚĂǀĞƐƵĨĨŝĐŝĞŶƚĨƵŶĚƐƚŽ ĐŽŶƚŝŶƵĞŽƉĞƌĂƚŝŽŶƐĨŽƌĂƚůĞĂƐƚϭϮŵŽŶƚŚƐĨƌŽŵƚŚĞƌĞƉŽƌƚŝŶŐ ĚĂƚĞ͘ŶƵŵďĞƌŽĨĂƐƐƵŵƉƚŝŽŶƐĂŶĚƐŝŐŶŝĨŝĐĂŶƚũƵĚŐŵĞŶƚƐĂƌĞ ŝŶĐŽƌƉŽƌĂƚĞĚŝŶƚŽƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞƐĞĨŽƌĞĐĂƐƚƐ͘DĂŶĂŐĞŵĞŶƚ ĐŽŶĐůƵĚĞĚƚŚĂƚƚŚĞƌĂŶŐĞŽĨƉŽƐƐŝďůĞŽƵƚĐŽŵĞƐĐŽŶƐŝĚĞƌĞĚŝŶƚŚĞ ĂƐƐĞƐƐŵĞŶƚƉƌŽĐĞƐƐĚŽĞƐŶŽƚůĞĂĚƚŽŵĂƚĞƌŝĂůƵŶĐĞƌƚĂŝŶƚLJ ƌĞŐĂƌĚŝŶŐĞǀĞŶƚƐŽƌĐŝƌĐƵŵƐƚĂŶĐĞƐƚŚĂƚŵĂLJĐĂƐƚƐŝŐŶŝĨŝĐĂŶƚĚŽƵďƚ ŽŶƚŚĞ'ƌŽƵƉΖƐĂďŝůŝƚLJƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘ The Group’s use of the going concern basis of accounting is a key ĂƵĚŝƚŵĂƚƚĞƌĚƵĞƚŽƚŚĞĂƐƐŽĐŝĂƚĞĚĞdžƚĞŶƚŽĨƵŶĐĞƌƚĂŝŶƚLJĂŶĚ ĐŽŶƐĞƋƵĞŶƚůLJŚŝŐŚůĞǀĞůŽĨũƵĚŐŵĞŶƚƌĞƋƵŝƌĞĚŝŶĞǀĂůƵĂƚŝŶŐƚŚĞ 'ƌŽƵƉΖƐƉůĂŶƐĨŽƌĨƵƚƵƌĞĂĐƚŝŽŶƐĂŶĚƚŚĞŝƌĨŝŶĂŶĐŝĂůŝŵƉĂĐƚ͘ KƵƌƉƌŽĐĞĚƵƌĞƐŝŶƚŚŝƐĂƌĞĂŝŶĐůƵĚĞĚ͕ĂŵŽŶŐŽƚŚĞƌƐ͗ • ZĞǀŝĞǁŽĨƚŚĞŵŝŶƵƚĞƐŽĨƚŚĞDĂŶĂŐĞŵĞŶƚŽĂƌĚĂŶĚ^ƵƉĞƌǀŝƐŽƌLJ ŽĂƌĚŵĞĞƚŝŶŐƐ͕ǁŝƚŚƚŚĞŐŽĂůŽĨŝĚĞŶƚŝĨLJŝŶŐƚŚĞŵĞĂƐƵƌĞƐƚŚĂƚƚŚĞ DĂŶĂŐĞŵĞŶƚŽĂƌĚŝŶƚĞŶĚƐƚŽŝŵƉůĞŵĞŶƚŝŶŽƌĚĞƌƚŽĞŶƐƵƌĞ ƐƵĨĨŝĐŝĞŶƚĨƵŶĚƐĨŽƌĐƵƌƌĞŶƚĂĐƚŝǀŝƚŝĞƐ͖ • ŝƐĐƵƐƐŝŽŶǁŝƚŚŵĂŶĂŐĞŵĞŶƚĂďŽƵƚƉůĂŶƐĨŽƌĨƵƚƵƌĞĂĐƚŝǀŝƚŝĞƐŝŶ ƌĞůĂƚŝŽŶƚŽƚŚĞŐŽŝŶŐĐŽŶĐĞƌŶĂƐƐƵŵƉƚŝŽŶ͕ǁŚĞƚŚĞƌƚŚĞŽƵƚĐŽŵĞŽĨ ƚŚŽƐĞƉůĂŶƐŝƐůŝŬĞůLJƚŽŝŵƉƌŽǀĞƚŚĞƐŝƚƵĂƚŝŽŶĂŶĚǁŚĞƚŚĞƌ ŵĂŶĂŐĞŵĞŶƚΖƐƉůĂŶƐĂƌĞĨĞĂƐŝďůĞŝŶƚŚĞĐŝƌĐƵŵƐƚĂŶĐĞƐ͖ • ŶĂůLJƐŝƐŽĨƚŚĞ'ƌŽƵƉΖƐŶĞƚǁŽƌŬŝŶŐĐĂƉŝƚĂůƉŽƐŝƚŝŽŶĂƐŽĨϯϭ ĞĐĞŵďĞƌϮϬϮϰƚŽĂƐƐĞƐƐƚŚĞĂǀĂŝůĂďŝůŝƚLJŽĨůŝƋƵŝĚĨƵŶĚƐƚŽŵĞĞƚ ƐŚŽƌƚͲƚĞƌŵĨŝŶĂŶĐŝĂůŽďůŝŐĂƚŝŽŶƐ͖ • ǀĂůƵĂƚŝŶŐƚŚĞŚŝƐƚŽƌŝĐĂůĂĐĐƵƌĂĐLJŽĨŵĂŶĂŐĞŵĞŶƚďƵĚŐĞƚŝŶŐďLJ ĐŽŵƉĂƌŝŶŐŚŝƐƚŽƌŝĐĂůĐĂƐŚĨůŽǁƉƌŽũĞĐƚŝŽŶƐǁŝƚŚĂĐƚƵĂůŽƵƚĐŽŵĞƐ ĂŶĚĂŶĂůLJƐŝŶŐƐĞŶƐŝƚŝǀŝƚLJŽĨƚŚĞďƵĚŐĞƚƐƚŽĐŚĂŶŐĞƐŝŶŬĞLJ ĂƐƐƵŵƉƚŝŽŶƐĂŶĚĐŽŶƐŝĚĞƌŝŶŐǁŚĞƚŚĞƌƚŚĞůĞǀĞůŽĨŬĞLJĂƐƐƵŵƉƚŝŽŶƐ ŝŶĚŝĐĂƚĞƐŵĂŶĂŐĞŵĞŶƚďŝĂƐ͖ • dĂŬŝŶŐŝŶƚŽĂĐĐŽƵŶƚǁŚĞƚŚĞƌĂĚĚŝƚŝŽŶĂůĨĂĐƚƐŽƌŝŶĨŽƌŵĂƚŝŽŶŚĂǀĞ ďĞĐŽŵĞĂǀĂŝůĂďůĞƐŝŶĐĞƚŚĞĚĂƚĞƚŚĞ'ƌŽƵƉŵĂĚĞƚŚĞĂƐƐĞƐƐŵĞŶƚ͖ • ƐƐĞƐƐŝŶŐƚŚĞĂǀĂŝůĂďŝůŝƚLJŽĨƚŚĞĨŝŶĂŶĐŝŶŐĨĂĐŝůŝƚŝĞƐĂŶĚ ĂƌƌĂŶŐĞŵĞŶƚŝŶĐůƵĚŝŶŐŝŶƐƉĞĐƚŝŽŶŽĨƉƌŽůŽŶŐĂƚŝŽŶĂŐƌĞĞŵĞŶƚƐ͖ • ƐƐĞƐƐŝŶŐǁŚĞƚŚĞƌ͕ŝŶůŝŐŚƚŽĨƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞĂƉƉůŝĐĂďůĞ ĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĨƌĂŵĞǁŽƌŬ͕ƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐƉƌŽǀŝĚĞĂĚĞƋƵĂƚĞĚŝƐĐůŽƐƵƌĞƐĂďŽƵƚĞǀĞŶƚƐŽƌ ĐŝƌĐƵŵƐƚĂŶĐĞƐƚŚĂƚŚĂǀĞďĞĞŶŝĚĞŶƚŝĨŝĞĚƚŚĂƚŵĂLJĐĂƐƚƐŝŐŶŝĨŝĐĂŶƚ ĚŽƵďƚŽŶƚŚĞ'ƌŽƵƉΖƐĂďŝůŝƚLJƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘ 188 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ KƚŚĞƌ/ŶĨŽƌŵĂƚŝŽŶ DĂŶĂŐĞŵĞŶƚŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶ͘dŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶĐŽŵƉƌŝƐĞƐƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚ;ŝŶĐůƵĚŝŶŐƚŚĞ ^ƵƐƚĂŝŶĂďŝůŝƚLJ^ƚĂƚĞŵĞŶƚĂƐĂƐĞƉĂƌĂƚĞƉĂƌƚŽĨƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚͿĂŶĚŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚŝŶĐůƵĚĞĚŝŶƚŚĞŶŶƵĂů ZĞƉŽƌƚŽĨƚŚĞ'ƌŽƵƉbut does not include the financial statements and our auditor’s report thereon. KƵƌŽƉŝŶŝŽŶŽŶƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĚŽĞƐŶŽƚĐŽǀĞƌƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶ͘ /ŶĐŽŶŶĞĐƚŝŽŶǁŝƚŚŽƵƌĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ŽƵƌƌĞƐƉŽŶƐŝďŝůŝƚLJŝƐƚŽƌĞĂĚƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶĂŶĚ͕ŝŶĚŽŝŶŐƐŽ͕ ĐŽŶƐŝĚĞƌǁŚĞƚŚĞƌƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶŝƐŵĂƚĞƌŝĂůůLJŝŶĐŽŶƐŝƐƚĞŶƚǁŝƚŚƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ŽƌŽƵƌŬŶŽǁůĞĚŐĞŽďƚĂŝŶĞĚŝŶƚŚĞ ĂƵĚŝƚ͕ŽƌŽƚŚĞƌǁŝƐĞĂƉƉĞĂƌƐƚŽďĞŵĂƚĞƌŝĂůůLJŵŝƐƐƚĂƚĞĚ͘ tŝƚŚƌĞŐĂƌĚƚŽƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚĂŶĚƚŚĞŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚ͕ǁĞĂůƐŽƉĞƌĨŽƌŵĞĚƉƌŽĐĞĚƵƌĞƐƉƌĞƐĐƌŝďĞĚďLJ ĂƉƉůŝĐĂďůĞůĞŐĂůƌĞƋƵŝƌĞŵĞŶƚƐĂŶĚǁĞƌĞƉŽƌƚƚŚĂƚ͗ • ƚŚĞŝŶĨŽƌŵĂƚŝŽŶŐŝǀĞŶŝŶƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚĂŶĚƚŚĞŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚĨŽƌƚŚĞĨŝŶĂŶĐŝĂůLJĞĂƌĨŽƌǁŚŝĐŚ ƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƌĞƉƌĞƉĂƌĞĚ͕ŝƐĐŽŶƐŝƐƚĞŶƚ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ǁŝƚŚƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͖ • ƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚ͕ĞdžĐůƵĚŝŶŐƚŚĞ^ƵƐƚĂŝŶĂďŝůŝƚLJZĞƉŽƌƚ;ǁŚŝĐŚĐŽŶƐƚŝƚƵƚĞƐĂƐĞƉĂƌĂƚĞƉĂƌƚŽĨƚŚĞDĂŶĂŐĞŵĞŶƚ ZĞƉŽƌƚͿ͕ĂŶĚƚŚĞŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚŚĂǀĞďĞĞŶƉƌĞƉĂƌĞĚ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ ĂƉƉůŝĐĂďůĞůĞŐĂůƌĞƋƵŝƌĞŵĞŶƚƐ͖ • ǁŝƚŚƌĞƐƉĞĐƚƚŽƚŚĞ^ƵƐƚĂŝŶĂďŝůŝƚLJZĞƉŽƌƚ;ǁŚŝĐŚŝƐŝŶĐůƵĚĞĚĂƐƉĂƌƚŽĨƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶĂŶĚĐŽŶƐƚŝƚƵƚĞƐĂƐĞƉĂƌĂƚĞ ƉĂƌƚŽĨƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚͿ͕ǁĞƉĞƌĨŽƌŵĞĚĂůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞĞŶŐĂŐĞŵĞŶƚ͕ƚŚĞƌĞƐƵůƚƐŽĨǁŚŝĐŚǁĞƌĞƉƌĞƐĞŶƚĞĚŝŶ ĂƐĞƉĂƌĂƚĞůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚǁŝƚŚĂŶƵŶŵŽĚŝĨŝĞĚĐŽŶĐůƵƐŝŽŶ͘ /Ĩ͕ďĂƐĞĚŽŶƚŚĞǁŽƌŬǁĞŚĂǀĞƉĞƌĨŽƌŵĞĚĂďŽǀĞ͕ǁĞĐŽŶĐůƵĚĞƚŚĂƚƚŚĞƌĞŝƐĂŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚ͕ǁĞĂƌĞƌĞƋƵŝƌĞĚƚŽƌĞƉŽƌƚƚŚĂƚ ĨĂĐƚ͘tĞŚĂǀĞŶŽƚŚŝŶŐƚŽƌĞƉŽƌƚŝŶƚŚŝƐƌĞŐĂƌĚ͘ ZĞƐƉŽŶƐŝďŝůŝƚŝĞƐŽĨDĂŶĂŐĞŵĞŶƚĂŶĚdŚŽƐĞŚĂƌŐĞĚǁŝƚŚ'ŽǀĞƌŶĂŶĐĞĨŽƌƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ DĂŶĂŐĞŵĞŶƚŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƚŚĂƚŐŝǀĞĂƚƌƵĞĂŶĚĨĂŝƌǀŝĞǁŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚh /&Z^͕ĂŶĚĨŽƌƐƵĐŚŝŶƚĞƌŶĂůĐŽŶƚƌŽůĂƐŵĂŶĂŐĞŵĞŶƚĚĞƚĞƌŵŝŶĞƐŝƐŶĞĐĞƐƐĂƌLJƚŽĞŶĂďůĞƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ ƚŚĂƚĂƌĞĨƌĞĞĨƌŽŵŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚ͕ǁŚĞƚŚĞƌĚƵĞƚŽĨƌĂƵĚŽƌĞƌƌŽƌ͘ In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going conĐĞƌŶ͕ ĚŝƐĐůŽƐŝŶŐ͕ĂƐĂƉƉůŝĐĂďůĞ͕ŵĂƚƚĞƌƐƌĞůĂƚĞĚƚŽŐŽŝŶŐĐŽŶĐĞƌŶĂŶĚƵƐŝŶŐƚŚĞŐŽŝŶŐĐŽŶĐĞƌŶďĂƐŝƐŽĨĂĐĐŽƵŶƚŝŶŐƵŶůĞƐƐŵĂŶĂŐĞŵĞŶƚ ĞŝƚŚĞƌŝŶƚĞŶĚƐƚŽůŝƋƵŝĚĂƚĞƚŚĞ'ƌŽƵƉŽƌƚŽĐĞĂƐĞŽƉĞƌĂƚŝŽŶƐ͕ŽƌŚĂƐŶŽƌĞĂůŝƐƚŝĐĂůƚĞƌŶĂƚŝǀĞďƵƚƚŽĚŽƐŽ͘ Those charged with governance are responsible for overseeing the Group’s financial reporting process. 189 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ Auditors’ Responsibilities for the Audit of the Financial Statements KƵƌŽďũĞĐƚŝǀĞƐĂƌĞƚŽŽďƚĂŝŶƌĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞĂďŽƵƚǁŚĞƚŚĞƌƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƐĂǁŚŽůĞĂƌĞĨƌĞĞĨƌŽŵŵĂƚĞƌŝĂů ŵŝƐƐƚĂƚĞŵĞŶƚ͕whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a ŚŝŐŚůĞǀĞůŽĨĂƐƐƵƌĂŶĐĞ͕ďƵƚŝƐŶŽƚĂŐƵĂƌĂŶƚĞĞƚŚĂƚĂŶĂƵĚŝƚĐŽŶĚƵĐƚĞĚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚƐŽŶƵĚŝƚŝŶŐǁŝůů ĂůǁĂLJƐĚĞƚĞĐƚĂŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚǁŚĞŶŝƚĞdžŝƐƚƐ͘DŝƐƐƚĂƚĞŵĞŶƚƐĐĂŶĂƌŝƐĞĨƌŽŵĨƌĂƵĚŽƌĞƌƌŽƌĂŶĚĂƌĞĐŽŶƐŝĚĞƌĞĚŵĂƚĞƌŝĂůŝĨ͕ ŝŶĚŝǀŝĚƵĂůůLJŽƌŝŶƚŚĞĂŐŐƌĞŐĂƚĞ͕ƚŚĞLJĐŽƵůĚƌĞĂƐŽŶĂďůLJďĞĞdžƉĞĐƚĞĚƚŽŝŶĨůƵĞŶĐĞƚŚĞĞĐŽŶŽŵŝĐĚĞĐŝƐŝŽŶƐŽĨƵƐĞƌƐƚĂŬĞŶŽŶƚŚĞďĂƐŝƐ ŽĨƚŚĞƐĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘ ƐƉĂƌƚŽĨĂŶĂƵĚŝƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚƐŽŶƵĚŝƚŝŶŐ͕ǁĞĞdžĞƌĐŝƐĞƉƌŽĨĞƐƐŝŽŶĂůũƵĚŐŵĞŶƚĂŶĚŵĂŝŶƚĂŝŶ ƉƌŽĨĞƐƐŝŽŶĂůƐŬĞƉƚŝĐŝƐŵƚŚƌŽƵŐŚŽƵƚƚŚĞĂƵĚŝƚ͘tĞĂůƐŽ͗ • /ĚĞŶƚŝĨLJĂŶĚĂƐƐĞƐƐƚŚĞƌŝƐŬƐŽĨŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ǁŚĞƚŚĞƌĚƵĞƚŽĨƌĂƵĚŽƌĞƌƌŽƌ͕ ĚĞƐŝŐŶĂŶĚƉĞƌĨŽƌŵĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐƌĞƐƉŽŶƐŝǀĞƚŽƚŚŽƐĞƌŝƐŬƐ͕ĂŶĚŽďƚĂŝŶĂƵĚŝƚĞǀŝĚĞŶĐĞƚŚĂƚŝƐƐƵĨĨŝĐŝĞŶƚĂŶĚ ĂƉƉƌŽƉƌŝĂƚĞƚŽƉƌŽǀŝĚĞĂďĂƐŝƐĨŽƌŽƵƌŽƉŝŶŝŽŶ͘dŚĞƌŝƐŬŽĨŶŽƚĚĞƚĞĐƚŝŶŐĂŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚƌĞƐƵůƚŝŶŐĨƌŽŵĨƌĂƵĚ ŝƐŚŝŐŚĞƌƚŚĂŶĨŽƌŽŶĞƌĞƐƵůƚŝŶŐĨƌŽŵĞƌƌŽƌ͕ĂƐĨƌĂƵĚŵĂLJŝŶǀŽůǀĞĐŽůůƵƐŝŽŶ͕ĨŽƌŐĞƌLJ͕ŝŶƚĞŶƚŝŽŶĂůŽŵŝƐƐŝŽŶƐ͕ ŵŝƐƌĞƉƌĞƐĞŶƚĂƚŝŽŶƐ͕ŽƌƚŚĞŽǀĞƌƌŝĚĞŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůƐ͘ • KďƚĂŝŶĂŶƵŶĚĞƌƐƚĂŶĚŝŶŐŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůƌĞůĞǀĂŶƚƚŽƚŚĞĂƵĚŝƚŝŶŽƌĚĞƌƚŽĚĞƐŝŐŶĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐƚŚĂƚĂƌĞ ĂƉƉƌŽƉƌŝĂƚĞŝŶƚŚĞĐŝƌĐƵŵƐƚĂŶĐĞƐ͕ďƵƚŶŽƚĨŽƌƚŚĞƉƵƌƉŽƐĞŽĨĞdžƉƌĞƐƐŝŶŐĂŶŽƉŝŶŝŽŶŽŶƚŚĞĞĨĨĞĐƚŝǀĞŶĞƐƐŽĨƚŚĞ Group’s internal controls. • ǀĂůƵĂƚĞƚŚĞĂƉƉƌŽƉƌŝĂƚĞŶĞƐƐŽĨĂĐĐŽƵŶƚŝŶŐƉŽůŝĐŝĞƐƵƐĞĚĂŶĚƚŚĞƌĞĂƐŽŶĂďůĞŶĞƐƐŽĨĂĐĐŽƵŶƚŝŶŐĞƐƚŝŵĂƚĞƐĂŶĚƌĞůĂƚĞĚ ĚŝƐĐůŽƐƵƌĞƐŵĂĚĞďLJŵĂŶĂŐĞŵĞŶƚ͘ • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the ĂƵĚŝƚĞǀŝĚĞŶĐĞŽďƚĂŝŶĞĚ͕ǁŚĞƚŚĞƌĂŵĂƚĞƌŝĂůƵŶĐĞƌƚĂŝŶƚLJĞdžŝƐƚƐƌĞůĂƚĞĚƚŽĞǀĞŶƚƐŽƌĐŽŶĚŝƚŝŽŶƐƚŚĂƚŵĂLJĐĂƐƚ significant doubt on the Group’s abiůŝƚLJƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘/ĨǁĞĐŽŶĐůƵĚĞƚŚĂƚĂŵĂƚĞƌŝĂůƵŶĐĞƌƚĂŝŶƚLJ exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements Žƌ͕ŝĨƐƵĐŚĚŝƐĐůŽƐƵƌĞƐĂƌĞŝŶĂĚĞƋƵĂƚĞ͕ƚŽŵŽĚŝĨLJŽƵƌŽƉŝŶŝŽŶ͘KƵƌĐŽŶĐůƵƐŝŽŶƐĂƌĞďĂƐĞĚŽŶƚŚĞĂƵĚŝƚĞǀŝĚĞŶĐĞ obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease ƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘ • ǀĂůƵĂƚĞƚŚĞŽǀĞƌĂůůƉƌĞƐĞŶƚĂƚŝŽŶ͕ƐƚƌƵĐƚƵƌĞĂŶĚĐŽŶƚĞŶƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ŝŶĐůƵĚŝŶŐƚŚĞĚŝƐĐůŽƐƵƌĞƐ͕ĂŶĚ ǁŚĞƚŚĞƌƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƌĞƉƌĞƐĞŶƚƚŚĞƵŶĚĞƌůLJŝŶŐƚƌĂŶƐĂĐƚŝŽŶƐĂŶĚĞǀĞŶƚƐŝŶĂŵĂŶŶĞƌƚŚĂƚĂĐŚŝĞǀĞƐĨĂŝƌ ƉƌĞƐĞŶƚĂƚŝŽŶ͘ • WůĂŶĂŶĚƉĞƌĨŽƌŵƚŚĞŐƌŽƵƉĂƵĚŝƚƚŽŽďƚĂŝŶƐƵĨĨŝĐŝĞŶƚĂƉƉƌŽƉƌŝĂƚĞĂƵĚŝƚĞǀŝĚĞŶĐĞƌĞŐĂƌĚŝŶŐƚŚĞĨŝŶĂŶĐŝĂůŝŶĨŽƌŵĂƚŝŽŶ ŽĨƚŚĞĞŶƚŝƚŝĞƐŽƌďƵƐŝŶĞƐƐƵŶŝƚƐǁŝƚŚŝŶƚŚĞŐƌŽƵƉĂƐĂďĂƐŝƐĨŽƌĨŽƌŵŝŶŐĂŶŽƉŝŶŝŽŶŽŶƚŚĞŐƌŽƵƉĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘ tĞĂƌĞƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞĚŝƌĞĐƚŝŽŶ͕ƐƵƉĞƌǀŝƐŝŽŶĂŶĚƌĞǀŝĞǁŽĨƚŚĞĂƵĚŝƚǁŽƌŬƉĞƌĨŽƌŵĞĚĨŽƌƉƵƌƉŽƐĞƐŽĨƚŚĞŐƌŽƵƉ ĂƵĚŝƚ͘tĞƌĞŵĂŝŶƐŽůĞůLJƌĞƐƉŽŶƐŝďůĞĨŽƌŽƵƌĂƵĚŝƚ͘ 190 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ Auditors’ Responsibilities for the Audit of the Financial Statements (continued) tĞĐŽŵŵƵŶŝĐĂƚĞǁŝƚŚƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞƌĞŐĂƌĚŝŶŐ͕ĂŵŽŶŐŽƚŚĞƌŵĂƚƚĞƌƐ͕ƚŚĞƉůĂŶŶĞĚƐĐŽƉĞĂŶĚƚŝŵŝŶŐŽĨƚŚĞĂƵĚŝƚ ĂŶĚƐŝŐŶŝĨŝĐĂŶƚĂƵĚŝƚĨŝŶĚŝŶŐƐ͕ŝŶĐůƵĚŝŶŐĂŶLJƐŝŐŶŝĨŝĐĂŶƚĚĞĨŝĐŝĞŶĐŝĞƐŝŶŝŶƚĞƌŶĂůĐŽŶƚƌŽůƐƚŚĂƚǁĞŝĚĞŶƚŝĨLJĚƵƌŝŶŐŽƵƌĂƵĚŝƚ͘ tĞ ĂůƐŽ ƉƌŽǀŝĚĞ ƚŚŽƐĞ ĐŚĂƌŐĞĚ ǁŝƚŚ ŐŽǀĞƌŶĂŶĐĞ ǁŝƚŚ Ă ƐƚĂƚĞŵĞŶƚ ƚŚĂƚ ǁĞ ŚĂǀĞ ĐŽŵƉůŝĞĚ ǁŝƚŚ ƌĞůĞǀĂŶƚ ĞƚŚŝĐĂů ƌĞƋƵŝƌĞŵĞŶƚƐ ƌĞŐĂƌĚŝŶŐŝŶĚĞƉĞŶĚĞŶĐĞ͕ĂŶĚĐŽŵŵƵŶŝĐĂƚĞǁŝƚŚƚŚĞŵĂůůƌĞůĂƚŝŽŶƐŚŝƉƐĂŶĚŽƚŚĞƌŵĂƚƚĞƌƐƚŚĂƚŵĂLJƌĞĂƐŽŶĂďůLJďĞƚŚŽƵŐŚƚƚŽďĞĂƌ ŽŶŽƵƌŝŶĚĞƉĞŶĚĞŶĐĞ͕ĂŶĚǁŚĞƌĞĂƉƉůŝĐĂďůĞ͕ĂĐƚŝŽŶƐƚĂŬĞŶƚŽĞůŝŵŝŶĂƚĞƚŚƌĞĂƚƐŽƌƐĂĨĞŐƵĂƌĚƐĂƉƉůŝĞĚ͘ &ƌŽŵƚŚĞŵĂƚƚĞƌƐĐŽŵŵƵŶŝĐĂƚĞĚǁŝƚŚƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞ͕ǁĞĚĞƚĞƌŵŝŶĞƚŚŽƐĞŵĂƚƚĞƌƐƚŚĂƚǁĞƌĞŽĨŵŽƐƚƐŝŐŶŝĨŝĐĂŶĐĞ ŝŶƚŚĞĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞĐƵƌƌĞŶƚƉĞƌŝŽĚĂŶĚĂƌĞƚŚĞƌĞĨŽƌĞƚŚĞŬĞLJĂƵĚŝƚŵĂƚƚĞƌƐ͘tĞĚĞƐĐƌŝďĞƚŚĞƐĞŵĂƚƚĞƌƐŝŶ our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumsƚĂŶĐĞƐ͕ ǁĞ ĚĞƚĞƌŵŝŶĞ ƚŚĂƚ Ă ŵĂƚƚĞƌ ƐŚŽƵůĚ ŶŽƚ ďĞ ĐŽŵŵƵŶŝĐĂƚĞĚ ŝŶ ŽƵƌ ƌĞƉŽƌƚ ďĞĐĂƵƐĞ ƚŚĞ ĂĚǀĞƌƐĞ ĐŽŶƐĞƋƵĞŶĐĞƐ ŽĨ ĚŽŝŶŐ ƐŽ ǁŽƵůĚ ƌĞĂƐŽŶĂďůLJďĞĞdžƉĞĐƚĞĚƚŽŽƵƚǁĞŝŐŚƚŚĞƉƵďůŝĐŝŶƚĞƌĞƐƚďĞŶĞĨŝƚƐŽĨƐƵĐŚĐŽŵŵƵŶŝĐĂƚŝŽŶ͘ ZĞƉŽƌƚŽŶKƚŚĞƌ>ĞŐĂůĂŶĚZĞŐƵůĂƚŽƌLJZĞƋƵŝƌĞŵĞŶƚƐ tĞǁĞƌĞĂƉƉŽŝŶƚĞĚďLJƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞŽŶϭϴ:ƵůLJϮϬϮϰƚŽĂƵĚŝƚƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨWůĂƐƚŝŬ Ě͘Ě͘ĨŽƌƚŚĞLJĞĂƌĞŶĚĞĚϯϭĞĐĞŵďĞƌϮϬϮϰ͘KƵƌƚŽƚĂůƵŶŝŶƚĞƌƌƵƉƚĞĚƉĞƌŝŽĚŽĨĞŶŐĂŐĞŵĞŶƚŝƐĨŝǀĞLJĞĂƌƐ͕ĐŽǀĞƌŝŶŐƚŚĞƉĞƌŝŽĚĨƌŽŵϯϭ ĞĐĞŵďĞƌϮϬϮϬƚŽϯϭĞĐĞŵďĞƌϮϬϮϰ͘ tĞĐŽŶĨŝƌŵƚŚĂƚ͗ • ŽƵƌĂƵĚŝƚŽƉŝŶŝŽŶŝƐĐŽŶƐŝƐƚĞŶƚǁŝƚŚƚŚĞĂĚĚŝƚŝŽŶĂůƌĞƉŽƌƚƉƌĞƐĞŶƚĞĚƚŽƚŚĞƵĚŝƚŽŵŵŝƚƚĞĞŽĨƚŚĞŽŵƉĂŶLJĚĂƚĞĚϮϰ ƉƌŝůϮϬϮϱ͖ • ĨŽƌƚŚĞƉĞƌŝŽĚƚŽǁŚŝĐŚŽƵƌƐƚĂƚƵƚŽƌLJĂƵĚŝƚƌĞůĂƚĞƐǁĞŚĂǀĞŶŽƚƉƌŽǀŝĚĞĚĂŶLJƉƌŽŚŝďŝƚĞĚŶŽŶͲĂƵĚŝƚƐĞƌǀŝĐĞƐ;E^ƐͿ ƌĞĨĞƌƌĞĚƚŽŝŶƌƚŝĐůĞϰϰŽĨƚŚĞƵĚŝƚĐƚ͘tĞĂůƐŽƌĞŵĂŝŶĞĚŝŶĚĞƉĞŶĚĞŶƚŽĨƚŚĞĂƵĚŝƚĞĚĞŶƚŝƚLJŝŶĐŽŶĚƵĐƚŝŶŐƚŚĞĂƵĚŝƚ͘ The engagement partner on the audit resulting in this independent auditors’ report is Domagoj Hrkać. 191 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶŽŵƉůŝĂŶĐĞǁŝƚŚƚŚĞ^&ZĞŐƵůĂƚŝŽŶ /ŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƌƚŝĐůĞϰϲϮƉĂƌĂŐƌĂƉŚϱŽĨĂƉŝƚĂůDĂƌŬĞƚĐƚ͕ǁĞĂƌĞƌĞƋƵŝƌĞĚƚŽĞdžƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽŶ ĐŽŵƉůŝĂŶĐĞŽĨƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞ'ƌŽƵƉĂƐĂƚĂŶĚĨŽƌƚŚĞLJĞĂƌĞŶĚĞĚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ĂƐŝŶĐůƵĚĞĚŝŶ ƚŚĞĂƚƚĂĐŚĞĚĞůĞĐƚƌŽŶŝĐĨŝůĞĂĚƉůĂƐƚŝŬͲŐƌƵƉĂͲϮϬϮϰͲϭϮͲϯϭͲϬͲĞŶ͘njŝƉ͕ǁŝƚŚƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞŽŵŵŝƐƐŝŽŶĞůĞŐĂƚĞĚZĞŐƵůĂƚŝŽŶ ;hͿϮϬϭϵͬϴϭϱŽĨϭϳĞĐĞŵďĞƌϮϬϭϴƐƵƉƉůĞŵĞŶƚŝŶŐŝƌĞĐƚŝǀĞϮϬϬϰͬϭϬϵͬŽĨƚŚĞƵƌŽƉĞĂŶWĂƌůŝĂŵĞŶƚĂŶĚŽĨƚŚĞŽƵŶĐŝůǁŝƚŚ ƌĞŐĂƌĚƚŽƌĞŐƵůĂƚŽƌLJƚĞĐŚŶŝĐĂůƐƚĂŶĚĂƌĚƐŽŶƚŚĞƐƉĞĐŝĨŝĐĂƚŝŽŶŽĨĂƐŝŶŐůĞĞůĞĐƚƌŽŶŝĐƌĞƉŽƌƚŝŶŐĨŽƌŵĂƚ(the “RTS on ESEF”). ZĞƐƉŽŶƐŝďŝůŝƚŝĞƐŽĨDĂŶĂŐĞŵĞŶƚĂŶĚdŚŽƐĞŚĂƌŐĞĚǁŝƚŚ'ŽǀĞƌŶĂŶĐĞ DĂŶĂŐĞŵĞŶƚŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶĂĚŝŐŝƚĂůĨŽƌŵĂƚƚŚĂƚĐŽŵƉůŝĞƐǁŝƚŚƚŚĞ Zd^ŽŶ^&͘dŚŝƐƌĞƐƉŽŶƐŝďŝůŝƚLJŝŶĐůƵĚĞƐ͗ • ƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶƚŚĞĂƉƉůŝĐĂďůĞdž,dD>ĨŽƌŵĂƚĂŶĚƚŚĞŝƌƉƵďůŝĐĂƚŝŽŶ͖ • ƚŚĞƐĞůĞĐƚŝŽŶĂŶĚĂƉƉůŝĐĂƚŝŽŶŽĨĂƉƉƌŽƉƌŝĂƚĞŝyZ>ƚĂŐƐ͕ƵƐŝŶŐũƵĚŐŵĞŶƚǁŚĞƌĞŶĞĐĞƐƐĂƌLJ͖ • ĞŶƐƵƌŝŶŐĐŽŶƐŝƐƚĞŶĐLJďĞƚǁĞĞŶĚŝŐŝƚŝƐĞĚŝŶĨŽƌŵĂƚŝŽŶĂŶĚƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƉƌĞƐĞŶƚĞĚŝŶŚƵŵĂŶͲ ƌĞĂĚĂďůĞĨŽƌŵĂƚ͖ĂŶĚ • ƚŚĞĚĞƐŝŐŶ͕ŝŵƉůĞŵĞŶƚĂƚŝŽŶĂŶĚŵĂŝŶƚĞŶĂŶĐĞŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůƌĞůĞǀĂŶƚƚŽƚŚĞĂƉƉůŝĐĂƚŝŽŶŽĨƚŚĞZd^ŽŶ^&͘ dŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞĂƌĞƌĞƐƉŽŶƐŝďůĞĨŽƌŽǀĞƌƐĞĞŝŶŐƚŚĞGroup’s^&ƌĞƉŽƌƚŝŶŐ͕ĂƐĂƉĂƌƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐ ƉƌŽĐĞƐƐ͘ ƵĚŝƚŽƌƐΖZĞƐƉŽŶƐŝďŝůŝƚŝĞƐ KƵƌƌĞƐƉŽŶƐŝďŝůŝƚLJŝƐƚŽĞdžƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽŶǁŚĞƚŚĞƌƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĐŽŵƉůLJ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ǁŝƚŚ ƚŚĞZd^ŽŶ^&͕ďĂƐĞĚŽŶƚŚĞĞǀŝĚĞŶĐĞǁĞŚĂǀĞŽďƚĂŝŶĞĚtĞĐŽŶĚƵĐƚĞĚŽƵƌƌĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞĞŶŐĂŐĞŵĞŶƚŝŶĂĐĐŽƌĚĂŶĐĞ ǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚŽŶƐƐƵƌĂŶĐĞŶŐĂŐĞŵĞŶƚƐϯϬϬϬ;ZĞǀŝƐĞĚͿ͕ƐƐƵƌĂŶĐĞŶŐĂŐĞŵĞŶƚƐKƚŚĞƌƚŚĂŶƵĚŝƚƐŽƌZĞǀŝĞǁƐŽĨ ,ŝƐƚŽƌŝĐĂů&ŝŶĂŶĐŝĂů/ŶĨŽƌŵĂƚŝŽŶ;/^ϯϬϬϬͿŝƐƐƵĞĚďLJƚŚĞ/ŶƚĞƌŶĂƚŝŽŶĂůƵĚŝƚŝŶŐĂŶĚƐƐƵƌĂŶĐĞ^ƚĂŶĚĂƌĚƐŽĂƌĚ͘ ƌĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞĞŶŐĂŐĞŵĞŶƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/^ϯϬϬϬŝŶǀŽůǀĞƐƉĞƌĨŽƌŵŝŶŐƉƌŽĐĞĚƵƌĞƐƚŽŽďƚĂŝŶĞǀŝĚĞŶĐĞĂďŽƵƚ compliance with the RTS on ESEF. The nature, timing and extent of procedures selected depend on the auditor’s judgment, ŝŶĐůƵĚŝŶŐƚŚĞĂƐƐĞƐƐŵĞŶƚŽĨƚŚĞƌŝƐŬƐŽĨŵĂƚĞƌŝĂůĚĞƉĂƌƚƵƌĞƐĨƌŽŵƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƐĞƚŽƵƚŝŶƚŚĞZd^ŽŶ^&͕ǁŚĞƚŚĞƌĚƵĞƚŽ ĨƌĂƵĚŽƌĞƌƌŽƌ͘ZĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞŝƐĂŚŝŐŚĚĞŐƌĞĞŽĨĂƐƐƵƌĂŶĐĞ͘,ŽǁĞǀĞƌ͕ŝƚĚŽĞƐŶŽƚŐƵĂƌĂŶƚĞĞƚŚĂƚƚŚĞƐĐŽƉĞŽĨƉƌŽĐĞĚƵƌĞƐ ǁŝůůŝĚĞŶƚŝĨLJĂůůƐŝŐŶŝĨŝĐĂŶƚ;ŵĂƚĞƌŝĂůͿŶŽŶͲĐŽŵƉůŝĂŶĐĞǁŝƚŚƚŚĞZd^ŽŶ^&͘ KƵƌƉƌŽĐĞĚƵƌĞƐŝŶĐůƵĚĞĚ͕ĂŵŽŶŐŽƚŚĞƌƚŚŝŶŐƐ͗͗ • ŽďƚĂŝŶŝŶŐĂŶƵŶĚĞƌƐƚĂŶĚŝŶŐŽĨƚŚĞƚĂŐŐŝŶŐƉƌŽĐĞƐƐ͖ • ĞǀĂůƵĂƚŝŶŐƚŚĞĚĞƐŝŐŶĂŶĚŝŵƉůĞŵĞŶƚĂƚŝŽŶŽĨƌĞůĞǀĂŶƚĐŽŶƚƌŽůƐŽǀĞƌƚŚĞƚĂŐŐŝŶŐƉƌŽĐĞƐƐ͖ • ƚƌĂĐŝŶŐƚŚĞƚĂŐŐĞĚĚĂƚĂƚŽƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞ'ƌŽƵƉƉƌĞƐĞŶƚĞĚŝŶŚƵŵĂŶͲƌĞĂĚĂďůĞĨŽƌŵĂƚ͖ • evaluating the completeness of the Group’s tagging of the consolidated financial statements; • ĞǀĂůƵĂƚŝŶŐƚŚĞĂƉƉƌŽƉƌŝĂƚĞŶĞƐƐŽĨƚŚĞƵƐĞŽĨŝyZ>ĞůĞŵĞŶƚƐƐĞůĞĐƚĞĚĨƌŽŵƚŚĞ^&ƚĂdžŽŶŽŵLJƵƐĞĚĂŶĚĐƌĞĂƚŝŽŶŽĨ ĞdžƚĞŶƐŝŽŶĞůĞŵĞŶƚƐǁŚĞƌĞŶŽƐƵŝƚĂďůĞĞůĞŵĞŶƚŝŶƚŚĞ^&ƚĂdžŽŶŽŵLJŚĂƐďĞĞŶŝĚĞŶƚŝĨŝĞĚ͖ • ĞǀĂůƵĂƚŝŶŐƚŚĞƵƐĞŽĨĂŶĐŚŽƌŝŶŐŝŶƌĞůĂƚŝŽŶƚŽƚŚĞĞdžƚĞŶƐŝŽŶĞůĞŵĞŶƚƐ͖ĂŶĚ • ĞǀĂůƵĂƚŝŶŐƚŚĞĂƉƉƌŽƉƌŝĂƚĞŶĞƐƐŽĨƚŚĞĨŽƌŵĂƚŽĨƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘ tĞďĞůŝĞǀĞƚŚĂƚƚŚĞĞǀŝĚĞŶĐĞǁĞŚĂǀĞŽďƚĂŝŶĞĚŝƐƐƵĨĨŝĐŝĞŶƚĂŶĚĂƉƉƌŽƉƌŝĂƚĞƚŽƉƌŽǀŝĚĞĂďĂƐŝƐĨŽƌŽƵƌŽƉŝŶŝŽŶ͘ 192 193 Notes 2024 2023 Sales 4 147,967 123,832 Other income 5 4,476 5,476 Total income 152,443 129,308 Increase/(decrease)in the value of work in progress and finished products 23 418 (227) Cost of raw material and supplies 6 (64,871) (66,677) Cost of goods sold 7 (24,229) (7,223) Service costs 8 (11,726) (12,122) Staff costs 9 (34,638) (31,980) Depreciation and amortisation 10 (10,811) (10,273) Other operating expenses 11 (3,960) (3,767) Provisions for risks and charges, (net) 12 (1) 136 Impairment of trade receivables, (net) (23) (238) Total operating expenses (149,841) (132,371) (Loss)/Profit from operations 2,601 (3,063) Finance income 13 271 199 Finance costs 14 (2,917) (2,349) Loss from financing activities (2,646) (2,150) Share in the profit of associates 22 3,091 4,359 (Loss)/Profit before taxation 3,046 (854) Income tax expense 15 (914) (419) (Loss)/Profit for the year 2,1 32 (1,273) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 (All amounts are expressed in thousands of euros) www.adplastik.hr 194 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 (CONTINUED) (All amounts are expressed in thousands of euros) The accompanying policies and notes form an integral part of these of these financial statements. ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS Notes 2024 2023 Exchange differences on translation of a foreign operation,items 16 (1,099) (1,476) Accruals of foreign exchange differences from the current year, net of tax 16 (621) (2,743) Other comprehensive income for the year, net of income tax (1,720) (4,219) Total comprehensive (loss)/income for the year 412 (5,492) Loss/Profit attributable to Equity holders of the Company 2,132 (1,273) Non-controlling interests - - Total comprehensive loss/income attributable to: Equity holders of the Company 412 (5,492) Non-controlling interests - - Basic and diluted (loss)/earnings per share (in euros and cents) 17 0.51 (0.31) www.adplastik.hr 195 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2024 (All amounts are expressed in thousands of euros) ASSETS Note 31.12.2024 31.12.2023 Non-current assets Intangible assets 18 9,540 9,572 Goodwill 36 2,391 2,391 Property, plant and equipment 19 92,183 91,507 Right-of-use assets 20 2,478 2,483 Investment property 21 3,217 3,256 Investments in associates 22 10,812 11,872 Deferred tax assets 15 3,300 3,036 Total non-current assets 123,921 124,117 Current assets Inventories 23 23,464 32,288 Trade receivables 24 25,045 21,534 Other receivables 25 3,126 6,092 Cash and cash equivalents 26 4,262 4,042 Prepaid expenses 629 660 Accrued income 432 403 Total current assets 56,958 65,019 TOTAL ASSETS 180,879 189,136 The accompanying policies and notes form an integral part of these of these financial statements. www.adplastik.hr 196 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2024 (CONTINUED) (All amounts are expressed in thousands of euros) The accompanying policies and notes form an integral part of these of these financial statements. Note 31.12.2024 31.12.2023 Shareholder’s equity and liabilities Share capital 27 54,595 54,595 Capital and other reserves 24,119 25,201 Retained earnings 20,194 18,668 Total shareholder’s equity 98,908 98,464 Long-term provisions 28 466 461 Long-term borrowings 29 17,850 30,566 Deferred revenue 30 1 37 Lease liabilities 31 1,380 1,581 Deferred tax liability 15 940 856 Total non-current liabilities 20,637 33,501 Advances received 32 5,938 10,339 Trade payables 33 22,471 20,977 Short-term borrowings 34 26,756 19,359 Other current liabilities 35 3,948 4,570 Lease liabilities 31 1,146 936 Short-term provisions 28 1,075 990 Total current liabilities 61,334 57,171 Total liabilities 81,971 90,672 TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES 180,879 189,136 www.adplastik.hr 197 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024 (All amounts are expressed in thousands of euros) The accompanying policies and notes form an integral part of these financial statements. Legal, Reserves Exchange Total equity statutory from accru- Reserves differences attributable Non- Share capital Capital re- and als of foreign for own Own shares Retained on trans- to the equity controlling Total serves general exchange shares earnings lation of a holders of interests reserves differences foreign oper- the parent ation Balance at 31 December 54,595 25,938 7,783 (3,795) 2,772 (871) 18,668 (6,627) 98,464 - 98,464 2023 Profit for the year - - - - - - 2,132 - 2,132 - 2,132 Other comprehensive in- come for the year - - - (621) - - (1) (1,099) (1,720) - (1,720) Total comprehensive in- come for the year - - - (621) - - 2,131 (1,099) 412 - 412 Release of reserves for own(treasury) shares - - - - (1,979) - 1,979 - - - - Disposal of own (treasury) - (45) - - - 78 - - 33 - 33 shares Transactions with own- ers recognized directly in equity - (45) - - (1,979) 78 1,979 - 33 - 33 Realization of recognised - - - 355 - - (355) - - - - exchange differences Reserves for not written off costs of development - - 2,229 - - - (2,229) - - - - Balance at 31 December 54,595 25,893 10,012 (4,061) 793 (793) 20,194 (7,726) 98,908 - 98,908 2024 www.adplastik.hr 198 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024 (CONTINUED) (All amounts are expressed in thousands of euros) The accompanying policies and notes form an integral part of these financial statements Legal, Reserves Exchange Total equity statutory from accru- Reserves differences attributable Non- Share capital Capital re- and als of foreign for own Own shares Retained on trans- to the equity controlling Total serves general exchange shares earnings lation of a holders of interests reserves differences foreign oper- the parent ation Balance at 31 December 55,738 25,456 7,783 (1,103) 2,772 (921) 19,231 (5,159) 103,798 - 103,798 2022 Loss for the year - - - - - - (1,273) - (1,273) - (1,273) Other comprehensive in- come for the year - - - (2,743) - - (8) (1,469) (4,219) - (4,219) Total comprehensive in- come for the year - - - (2,743) - - (1,281) (1,469) (5,492) - (5,492) Disposal of own (treasury) - (20) - - - 50 - - 30 - 30 shares Transactions with own- ers recognized directly in equity - (20) - - - 50 - - 30 - 30 Realization of recognised - - - 51 - - (51) 1 1 - 1 exchange differences Coverage Of the previous - (642) - - - - 642 - - - - year's loss Correction of the Share cap- ital due to EUR conversion (1,143) 1,143 - - - - - - - - - Abolition of the dividend ob- ligation in ADP Tisza - - - - - - 125 - 125 - 125 Balance at 31 December 54,595 25,938 7,783 (3,795) 2,772 (871) 18,668 (6,627) 98,464 - 98,464 2023 www.adplastik.hr 199 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024 (All amounts are expressed in thousands of euros) CASH FLOWS FROM OPERATING ACTIVITIES Notes 2024 2023 Profit/(loss) for the year 2,132 (1,273) Adjusted for: Income tax 15 914 419 Depreciation and amortization 10 10,811 10,273 Tangible assets assets write-off 11 154 146 Intangible assets write-off 11 277 45 Interest expense and exchange rates recognised in profit or loss 1,850 795 Share in profit of associates 22 (3,091) (4,359) Gain from sale of property, plant and equipment and intangible assets 5 (1,273) (2,819) Interest income 13 (271) (199) Increase/(decrease) in long-term and short-term provisions, (net) 89 (159) Value adjustment of investment in property 5 - (329) Loss allowance for trade receivables, (net) 23 205 Write down and write off of inventories 6 182 2,658 Profit from operations before working capital changes 11,797 5,403 Decrease/(increase) in inventories 23 8,642 (6,397) (Increase)/decrease in trade receivables (767) (6,299) Increase in other receivables 25 2,947 (1,990) Increase in trade payables 1,540 3,311 (Decrease)/increase of advances received 32 (4,401) (169) (Decrease)/increase in other current liabilities (940) 823 Decrease of accrued income and prepaid expenses 2 351 Interest paid (1,621) (827) Income tax paid (743) (33) Cash flows from operating activities 16,456 (5,827) The accompanying policies and notes form an integral part of these financial statements. www.adplastik.hr 200 (All amounts are expressed in thousands of euros) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024 (CONTINUED) CASH FLOWS FROM INVESTING ACTIVITIES Notes 2024 2023 Interest received 288 179 Purchase of property, plant and equipment 19 (9,894) (5,437) Purchase of intangible assets 18 (3,013) (3,423) Proceeds from sale of property, plant and equipment and intangible assets 2,319 3,380 Dividends received 618 4,341 Cash (used) investing activities (9,683) (960) CASH FLOWS FROM FINANCING ACTIVITIES 2024 2023 Proceeds from borrowings 34 21,398 35,308 Repayment of borrowings 34 (27,221) (28,175) Repayment of lease liabilities 32 (1,144) (1,150) Cash (used) in/from financing activities (6,967) 5,983 Unrealised exchange rate differences in respect of cash and cash equivalents (11) 5 (Decrease) in cash and cash equivalents, net (205) (799) Cash and cash equivalents at the beginning of the year 26 3,249 4,048 Cash and cash equivalents at the end of the year 26 3,044 3,249 The accompanying policies and notes form an integral part of these financial statements www.adplastik.hr 201 The following new standards, interpretations, and amend- ments to existing standards are mandatory for periods begin- ning on 1 January 2024: ■ Amendments to IAS 1 Presentation of Financial State- ments: Classification of Liabilities as Current or Non-cur- rent, Long-term Liabilities in Agreements ■ Amendments to IFRS 16 Leases: Lease Liability in Sale and Leaseback Transactions ■ Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Ar- rangements The adoption of these standards did not have a significant im- pact on the amounts recognized in the statement of financial position or the statement of comprehensive income, nor on the disclosed accounting policies. The following new standards, interpretations, and amend- ments to existing standards issued by the IASB and adopt- ed by the EU are still not in effect or have not been adopted by the EU. If applicable, the Company intends to adopt these standards when they become effective. ■ Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Exchangeability Issues ■ Amendments to the Classification and Measurement of Fi- nancial Instruments (IFRS 7 and IFRS 9): Classification of Financial Assets, Payment Settlement via Electronic Means ■ IFRS 1, IFRS 7, IFRS 9, IFRS 10, IAS 7 Annual Improve- ments to IFRS Standards 2011-2013 Cycle: Clarifications, Simplifications, Corrections, and Amendments to Improve Consistency of the aforementioned IFRSs ■ IFRS 18 Presentation and Disclosure in Financial State- ments: New Standard ■ IFRS 19 Parent-Subsidiary Relations with No Public Ac- countability - Disclosures: New Standard Set out below are the principal accounting policies consist- ently applied in the preparation of the financial statements for the current and prior year. 2.1 STATEMENT OF COMPLIANCE The separate financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union. 2.2 BASIS OF PREPARATION The Group maintains its accounting records in the Croatian language, in euro and in accordance with Croatian laws and the accounting principles and practices observed by enter- prises in Croatia. All components of the Group maintain ac- counting records in their functional currencies. The preparation of the consolidated financial statements re- quires from the Management Board to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 1. NEW STANDARDS AND AMANDMENTS TO EXISTING NOT YET ADOPTED Notes to the consolidated financial statements For the year ended 31 December 2024 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES www.adplastik.hr 202 2.2 BASIS OF PREPARATION (CONTINUED) These estimates are based on the information available as at the date of preparation of the financial statements, and actual results could differ from those estimates. The consolidated financial statements of the Group represent aggregate amounts of assets, liabilities, capital and reserves of the Group as of 31 December 2024, and the results of opera- tions for the year that ended. Consolidated financial statements are presented in euro (EUR). All amounts presented in the financial statements are ex- pressed in thousands of euros unless otherwise stated, and there may be differences of 1 in the totals due to rounding. 2.3 BASIS OF CONSOLIDATION Accompanying consolidated financial statements comprise of the Companys financial statements and the entities under its control. The control principle sets out the following three elements of control: ■ power over the investee; ■ exposure, or rights, to variable returns from involvement with the investee; and ■ the ability to use power over the investee to affect the amount of those returns. The Company re-evaluates the existence of its control when the facts and circumstances indicate that one or more of the above-mentioned control elements have occurred. Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. AD Plastik Group in the reporting period consists of compa- nies: ■ AD Plastik d.d., Croatia ■ AO AD Plastik Togliatti, Russian Federation ■ ZAO AD Plastik Kaluga, Russian Federation ■ AD Plastik Tisza Kft. Hungary ■ ADP d.o.o., Serbia ■ AD Plastik d.o.o., Slovenia 2.4 REVENUE RECOGNITION Revenue is measured based on the consideration specified in a contract with a customer. The contract exists only if it is legally enforceable and meets all of the following criteria: ■ the contract is approved, and the parties are committed to their obligations, ■ the rights to goods and services and payment terms can be identified, ■ the contract has commercial substance, and ■ collection of consideration is probable. The definition of contract as stated above is by combining the clauses of following documentation: the Buyer’s Gener- al Terms and conditions, the Nomination letter, the Purchase agreement and Purchase order. The Group has contracts with Buyers (OEM) as Tier 1, with Buyer’s suppliers as Tier 2, with subsidiaries and associates. The contracts exist for sales of following goods and services: ■ Product sale, ■ Tooling sale, ■ R&D activities ■ Royalty services, ■ Technical support services Contracts do not commit the customer to a specified quantity of products; however, the Group is generally required to ful- fil its customer’s purchasing requirements for the production life of the vehicle. Contracts do not typically become a perfor- mance obligation until the Group receives either a purchase order for a specific number of parts at a specified price. The long-term agreements with customers for specific product may range from five to seven years, contracts may be termi- nated by customers at any time, while occurred very rarely. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 203 The Group’s customers pay for products received in accord- ance with payment terms that are customary in the industry, typically 60 to 120 days. The Group’s contracts with its cus- tomers do not have significant financing components. Tooling and product sales may be contracted in separate agreements, or concluded at different points in time, or may be contracted in one agreement. In either case, any binding obligation for the customer with respect to parts is created only upon issuance of purchase orders. Revenue from tool- ing sale and product sale is recognised at point in time when the control is passed on the buyer. The Group has determined that royalty and technical sup- port services, tooling and the delivery of product parts are separate and distinct for the customer and therefore consti- tute separate performance obligations under IFRS 15, when the ownership is transferred. The prices agreed in the contracts for the single perfor- mance obligations are considered to be the stand-alone. The Group, in contracts with variable consideration, assess- es whether there is an obligation to return the consideration to the customer and includes a portion of the variable con- sideration only if it is highly probable that there will not be a significant reversal of the total recognized revenue after resolving the uncertainties related to the variable consider- ation. The Group considers a contract modification to have oc- curred when there is a change in the scope or price of the contract, or both, which is approved by the contracting par- ties. The Group considers that a contract modification ex- ists when the contracting parties approve a modification that establishes new enforceable rights and performance obligations, or changes the existing ones. The Group rec- ognizes a contract modification as a separate contract if the scope of the contract increases due to the addition of promised goods or services that are distinct from the previ- ous ones, and if the contract price increases by an amount of consideration that reflects the selling prices of the addi- tional promised goods or services and all appropriate ad- justments to that price to reflect the circumstances of the contract. The Group recognizes a contract modification as part of the existing contract if the remaining goods or ser- vices are not distinct and therefore form part of a single per- formance obligation, which is partially fulfilled on the date of the contract modification. Revenue from sale of products Product sales are recognized when the products are deliv- ered to, and accepted by the customer and when the control of a product is transferred to the customer. Sales to custom- ers with whom self- invoicing has been arranged are recog- nized upon receiving from such a customer the confirmation of delivery, i.e. when control is transferred to the customer. Each delivery is considered as performance obligation that is satisfied at point in time. Some of the Group’s contracts include variable consideration which take a form of year-to- year price reductions („productivity“), but Group has con- cluded that those discounts do not give rise to a material right as those decreases are consistent with the pricing pat- tern in the automotive industry which takes into considera- tion learning curve effect. Some contracts with customers include warranty clauses for repair of faulty goods during a specified long-term peri- od and cover only a product’s compliance with agreed spec- ifications. Such warranties granted by the Group are in most cases assurance type warranties recognized in accordance with IAS 37 when the control of product transfers to cus- tomers. Revenue from the manufacture of tools Revenues from tools are matched with contracts that are specifically concluded for developing an asset, or a group of assets, closely linked and interdependent on the design, technology and function or their final use or application. The Group estimates that the transfer of control of tools, gauges and other devices is met at the time of „SOP“ (Start Of Pro- duction), i.e. start of the mass production on them. At that point the Group recognizes revenue from the sale of tools. Costs of modification, completion and similar tool costs are recognised by the Group as an increase in inventory value. 2.4 REVENUE RECOGNITION (CONTINUED) 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 204 Revenue from royalty and technical services The Group generates revenues from royalty fees by conclud- ing contracts with affiliates to whom it sells the right to use intellectual property calculated on the amount of products produced by these companies, and for which products the Group has carried out development activities. Revenue from licenses is recognized at the time of execution, according to the quantities of products produced by the cus- tomer. The Group generates revenues from technical services on the basis of contracts it has with affiliated companies to which it provides technical consulting services for the needs of devel- opment and industrialization. Revenue from royalty is recognized at the time of execution based on the generated sales of customers while revenue for technical-administrative support and consultancy services is recognized over time based on when the service is rendered. 2.5 BORROWING COSTS Borrowing costs directly attributable to the acquisition, con- struction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs that cannot be directly attributable to ac- quisition, construction or production of qualifying asset, are capitalized applying a capitalization rate. Capitalization rate is weighted average of borrowing costs applicable to the gen- eral borrowings, excluding borrowing costs that are directly attributable for acquisition of qualifying asset, until substan- tially all the activities necessary to prepare that asset for its intended use or sale are completed. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for cap- italization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. 2.6 FOREIGN-CURRENCY TRANSACTIONS Transactions in foreign currencies are translated into the re- spective functional currencies of Group companies at the ex- change rates at the dates of the transactions. Presentation currency for Group is Euro. Functional curren- cies for companies included in Group are as follows: ■ AD Plastik d.d., Croatia ................................................Euro ■ AO AD Plastik Togliatti, Russian Federation ....Russ. rouble ■ ZAO AD Plastik Kaluga, Russian Federation ....Russ. rouble ■ AD Plastik Tisza Kft. Hungary................... Hungarian forint ■ ADP d.o.o., Serbia .......................................... Serbian dinar ■ AD Plastik d.o.o., Slovenia ...........................................Euro Monetary assets and liabilities denominated in foreign cur- rencies are translated into the functional currency at the ex- change rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was deter- mined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss and presented within finance costs. 2.7 FOREIGN OPERATIONS The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euro at the exchange rates at the re- porting date. The income and expenses of foreign opera- tions are translated into euro at the exchange rates at the dates of the transactions. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.4 REVENUE RECOGNITION (CONTINUED) www.adplastik.hr 205 reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumu- lative amount is reattributed to NCI. When the Group dis- poses of only part of an associate or joint venture while retaining significant influence or joint control, the rele- vant proportion of the cumulative amount is reclassified to profit or loss. The Group may have a monetary item as an amount receiv- able from, or payable to a foreign entity. An item neither planned to be settled nor likely to arise in the foreseeable future is essentially part of the entity’s net investment in a foreign operation and accounted for in accordance with IAS 21. The Group recognizes foreign exchange differences arising from monetary items that are part of the net foreign investment initially in other comprehensive income and ac- cumulates them under a separate component of equity – Reserves from accruals of foreign exchange differences. On disposal of a net investment in a foreign operation, the entire balance of exchange differences is transferred from equity to profit or loss. 2.8 INCOME TAX Current tax Income tax expense is based on taxable profit for the year and represents the sum of the tax currently payable and deferred tax. Income tax is recognised in the statement of comprehensive income, except where it relates to items rec- ognised directly in equity, in which case it is also recognised in equity. Current tax represents tax expected to be paid on the basis of taxable profit for the year, using the tax rates en- acted at the date of the statement of financial position, ad- justed by appropriate prior-period tax liabilities. According to the Croatian tax laws. Groups subsidiaries are not taxable at the consolidation level nor can tax losses be transferred among the group members. Subsidiaries are subject to the tax laws of their countries of registration. Deferred tax Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial re- porting purposes and the amounts used for taxation purpos- es. Deferred tax assets and liabilities are measured at the tax rate expected to apply to taxable profit in the period in which the liability is expected to be settled or the asset real- ised, based on the tax rates in effect at the date of the state- ment of financial position. The measurement of deferred tax liabilities and assets re- flects the amount that the Group expects, at the date of the statement of financial position, to recover or settle the car- rying amounts of its assets and liabilities. Deferred tax assets and liabilities are not discounted and are classified in the statement of financial position as non-cur- rent assets and/or non-current liabilities. Deferred tax as- sets are recognised only to the extent that it is probable that the related tax benefit will be realised. At each date of the statement of financial position, the Group reviews the unrec- ognised potential tax assets and the carrying amount of the recognised tax assets. 2.9 PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS Property, plant and equipment as well as intangible assets are recognised at purchase cost and subsequently reduced by ac- cumulated depreciation/amortisation. Intangible asset repre- sents capitalized development costs of all Group’s projects. Intangible assets – Projects (which mainly refers to models, designs, and prototypes for auto parts developed by the Com- pany) are depreciated according to its useful life which varies from 2 to 7 years. The purchase cost comprises the purchase price, import duties and non-refundable sales taxes (for prop- erty, plant and equipment) and any directly attributable costs 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.7 FOREIGN OPERATIONS (CONTINUED) www.adplastik.hr 206 Depreciation rates in 2024 Depreciation rates in 2023 Buildings 1.50 1.50 Machinery 7.00 - 10.00 7.00 - 10.00 Tools, furniture, office and laboratory equipment, measuring and control instruments 7.00 – 50.00 7.00 – 50.00 Vehicles 20.00 20.00 IT equipment 10.00 - 20.00 10.00 - 20.00 Others 10.00 10.00 Intangible assets - Projects 14.29 – 50.00 14.29 – 33.33 Software 20.00 – 50.00 20.00 – 50.00 of bringing an asset to its working condition and location for its intended use, such as employee remuneration, profession- al fees directly arising from putting an asset into its working condition, test costs (for intangible assets), as well as all oth- er costs directly attributable to bringing an asset to a condi- tion for its intended use. Maintenance and repairs, replace- ments and improvements of minor importance are expensed as incurred. Where it is obvious that expenses incurred result- ed in an increase of expected future economic benefits to be derived from the use of an item of property, plant and equip- ment or intangible assets in excess of the originally assessed standard performance of the asset, they are added to the car- rying amount of the asset. Gains or losses on the retirement or disposal of property, plant and equipment or intangible assets are included in the statement of comprehensive income in the period in which they occur. Depreciation commences on put- ting an asset into use. Depreciation is provided so as to write down the cost or revalued amount of an asset other than land, property, plant and equipment and intangible assets under de- velopment over the estimated useful life of the asset using the straight-line method as follows: Intangible assets based on contracts with customers occurred during the allocation of the purchase price by the acquisition of AD Tisza in Hungary, and these intangible assets are amortized at rates ranging from 16.67% to 25.00%. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.9 PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS (CONTINUED) www.adplastik.hr 207 2.10 GOODWILL Goodwill represents the excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net as- sets of a business at the acquisition date. Goodwill generated by acquisition of a subsidiary is presented as an intangible asset. Goodwill is tested for impairment annually or more often if the events and circumstances that indicate potential impair- ment occur. Goodwill is measured as cost of acquisition less accumulated losses due to impairment. Impairment losses on goodwill are not reversed. Gains and losses from the sale of a business include the net book value of goodwill, which relates to the sold business. For the purposes of impairment testing, goodwill is allocat- ed to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. 2.11 IMPAIRMENT OF NON-FINANCIAL ASSETS At each reporting date the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is an indication that the assets have suffered an impairment loss. If any such indica- tion exists, the recoverable amount of the asset is estimat- ed in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recov- erable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of alloca- tion can be identified, the Group’s assets are also allocated to individual cash-generating units or, if this is not possible, they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. 2.12 INVESTMENTS IN ASSOCIATES An associate is an entity over which the Group has significant influence but no control over the entity. Significant influence is the power to participate in the financial and operating poli- cy decisions of the investee, but it is not control or joint con- trol over those policies. The results of operations of associates are incorporated in these financial statements using the equity method of ac- counting. Under this method, the Group’s share in the profit or loss of associates is recognized in profit and loss from the date of acquisition of significant influence until the date on which significant influence is lost. Investments are recognized initially at cost and are subse- quently adjusted by the changes in the acquirer’s share of the net profit of the investee. Where the Group’s share of losses in an associate is equal to or higher than the equity investment in the associate, no further losses are recognized, except where the Group has assumed an obligation or committed to make a payment on behalf of the associate. 2.13 INVENTORIES Inventories of raw material and spare parts are stated at the lower of cost and net realisable value, whichever is lower. Cost is determined using the weighted-average cost method. Net realisable value represents the estimated selling price in the ordinary course of business less all variable selling costs. Small inventory is written off when put in use. The cost of product inventories i.e. the production price is based on direct material used, the cost of which is determined using the weighted average cost method, then direct labour costs and fixed overheads at the actual level of production which approximates the normal capacities, as well as variable overheads that are based on the actual use of the production capacities. Inventories of goods are recognized at the cost of acquiring the inventories, which include the purchase price, import du- ties and other non-recoverable taxes, transportation costs, and other costs directly attributable to the acquisition of fin- ished goods or materials. 2.14 OTHER TRADE RECEIVABLES AND PREPAYMENTS Other receivables and prepayments represent receivables and prepayments that are not included in financial instruments, and they are carried at nominal amounts less an appropri- ate allowance for impairment for estimated irrecoverable amounts. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 208 The Group impairs the carrying amount of receivables in the same way as the impairment of financial assets. 2.15 CASH AND CASH EQUIVALENTS Cash comprises account balances with banks, cash in hand, deposits and securities at call or with maturities of less than three months. 2.16 PROVISIONS Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an out- flow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each date of the statement of financial position and adjusted to reflect the current best estimate. Where the effect of discounting is material, the amount of the provision is the present value of the ex- penditures expected to be required to settle the obligation, determined using the estimated risk free interest rate as the discount rate. Where discounting is used, the reversal of such discounting in each year is recognised as a finan- cial expense and the carrying amount of the provision in- creases in each year to reflect the passage of time. The amount recognised as a provision is the best estimate of the consideration required to settle the present obliga- tion at the date of the statement of financial position, tak- ing into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Provisions for litigation losses represents provisions relat- ing to litigation against the Company from regular commer- cial operations and from disputes with former employees. Provisions for unused vacation days are calculated on the basis of the remaining days of the vacation days that employees have made in the current year, multiplied by amount of gross 2 daily wage. Employees bonuses represents rewards that were planned to be paid out in the coming year based on results from the current year. 2.17 TERMINATION, LONG-SERVICE AND OTHER EMPLOYEE BENEFITS (a) Pension-related obligations In the normal course of business, the Group makes payments, through salary deductions, to mandatory pension funds on behalf of its employees, as required by law. The contributions paid to the mandatory pension funds are recognised as salary expense when accrued. The Group does not have any other retirement benefit plan and, consequently, has no other ob- ligations in respect of the retirement benefits for its employ- ees. In addition, the Group is not obliged to provide any other post-employment benefits. (b) Long-term employee benefits Long-term employee benefits represent jubilee awards and post employment benefit obligations. Post employment benefit obligations falling due more than 12 months after the reporting date are discounted to their present value. Ju- bilee awards are paid in intervals according to time that em- ployee was working for company. The cost of benefits is determined using the projected unit credit method based on an actuarial valuation performed at each reporting date. Gains and losses arising from actuarial valuation are recognized in the period in which they arise. Past service cost is recognized immediately to the extent that the benefits have already been vested. Otherwise, it is amortized on a straight-line basis over a specified period un- til the benefits become vested. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.14 OTHER TRADE RECEIVABLES AND PREPAYMENTS (CONTINUED) www.adplastik.hr 209 2.18 FINANCIAL INSTRUMENTS Financial assets Trade receivables are initially recognised when they are originated. All other financial assets are initially recognised when the Group becomes a party to the contractual provi- sions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a signifi- cant financing component is initially measured at the trans- action price. On initial recognition, a financial asset is classified as meas- ured at amortised cost. Financial assets are not reclassified subsequent to their ini- tial recognition unless the Group changes its business mod- el for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: ■ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and ■ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Business model assessment The Group makes an assessment of the objective of the busi- ness model in which a financial asset is held at a portfolio lev- el because this best reflects the way the business is managed and information is provided to management. The information considered includes: ■ the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning con- tractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash out- flows or realising cash flows through the sale of the assets; ■ how the performance of the portfolio is evaluated and re- ported to the Group’s management; ■ the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; ■ how managers of the business are compensated – e.g. whether compensation is based on the fair value of the as- sets managed or the contractual cash flows collected; and ■ the frequency, volume and timing of sales of financial as- sets in prior periods, the reasons for such sales and expec- tations about future sales activity. Trade receivables are held in the business model of holding for the purpose of collection. Assessment whether contractual cash flows are solely pay- ments of principal and interest For the purposes of this assessment, relevant for the purpose of classifying financial assets at amortised cost, ‘principal’ is defined as the fair value of the financial asset on initial recog- nition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and ad- ministrative costs), as well as a profit margin. In assessing the main criterion, i.e. whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a con- tractual term that could change the timing or amount of con- tractual cash flows such that it would not meet this condition. The structure of the Group’s financial assets is simple and pri- marily relates to trade receivables without a significant finan- cial component. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 210 Subsequent measurement and gains and losses These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign ex- change gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recog- nised in profit or loss. Financial liabilities Debt securities are initially recognised when they are orig- inated. All other financial liabilities are initially recognised when the Group becomes a party to the contractual provi- sions of the instrument. A financial liability is initially measured at fair value plus transaction costs that are directly attributable to its acqui- sition or issue, if this is an instrument which is not stated at fair value through profit or loss. Financial liabilities are classified as measured at amortised cost. A financial liability is classified as as measured at am- ortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recog- nised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. The Group derecognises a financial liability when its con- tractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified lia- bility are substantially different, in which case a new finan- cial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference be- tween the carrying amount extinguished and the considera- tion paid (including any non-cash assets transferred or lia- bilities assumed) is recognised in profit or loss. Impairment of non-derivative financial assets The Group recognises loss allowances for expected credit loss (ECLs) on financial assets measured at amortised cost. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial as- set has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available with- out undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information. The Group assumes that the credit risk on a financial asset has increased significantly if early warning indicators have been activated in accordance with the Group’s policy or con- tractual terms of the instrument. The Group considers a financial asset to be fully or partially in default if: ■ the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to ac- tions such as realising security (if any is held); or ■ the financial asset is more than 360 days past due based on historical experience of average market participant. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instru- ment. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.18 FINANCIAL INSTRUMENTS (CONTINUED) www.adplastik.hr 211 12-month ECLs are the portion of ECLs that result from de- fault events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. Expected credit losses measurement In accordance with IFRS 9, assets that are carried at am- ortised cost must have attributed excepted credit losses (ECL)- the formula for calculating the annual ECL is the fol- lowing: Probability of default (PD) x Loss given default (LGD) x Ex- posure at default (EAD) Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset or liability, and of allocat- ing interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated fu- ture cash payments through the expected life of the finan- cial asset or liability, or, where appropriate, a shorter period. Impairment of financial assets Financial assets are assessed for indications of impairment at each date of the statement of financial position. A finan- cial asset is impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated fu- ture cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the expected credit losses. Impairment loss on a financial asset is recognised by reduc- ing the carrying amount of the asset through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Derecognition of financial assets The Group derecognises a financial asset only when the con- tractual rights to the cash flows from the asset have expired, when the asset is transferred and when substantially all the risks and rewards of ownership of the asset are passed onto another entity. If the Group neither transfers nor retains sub- stantially all the risks and rewards of ownership and contin- ues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substan- tially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the finan- cial asset and also recognises a collateralised borrowing for the proceeds received. Classification as debt or equity Debt and equity instruments are classified as either finan- cial liabilities or as equity in accordance with the substance of the underlying contractual arrangement. Interest income Interest income is recognised on a pro rata temporis basis, using the effective interest method. Interest earned on bal- ances with commercial banks (demand and term deposits) is credited to income for the period as it accrues. Interest on trade receivables is recognised as income when accrued. 2.19 CONTINGENCIES Contingent liabilities have not been recognised in these consolidated financial statements. They are disclosed if the possibility of outflow of resources embodying economic benefits is possible. A contingent asset is not recognised in financial statements, but it is disclosed when the inflow of economic benefits becomes probable. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.18 FINANCIAL INSTRUMENTS (CONTINUED) www.adplastik.hr 212 2.20 EVENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION Events after the date of the statement of financial position that provide additional information about the Group’s posi- tion at that date (adjusting events) are reflected in the finan- cial statements. Subsequent events that are not adjusting events are disclosed in the notes to the consolidated finan- cial statements when material. 2.21 SEGMENT REPORTING In the consolidated financial statements, the Group disclos- es sales revenues grouped by country. When assessing busi- ness performance and making decisions on the allocation of resources in accordance with IFRS 8, the Group’s Manage- ment Board uses the division into two business segments: the EU, UK and Serbia and Russia. In the consolidated finan- cial statements, the Group’s operating results, assets and liabilities are presented for above mentioned business seg- ments. The division into segments is based on the Group’s presence in the different markets. Transactions between segments relate to sales of materials, revenues from engineering services and royalty revenues. 2.22 LEASES At inception of a contract, Group assesses whether a con- tract is, or contains lease. A contract is, or contains a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consid- eration. To assess whether a contract conveys the right to control the use of an identified asset, Group uses the defini- tion of a lease in IFRS 16. Leases are recognised by the present value of the lease pay- ments and showed either as right-of-use assets or together with property, plant and equipment. Group also recognises a financial liability representing its obligation to make future lease payments. Lessees are recognised separately interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees are also required to re-measure lease liability due to certain events (e.g. a change in lease term, a change in future lease payments, resulting from a change in an index or discounting rate). The standard includes two recognition exemptions for lessees: “low-value“ leases (e.g. tablets and personal computers) and „short-term“ leases (leases which ends within 12 months). Low-value leases are assets with value lower than EUR 4,000. Right-of-use assets and lease liabilities will be report- ed separately in the statement of financial position. The Group has elected not to apply the requirements of IFRS 16 for low-value leases (e.g. printers) and short-term leas- es (e.g. apartments). Detailed movement of right of use assets are presented in Note 20 and movements of lease liability in Note 31. 2.23 GRANTS The Group recognizes grants as income over the period necessary to match them with related costs, for which they are intended to compensate on a systematic basis. A grant receivable as compensation for costs already in- curred is derecognised as income in the period in which it is receivable. A grant related to income is reported as deduction from the related expense. 2.24 INVESTMENT PROPERTY Investment property is property held by the Group to earn rentals or for capital appreciation or for both, but not for sale in the ordinary course of business or for administrative purposes. Investment property is measured initially at its cost, includ- ing transaction costs. Subsequently, investment property is stated at cost less accumulated depreciation and any im- pairment loss. Investment property is depreciated on a straight-line basis at the rate of 1.5%. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 213 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) In the application of the Group’s accounting policies, which are described in Note 2, the Management Board is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from those estimates. The estimates and underlying assump- tions are continually reviewed. Revisions to accounting esti- mates are recognised in the period in which the estimate is re- vised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods. The key areas of estimation in applying the Group’s accounting policies that had a most significant impact on the amounts recognized in the financial statements were as follows. Revenue from the sale of tools Tools are custom made for the customer and cannot be used for other purposes. In accordance with the automotive prac- tice, those contracts may differ with respect to the develop- ment of tools and transfer of the title to the customer. In such cases, the Group determines whether tool arrangements are sale, lease or development of own equipment, whether this is a lease arrangement and whether it is separate from the sale of car parts. The Group has assessed that the sale of car parts is a sepa- rate performance obligation from the sale of tools since the customer has the control over the use of tool and uncondi- tional right for payment upon the transfer of control of tool Investment property is derecognised when either it has been disposed of or permanently withdrawn from use or no future economic benefits are expected from its disposal. Any gains or losses on the retirement or disposal of investment prop- erty are recognised in the income statement in the year of retirement or disposal. to the customer. Additionally, the development of the tool is not integrated with the production of parts to produce a com- bined output and those two are not interrelated as tool can be sold without affecting the sale of car parts. The contract for the sale of tools and the contract for the sale of auto parts are separate contracts, which should not be combined because there are two different performance obligations, which can also be seen from the fact that the prices for the tools are not linked to the contract for the sale of auto parts. In addition, although in production of parts the Group may continue to use tools that it sold to customers, the Group has concluded that its arrangements do not contain a lease be- cause customers control the use of the asset. Measurement of fair values Certain Group’s accounting policies and disclosures require the measurement of fair values for non-financial assets. The Group has an established control framework with respect to fair value measurement which assumes the overall respon- sibility of the Management Board and finance department in relation to the monitoring of all significant fair value measure- ments and consultation with external experts. Fair values are measured using information collected from third parties in which case the Board and the finance depart- ment assess whether the evidence collected from third par- ties support the conclusion that such valuations meet the requirements of IFRSs, including the level in the fair value hi- erarchy where such valuations should be classified. 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY 2.18 FINANCIAL INSTRUMENTS (CONTINUED) www.adplastik.hr 214 Fair values are categorised into different level in a fair value hierarchy based on the inputs used in the valuation tech- niques as follows: ■ Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. ■ Level 2 - inputs other than quoted prices included in level 1, that are observable for the asset or liability either di- rectly (i.e. as prices) or indirectly (i.e. derived from pric- es). ■ Level 3 - input variables for assets or liabilities that are not based on observable market data (unobservable in- puts). The fair value of financial instruments traded in active mar- kets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agen- cy, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter deriva- tives) is determined by using valuation techniques. These valuation techniques maximise the use of observable mar- ket data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more significant inputs are not based on observable market data, the fair value estimate is included in level 3. Going concern assumption Group reported a net profit for the year ended 31 December 2024 of EUR 2,132 thousand (2023: loss of EUR 1,273 thou- sand). As at 31 December 2024, the Group’s current liabili- ties exceeded current assets by EUR 4,376 thousand (31 De- cember 2023: current assets exceeded current liabilities by EUR 7,848 thousand). According to Note 34, it is evident that EUR 17,851 thousand of long-term loans mature in 2025 and accordingly, the Group has already initiated discussions with banks in 2024 with the aim of rescheduling the maturi- ties of short-term loan liabilities. In February 2025, an agreement was successfully conclud- ed and implemented with the Group’s leading creditors to reschedule the maturity of short-term loan liabilities in the total amount of EUR 9,390 thousand, which mature in a pe- riod of over one year. The remaining amount of short-term liabilities under long- term loans will be repaid in 2025 in accordance with the re- payment plans, while short-term loans (revolving lines and overdrafts) in the amount of EUR 8,418 thousand will, in ac- cordance with established practice, be prolonged for an ad- ditional year. The Group’s going concern assumption is based on the Man- agement’s assessment that the future cash flows generated by the Group are sufficient to meet the Group’s obligations. The Group’s Management has included a range of possible outcomes in its estimates and believes that the use of rea- sonable estimates does not compromise the going concern principle. Given the agreement reached with the Group’s main creditors, over EUR 370 million in value of new business con- tracted in the past three years, the expected growth in profit- ability and insignificant investments in tangible assets in the coming periods, the Management Board of the Group believes that these consolidated financial statements, assuming a go- ing concern, have been properly prepared. Business risk in Russia The Group has control over the cash flows of its Russian sub- sidiaries. There is currently a limit on the collection of credit receivables of RUB 10,000 thousand per month per subsid- iary. There is no limit on the collection amount for other re- ceivables for goods, services and loan interests. ZAO AD Plas- tik Kaluga is operating in a “cold mode”, taking into account the withdrawal of all European customers from the Russian market with whom the Company did business before the start of the Russian-Ukrainian crisis. AO AD Plastik from Togliatti continues to operate with its main customer AutoVaz on the production of several models for Lada vehicles. 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED) www.adplastik.hr 215 IFRS 8 requires operating segments to be identified based on internal reports about components of the Group that are reg- ularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their per- formance. Year ended 31 December 2024 4. SEGMENT INFORMATION EU, UK and Serbia Russia Total External income 130,928 21,515 152,443 Intra segment income 4,022 - 4,022 Total income 134,950 21,515 156,465 EBITDA 8,376 5,037 13,413 Profit of the year 402 1,731 2,132 EU, UK and Serbia Russia Intra-seg- ment effect Total Total assets 178,379 25,044 (22,544) 180,879 Capital and reserves 104,645 3,034 (8,771) 98,908 Liabilities 73,734 22,010 (13,773) 81,971 Total equity and liabil- ities 178,379 25,044 (22,544) 180,879 Year ended 31 December 2023 EU, UK and Serbia Russia Total External income 114,173 15,135 129,308 Intra segment income 1,037 - 1,037 Total income 115,210 15,135 130,345 EBITDA 4,730 2,480 7,210 Profit/(loss) of the year 99 (1,372) (1,273) EU, UK and Serbia Russia Intra-seg- ment effect Total Total assets 185,106 26,291 (22,261) 189,136 Capital and reserves 105,192 2,147 (8,875) 98,464 Liabilities 79,914 24,144 (13,386) 90,672 Total equity and liabil- ities 185,106 26,291 (22,261) 189,136 www.adplastik.hr 216 The largest sales income from companies in the same group, which make more than 15% of sales income in 2024, amount- ed to EUR 37,181 thousand (2023: EUR 28,630 thousand), while the carrying amount of receivables from this group amounted to EUR 6,670 thousand at 31.12.2024 (31.12.2023: EUR 5,251 thousand). The second largest sales income from companies in the same group, which make more than 15% of sales income in 2024 amounted to EUR 28,625 thousand (2023: EUR 16,074 thousand), while the carrying amount of receivables from this group amounted to EUR 375 thousand at 31.12.2024 (31.12.2023: EUR 2,860 thousand). EBITDA represents profit before income taxes, finance income/costs, depreciation and amortization. Sales revenue based on geographical location of the customer: Sales segmentation by type of the product: 2024 2023 Slovenia 29,560 20,845 Romania 26,391 18,723 Russia 20,194 14,271 Hungary 16,652 15,875 France 10,843 18,243 Poland 9,912 5,645 Slovakia 7,032 2,425 Italy 5,276 7,193 United Kingdom 4,952 5,502 Serbia 4,755 61 Spain 4,408 4,845 Germany 3,977 6,213 Czech Republic 1,228 1,118 Croatia 868 1,358 Other 1,919 1,515 147,967 123,832 2024 2023 Car parts sales 115,701 112,760 Revenue from tools 23,319 4,952 Merchandise 6,061 4,886 Royalty revenue 1,560 234 Engineering services revenue 1,056 1,000 Product development services 270 - 147,967 123,832 4. SEGMENT INFORMATION (CONTINUED) www.adplastik.hr 217 6. COST OF RAW MATERIAL AND SUPPLIES 5. OTHER INCOME 2024 2023 Income from compensation for can- celed projects 1,590 - Gain from sale of property, plant and equipment and intangible assets 1,273 2,818 Income from consumption of own products and services 398 78 Rental income and income from the sale of services to tenants 371 581 Income from sales of waste and secondary raw material 191 372 Income from damages and insur- ance 55 78 Income from validation, quality con- trol and laboratory testing 11 72 Other operating income 587 1,477 4,476 5,476 2024 2023 Direct materials 57,995 55,513 Electricity 3,818 4,748 Other raw material and supplies 2,877 3,758 Inventory shortage costs and value adjustments of inventory 182 2,658 64,872 66,677 7. COST OF GOODS SOLD 2024 2023 Cost of tools sold 19,179 4,142 Cost of trade goods 5,049 3,081 24,229 7,223 8. SERVICE COST 2024 2023 Transport 3,969 4,755 Intellectual services 1,723 1,856 Maintenance costs 1,604 1,631 Software licenses 1,091 1,038 Security and fire services 653 538 Logistic services at distribution warehouses 548 477 Communal fee 497 424 Rental costs 412 359 Marketing 160 157 Telephone, cell phone, internet costs 128 122 Water 116 120 Forwarding and shipping costs 22 26 Licence fees 16 36 Other service costs 787 583 11,726 12,122 During 2024, the Group’s auditors provided the Group with ser- vices related to the costs of the statutory audit of the Com- pany’s consolidated and unconsolidated statements and oth- er verification services related to sustainability reporting and reporting on the remuneration of the Management Board and the Supervisory Board in the total amount of EUR 220 thou- sand (2023: EUR 145 thousand), as well as permitted non-audit services related to financial analysis in the amount of EUR 28 thousand (2023: EUR 51 thousand). Gain from sale of property, plant and equipment and intangible assets in 2024, include gain from sales of intangible assets in amount of EUR 978 thousand and tangible assets in amount of EUR 295 thousand (2023: sales of intangible assets in amount of EUR 1,957 thousand and tangible assets in amount of EUR 861 thousand). www.adplastik.hr 218 9. STAFF COSTS 2024 2023 Net wages and salaries 19,570 18,201 Taxes and contributions 11,504 10,884 Other staff costs 3,564 2,895 34,638 31,980 Other staff costs comprise jubilee awards, bonuses, termination benefits, commuting costs, cost of student service and other business-related costs. The Group included reversal of provision for unused vacation in amount of EUR 24 thousand. Also, within “Other staff cost” provision for termination benefits in amount of EUR 125 thousand is shown. In the previous period, reversal of provision for jubilee awards in amount of EUR 22 thousand was shown as a cost reduction within “Other staff cost”. Also, within “Other staff costs” provision for unused vacation days in amount of EUR 176 thousand and provision for ter- mination benefits in amount of EUR 21 thousand were shown. 10. DEPRECIATION AND AMORTISATION 2024 2023 Depreciation of property, plant, and equipment (Note 19) 7,752 7,361 Amortization of intangible assets (Note 18) 1,858 1,726 Depreciation of right of use asset (Note 20) 1,162 1,153 Depreciation of investment property (Note 21) 39 33 10,811 10,273 11. OTHER OPERATING EXPENSES 2024 2023 Business trips 575 451 Insurance premiums 509 439 Withholding tax and property tax expense 505 635 Membership fees, contributions, mu- nicipal utility fees 364 345 Impairment and write off of capital- ised development cost 277 43 Cost of own consumption and goods provided free of charge 251 372 Entertainment/representation costs 249 177 Bank fees and commissions 236 118 Gifts, donations and sponsorships 191 214 Customer complaints 181 172 Non-current tangible assets write off 155 145 Professional training costs 103 104 Safety at work and health services 80 81 Supervisory Board fees 52 89 Other expenses 232 382 3,960 3,767 12. PROVISIONS FOR RISKS AND CHARGES 2024 2023 Provision for legal cases, net (Note 28) 1 (4) Provision for warranties, net (Note 28) - (132) 1 (136) www.adplastik.hr 219 13. FINANCE INCOME 14. FINANCE COSTS 15. INCOME TAX 2024 2023 Interest income 271 199 271 199 2024 2023 Interest expense 1,536 859 Foreign exchange losses, net 1,323 1,451 Interest expense on lease liabilities 59 39 2,917 2,349 2024 2023 Current tax (1,070) (591) Deferred tax 156 172 (914) (419) Income tax comprises the following: 2024 2023 Deffered tax assets Deferred tax liabilities Deffered tax assets Deferred tax liabilities Balance at 1 January 3,036 856 2,321 377 Increase 560 94 1,368 497 Usage 16 - (59) - Reversal (312) (10) (594) (18) Balance at 31 December 3,300 940 3,036 856 Deferred tax is presented in the statement of financial position as follows: 2024 2023 Profit/loss before tax 3,046 (853) Tax using the Company’s domestic tax rate (18%) 548 (153) Effect of tax rates in foreign jurisdictions 121 120 Tax effect of: Share of profit of equity-accounted investees reported (556) (785) Tax exempt revenue 519 967 Non-deductible expenses (60) (400) Current-year losses for which no deferred tax asset is recognised 394 76 Changes in estimates from previous years (52) 594 Profit tax expense 914 419 Effective tax rate 30.01% (49.12%) Reconciliation between the accounting and tax results is shown as follows: www.adplastik.hr 220 2024 Opening balance Charged to statement of compr. income Charged to other compr. income Closing balance Temporary differences: Provisions for jubilee awards and termination benefits 86 16 - 102 Impairment of inventory 66 34 - 100 Impairment/reversal receivables/loans 66 55 - 121 Deferred tax assets from carried-over tax losses 2,070 144 (6) 2,208 Impairment of Investment property 329 - - 329 Deferred tax liabilities from allocation of purchase price on fair value of Tisza Automotive Kft. (29) 10 - (19) Differences between tax depreciation rates and accounting de- preciation rates (414) (111) 30 (495) Lease liabilities 419 25 (3) 441 Right of use assets (413) (17) 3 (427) Balance at 31 December 2,180 156 24 2,360 Deferred tax assets arise from the following: 2023 Opening balance Charged to state- ment of compr. income Charged to other compr. income Closing balance Temporary differences: Provisions for jubilee awards and termination benefits 86 - - 86 Impairment of inventory - 66 - 66 Impairment/reversal receivables/loans - 66 - 66 Deferred tax assets from carried-over tax losses 1,848 217 6 2,070 Impairment of Investment property 387 (59) - 329 Deferred tax liabilities from allocation of purchase price on fair value of Tisza Automotive Kft. (47) 18 - (29) Differences between tax depreciation rates and account- ing depreciation rates (330) (142) 58 (414) Lease liabilities - 419 - 419 Right of use assets - (413) - (413) Balance at 31 December 1,944 172 64 2,180 15. INCOME TAX (CONTINUED) www.adplastik.hr 221 15. INCOME TAX (CONTINUED) In the future period from 2025 to 2029, the Group plans to generate taxable profit for which the aforementioned recognized deferred tax assets from tax losses will be utilized, except for the amount of unrec- ognized deferred tax of EUR 2,520 thousand that arose in subsidiaries in Serbia and Russia, given that it is unlikely that they will be utilized at the reporting date. The tax losses available for carry-forward to the following tax periods are as follows: 2024 2023 Tax losses from 2020 1,744 1,805 Tax losses from 2021 230 241 Tax losses from 2022 15,184 15,472 Tax losses from 2023 4,813 4,905 Tax losses from 2024 5,166 - 27,137 22,423 Reserves from accruals of foreign exchange differences – transactions with subsidiaries Exchange differences from translation a foreign operations – transactions with subsidiaries 2024 2023 2024 2023 Balance at beginning of the year (3,795) (1,103) (6,627) (5,159) Exchange differences from translation of foreign operations - - (1,099) (1,469) Accruals of foreign exchange differenc- es from the current year (757) (3,429) - - Income tax 136 686 - - Exchange differences from translation of foreign operations, net (621) (2,743) (1,099) (1,469) Realization of exchange differences 355 51 - 1 Balance at end of year (4,061) (3,795) (7,726) (6,627) 16. EXCHANGE DIFFERENCES FROM TRANSLATION OF FOREIGN OPERATIONS AND RESERVES FROM ACCRUALS OF FOREIGN EXCHANGE DIFFERENCES – TRANSACTIONS WITH SUBSIDIARIES www.adplastik.hr 222 Basic earnings per share are determined by dividing the Group’s net profit by the weighted average number of ordinary shares in issue during the year, excluding the average num- ber of ordinary shares redeemed and held by the Group as treasury shares. The basic earnings per share equal the dilut- ed earnings per share, as there are currently no share options that would potentially increase the number of issued shares. Projects comprise investments in the development of new products that are expected to generate economic benefits in future periods. Consequently, the costs are amortised over the period in which the related economic benefits flow into the Group. Intangible assets under development mostly consists of capitalised development cost of new products. In 2024, the cost of net salaries and wages of EUR 540 thousand, the cost of taxes and contributions from sal- aries of EUR 210 thousand and the cost of contributions to salaries of EUR 111 thousand were capitalized in in- tagible assets. In the previous 2023, the capitalized cost of net salaries and wages amounted to EUR 366 thou- sand, the cost of taxes and contributions from salaries amounted to EUR 151 thousand, and the cost of contri- butions to salaries amounted to EUR 79 thousand. In 2024, capitalized interest expense in the amount of EUR 20 thousand (2023: EUR 19 thousand) was recog- nized on intangible assets . 17. EARNINGS PER SHARE 18. INTANGIBLE ASSETS 2024 2023 Profit/(loss) of the year 2,132 (1,273) Weighted average number of shares 4,161,277 4,159,022 Basic and diluted earnings/(loss) per share (in euros and cents) 0.51 (0.31) 2024 2023 Issued ordinary shares on 1 January 4,199,584 4,199,584 Effect of treasury shares held (35,008) (38,428) Effect of treasury shares disposed of (3,299) (2,134) Weighted-average number of ordinary shares on 31 December 4,161,277 4,159,022 www.adplastik.hr 223 18. INTANGIBLE ASSETS (CONTINUED) Licences and Soft- ware Projects Other in- tangible assets Customer contracts Intangible assets un- der devel- opment Prepay- ments for intangible assets Total Cost Balance at 31 December 2022 2,310 19,011 833 1,357 3,393 - 26,904 Additions - - - - 3,423 - 3,423 Assets put into use 8 1,060 3 - (1,072) - - Disposals (1) (1,113) - - - - (1,114) Write off and retirements (64) (383) - - - - (447) Effect of exchange differences 5 (350) (2) - - - (347) Balance at 31 December 2023 2,257 18,226 835 1,357 5,744 - 28,419 Additions - - - - 3,013 - 3,013 Assets put into use 27 5,606 - - (5,633) - - Disposals - (891) - - - - (891) Write off and retirements - (1,065) - - - - (1,065) Effect of exchange differences (18) (114) (4) - - - (136) Balance at 31 December 2024 2,265 21,763 831 1,357 3,124 - 29,340 Accumulated amortisation Balance at 31 December 2022 1,976 14,727 534 1,040 - - 18,277 Charge for the year (Note 10) 101 1,271 151 203 - - 1,726 Disposals - (545) - - - - (545) Write off and retirements (64) (338) - - - - (402) Effect of exchange differences 1 (208) (2) - - - (209) Balance at 31 December 2023 2,014 14,907 683 1,243 - - 18,847 Charge for the year (Note 10) 83 1,599 62 114 - - 1,858 Disposals - - - - - - - Write off and retirements - (788) - - - - (788) Effect of exchange differences (16) (100) (1) - - - (117) Balance at 31 December 2024 2,081 15,617 744 1,357 - - 19,800 Net book value Balance at 31 December 2023 243 3,319 152 114 5,744 - 9,572 Balance at 31 December 2024 184 6,145 87 - 3,124 - 9,540 www.adplastik.hr 224 Land Buildings Plant and equipment Other tangi- ble assets Assets un- der develop- ment Prepay- ments for tangible assets Total Cost Balance at 31 December 2022 18,376 51,788 113,362 399 5,825 343 190,093 Additions - - - - 6,222 (89) 6,133 Assets put into use 5 1,979 2,930 16 (4,930) - - Disposals - (48) (3,622) (5) - - (3,675) Write off and retirements - (220) (428) (1) - - (649) Effect of exchange differences (106) (2,498) (4,157) (25) (747) (7) (7,540) Balance at 31 December 2023 18,276 51,000 108,085 384 6,370 247 184,362 Additions - - - - 10,108 (214) 9,894 Assets put into use - 760 10,011 10 (10,768) (14) - Disposals - (21) (948) (1) - - (970) Write off and retirements - (213) (1,007) (33) - - (1,253) Effect of exchange differences (33) (841) (1,441) (20) (199) (1) (2,535) Balance at 31 December 2024 18,243 50,685 114,701 339 5,511 19 189,498 Accumulated depreciation Balance at 31 December 2022 - 16,017 77,250 271 - - 93,538 Charge for the year (Note 10) - 1,075 6,248 38 - - 7,361 Disposals - (32) (3,646) (4) - - (3,683) Write off and retirements - (82) (420) (1) - - (503) Effect of exchange differences - (936) (2,916) (5) - - (3,857) Balance at 31 December 2023 - 16,041 76,516 299 - - 92,855 Charge for the year (Note 10) - 1,115 6,611 26 - - 7,752 Disposals - (15) (799) (1) - - (815) Write off and retirements - (83) (984) (33) - - (1,100) Effect of exchange differences - (273) (1,084) (20) - - (1,377) Balance at 31 December 2024 - 16,785 80,260 270 - - 97,314 Net book value At 31 December 2023 18,276 34,959 31,569 86 6,370 247 91,507 At 31 December 2024 18,243 33,900 34,440 69 5,511 19 92,183 19. PROPERTY, PLANT AND EQUIPMENT From assets mentioned in Note 19 Property, plant and equip- ment and in Note 21 Investment property, pledged assets are lands with the book value on the date of 31.12.2024 of (all in EUR thousand) 15,272 (31.12.2023 13,390), buildings 20,261 (31.12.2023 19,648). The listed items as of December 31, 2024, include investments in land with a net book value of EUR 1,479 thousand, and investments in buildings with a net book value of EUR 1,738 thousand. www.adplastik.hr 225 20. RIGHT OF USE ASSET Land Buildings Plant and equipment Total Cost Balance at 31 December 2022 36 3,609 1,860 5,505 Additions 2 - 74 76 Lease modification, net - 1,269 34 1,303 Effect of exchange differences (9) (14) 30 7 Balance at 31 December 2023 29 4,864 1,998 6,891 Additions 1 - 131 132 Lease modification, net - 11 1,035 1,046 Contract termination/expiration (5) (45) - (50) Effect of exchange differences (1) (2) (53) (56) Balance at 31 December 2024 24 4,828 3,111 7,963 Accumulated depreciation Balance at 31 December 2022 7 2,147 1,110 3,264 Charge for the year (Note 10) 1 699 453 1,153 Lease modification - - (10) (10) Effect of exchange differences (2) (14) 17 1 Balance at 31 December 2023 6 2,832 1,570 4,408 Charge for the year (Note 10) 1 717 444 1,162 Contract termination/expiration (5) (45) - (50) Effect of exchange differences - (2) (33) (35) Balance at 31 December 2024 2 3,502 1,981 5,485 Net book value At 31 December 2023 23 2,032 428 2,483 At 31 December 2024 22 1,326 1,130 2,47 8 Amounts recognised in profit and loss 2024 2023 Depreciation expense on right of use assets 1,162 1,153 Expense relating to leases of low value 314 184 Expense relating to short-term leases 64 67 Interest expense on lease liabilities 59 39 Expenses relating to variable lease payments not in- cluded in the measurement of lease liability 34 109 1,633 1,552 In accordance with IFRS 16, Group has classified leases for land, buildings and plant and equipment as “Right-of-use as- set”. Within the category “Buildings”, apart- ments and the leases of office buildings and warehouses used by the Group in busi- ness are located in. The “Plant and equip- ment” category includes concluded ma- chines, car and forklift rental agreements. www.adplastik.hr 226 Income from the rental of the building in 2024 amounts to EUR 110 thousand (2023: EUR 266 thousand), and the depre- ciation charge for the year 2024 amounts to EUR 39 thousand (2023: EUR 33 thou- sand). At December 31 2024 the carrying amount of investment property approximates fair value, that has been internally determined by the company based on the income cap- italisation method which assumes sus- tainable annual lease income which in- vestment property generates or is able to generate during its ordinary course of business. 21. INVESTMENT PROPERTY Land Buildings Total Cost Balance at 31 December 2022 1,479 2,210 3,689 Value increase of investment property - 408 408 Balance at 31 December 2023 1,479 2,618 4,097 Balance at 31 December 2024 1,479 2,618 4,097 Accumulated depreciation Balance at 31 December 2022 - 728 728 Charge for the year (Note 10) - 33 33 Value increase of investment property - 79 79 Balance at 31 December 2023 - 840 840 Charge for the year (Note 10) - 39 39 Balance at 31 December 2024 - 879 879 Net book value Balance at 31 December 2023 1,479 1,778 3,257 Balance at 31 December 2024 1,479 1,739 3,218 22. INVESTMENTS IN ASSOCIATES Name of associate Principal activity Country of incorpo- ration and business Ownership interest in % Amount of equity in- vestment, EUR'000 2024 2023 2024 2023 EURO Auto Plastic Systems Manufacture of other vehicle spare parts and accessories Mioveni, Romania 50.00% 50.00% 10,813 11,872 10,813 11,872 Name of associate Amount of equity investment Share in the result for the year 2024 Dividend paid Effect of exchange differences Amount of equity investment 31.12.2023 31.12.2024 EURO Auto Plastic Systems 11,872 3,091 (3,470) (680) 10,813 Total 11,872 3,091 (3,470) (680) 10,813 www.adplastik.hr 227 22. INVESTMENTS IN ASSOCIATES (CONTINUED) Euro Auto Plastic Systems s.r.l. is considered to be associ- ate since the management of its operations is under the con- trol of Faurecia Automotive Holdings s.a.s. Set out below is a summary of financial information about the associates : 31.12.2024 31.12.2023 Current assets 62,432 38,767 Fixed assets 19,650 19,478 Total assets 82,082 58,245 Short-term liabilities 60,624 35,959 Long-term liabilities and pro- visions 1,194 1,271 Total Liabilities 61,818 37,230 Net assets 20,264 21,015 23. INVENTORIES 31.12.2024 31.12.2023 Raw material and supplies on stock 11,380 9,990 Tools 5,609 11,700 Finished products 3,440 3,203 Work in progress 1,779 1,836 Prepayments for inventories 909 5,074 Merchandise on stock 347 485 23,464 32,288 The amount of inventories recognised as an expense during the 2024 was EUR 118,863 thousand (in the 2023 the expense was EUR 99,341 thousand). The amount includes material costs, personnel costs, transportation costs, depreciation and other indirect costs of producing inventory. Total write-down of damaged and obsolete inventories in 2024 was EUR 182 thousand (in 2023 it was EUR 2,658 thousand). 24. TRADE RECEIVABLES 31.12.2024 31.12.2023 Trade receivables (un- related companies) 21,278 21,396 Receivables for divi- dends (associates) 3,470 619 Trade receivables (as- sociates) 1,274 505 Expected credit loss (977) (986) 25,045 21,534 The average debtors’ days were 59 days in 2024 (2023: 61 days). The movements expected credit losses are presented as follows: 2024 2023 Balance at beginning of the year 986 846 Movements based on expected cred- it gains/losses 29 71 Collected during the year (5) (11) Trade receivables impairment - 178 Written off during the year (13) - Exchange differences (20) (98) Total expected credit loss 977 986 www.adplastik.hr 228 Ageing analysis of receivables is shown as follows: 31.12.2024 31.12.2023 0-90 days past due 1,594 2,539 91-180 days past due 663 168 181-365 days past due 156 272 Over 365 days past due 97 20 Not due 22,535 18,535 25,045 21,534 25. OTHER RECEIVABLES 31.12.2024 31.12.2023 Receivables from the State and State institu- tions 2,720 4,811 Prepayments made 373 1,165 Due from employees 26 110 Other receivables 6 6 3,125 6,092 26. CASH AND CASH EQUIVALENTS 31.12.2024 31.12.2023 Current account balance 3,888 1,668 Deposits 368 2,369 Cash in hand 6 5 Cash and cash equivalents in state- ment of financial position 4,262 4,042 Bank overdrafts (1,218) (793) Cash and cash equivalents in state- ment of cash flows 3,044 3,249 As at 31 December 2024 the amount of EUR 368 thousand (31 December 2023 EUR 2,369 thousand) includes short term deposits which bear interest rate ranging from 21.00% to 23.19%. 27. SHARE CAPITAL Subscribed capital amounts to EUR 54,595 thousand and con- sists of 4,199,584 shares, with a nominal value of EUR 13 per share (2023: EUR 54,595 thousand; 4,199,584 shares, with a nominal value of EUR 13 each). All shares are ordinary shares with all associated rights, except for treasury shares. These rights include the right to vote at the General Assembly of the Company as well as the right to receive dividends. Capital reserves are the differences between the nominal and sale value of shares. Statutory and general reserves consist of legal and statutory reserves and reserves for unwritten development costs. Reserves were made by transferring from retained earnings to the position of legal and general reserves in the Group’s capital in accordance with the local legislation. The transfer of capi- talized development costs to intangible assets is made on the basis of net book value. The treasury share item refers to 35,008 treasury shares as at 31.12.2024 while on 31.12.2023 treasury shares amounted 38,428. Retained earnings consists of retained earnings, profit for the year and all the transfers from retained earnings (dividend pay- ments, transfer to reserves). On the basis of mother company long-term investment in the subsidiary companies, in the group statement, have been formed reserves from the accrual of exchange rate differences. 24. TRADE RECEIVABLES (CONTINUED) www.adplastik.hr 229 Short-term Long-term 31.12.2024 31.12.2023 31.12.2024 31.12.2023 Vacation accrual 737 772 - - Termination benefits 170 36 307 316 Legal cases 127 126 - - Jubilee awards (long-service benefits) 27 41 159 144 Employee bonuses 14 16 - - 1,075 991 466 460 28. LONG-TERM AND SHORT-TERM PROVISIONS Jubilee Awards Retirement/ termination benefits Legal Cases Vacation Ac- crual Employee Bonuses Risks within the warranty period Total Balance at 1 January 2024 185 352 126 772 16 - 1,451 Increase/(decrease) in provi- sions,net - 125 1 (35) (1) - 90 Balance at 31 December 2024 185 477 127 737 15 - 1,541 Balance at 1 January 2023 206 332 367 636 20 132 1,693 Increase/(decrease) in provi- sions,net (21) 20 (241) 136 (4) (132) (242) Balance at 31 December 2023 185 352 126 772 16 - 1,451 Movement in provisions was as follows: The part of the provision included in other staff costs is shown in Note 9. All companies within the Group use a discount rate (in range 2.32% - 5.77%), fluctuation rate (in range 11% - 31.38%) and mortal- ity data that are in line with the company’s country of residence when calculating provisions (2023: discount rate in range 1.85% - 6.50%, fluctuation rate in range 11% - 15.50%). www.adplastik.hr 230 29. LONG-TERM BORROWINGS By the 31.12.2024, Group has received bank certificate report which claims that it renounces from sustaining DSCR ratio and net debt and EBITDA ratio clause, relat- ed to long term credit. Net carrying amount of credit is EUR 10,959 thousand. In the event of a breach of finan- cial covenants, the bank has the right to cancel the loan agreement and declare it prematurely due. Long-term borrowings are used to finance capital invest- ments and development projects. Instruments of collat- eral provided for the for long-term loans include mort- gage on real estate and equipment (Note 19), HBOR portfolio insurance and payment instruments. Most ex- isting long-term loans are paid monthly. In 2024, the weighted average interest rate on the long- term loans was 2.60% (2023: 1.45 %). 31.12.2024 31.12.2023 Long-term borrowings 35,701 40,797 Long-term commodity loans provided by sup- pliers - 199 35,701 40,996 Current portion of long-term borrowings (Note 34) (17,851) (10,430) Total long-term borrowings 17,850 30,566 Deferred revenue arose as a result of borrowing from a fi- nancial institution at an interest rate lower than the mar- ket rate. 30. DEFERRED REVENUE 31.12.2024 31.12.2023 Deferred revenue 1 37 Total deferred revenue 1 37 31. LEASE LIABILITIES 32. ADVANCES RECEIVED Advances received from foreign customers represent cash advanced ordered tools. 31.12.2024 31.12.2023 Customers outside Croatia 5,937 10,338 Customers in Croatia 1 1 5,938 10,339 2024 2023 Balance at 1 January 2,517 2,292 Additions 132 74 Lease modifications, net 1,045 1,293 Interest expense on lease liabilities 59 39 Principal paid (1,144) (1,150) Interest paid (59) (39) Effect of exchange dif- ferences (24) 8 2,526 2,517 Long-term liabilities 1,380 1,581 Short-term liabilities 1,146 936 31.12.2024 31.12.2023 Trade payables outside Croatia 15,807 13,391 Trade payables in Croatia 5,878 4,966 Accrued expenses 786 2,620 22,471 20,977 33. TRADE PAYABLES Average payment period for trade payables during 2024 equaled to 69 days (2023: 68 days). www.adplastik.hr 231 2024 2023 Balance on 1 January 49,925 41,849 New loans 21,398 35,308 Change in bank overdraft 440 793 Invoiced interest 1,473 627 Exchange differences (10) (1) Interest paid (1,500) (537) Repayments of received loans (27,221) (28,175) Other 101 61 Balance on 31 December 44,606 49,925 34. SHORT-TERM BORROWINGS 31.12.2024 31.12.2023 Current portion of long-term borrowings (Note 29) 17,851 10,430 Short-term loans – principle payable 8,418 8,591 Short-term commodity loans provided by suppliers 361 182 Short term borrowings – in- terest payable 126 156 26,756 19,359 The short-term borrowings were used to finance develop- ment projects and for working capital purposes. Instru- ments of collateral provided for the short-term borrowings are payment instruments. The short-term borrowings represent loans provided by the commercial banks, with a weighted average interest rate of 4.09% (2023: 2.69 %). Movements in payables for borrowings (long-term and short-term) during the year: 35. OTHER CURRENT LIABILITIES Obligations for state aid shown within deferred revenue arose as a result of borrowing from a financial institution at an interest rate lower than the market rate. 31.12.2024 31.12.2023 Due to the State and State institutions 2,111 2,771 Amounts due to employees 1,775 1,671 Deferred revenue 36 101 Other current liabilities 27 27 3,949 4,570 36. GOODWILL 31.12.2024 31.12.2023 Goodwill resulting from ac- quisition of Tisza Automo- tive Kft. 2,391 2,391 2,391 2,391 Recognized goodwill in amount of 2,391 EUR thousand re- lates to the difference between fair value of the net assets of AD Plastik Tisza Kft. and the value paid for the purchase of AD Plastik Tisza Kft. by AD Plastik d.d. Solin. In 2023 and 2024 the Group tested impairment of good- will resulted from acquisition of Tisza Automotive Kft. It is estimated that the company AD Plastik Tisza constitutes one cash generating unit. In 2024, the recoverable amount of the cash-generating unit was determined based on the application of the value in use method. The estimate is made based on a projection of future cash flows based on three-year plans, Cash flows beyond the three- year period is extrapolated using the estimated growth rates which is determined for cash generating unit.. The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources. www.adplastik.hr 232 37. RELATED PARTY TRANSACTIONS Transactions with related companies were as follows: Receivables and payables for goods and services Receivables Payables 31.12.2024 31.12.2023 31.12.2024 31.12.2023 EURO APS, Romania 1,277 507 13 5 1,277 507 13 5 Operating and financing income and expenses Income Purchases 2024 2023 2024 2023 EURO APS, Romania 2,616 1,518 13 5 Sankt-Peterburgskaya investicionnaya kompaniya - - 27 30 2,616 1,518 40 35 Sankt-Peterburgskaya investicionnaya kompaniya is member of Group in which is also company AO Holding Autokomponenti which holds 30% of shares in Company. The total remuneration provided to the members of the Supervisory Board of AD Plastik d.d. and subsidiaries, The President and members of Man- agement Board, Board Assistants and General directors of subsidiaries in 2024 amounts to EUR 1,628 thousand (in 2023 EUR 1,749 thousand). Receivables and payables for loans and interest Receivables Payables 31.12.2024 31.12.2023 31.12.2024 31.12.2023 Sankt-Peterburgskaya investicionnaya kompaniya - - 1,906 2,508 - - 1,906 2,508 Receivables Receivables for dividends 31.12.2024 31.12.2023 EURO APS, Romania 3,470 619 3,470 619 36. GOODWILL (CONTINUED) The cash flow projections included specific es- timates for three years, considering WACC rate of 9.36 percent (in 2023 9.77 percent) and a terminal growth rate thereafter. The estimated growth in operating cash flows for the three- year period was 12.24 percent.The terminal growth rate was determined in accordance with market assumptions and was estimated by the Group at 3%. Budgeted EBITDA was estimated considering past experience, adjusted as fol- lows. ■ new projects with customers either contracted with, announced by or sub- ject to the negotiations with customers. By performing the impairment test of goodwill, the Group has concluded that no impairment should be recognised on goodwill resulted from acquisition of Tisza Automotive Kft in 2024 and 2023.. www.adplastik.hr 233 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Commodity loans on 31 December 2024 amounted EUR 361 thousand (31 December 2023: EUR 381 thou- sand) (Note 29 and Note 34). Above referred amounts are included in the Group’s net debt. Equity consists of share capital, reserves, reserves for own shares, own shares, retained earnings and profit/ loss for the year. The Group strives to have a debt-to-equity ratio of less than 50%. 38.1 GEARING RATIO The Group’s gearing ratio, expressed as the ratio of net debt to equity, is as follows: 31.12.2024 31.12.2023 Long-term borrowings (Note 29) 17,850 30,566 Short-term borrowings (Note 34) 26,756 19,359 Cash and cash equiva- lents (Note 26) (4,262) (4,042) Net debt 40,344 45,883 Equity 98,908 98,464 Net debt-to-equity ratio 40.79% 46.60% Accrued income and other receivables include accrued in- come, other receivables less receivables from the State and advances given. Trade and other payables include: trade and other paya- bles less payables to the State and grants. Details of concentration of credit risk are included in Note 24 Trade receivables. Detailed information on credit risk management is stated under chapter Risks and opportuni- ties in business of the Integrated annual report which inte- gral part are those financial statements. 38.2 CATEGORIES OF FINANCIAL INSTRUMENTS 31.12.2024 31.12.2023 Financial assets 29,770 26,094 Trade receivables (Note 24) 25,045 21,534 Cash and cash equivalents and deposits (Note 26) 4,262 4,042 Accrued income and other receivables 463 518 Financial liabilities 71,333 75,031 Loans received (Notes 29,34) 44,607 49,925 Trade and other payables 24,200 22,589 Lease liabilities (Note 31) 2,526 2,517 www.adplastik.hr 234 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) 38.3 RISK OF RELYING ON ONE CUSTOMER Historical dependence on the one customer has been reduced through diversification of the customer portfolio. However, the consolidation of manufacturers in the automotive industry limits the possibility of further diversification. Risk is managed by con- tracting with new customers and those with a smaller share of the company’s revenues and by developing long-term relationships with multiple partners to ensure revenue stability. 38.4. MARKET RISK Fluctuations in demand and changes in trends in the automotive industry, such as the transition to electric vehicles and hybrid mod- els, can affect business. The transition to environmentally friendly technologies requires an adjustment of product and service strat- egies. Inflation and rising prices of key raw materials can also fur- ther threaten profitability, and the emergence of low-cost Chinese manufacturers on the European market further increases pressure on margins, but also opens up new opportunities. Group manag- es this risk through a focus on diversifying its product portfolio, monitoring global and regional trends, including the entry of new manufacturers into the EU market, and close cooperation with cus- tomers to adjust prices in line with market changes. 38.5. INTEREST RATE RISK Rising interest rates can increase financing costs, which reduc- es profitability and limits the availability of capital for invest- ments. Although interest rates began to decline in 2024 with the repayment of older loans with lower (fixed) interest rates and newer borrowings at higher interest rates, financing costs have increased. Interest rate risk is managed by negotiating more favorable borrowing terms, including variable interest rates in high-interest conditions and fixed rates in low-interest condi- tions, refinancing existing loan obligations in accordance with market conditions, with the aim of optimizing the cost of financ- ing, and transferring a portion of investments in long-term pro- ject assets to the buyer. Interest-bearing loans are contracted with variable and fixed interest rates. Loans with variable rates expose the Company to cash flow interest rate risk. As of De- cember 31, 2024, loans contracted with variable interest rates amount to EUR 18,843 thousand (2023: EUR 19,625 thousand). Interest rates on bank loans are linked to one- month and three-month EURIBOR. On December 31, 2024, if interest rates on loans with a variable interest rate were 1 percentage point lower/high- er, assuming that other variables remain unchanged, the Company’s net profit would be EUR 201 thousand lower/ higher (2023: EUR 105 thousand ) . 38.6. CREDIT RISK The risk of non-payment by customers can lead to cash flow problems and reduce the Group’s liquidity. AD Plastik Group cooperates with reputable customers who are financially stable companies, which minimizes the collection risk and receivables are realized within the agreed deadlines. Group manages this risk by contracting with customers with a high financial rating and by monitoring the due dates of re- ceivables and acting promptly in case of delays. 38.7 FOREIGN CURRENCY RISK MANAGEMENT The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. The carrying amounts of the Group’s for- eign-currency denominated monetary assets and monetary liabilities at the reporting date are provided in the table be- low. In 2024. the exposure of Parent Company in EUR is ex- cluded, given that the euro is the domestic curreny of Parent Company from January 1,2023. The amounts are converted into euros: www.adplastik.hr 235 38.7 FOREIGN CURRENCY RISK MANAGEMENT (CONTINUED) 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) In EUR 4,644 thousand of EUR assets and EUR 34,637 thousand of EUR liabilities of subsidiaries (in 2023 EUR 4,811 thousand od EUR assets and EUR 34,229 thou- sand of EUR liabilities of Group) is included exposure on EUR intra Group receivables and loans in amount of EUR 1,626 thousand, i.e EUR 27,221 thousand (in 2023 EUR 28,455 thousand). In addition, the reminder of EUR 50,501 thousand of assets and EUR 65,580 thousand of liabilities as at 31 December 2024 (31 December 2023: EUR 49,111 thousand of assets and EUR 69,364 thou- sand of liabilities) relates to exposure in domestic cur- rencies. Foreign currency sensitivity analysis Foreign currency risk note includes exchange rate ex- posure of all monetary positions in all companies of the Group, which generate foreign exchange differences in separate reports of those companies. On 31 December 2024, if RUB were to depreciate/ap- preciate by 1% compared to EUR, assuming all other variables remain unchanged, net profit of the Group for 2024 would be EUR 65 thousand (2023: EUR 53 thou- sand) (lower)/higher, because of (negative)/positive foreign exchange differences generated by conversion of trade receivables, cash and cash equivalents, trade payables and loans received originally denominated in euros. 38.8 LIQUIDITY RISK MANAGEMENT This risk represents the risk of the company not being able to convert assets into liquid assets in a short time, i.e the inability to fulfill its ob- ligations to creditors. Therefore, AD Plastik Group maintains optimal amounts of funds on the account with secured available credit lines. Cash flow management is of key importance for liquidity risk manage- ment. Each company within the Group, based on operational business plans, financial liabilities and investment needs, plans its future cash needs on a monthly, quarterly and annual basis. Based on that data, the parent company’s Finance Department prepares a consolidated cash flow plan of the Group, and makes decisions on timely provision of credit lines for capital investments and project financing, as well as placing surplus funds in deposits or covering the lack of funds from short-term financing sources. In 2024, the parent company issued corporate guarantees to the sub- sidiaries in the following amounts: EUR 7,700 thousand to banks and EUR 1,044 thousand to suppliers (in 2023: EUR 7,700 thousand to banks, EUR 1,377 thousand to suppliers and EUR 3,000 thousand to buyers). The following tables detail the Group’s remaining contractual maturity for its non-derivative financial assets and liabilities. The tables have been drawn up based on the undiscounted cash flows of financial as- sets and liabilities based on the earliest date on which the Group can require payment i.e. can be required to pay. At 31 December Assets Liabilities Net FX position 2024 2023 2024 2023 2024 2023 EUR 4,644 4,811 34,637 34,229 (29,993) (29,418) RON 3,468 618 - - 3,468 618 USD 3 5 - 2 3 3 GBP 2 4 - 6 2 (2) CNY - - - 24 - (24) 8,117 5,438 34,637 34,261 (26,520) (28,823) www.adplastik.hr 236 2024 Weighted av- erage interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total Carrying amount Assets Non-interest bearing - 15,309 10,900 3,150 - 43 29,402 29,402 Interest bearing 16.65% 375 - - - - 375 369 15,684 10,900 3,150 - 43 29,777 29,771 Liabilities Non-interest bearing - 14,117 7,207 985 153 744 23,206 23,206 Interest bearing 2.88% 1,818 8,337 18,470 18,765 - 47,390 45,600 Lease liability 2.13% 113 195 877 1,419 - 2,604 2,526 16,048 15,739 20,332 20,337 744 73,200 71,332 2023 Weighted av- erage interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total Carrying amount Assets Non-interest bearing - 10,973 10,312 2,440 - - 23,725 23,725 Interest bearing 11.31% 2,392 - - - - 2,392 2,369 13,365 10,312 2,440 - - 26,117 26,094 Liabilities Non-interest bearing - 12,081 8,164 2,344 - - 22,589 22,589 Interest bearing 1.67% 1,241 1,910 17,523 31,664 771 53,109 49,925 Lease liability 2.13% 117 174 685 1,627 - 2,603 2,517 13,439 10,248 20,552 33,291 771 78,301 75,031 Total interest bearing liabilities in amount of EUR 45,600 thousand at 31 December 2024 refers to liabilities denominated in EUR (at 31 December 2023 EUR 49,925 thousand refers to liabilities denominated in EUR). 38.8 LIQUIDITY RISK MANAGEMENT (CONTINUED) 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) www.adplastik.hr 237 39. EVENTS AFTER THE REPORTING PERIOD After 31 December 2024, there were no events that would have a significant impact on the financial statements for the year 2024, respectively they are not of such significance to the Group to require disclosure in the notes to the fi- nancial statements. Information on the rescheduling of the Group’s credit obli- gations in 2025 is presented in Note 3. Critical accounting judgments and key sources of estimation uncertainty. The Group’s management has considered the effects of the introduction of US tariffs on European car manufacturers and does not expect them to have any significant effects on business performance. Main reason for it comes from the fact that direct exposure to USA market is insignificant for the Group, while most of the vehicles for which Company sup- plies are predominantly produced for European market. The same situation is with all significant recently won nominations. Based on the Management’s estimate, Group had no material contingent liabili- ties at 31 December 2024 which would require to be disclosed in the notes to the financial statements. Group had no capital expenditure commitments contract- ed at 31 December 2024 which would require to be disclosed in the notes to the financial statements. As at 31 December 2024 and 2023 there were no material legal actions outstanding against the Group with an expected negative outcome other than those reflected in these separate financial statements. 38.9. FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments held to maturity in the ordinary course of business are car- ried at the lower of cost and net amount less repaid portion. Fair value is the price that would be generated from the sales of some item of an asset or paid for trans- ferring some liability in a fair transac- tion between market participants at the measurement date, regardless of wheth- er it would be directly visible or evaluat- ed by applying some other valuation tech- nique. At 31 December 2024, the carrying amounts of cash, receivables, short-term liabilities, accrued expenses, short-term borrowings and other financial instru- ments match their fair values. 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) 40. CONTIGENT LIABILITIES 41. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements were approved by the Management Board of AD Plastik d.d. and authorised for issue on 24 April 2025. Josip Divić Member of the Management Board Mladen Peroš Member of the Management Board Marinko Došen President of the Management Board For AD Plastik d.d., Solin by: 24 April 2025 www.adplastik.hr 238 www.adplastik.hr 239 AD PLASTIK D.D., SOLIN SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 Responsibility of The Management Board for the separate financial statements 242 Independent Auditor´s Report 243 Separate statement of comprehensive income 253 Separate statement of financial position 254 Separate statement of changes in shareholders’ equity 256 Separate statement of cash flows 257 Notes to the separate financial statements 259 www.adplastik.hr 240 www.adplastik.hr 241 Pursuant to the Accounting Act of the Republic of Croatia, the Management Board is responsible for ensuring that separate financial statements are prepared for each financial year in accordance with International Financial Reporting Standards (IFRSs), as adopted in the European union, which give a true and fair view of the financial position and results of operations of AD Plastik d.d. Solin (the “Company”) for that period. After making enquiries, the Management Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board continues to adopt the going concern ba- sis in preparing the separate financial statements. In preparing those separate financial statements, the Management Board is responsible for: ■ selecting suitable accounting policies and then applying them consistently; ■ making reasonable and prudent judgements and estimates; ■ following applicable accounting standards and disclosing and explaining any material departure in the separate financial statements; ■ preparing the separate financial statements under the going concern principle unless it is inappropriate to presume that the Company will continue in business. The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Company and their compliance with the Croatian Accounting Act. The above stated responsibility includes the responsibility for accuracy of the Management Report, which is an integral part of separate financial statements and submission of fi- nancial statements in electronic reporting format (ESEF) prescribed by regulatory technical standards developed by ESMA (European Securities and Markets Authority) and adopted by the European Commission. The Management Board is also responsible for safeguard- ing the assets of the Company, and hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities. MANAGEMENT BOARD RESPONSIBILITY FOR SEPARATE FINANCIAL STATEMENTS Signed on behalf of the Management Board For AD Plastik d.d., Solin: AD Plastik d.d. Matoševa 8, 21210 Solin, Republic of Croatia 24 April 2025 Josip Divić Member of Management Board Mladen Peroš Member of Management Board Marinko Došen President of the Management Board www.adplastik.hr 242 Independent Auditors’ ZĞƉŽƌƚƚŽƚŚĞƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ KƉŝŶŝŽŶ tĞŚĂǀĞĂƵĚŝƚĞĚƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨWůĂƐƚŝŬĚ͘Ě͘(“the Company”), which compƌŝƐĞƚŚĞƐĞƉĂƌĂƚĞ ƐƚĂƚĞŵĞŶƚŽĨĨŝŶĂŶĐŝĂůƉŽƐŝƚŝŽŶŽĨƚŚĞŽŵƉĂŶLJĂƐĂƚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ĂŶĚŝƚƐƐĞƉĂƌĂƚĞƐƚĂƚĞŵĞŶƚƐŽĨ ĐŽŵƉƌĞŚĞŶƐŝǀĞŝŶĐŽŵĞ͕ĐĂƐŚĨůŽǁƐĂŶĚĐŚĂŶŐĞƐŝŶshareholders’ ĞƋƵŝƚLJĨŽƌƚŚĞLJĞĂƌƚŚĞŶĞŶĚĞĚ͕ĂŶĚŶŽƚĞƐ͕ ĐŽŵƉƌŝƐŝŶŐŵĂƚĞƌŝĂůĂĐĐŽƵŶƚŝŶŐƉŽůŝĐŝĞƐĂŶĚŽƚŚĞƌĞdžƉůĂŶĂƚŽƌLJŝŶĨŽƌŵĂƚŝŽŶ(further referred to as “the financial statements”)͘ /ŶŽƵƌŽƉŝŶŝŽŶ͕ƚŚĞĂĐĐŽŵƉĂŶLJŝŶŐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŐŝǀĞĂƚƌƵĞĂŶĚĨĂŝƌǀŝĞǁŽĨƚŚĞƵŶĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂů ƉŽƐŝƚŝŽŶŽĨƚŚĞŽŵƉĂŶLJĂƐĂƚϯϭĞĐĞŵďĞƌϮϬϮϰĂŶĚŽĨƵŶĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƉĞƌĨŽƌŵĂŶĐĞĂŶĚŝƚƐƵŶĐŽŶƐŽůŝĚĂƚĞĚ ĐĂƐŚĨůŽǁƐĨŽƌƚŚĞLJĞĂƌƚŚĞŶĞŶĚĞĚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů&ŝŶĂŶĐŝĂůZĞƉŽƌƚŝŶŐ^ƚĂŶĚĂƌĚƐĂƐĂĚŽƉƚĞĚďLJƚŚĞ European Union (“EU IFRS”). ĂƐŝƐĨŽƌKƉŝŶŝŽŶ tĞĐŽŶĚƵĐƚĞĚŽƵƌĂƵĚŝƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚƐŽŶƵĚŝƚŝŶŐ͘KƵƌƌĞƐƉŽŶƐŝďŝůŝƚŝĞƐƵŶĚĞƌƚŚŽƐĞ ƐƚĂŶĚĂƌĚƐĂƌĞĨƵƌƚŚĞƌĚĞƐĐƌŝďĞĚŝŶƚŚĞAuditors’ Responsibilities for the Audit of the Financial StatementsƐĞĐƚŝŽŶŽĨ ŽƵƌƌĞƉŽƌƚ͘tĞĂƌĞŝŶĚĞƉĞŶĚĞŶƚŽĨƚŚĞŽŵƉĂŶLJŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞĞƚŚŝĐĂůƌĞƋƵŝƌĞŵĞŶƚƐƚŚĂƚĂƌĞƌĞůĞǀĂŶƚƚŽŽƵƌ ĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶƌŽĂƚŝĂĂŶĚǁĞŚĂǀĞĨƵůĨŝůůĞĚŽƵƌŽƚŚĞƌĞƚŚŝĐĂůƌĞƐƉŽŶƐŝďŝůŝƚŝĞƐŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ ƚŚĞƐĞƌĞƋƵŝƌĞŵĞŶƚƐ͘tĞďĞůŝĞǀĞƚŚĂƚƚŚĞĂƵĚŝƚĞǀŝĚĞŶĐĞǁĞŚĂǀĞŽďƚĂŝŶĞĚŝƐƐƵĨĨŝĐŝĞŶƚĂŶĚĂƉƉƌŽƉƌŝĂƚĞƚŽƉƌŽǀŝĚĞĂ ďĂƐŝƐĨŽƌŽƵƌŽƉŝŶŝŽŶ͘ 243 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ <ĞLJĂƵĚŝƚŵĂƚƚĞƌƐĂƌĞƚŚŽƐĞŵĂƚƚĞƌƐƚŚĂƚ͕ŝŶŽƵƌƉƌŽĨĞƐƐŝŽŶĂůũƵĚŐŵĞŶƚ͕ǁĞƌĞŽĨŵŽƐƚƐŝŐŶŝĨŝĐĂŶĐĞŝŶŽƵƌĂƵĚŝƚŽĨƚŚĞ ĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞĐƵƌƌĞŶƚƉĞƌŝŽĚ͘dŚĞƐĞŵĂƚƚĞƌƐǁĞƌĞĂĚĚƌĞƐƐĞĚŝŶƚŚĞĐŽŶƚĞdžƚŽĨŽƵƌĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐĂƐĂǁŚŽůĞ͕ĂŶĚŝŶĨŽƌŵŝŶŐŽƵƌŽƉŝŶŝŽŶƚŚĞƌĞŽŶ͕ĂŶĚǁĞĚŽŶŽƚƉƌŽǀŝĚĞĂƐĞƉĂƌĂƚĞŽƉŝŶŝŽŶŽŶƚŚĞƐĞ ŵĂƚƚĞƌƐ͘ ZsEhZK'E/d/KE ZĞǀĞŶƵĞ ŝŶ ϮϬϮϰ͗ hZϭϭϭ͕ϭϱϮ ƚŚŽƵƐĂŶĚ;ϮϬϮϯ͗hZ ϴϵ͕ϯϴϴƚŚŽƵƐĂŶĚͿ͘Ɛ Ăƚ ϯϭ ĞĐĞŵďĞƌϮϬϮϰ͕ ƚƌĂĚĞƌĞĐĞŝǀĂďůĞƐ͗ hZ Ϯϭ͕ϵϭϲƚŚŽƵƐĂŶĚ͖ĂĐĐƌƵĞĚƌĞǀĞŶƵĞ͗hZϯϮϱƚŚŽƵƐĂŶĚ;ϯϭĞĐĞŵďĞƌϮϬϮϯ͕ƚƌĂĚĞƌĞĐĞŝǀĂďůĞƐ͗hZϭϳ͕ϬϮϵƚŚŽƵƐĂŶĚ͖ĂĐĐƌƵĞĚ ƌĞǀĞŶƵĞ͗hZϯϰϯƚŚŽƵƐĂŶĚͿ͘ WůĞĂƐĞƌĞĨĞƌƚŽƚŚĞEŽƚĞϮ͘ϯZĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶŽĨ^ŝŐŶŝĨŝĐĂŶƚĂĐĐŽƵŶƚŝŶŐƉŽůŝĐŝĞƐĂŶĚEŽƚĞϰ^ĂůĞƐŝŶƚŚĞĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐ͘ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ ZĞǀĞŶƵĞŝƐĂŶŝŵƉŽƌƚĂŶƚŵĞƚƌŝĐƵƐĞĚƚŽĞǀĂůƵĂƚĞƚŚĞ ĨŝŶĂŶĐŝĂůƉĞƌĨŽƌŵĂŶĐĞŽĨƚŚĞŽŵƉĂŶLJ͘/ŶƚŚĞLJĞĂƌ ĞŶĚĞĚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ŝƚƐƉƌŝŶĐŝƉĂůƌĞǀĞŶƵĞ ƐƚƌĞĂŵƐŝŶĐůƵĚĞĚƐĂůĞƐŽĨĐĂƌƉĂƌƚƐĂŶĚŽĨĐƵƐƚŽŵŝnjĞĚ ƚŽŽůƐĚĞǀĞůŽƉĞĚďLJƚŚĞŽŵƉĂŶLJ͘ƐĚŝƐĐƵƐƐĞĚŝŶEŽƚĞ Ϯ͘ϯ͕ƌĞǀĞŶƵĞŝƐƌĞĐŽŐŶŝnjĞĚǁŚĞŶĐŽŶƚƌŽůŽǀĞƌƚŚĞ ŐŽŽĚƐŝƐƚƌĂŶƐĨĞƌƌĞĚƚŽƚŚĞĐƵƐƚŽŵĞƌ͘ ƉƉůŝĐĂƚŝŽŶŽĨƚŚĞƌĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶƉƌŝŶĐŝƉůĞƐŽĨ ƚŚĞƌĞůĞǀĂŶƚĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐƐƚĂŶĚĂƌĚ͕/&Z^ϭϱ ZĞǀĞŶƵĞĨƌŽŵŽŶƚƌĂĐƚƐǁŝƚŚƵƐƚŽŵĞƌƐ(“the Standard”),ŝƐĐŽŵƉůĞdžĂŶĚƌĞƋƵŝƌĞƐŵĂŬŝŶŐƐŝŐŶŝĨŝĐĂŶƚ ĂƐƐƵŵƉƚŝŽŶƐĂŶĚũƵĚŐŵĞŶƚ͘/ŶƚŚĞŽŵƉĂŶLJ’s case, ƉĂƌƚŝĐƵůĂƌĐŽŵƉůĞdžŝƚLJŝƐĂƐƐŽĐŝĂƚĞĚǁŝƚŚƚŚĞĨŽůůŽǁŝŶŐ ĂƐƉĞĐƚƐ͗ — ĞƚĞƌŵŝŶĂƚŝŽŶŽĨǁŚĞƚŚĞƌĂĐƵƐƚŽŵĞƌĐŽŶƚƌĂĐƚ ĞdžŝƐƚƐƌĞƋƵŝƌĞƐƚŚĞŽŵƉĂŶLJƚŽĂƐƐĞƐƐǁŚĞƚŚĞƌ ŽŶĞĚŽĐƵŵĞŶƚŽƌĂĐŽŵďŝŶĂƚŝŽŶŽĨĚŽĐƵŵĞŶƚƐ͕ ŝŶĐůƵĚŝŶŐŐĞŶĞƌĂůƚĞƌŵƐŽĨďƵƐŝŶĞƐƐ͕ŶŽŵŝŶĂƚŝŽŶ ůĞƚƚĞƌ͕ĂŐƌĞĞŵĞŶƚǁŝƚŚĐƵƐƚŽŵĞƌĂŶĚƉƵƌĐŚĂƐĞ ŽƌĚĞƌƐ͕ĐƌĞĂƚĞĞŶĨŽƌĐĞĂďůĞƌŝŐŚƚƐĂŶĚŽďůŝŐĂƚŝŽŶƐ ŽĨƚŚĞƉĂƌƚŝĞƐƚŽƚŚĞĂƌƌĂŶŐĞŵĞŶƚ͘ — 'ŽŽĚƐǁŝƚŚĚŝĨĨĞƌĞŶƚƌĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶ ƉĂƚƚĞƌŶƐ͕ƐƵĐŚĂƐƐƉĂƌĞƉĂƌƚƐĂŶĚƚŽŽůŝŶŐ͕ŵĂLJďĞ ƐŽůĚĂƐƉĂƌƚŽĨŽŶĞĐŽŶƚƌĂĐƚŽƌƐĞǀĞƌĂůĐŽŶƚƌĂĐƚƐ ĂĐĐŽƵŶƚĞĚĨŽƌĂƐŽŶĞĂƌƌĂŶŐĞŵĞŶƚ͘dŚĞŽŵƉĂŶLJ ĂƉƉůŝĞƐƐŝŐŶŝĨŝĐĂŶƚũƵĚŐŵĞŶƚŝŶŝĚĞŶƚŝĨLJŝŶŐ ĐŽŶƚƌĂĐƚƐǁŚŝĐŚƌĞƋƵŝƌĞƚŽďĞĐŽŵďŝŶĞĚĂŶĚ ĂĐĐŽƵŶƚĞĚĨŽƌĂƐŽŶĞĂƌƌĂŶŐĞŵĞŶƚ͕ĂŶĚŝŶ ŝĚĞŶƚŝĨLJŝŶŐƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶƐƚŚĞƌĞŝŶ͘ KƵƌĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐŝŶƚŚŝƐĂƌĞĂŝŶĐůƵĚĞĚ͕ĂŵŽŶŐŽƚŚĞƌƐ͗ • ƐƐĞƐƐŝŶŐƚŚĞĂĐĐŽƵŶƚŝŶŐƉŽůŝĐLJĨŽƌƌĞĐŽŐŶŝƚŝŽŶŽĨƌĞǀĞŶƵĞĂŶĚŝƚƐ ĐŽŵƉůŝĂŶĐĞǁŝƚŚƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞ^ƚĂŶĚĂƌĚ͖ • hƉĚĂƚŝŶŐŽƵƌƵŶĚĞƌƐƚĂŶĚŝŶŐŽĨƚŚĞŽŵƉĂŶLJ’s revenue recognition ƉƌŽĐĞƐƐ͕ĂŶĚƚĞƐƚŝŶŐƚŚĞĚĞƐŝŐŶĂŶĚŝŵƉůĞŵĞŶƚĂƚŝŽŶŽĨƐĞůĞĐƚĞĚ ƌĞůĂƚĞĚŝŶƚĞƌŶĂůĐŽŶƚƌŽůƐǁŝƚŚŝŶ͖ • &ŽƌĂƐĂŵƉůĞŽĨƐĂůĞƐƚƌĂŶƐĂĐƚŝŽŶƐŝŶƚŚĞĐƵƌƌĞŶƚLJĞĂƌ͕ŝŶƐƉĞĐƚŝŶŐ ƵŶĚĞƌůLJŝŶŐĐŽŶƚƌĂĐƚƵĂůƉƌŽǀŝƐŝŽŶƐĂŶĚŵĂŬŝŶŐŝŶƋƵŝƌŝĞƐŽĨƌĞůĞǀĂŶƚ ƐĂůĞƐĂŶĚĨŝŶĂŶĐĞƉĞƌƐŽŶŶĞů͕ŝŶŽƌĚĞƌƚŽĐŚĂůůĞŶŐĞ͗ o dŚĞĞdžŝƐƚĞŶĐĞŽĨĂĐƵƐƚŽŵĞƌĐŽŶƚƌĂĐƚ͕ďLJƌĞĨĞƌĞŶĐĞƚŽƚŚĞ ƌĞůĞǀĂŶƚĐƌŝƚĞƌŝĂŽĨƚŚĞ^ƚĂŶĚĂƌĚ͕ŝŶĐůƵĚŝŶŐ͕ĂŵŽŶŐŽƚŚĞƌ things, those relating to the parties’ commitment to their ŽďůŝŐĂƚŝŽŶƐĂŶĚƉƌŽďĂďŝůŝƚLJŽĨĐŽůůĞĐƚŝŶŐƚŚĞĐŽŶƐŝĚĞƌĂƚŝŽŶ ĚƵĞ͖ o /ĚĞŶƚŝĨŝĐĂƚŝŽŶŽĨƚŚĞĐŽŶƚƌĂĐƚƐǁŚŝĐŚƌĞƋƵŝƌĞƚŽďĞĂĐĐŽƵŶƚĞĚ ĨŽƌŽŶĂĐŽŵďŝŶĞĚďĂƐŝƐĂŶĚŽĨƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶƐ ǁŝƚŚŝŶƚŚŽƐĞĐŽŶƚƌĂĐƚƐ͕ďLJĂŵŽŶŐŽƚŚĞƌƚŚŝŶŐƐ͕ĂƐƐĞƐƐŵĞŶƚŽĨ ǁŚĞƚŚĞƌƚŚĞŐŽŽĚƐĂŶĚƐĞƌǀŝĐĞƐŝŶƚŚĞĂƌƌĂŶŐĞŵĞŶƚƐĂƌĞ ĚŝƐƚŝŶĐƚĂŶĚĂůƐŽǁŚĞƚŚĞƌĂŶLJƐƵďƐĞƋƵĞŶƚĐŚĂŶŐĞƐƚŽƚŚĞ ĐŽŶƚƌĂĐƚƉƌŝĐĞĂƌŝƐŝŶŐĨƌŽŵƚŚĞůĞĂƌŶŝŶŐĐƵƌǀĞƌĞƐƵůƚŝŶƚŚĞ reduced price representing the parts’ standͲĂůŽŶĞƐĞůůŝŶŐ ƉƌŝĐĞ͖ o /ŶƐƉĞĐƚŝŶŐƵŶĚĞƌůLJŝŶŐĐŽŶƚƌĂĐƚƐǁŝƚŚĐƵƐƚŽŵĞƌƐĨŽƌƚŽŽůŝŶŐ ƐĂůĞƐƚƌĂŶƐĂĐƚŝŽŶƐƚŽŝĚĞŶƚŝĨLJĂŶLJůĞĂƐĞĐŽŵƉŽŶĞŶƚĞŵďĞĚĚĞĚ ǁŝƚŚŝŶƚŚŽƐĞĐŽŶƚƌĂĐƚƐ͕ŵĂŝŶůLJďLJĞǀĂůƵĂƚŝŶŐŽǁŶĞƌƐŚŝƉƌŝŐŚƚƐ͕ ƚŚĞƉĂƌƚLJĚŝƌĞĐƚŝŶŐƚŚĞƵƐĞŽĨƚŚĞƚŽŽůĂŶĚǁŚĞƚŚĞƌƚŚĞƌĞŝƐĂ ƐĞƉĂƌĂƚĞƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶŝŶƌĞůĂƚŝŽŶƚŽƚŚĞƐĂůĞŽĨĐĂƌ ƉĂƌƚƐ͘ 244 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ;ĐŽŶƚŝŶƵĞĚͿ ZsEhZK'E/d/KE;KEd/EhͿ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ — DĂŶLJĐŽŶƚƌĂĐƚƐǁŝƚŚĐƵƐƚŽŵĞƌƐĞŶƚŝƚůĞĐƵƐƚŽŵĞƌƐƚŽƉƌŝĐĞ ƌĞĚƵĐƚŝŽŶƐĂĨƚĞƌĂĐĞƌƚĂŝŶƉĞƌŝŽĚŽĨƉƵƌĐŚĂƐĞŽƌĚĞƌƐ;ĂƐĂ ƌĞƐƵůƚŽĨĞdžƉĞĐƚĞĚƌĞĚƵĐƚŝŽŶŝŶƚŚĞŽŵƉĂŶLJ’s costs along ŝƚƐůĞĂƌŶŝŶŐĐƵƌǀĞͿ͘:ƵĚŐĞŵĞŶƚŝƐƌĞƋƵŝƌĞĚƚŽĚĞƚĞƌŵŝŶĞ ǁŚĞƚŚĞƌsuch ‘efficiency savings’ provide ĐƵƐƚŽŵĞƌƐǁŝƚŚ ŵĂƚĞƌŝĂůƌŝŐŚƚƐƚŽďĞĂĐĐŽƵŶƚĞĚĨŽƌĂƐƐĞƉĂƌĂƚĞ ƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶƐ͘ — dŽŽůŝŶŐĂƌƌĂŶŐĞŵĞŶƚƐĂƌĞƚLJƉŝĐĂůůLJĐŽŶƚƌĂĐƚƐŽƌ ĨƌĂŵĞǁŽƌŬĂŐƌĞĞŵĞŶƚƐďĞƚǁĞĞŶƚŚĞŽŵƉĂŶLJĂŶĚŝƚƐ ĐƵƐƚŽŵĞƌƐĨŽƌƚŚĞƐĂůĞŽĨƚŽŽůƐƚŽďĞƵƐĞĚŝŶƚŚĞ ƉƌŽĚƵĐƚŝŽŶŽĨĐƵƐƚŽŵŝnjĞĚƉĂƌƚƐĨŽƌĂŐŝǀĞŶĐƵƐƚŽŵĞƌ͘ ^ŝŶĐĞƐƵĐŚƚŽŽůŝŶŐĂƌƌĂŶŐĞŵĞŶƚƐŵĂLJǀĂƌLJǁŝƚŚƌĞƐƉĞĐƚƚŽ ƚƌĂŶƐĨĞƌŽĨĚĞǀĞůŽƉŵĞŶƚĂĐƚŝǀŝƚŝĞƐĂŶĚŽǁŶĞƌƐŚŝƉ͕ĐĂƌĞĨƵů ĂƐƐĞƐƐŵĞŶƚƚŽĚĞƚĞƌŵŝŶĞǁŚĞƚŚĞƌ͕ĂŵŽŶŐŽƚŚĞƌƚŚŝŶŐƐ͕ ĂŶĂƌƌĂŶŐĞŵĞŶƚŝƐĂƐĂůĞ͕ĂůĞĂƐĞŽƌĚĞǀĞůŽƉŵĞŶƚŽĨŝƚƐ ŽǁŶĞƋƵŝƉŵĞŶƚ͕ǁŚĞƚŚĞƌŝƚĐŽŶƚĂŝŶƐĂůĞĂƐĞĂŶĚǁŚĞƚŚĞƌ ŝƚŝƐĂƐĞƉĂƌĂƚĞƉĞƌĨŽƌŵĂŶĐĞŽďůŝŐĂƚŝŽŶĨƌŽŵƚŚĞƐĂůĞŽĨ ĐĂƌƉĂƌƚƐ͘ /ŶƚŚĞǁĂŬĞŽĨƚŚĞĂďŽǀĞĨĂĐƚŽƌƐ͕ǁĞĐŽŶƐŝĚĞƌĞĚƌĞǀĞŶƵĞ ƌĞĐŽŐŶŝƚŝŽŶƚŽďĞĂƐƐŽĐŝĂƚĞĚǁŝƚŚĂƐŝŐŶŝĨŝĐĂŶƚƌŝƐŬŽĨŵĂƚĞƌŝĂů ŵŝƐƐƚĂƚĞŵĞŶƚŝŶƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘dŚĞƌĞĨŽƌĞ͕ ƚŚĞĂƌĞĂƌĞƋƵŝƌĞĚŽƵƌŝŶĐƌĞĂƐĞĚĂƚƚĞŶƚŝŽŶŝŶƚŚĞĂƵĚŝƚĂŶĚĂƐ ƐƵĐŚǁĂƐĚĞƚĞƌŵŝŶĞĚƚŽďĞĂŬĞLJĂƵĚŝƚŵĂƚƚĞƌ͘ • &ŽƌĂƐĂŵƉůĞŽĨƐĂůĞƐƚƌĂŶƐĂĐƚŝŽŶƐƐĞůĞĐƚĞĚĂƐƉĂƌƚŽĨƚŚĞ ƉƌĞĐĞĚŝŶŐƉƌŽĐĞĚƵƌĞ͕ĐŚĂůůĞŶŐŝŶŐƚŚĞƚŝŵŝŶŐŽĨƚŚĞƚƌĂŶƐĨĞƌ ŽĨĐŽŶƚƌŽů͕ƚŚĞƌĞƐƵůƚŝŶŐƉĂƚƚĞƌŶŽĨƌĞǀĞŶƵĞƌĞĐŽŐŶŝƚŝŽŶĂŶĚ ƌĞǀĞŶƵĞĂŵŽƵŶƚƐ͕ďLJƌĞĨĞƌĞŶĐĞƚŽƐĂůĞƐŝŶǀŽŝĐĞƐ͕ŝŶǀĞŶƚŽƌLJ ĂŶĚƐŚŝƉƉŝŶŐĚŽĐƵŵĞŶƚƐ͕ĐƵƐƚŽŵĞƌĂĐĐĞƉƚĂŶĐĞĨŽƌŵƐĂŶĚ ŽƚŚĞƌĚŽĐƵŵĞŶƚƐĂƐĂƉƉƌŽƉƌŝĂƚĞ͖ • &ŽƌĂƐĂŵƉůĞŽĨŝŶǀŽŝĐĞƐ͕ŽďƚĂŝŶŝŶŐĐŽŶĨŝƌŵĂƚŝŽŶƐŽĨƚŚĞ ĂŵŽƵŶƚƐƌĞĐĞŝǀĂďůĞŽƵƚƐƚĂŶĚŝŶŐĂƐĂƚƚŚĞƌĞƉŽƌƚŝŶŐĚĂƚĞ͕ĂŶĚ ĞǀĂůƵĂƚŝŶŐĂŶLJĚŝĨĨĞƌĞŶĐĞƐďĞƚǁĞĞŶƚŚĞĂŵŽƵŶƚƐĐŽŶĨŝƌŵĞĚ ĂŶĚƚŚĞŽŵƉĂŶLJ’s records͕ďLJŝŶƐƉĞĐƚŝŶŐƚŚĞƵŶĚĞƌůLJŝŶŐ ĚŽĐƵŵĞŶƚĂƚŝŽŶƐƵĐŚĂƐĐŽŶƚƌĂĐƚƐ͕ŝŶǀŽŝĐĞƐ͕ƐŚŝƉƉŝŶŐ ĚŽĐƵŵĞŶƚƐ͕ĐƵƐƚŽŵĞƌĂĐĐĞƉƚĂŶĐĞĨŽƌŵƐĂŶĚƉĂLJŵĞŶƚƐŵĂĚĞ ďLJĐƵƐƚŽŵĞƌƐ͖ • /ŶƐƉĞĐƚŝŶŐũŽƵƌŶĂůĞŶƚƌŝĞƐƉŽƐƚĞĚƚŽƌĞǀĞŶƵĞĂĐĐŽƵŶƚƐ ĨŽĐƵƐŝŶŐŽŶƵŶƵƐƵĂůĂŶĚŝƌƌĞŐƵůĂƌŝƚĞŵƐ͖ • džĂŵŝŶŝŶŐǁŚĞƚŚĞƌƚŚĞŽŵƉĂŶLJ’s revenue recognitionͲ ƌĞůĂƚĞĚĚŝƐĐůŽƐƵƌĞƐŝŶƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ ĂƉƉƌŽƉƌŝĂƚĞůLJĂĚĚƌĞƐƐƚŚĞƌĞůĞǀĂŶƚƋƵĂŶƚŝƚĂƚŝǀĞĂŶĚ ƋƵĂůŝƚĂƚŝǀĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞĂƉƉůŝĐĂďůĞĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐ ĨƌĂŵĞǁŽƌŬ͘ 245 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ;ĐŽŶƚŝŶƵĞĚͿ ZZz/E's>hK&/Es^dDEd^/E^h^//Z/^E^^K/d^ ƐĂƚϯϭĞĐĞŵďĞƌϮϬϮϰ͕ŝŶǀĞƐƚŵĞŶƚƐŝŶƐƵďƐŝĚŝĂƌŝĞƐĂŶĚĂƐƐŽĐŝĂƚĞƐŝŶƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂŵŽƵŶƚĞĚƚŽhZϭϮ͕ϵϴϳ ƚŚŽƵƐĂŶĚ;ϯϭĞĐĞŵďĞƌϮϬϮϯ͗hZϭϰ͕ϵϴϬƚŚŽƵƐĂŶĚͿ͘ WůĞĂƐĞƌĞĨĞƌƚŽŶŽƚĞƐϮ͘ϵ/ŶǀĞƐƚŵĞŶƚŝŶƐƵďƐŝĚŝĂƌŝĞƐĂŶĚĂƐƐŽĐŝĂƚĞƐ͕ϮϬ/ŶǀĞƐƚŵĞŶƚŝŶƐƵďƐŝĚŝĂƌŝĞƐĂŶĚĂƐƐŽĐŝĂƚĞƐĂŶĚϯƌŝƚŝĐĂů ĂĐĐŽƵŶƚŝŶŐũƵĚŐŵĞŶƚƐĂŶĚŬĞLJƐŽƵƌĐĞƐŽĨĞƐƚŝŵĂƚŝŽŶƵŶĐĞƌƚĂŝŶƚLJ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ /ŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞƌĞůĞǀĂŶƚĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐ ƐƚĂŶĚĂƌĚƐ͕ƚŚĞŽŵƉĂŶLJŝƐƌĞƋƵŝƌĞĚƚŽƉĞƌĨŽƌŵĂŶ ŝŵƉĂŝƌŵĞŶƚƚĞƐƚĨŽƌĂƐƐĞƚƐĨŽƌǁŚŝĐŚŝŵƉĂŝƌŵĞŶƚ ŝŶĚŝĐĂƚŽƌƐǁĞƌĞŝĚĞŶƚŝĨŝĞĚ͘ ƵĞƚŽƚŚĞŵĂŐŶŝƚƵĚĞŽĨŝŶǀĞƐƚŵĞŶƚƐŝŶƐƵďƐŝĚŝĂƌŝĞƐĂŶĚ ĂƐƐŽĐŝĂƚĞƐ;ĂƐǁĞůůĂƐƚŽƚĂůĞdžƉŽƐƵƌĞƚŽǁĂƌĚƚŚĞƐĞ ĞŶƚŝƚŝĞƐ͕ĐĂůĐƵůĂƚĞĚĂƐƚŚĞƐƵŵŽĨƚŚĞĐĂƌƌLJŝŶŐĂŵŽƵŶƚƐ ŽĨƚŚĞŝŶǀĞƐƚŵĞŶƚƐĂŶĚƌĞůĂƚĞĚůŽĂŶƐĂŶĚƌĞĐĞŝǀĂďůĞƐ͕ ŶĞƚŽĨƌĞůĂƚĞĚůŝĂďŝůŝƚŝĞƐͿ͕ŝĚĞŶƚŝĨŝĐĂƚŝŽŶŽĨƚŚĞ ŝŵƉĂŝƌŵĞŶƚŝŶĚŝĐĂƚŽƌƐĨŽƌĂŶLJƐƵĐŚƐƵďƐŝĚŝĂƌŝĞƐĂŶĚ ĂƐƐŽĐŝĂƚĞƐĂƚƚŚĞƌĞƉŽƌƚŝŶŐĚĂƚĞĂŶĚƚĞƐƚŝŶŐĨŽƌƉŽƚĞŶƚŝĂů ŝŵƉĂŝƌŵĞŶƚƌĞƋƵŝƌĞƐƐŝŐŶŝĨŝĐĂŶƚŵĂŶĂŐĞŵĞŶƚ ũƵĚŐĞŵĞŶƚ͘ tŚĞƌĞŝŵƉĂŝƌŵĞŶƚŝŶĚŝĐĂƚŽƌƐĂƌĞŝĚĞŶƚŝĨŝĞĚĨŽƌĂĐĞƌƚĂŝŶ ĞdžƉŽƐƵƌĞ͕ƚŚĞŽŵƉĂŶLJƚĞƐƚƐƚŚĞŝŵƉĂŝƌŵĞŶƚďLJ ĚĞƚĞƌŵŝŶŝŶŐƚŚĞƌĞĐŽǀĞƌĂďůĞĂŵŽƵŶƚŽĨƚŚĞĂƐƐĞƚƐĂŶĚ ĐŽŵƉĂƌŝŶŐŝƚǁŝƚŚƚŚĞŝƌĐĂƌƌLJŝŶŐǀĂůƵĞƐ͘dŚĞƌĞĐŽǀĞƌĂďůĞ ĂŵŽƵŶƚƐĂƌĞĚĞƚĞƌŵŝŶĞĚ͕ǁŝƚŚƚŚĞĂƐƐŝƐƚĂŶĐĞĨƌŽŵ ĞdžƚĞƌŶĂůĂŶĚŝŶƚĞƌŶĂůĂƉƉƌĂŝƐĞƌƐ͕ĂƐĨĂŝƌǀĂůƵĞƐŽĨƚŚĞ ƵŶĚĞƌůLJŝŶŐƐƵďƐŝĚŝĂƌŝĞƐ͕ŵĞĂƐƵƌĞĚƵƐŝŶŐĂƉƉƌŽƉƌŝĂƚĞ ǀĂůƵĂƚŝŽŶƚĞĐŚŶŝƋƵĞƐ͕Ğ͘Ő͘ĚŝƐĐŽƵŶƚĞĚĐĂƐŚĨůŽǁŵŽĚĞůƐ ŽĨƚŚĞƵŶĚĞƌůLJŝŶŐĞŶƚŝƚLJ͕ƐƵƉƉůĞŵĞŶƚĞĚ͕ǁŚĞƌĞĂǀĂŝůĂďůĞ͕ ďLJĐŽŵƉĂƌĂďůĞǀĂůƵĂƚŝŽŶ͘ dŚĞĚĞƚĞƌŵŝŶĂƚŝŽŶŽĨƚŚĞƌĞĐŽǀĞƌĂďůĞĂŵŽƵŶƚƌĞƋƵŝƌĞƐ ŵĂŬŝŶŐĂŶƵŵďĞƌŽĨĂƐƐƵŵƉƚŝŽŶƐĂŶĚũƵĚŐĞŵĞŶƚƐ͕ŝŶ ƉĂƌƚŝĐƵůĂƌƚŚŽƐĞƌĞůĂƚŝŶŐƚŽƚŚĞƐĞůĞĐƚŝŽŶĂŶĚĂƉƉůŝĐĂƚŝŽŶ ŽĨǀĂůƵĂƚŝŽŶŵŽĚĞůƐ͕ĨƵƚƵƌĞĐĂƐŚĨůŽǁƉƌŽũĞĐƚŝŽŶƐĂŶĚ ĐŽƐƚƐƚŽƐĞůů͘&ƵƚƵƌĞĐĂƐŚĨůŽǁƉƌŽũĞĐƚŝŽŶƐĂƌĞƐƵďũĞĐƚƚŽ ƐŝŐŶŝĨŝĐĂŶƚǀĂƌŝĂďŝůŝƚLJĚƵĞƚŽĐŚĂŶŐŝŶŐŵĂƌŬĞƚĐŽŶĚŝƚŝŽŶƐ ĂŶĚĞŶǀŝƌŽŶŵĞŶƚ͘<ĞLJĂƐƐƵŵƉƚŝŽŶƐƌĞůĂƚĞƚŽĚŝƐĐŽƵŶƚ ƌĂƚĞƵƐĞĚĂŶĚĐĂƐŚĨůŽǁƐŐƌŽǁƚŚƌĂƚĞŝŶƚŚĞƌĞƐŝĚƵĂů ƉĞƌŝŽĚ͘ŵŝŶŽƌĐŚĂŶŐĞŝŶƚŚĞƐĞĂƐƐƵŵƉƚŝŽŶƐŵĂLJŚĂǀĞĂ ƐŝŐŶŝĨŝĐĂŶƚŝŵƉĂĐƚŽŶƚŚĞƌĞĐŽǀĞƌĂďůĞĂŵŽƵŶƚ͘ ƐĂƌĞƐƵůƚ͕ƚŚŝƐĂƌĞĂƌĞƋƵŝƌĞĚŽƵƌƐŝŐŶŝĨŝĐĂŶƚũƵĚŐŵĞŶƚ ĂŶĚŝŶĐƌĞĂƐĞĚĂƚƚĞŶƚŝŽŶŝŶƚŚĞĐŽƵƌƐĞŽĨŽƵƌĂƵĚŝƚĂŶĚ ĐŽŶƐĞƋƵĞŶƚůLJǁĞĐŽŶƐŝĚĞƌĞĚŝƚƚŽďĞĂŬĞLJĂƵĚŝƚŵĂƚƚĞƌ͘ KƵƌĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐŝŶƚŚŝƐĂƌĞĂŝŶĐůƵĚĞĚ͕ĂŵŽŶŐŽƚŚĞƌƐ͗ • ǀĂůƵĂƚŝŶŐ͕ĂŐĂŝŶƐƚƚŚĞƌĞůĞǀĂŶƚƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞĨŝŶĂŶĐŝĂů reporting standards, the process of management’s identification of ŝŵƉĂŝƌŵĞŶƚŝŶĚŝĐĂƚŽƌƐ͕ĐŽŶƐŝĚĞƌŝŶŐĨĂĐƚŽƌƐƐƵĐŚĂƐƵŶĨĂǀŽƵƌĂďůĞ ĚĞǀĞůŽƉŵĞŶƚƐŝŶƚŚĞŝŶĚƵƐƚƌLJ͕ŶĞŐĂƚŝǀĞŽƌŝŶƐƵĨĨŝĐŝĞŶƚŶĞƚĂƐƐĞƚƐ͕ ĐŚĂŶŐŝŶŐůĂǁƐĂŶĚƌĞŐƵůĂƚŝŽŶƐ͕ĚĞĐůŝŶŝŶŐĨŝŶĂŶĐŝĂůƉĞƌĨŽƌŵĂŶĐĞ ĐŽŵƉĂƌĞĚƚŽĂǀĂŝůĂďůĞŝŶĚƵƐƚƌLJĚĂƚĂƐƵĐŚĂƐƌĞůĞǀĂŶƚŵĂƌŬĞƚ ŵƵůƚŝƉůĞƐ;ĂƐƐŝƐƚĞĚďLJŽƵƌǀĂůƵĂƚŝŽŶƐƉĞĐŝĂůŝƐƚƐͿ͕ĞdžŝƐƚĞŶĐĞŽĨĂŶLJ ŽǀĞƌĚƵĞůŽĂŶƐĂŶĚƌĞĐĞŝǀĂďůĞƐĂŶĚͬŽƌƌŽůůŝŶŐŽĨĞdžŝƐƚŝŶŐĨĂĐŝůŝƚŝĞƐ͕ ĂŶĚĐŚĂŶŐŝŶŐďƵƐŝŶĞƐƐŵŽĚĞůƐ͖ tŚĞŶŝŵƉĂŝƌŵĞŶƚŝŶĚŝĐĂƚŽƌƐĂƌĞŝĚĞŶƚŝĨŝĞĚ͕ǁĞ͗ • ƐƐĞƐƐƚŚĞĂƉƉƌŽƉƌŝĂƚĞŶĞƐƐŽĨǀĂůƵĂƚŝŽŶŵĞƚŚŽĚŽůŽŐLJĂƉƉůŝĞĚĨŽƌ ŝŵƉĂŝƌŵĞŶƚƚĞƐƚŝŶŐĂŐĂŝŶƐƚƚŚĞƌĞůĞǀĂŶƚƌĞƋƵŝƌĞŵĞŶƚƐŽĨĨŝŶĂŶĐŝĂů ƌĞƉŽƌƚŝŶŐƐƚĂŶĚĂƌĚƐ͘ƐƉĂƌƚŽĨƚŚĞĂďŽǀĞ͕ǁĞŝĚĞŶƚŝĨLJƚŚĞ ƌĞůĞǀĂŶƚŵĞƚŚŽĚƐ͕ĂƐƐƵŵƉƚŝŽŶƐĂŶĚƐŽƵƌĐĞƐŽĨĚĂƚĂ͕ĂŶĚĂƐƐĞƐƐĞĚ ǁŚĞƚŚĞƌƐƵĐŚŵĞƚŚŽĚƐ͕ĂƐƐƵŵƉƚŝŽŶƐ͕ĚĂƚĂĂŶĚƚŚĞŝƌĂƉƉůŝĐĂƚŝŽŶ ĂƌĞĂƉƉƌŽƉƌŝĂƚĞŝŶƚŚĞĐŽŶƚĞdžƚŽĨƚŚĞƐĂŝĚƌĞƋƵŝƌĞŵĞŶƚƐ͖ • ƐƐŝƐƚĞĚďLJŽƵƌŽǁŶǀĂůƵĂƚŝŽŶƐƉĞĐŝĂůŝƐƚƐ͕ĐŚĂůůĞŶŐĞƚŚĞŬĞLJ ĂƐƐƵŵƉƚŝŽŶƐƵƐĞĚďLJŵĂŶĂŐĞŵĞŶƚŝŶŝƚƐŝŵƉĂŝƌŵĞŶƚƚĞƐƚŝŶŐ͕ ǁŚŝĐŚƐƉĞĐŝĨŝĐĂůůLJŝŶǀŽůǀĞƐ͗ o ǀĂůƵĂƚŝŶŐƚŚĞŚŝƐƚŽƌŝĐĂůĂĐĐƵƌĂĐLJŽĨŵĂŶĂŐĞŵĞŶƚďƵĚŐĞƚŝŶŐ ďLJĐŽŵƉĂƌŝŶŐŚŝƐƚŽƌŝĐĂůĐĂƐŚĨůŽǁƉƌŽũĞĐƚŝŽŶƐǁŝƚŚĂĐƚƵĂů ŽƵƚĐŽŵĞƐ͖ o ŚĂůůĞŶŐŝŶŐƚŚĞŬĞLJĂƐƐƵŵƉƚŝŽŶƐĂƉƉůŝĞĚ;ƐƵĐŚĂƐĚŝƐĐŽƵŶƚ ƌĂƚĞƐĂŶĚŐƌŽǁƚŚƌĂƚĞƐŝŶƚŚĞƌĞƐŝĚƵĂůƉĞƌŝŽĚͿďLJƌĞĨĞƌĞŶĐĞ ƚŽƉƵďůŝĐůLJĂǀĂŝůĂďůĞĞdžƚĞƌŶĂůƐŽƵƌĐĞƐĂŶĚĚĂƚĂŽŶŚŝƐƚŽƌŝĐĂů ĨŝŶĂŶĐŝĂůƉĞƌĨŽƌŵĂŶĐĞ͖ o ŶĂůLJƐŝŶŐƐĞŶƐŝƚŝǀŝƚLJŽĨƚŚĞŝŵƉĂŝƌŵĞŶƚƚĞƐƚƌĞƐƵůƚƐƚŽ ĐŚĂŶŐĞƐŝŶŬĞLJĂƐƐƵŵƉƚŝŽŶƐĂŶĚĐŽŶƐŝĚĞƌŝŶŐǁŚĞƚŚĞƌƚŚĞ ůĞǀĞůŽĨŬĞLJĂƐƐƵŵƉƚŝŽŶƐŝŶĚŝĐĂƚĞƐŵĂŶĂŐĞŵĞŶƚďŝĂƐ͖ o dƌacing the subsidiary assets’ fair values to valuations by ĞdžƚĞƌŶĂůĞdžƉĞƌƚƐĞŶŐĂŐĞĚďLJƚŚĞŽŵƉĂŶLJ͕ǁŚŽƐĞ ĐŽŵƉĞƚĞŶĐĞ͕ĐĂƉĂďŝůŝƚŝĞƐĂŶĚŽďũĞĐƚŝǀŝƚLJǁĞŝŶĚĞƉĞŶĚĞŶƚůLJ ĂƐƐĞƐƐĞĚ͘ 246 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ <ĞLJƵĚŝƚDĂƚƚĞƌƐ;ĐŽŶƚŝŶƵĞĚͿ ZZz/E's>hK&/Es^dDEd^/E^h^//Z/^E^^K/d^;KEd/EhͿ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ;ĐŽŶƚŝŶƵĞĚͿ • Examining whether the Company’s ŝŵƉĂŝƌŵĞŶƚƚĞƐƚŝŶŐͲ ƌĞůĂƚĞĚĚŝƐĐůŽƐƵƌĞƐŝŶƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ ĂƉƉƌŽƉƌŝĂƚĞůLJĂĚĚƌĞƐƐƚŚĞƌĞůĞǀĂŶƚƋƵĂŶƚŝƚĂƚŝǀĞĂŶĚ ƋƵĂůŝƚĂƚŝǀĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞĂƉƉůŝĐĂďůĞĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐ ĨƌĂŵĞǁŽƌŬ͘ 'K/E'KEZE WůĞĂƐĞƌĞĨĞƌƚŽŶŽƚĞƐϮ͘ϮĂƐŝƐŽĨƉƌĞƉĂƌĂƚŝŽŶĂŶĚϯƌŝƚŝĐĂůĂĐĐŽƵŶƚŝŶŐũƵĚŐŵĞŶƚƐĂŶĚŬĞLJƐŽƵƌĐĞƐŽĨĞƐƚŝŵĂƚŝŽŶƵŶĐĞƌƚĂŝŶƚLJ͕ ŐŽŝŶŐĐŽŶĐĞƌŶĂƐƐƵŵƉƚŝŽŶƐĞĐƚŝŽŶ <ĞLJĂƵĚŝƚŵĂƚƚĞƌ ,ŽǁŽƵƌĂƵĚŝƚĂĚĚƌĞƐƐĞĚƚŚĞŵĂƚƚĞƌ dŚĞŽŵƉĂŶLJΖƐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƌĞ ƉƌĞƉĂƌĞĚŽŶĂŐŽŝŶŐĐŽŶĐĞƌŶďĂƐŝƐ͘KŶƚŚĞ ƌĞƉŽƌƚŝŶŐĚĂƚĞƚŚĞŽŵƉĂŶLJŚĂĚŶĞŐĂƚŝǀĞŶĞƚ ǁŽƌŬŝŶŐĐĂƉŝƚĂů͘ dŚĞCompany’sŐŽŝŶŐĐŽŶĐĞƌŶĂƐƐĞƐƐŵĞŶƚŝƐ ďĂƐĞĚŽŶƚŚĞĐĂƐŚĨůŽǁƐĨŽƌĞĐĂƐƚ͕ǁŚŝĐŚ͕ ĂĐĐŽƌĚŝŶŐƚŽƚŚĞŵĂŶĂŐĞŵĞŶƚΖƐĂƐƐĞƐƐŵĞŶƚ͕ ƐƵƉƉŽƌƚƚŚĞĐůĂŝŵƚŚĂƚƚŚĞŽŵƉĂŶLJǁŝůůŚĂǀĞ ƐƵĨĨŝĐŝĞŶƚĨƵŶĚƐƚŽĐŽŶƚŝŶƵĞŽƉĞƌĂƚŝŽŶƐĨŽƌĂƚ ůĞĂƐƚϭϮŵŽŶƚŚƐĨƌŽŵƚŚĞƌĞƉŽƌƚŝŶŐĚĂƚĞ͘ ŶƵŵďĞƌŽĨĂƐƐƵŵƉƚŝŽŶƐĂŶĚƐŝŐŶŝĨŝĐĂŶƚ ũƵĚŐŵĞŶƚƐĂƌĞŝŶĐŽƌƉŽƌĂƚĞĚŝŶƚŽƚŚĞ ƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞƐĞĨŽƌĞĐĂƐƚƐ͘DĂŶĂŐĞŵĞŶƚ ĐŽŶĐůƵĚĞĚƚŚĂƚƚŚĞƌĂŶŐĞŽĨƉŽƐƐŝďůĞ ŽƵƚĐŽŵĞƐĐŽŶƐŝĚĞƌĞĚŝŶƚŚĞĂƐƐĞƐƐŵĞŶƚ ƉƌŽĐĞƐƐĚŽĞƐŶŽƚůĞĂĚƚŽŵĂƚĞƌŝĂůƵŶĐĞƌƚĂŝŶƚLJ ƌĞŐĂƌĚŝŶŐĞǀĞŶƚƐŽƌĐŝƌĐƵŵƐƚĂŶĐĞƐƚŚĂƚŵĂLJ ĐĂƐƚƐŝŐŶŝĨŝĐĂŶƚĚŽƵďƚŽŶƚŚĞŽŵƉĂŶLJΖƐĂďŝůŝƚLJ ƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘ The Company’s use of the going concern basis ŽĨĂĐĐŽƵŶƚŝŶŐŝƐĂŬĞLJĂƵĚŝƚŵĂƚƚĞƌĚƵĞƚŽƚŚĞ ĂƐƐŽĐŝĂƚĞĚĞdžƚĞŶƚŽĨƵŶĐĞƌƚĂŝŶƚLJĂŶĚ ĐŽŶƐĞƋƵĞŶƚůLJŚŝŐŚůĞǀĞůŽĨũƵĚŐŵĞŶƚƌĞƋƵŝƌĞĚ ŝŶĞǀĂůƵĂƚŝŶŐƚŚĞŽŵƉĂŶLJΖƐƉůĂŶƐĨŽƌĨƵƚƵƌĞ ĂĐƚŝŽŶƐĂŶĚƚŚĞŝƌĨŝŶĂŶĐŝĂůŝŵƉĂĐƚ͘ KƵƌƉƌŽĐĞĚƵƌĞƐŝŶƚŚŝƐĂƌĞĂŝŶĐůƵĚĞĚ͕ĂŵŽŶŐŽƚŚĞƌƐ͗ • ZĞǀŝĞǁŽĨƚŚĞŵŝŶƵƚĞƐŽĨƚŚĞDĂŶĂŐĞŵĞŶƚŽĂƌĚĂŶĚ^ƵƉĞƌǀŝƐŽƌLJŽĂƌĚ ŵĞĞƚŝŶŐƐ͕ǁŝƚŚƚŚĞŐŽĂůŽĨŝĚĞŶƚŝĨLJŝŶŐƚŚĞŵĞĂƐƵƌĞƐƚŚĂƚƚŚĞ DĂŶĂŐĞŵĞŶƚŽĂƌĚŝŶƚĞŶĚƐƚŽŝŵƉůĞŵĞŶƚŝŶŽƌĚĞƌƚŽĞŶƐƵƌĞƐƵĨĨŝĐŝĞŶƚ ĨƵŶĚƐĨŽƌĐƵƌƌĞŶƚĂĐƚŝǀŝƚŝĞƐ͖ • ŝƐĐƵƐƐŝŽŶǁŝƚŚŵĂŶĂŐĞŵĞŶƚĂďŽƵƚƉůĂŶƐĨŽƌĨƵƚƵƌĞĂĐƚŝǀŝƚŝĞƐŝŶƌĞůĂƚŝŽŶ ƚŽƚŚĞŐŽŝŶŐĐŽŶĐĞƌŶĂƐƐƵŵƉƚŝŽŶ͕ǁŚĞƚŚĞƌƚŚĞŽƵƚĐŽŵĞŽĨƚŚŽƐĞƉůĂŶƐŝƐ ůŝŬĞůLJƚŽŝŵƉƌŽǀĞƚŚĞƐŝƚƵĂƚŝŽŶĂŶĚǁŚĞƚŚĞƌŵĂŶĂŐĞŵĞŶƚΖƐƉůĂŶƐĂƌĞ ĨĞĂƐŝďůĞŝŶƚŚĞĐŝƌĐƵŵƐƚĂŶĐĞƐ͖ • ŶĂůLJƐŝƐŽĨƚŚĞŽŵƉĂŶLJΖƐŶĞƚǁŽƌŬŝŶŐĐĂƉŝƚĂůƉŽƐŝƚŝŽŶĂƐŽĨϯϭ ĞĐĞŵďĞƌϮϬϮϰƚŽĂƐƐĞƐƐƚŚĞĂǀĂŝůĂďŝůŝƚLJŽĨůŝƋƵŝĚĨƵŶĚƐƚŽŵĞĞƚƐŚŽƌƚͲ ƚĞƌŵĨŝŶĂŶĐŝĂůŽďůŝŐĂƚŝŽŶƐ͖ • ǀĂůƵĂƚŝŶŐƚŚĞŚŝƐƚŽƌŝĐĂůĂĐĐƵƌĂĐLJŽĨŵĂŶĂŐĞŵĞŶƚďƵĚŐĞƚŝŶŐďLJ ĐŽŵƉĂƌŝŶŐŚŝƐƚŽƌŝĐĂůĐĂƐŚĨůŽǁƉƌŽũĞĐƚŝŽŶƐǁŝƚŚĂĐƚƵĂůŽƵƚĐŽŵĞƐĂŶĚ ĂŶĂůLJƐŝŶŐƐĞŶƐŝƚŝǀŝƚLJŽĨƚŚĞďƵĚŐĞƚƐƚŽĐŚĂŶŐĞƐŝŶŬĞLJĂƐƐƵŵƉƚŝŽŶƐĂŶĚ ĐŽŶƐŝĚĞƌŝŶŐǁŚĞƚŚĞƌƚŚĞůĞǀĞůŽĨŬĞLJĂƐƐƵŵƉƚŝŽŶƐŝŶĚŝĐĂƚĞƐŵĂŶĂŐĞŵĞŶƚ ďŝĂƐ͖ • dĂŬŝŶŐŝŶƚŽĂĐĐŽƵŶƚǁŚĞƚŚĞƌĂĚĚŝƚŝŽŶĂůĨĂĐƚƐŽƌŝŶĨŽƌŵĂƚŝŽŶŚĂǀĞ ďĞĐŽŵĞĂǀĂŝůĂďůĞƐŝŶĐĞƚŚĞĚĂƚĞƚŚĞŽŵƉĂŶLJŵĂĚĞƚŚĞĂƐƐĞƐƐŵĞŶƚ͖ • ƐƐĞƐƐŝŶŐƚŚĞĂǀĂŝůĂďŝůŝƚLJŽĨƚŚĞĨŝŶĂŶĐŝŶŐĨĂĐŝůŝƚŝĞƐĂŶĚĂƌƌĂŶŐĞŵĞŶƚ ŝŶĐůƵĚŝŶŐŝŶƐƉĞĐƚŝŽŶŽĨƉƌŽůŽŶŐĂƚŝŽŶĂŐƌĞĞŵĞŶƚƐ͖ • ƐƐĞƐƐŝŶŐǁŚĞƚŚĞƌ͕ŝŶůŝŐŚƚŽĨƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞĂƉƉůŝĐĂďůĞ ĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĨƌĂŵĞǁŽƌŬ͕ƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƉƌŽǀŝĚĞ ĂĚĞƋƵĂƚĞĚŝƐĐůŽƐƵƌĞƐĂďŽƵƚĞǀĞŶƚƐŽƌĐŝƌĐƵŵƐƚĂŶĐĞƐƚŚĂƚŚĂǀĞďĞĞŶ ŝĚĞŶƚŝĨŝĞĚƚŚĂƚŵĂLJĐĂƐƚƐŝŐŶŝĨŝĐĂŶƚĚŽƵďƚŽŶƚŚĞŽŵƉĂŶLJΖƐĂďŝůŝƚLJƚŽ ĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘ 247 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ KƚŚĞƌ/ŶĨŽƌŵĂƚŝŽŶ DĂŶĂŐĞŵĞŶƚŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶ͘dŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶĐŽŵƉƌŝƐĞƐƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚ ;ŝŶĐůƵĚŝŶŐƚŚĞ^ƵƐƚĂŝŶĂďŝůŝƚLJ^ƚĂƚĞŵĞŶƚĂƐĂƐĞƉĂƌĂƚĞƉĂƌƚŽĨƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚͿĂŶĚŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞ Report included in the Annual Report of the Company but does not include the financial statements and our auditor’s ƌĞƉŽƌƚƚŚĞƌĞŽŶ͘ KƵƌŽƉŝŶŝŽŶŽŶƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĚŽĞƐŶŽƚĐŽǀĞƌƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶ͘ /ŶĐŽŶŶĞĐƚŝŽŶǁŝƚŚŽƵƌĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ŽƵƌƌĞƐƉŽŶƐŝďŝůŝƚLJŝƐƚŽƌĞĂĚƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶĂŶĚ͕ŝŶ ĚŽŝŶŐƐŽ͕ĐŽŶƐŝĚĞƌǁŚĞƚŚĞƌƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶŝƐŵĂƚĞƌŝĂůůLJŝŶĐŽŶƐŝƐƚĞŶƚǁŝƚŚƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ŽƌŽƵƌ ŬŶŽǁůĞĚŐĞŽďƚĂŝŶĞĚŝŶƚŚĞĂƵĚŝƚ͕ŽƌŽƚŚĞƌǁŝƐĞĂƉƉĞĂƌƐƚŽďĞŵĂƚĞƌŝĂůůLJŵŝƐƐƚĂƚĞĚ͘ tŝƚŚƌĞŐĂƌĚƚŽƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚĂŶĚƚŚĞŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚ͕ǁĞĂůƐŽƉĞƌĨŽƌŵĞĚƉƌŽĐĞĚƵƌĞƐ ƉƌĞƐĐƌŝďĞĚďLJĂƉƉůŝĐĂďůĞůĞŐĂůƌĞƋƵŝƌĞŵĞŶƚƐĂŶĚǁĞƌĞƉŽƌƚƚŚĂƚ͗ • ƚŚĞŝŶĨŽƌŵĂƚŝŽŶŐŝǀĞŶŝŶƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚĂŶĚƚŚĞŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚĨŽƌƚŚĞĨŝŶĂŶĐŝĂůLJĞĂƌ ĨŽƌǁŚŝĐŚƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƌĞƉƌĞƉĂƌĞĚ͕ŝƐĐŽŶƐŝƐƚĞŶƚ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ǁŝƚŚƚŚĞĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐ͖ • ƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚ͕ĞdžĐůƵĚŝŶŐƚŚĞ^ƵƐƚĂŝŶĂďŝůŝƚLJZĞƉŽƌƚ;ǁŚŝĐŚĐŽŶƐƚŝƚƵƚĞƐĂƐĞƉĂƌĂƚĞƉĂƌƚŽĨƚŚĞ DĂŶĂŐĞŵĞŶƚZĞƉŽƌƚͿ͕ĂŶĚƚŚĞŽƌƉŽƌĂƚĞ'ŽǀĞƌŶĂŶĐĞZĞƉŽƌƚŚĂǀĞďĞĞŶƉƌĞƉĂƌĞĚ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ŝŶ ĂĐĐŽƌĚĂŶĐĞǁŝƚŚĂƉƉůŝĐĂďůĞůĞŐĂůƌĞƋƵŝƌĞŵĞŶƚƐ͖ • ǁŝƚŚƌĞƐƉĞĐƚƚŽƚŚĞ^ƵƐƚĂŝŶĂďŝůŝƚLJZĞƉŽƌƚ;ǁŚŝĐŚŝƐŝŶĐůƵĚĞĚĂƐƉĂƌƚŽĨƚŚĞŽƚŚĞƌŝŶĨŽƌŵĂƚŝŽŶĂŶĚĐŽŶƐƚŝƚƵƚĞƐĂ ƐĞƉĂƌĂƚĞƉĂƌƚŽĨƚŚĞDĂŶĂŐĞŵĞŶƚZĞƉŽƌƚͿ͕ǁĞƉĞƌĨŽƌŵĞĚĂůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞĞŶŐĂŐĞŵĞŶƚ͕ƚŚĞƌĞƐƵůƚƐŽĨ ǁŚŝĐŚǁĞƌĞƉƌĞƐĞŶƚĞĚŝŶĂƐĞƉĂƌĂƚĞůŝŵŝƚĞĚĂƐƐƵƌĂŶĐĞƌĞƉŽƌƚǁŝƚŚĂŶƵŶŵŽĚŝĨŝĞĚĐŽŶĐůƵƐŝŽŶ͘ /Ĩ͕ďĂƐĞĚŽŶƚŚĞǁŽƌŬǁĞŚĂǀĞƉĞƌĨŽƌŵĞĚĂďŽǀĞ͕ǁĞĐŽŶĐůƵĚĞƚŚĂƚƚŚĞƌĞŝƐĂŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚ͕ǁĞĂƌĞƌĞƋƵŝƌĞĚ ƚŽƌĞƉŽƌƚƚŚĂƚĨĂĐƚ͘tĞŚĂǀĞŶŽƚŚŝŶŐƚŽƌĞƉŽƌƚŝŶƚŚŝƐƌĞŐĂƌĚ͘ ZĞƐƉŽŶƐŝďŝůŝƚŝĞƐŽĨDĂŶĂŐĞŵĞŶƚĂŶĚdŚŽƐĞŚĂƌŐĞĚǁŝƚŚ'ŽǀĞƌŶĂŶĐĞĨŽƌƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ DĂŶĂŐĞŵĞŶƚŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƚŚĂƚŐŝǀĞĂƚƌƵĞĂŶĚĨĂŝƌǀŝĞǁŝŶĂĐĐŽƌĚĂŶĐĞ ǁŝƚŚh/&Z^͕ĂŶĚĨŽƌƐƵĐŚŝŶƚĞƌŶĂůĐŽŶƚƌŽůĂƐŵĂŶĂŐĞŵĞŶƚĚĞƚĞƌŵŝŶĞƐŝƐŶĞĐĞƐƐĂƌLJƚŽĞŶĂďůĞƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞ ĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƚŚĂƚĂƌĞĨƌĞĞĨƌŽŵŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚ͕ǁŚĞƚŚĞƌĚƵĞƚŽĨƌĂƵĚŽƌĞƌƌŽƌ͘ In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a ŐŽŝŶŐĐŽŶĐĞƌŶ͕ĚŝƐĐůŽƐŝŶŐ͕ĂƐĂƉƉůŝĐĂďůĞ͕ŵĂƚƚĞƌƐƌĞůĂƚĞĚƚŽŐŽŝŶŐĐŽŶĐĞƌŶĂŶĚƵƐŝŶŐƚŚĞŐŽŝŶŐĐŽŶĐĞƌŶďĂƐŝƐŽĨ ĂĐĐŽƵŶƚŝŶŐƵŶůĞƐƐŵĂŶĂŐĞŵĞŶƚĞŝƚŚĞƌŝŶƚĞŶĚƐƚŽůŝƋƵŝĚĂƚĞƚŚĞŽŵƉĂŶLJŽƌƚŽĐĞĂƐĞŽƉĞƌĂƚŝŽŶƐ͕ŽƌŚĂƐŶŽƌĞĂůŝƐƚŝĐ ĂůƚĞƌŶĂƚŝǀĞďƵƚƚŽĚŽƐŽ͘ Those charged with governance are responsible for overseeing the Company’s financial reporting process. 248 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ Auditors’ Responsibilities for the Audit of the Financial Statements KƵƌŽďũĞĐƚŝǀĞƐĂƌĞƚŽŽďƚĂŝŶƌĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞĂďŽƵƚǁŚĞƚŚĞƌƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƐĂǁŚŽůĞĂƌĞĨƌĞĞĨƌŽŵ material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. ZĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞŝƐĂŚŝŐŚůĞǀĞůŽĨĂƐƐƵƌĂŶĐĞ͕ďƵƚŝƐŶŽƚĂŐƵĂƌĂŶƚĞĞƚŚĂƚĂŶĂƵĚŝƚĐŽŶĚƵĐƚĞĚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ /ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚƐŽŶƵĚŝƚŝŶŐǁŝůůĂůǁĂLJƐĚĞƚĞĐƚĂŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚǁŚĞŶŝƚĞdžŝƐƚƐ͘DŝƐƐƚĂƚĞŵĞŶƚƐĐĂŶ ĂƌŝƐĞĨƌŽŵĨƌĂƵĚŽƌĞƌƌŽƌĂŶĚĂƌĞĐŽŶƐŝĚĞƌĞĚŵĂƚĞƌŝĂůŝĨ͕ŝŶĚŝǀŝĚƵĂůůLJŽƌŝŶƚŚĞĂŐŐƌĞŐĂƚĞ͕ƚŚĞLJĐŽƵůĚƌĞĂƐŽŶĂďůLJďĞ ĞdžƉĞĐƚĞĚƚŽŝŶĨůƵĞŶĐĞƚŚĞĞĐŽŶŽŵŝĐĚĞĐŝƐŝŽŶƐŽĨƵƐĞƌƐƚĂŬĞŶŽŶƚŚĞďĂƐŝƐŽĨƚŚĞƐĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘ ƐƉĂƌƚŽĨĂŶĂƵĚŝƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚƐŽŶƵĚŝƚŝŶŐ͕ǁĞĞdžĞƌĐŝƐĞƉƌŽĨĞƐƐŝŽŶĂůũƵĚŐŵĞŶƚĂŶĚ ŵĂŝŶƚĂŝŶƉƌŽĨĞƐƐŝŽŶĂůƐŬĞƉƚŝĐŝƐŵƚŚƌŽƵŐŚŽƵƚƚŚĞĂƵĚŝƚ͘tĞĂůƐŽ͗ • /ĚĞŶƚŝĨLJĂŶĚĂƐƐĞƐƐƚŚĞƌŝƐŬƐŽĨŵĂƚĞƌŝĂůŵŝƐƐƚĂƚĞŵĞŶƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ǁŚĞƚŚĞƌĚƵĞƚŽĨƌĂƵĚ ŽƌĞƌƌŽƌ͕ĚĞƐŝŐŶĂŶĚƉĞƌĨŽƌŵĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐƌĞƐƉŽŶƐŝǀĞƚŽƚŚŽƐĞƌŝƐŬƐ͕ĂŶĚŽďƚĂŝŶĂƵĚŝƚĞǀŝĚĞŶĐĞƚŚĂƚŝƐ ƐƵĨĨŝĐŝĞŶƚĂŶĚĂƉƉƌŽƉƌŝĂƚĞƚŽƉƌŽǀŝĚĞĂďĂƐŝƐĨŽƌŽƵƌŽƉŝŶŝŽŶ͘dŚĞƌŝƐŬŽĨŶŽƚĚĞƚĞĐƚŝŶŐĂŵĂƚĞƌŝĂů ŵŝƐƐƚĂƚĞŵĞŶƚƌĞƐƵůƚŝŶŐĨƌŽŵĨƌĂƵĚŝƐŚŝŐŚĞƌƚŚĂŶĨŽƌŽŶĞƌĞƐƵůƚŝŶŐĨƌŽŵĞƌƌŽƌ͕ĂƐĨƌĂƵĚŵĂLJŝŶǀŽůǀĞ ĐŽůůƵƐŝŽŶ͕ĨŽƌŐĞƌLJ͕ŝŶƚĞŶƚŝŽŶĂůŽŵŝƐƐŝŽŶƐ͕ŵŝƐƌĞƉƌĞƐĞŶƚĂƚŝŽŶƐ͕ŽƌƚŚĞŽǀĞƌƌŝĚĞŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůƐ͘ • KďƚĂŝŶĂŶƵŶĚĞƌƐƚĂŶĚŝŶŐŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůƌĞůĞǀĂŶƚƚŽƚŚĞĂƵĚŝƚŝŶŽƌĚĞƌƚŽĚĞƐŝŐŶĂƵĚŝƚƉƌŽĐĞĚƵƌĞƐƚŚĂƚ ĂƌĞĂƉƉƌŽƉƌŝĂƚĞŝŶƚŚĞĐŝƌĐƵŵƐƚĂŶĐĞƐ͕ďƵƚŶŽƚĨŽƌƚŚĞƉƵƌƉŽƐĞŽĨĞdžƉƌĞƐƐŝŶŐĂŶŽƉŝŶŝŽŶŽŶƚŚĞ ĞĨĨĞĐƚŝǀĞŶĞƐƐŽĨƚŚĞŽŵƉĂŶLJ’s internal controls. • ǀĂůƵĂƚĞƚŚĞĂƉƉƌŽƉƌŝĂƚĞŶĞƐƐŽĨĂĐĐŽƵŶƚŝŶŐƉŽůŝĐŝĞƐƵƐĞĚĂŶĚƚŚĞƌĞĂƐŽŶĂďůĞŶĞƐƐŽĨĂĐĐŽƵŶƚŝŶŐĞƐƚŝŵĂƚĞƐ ĂŶĚƌĞůĂƚĞĚĚŝƐĐůŽƐƵƌĞƐŵĂĚĞďLJŵĂŶĂŐĞŵĞŶƚ͘ • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, ďĂƐĞĚŽŶƚŚĞĂƵĚŝƚĞǀŝĚĞŶĐĞŽďƚĂŝŶĞĚ͕ǁŚĞƚŚĞƌĂŵĂƚĞƌŝĂůƵŶĐĞƌƚĂŝŶƚLJĞdžŝƐƚƐƌĞůĂƚĞĚƚŽĞǀĞŶƚƐŽƌ ĐŽŶĚŝƚŝŽŶƐƚŚĂƚŵĂLJĐĂƐƚƐŝŐŶŝĨŝĐĂŶƚĚŽƵďƚŽŶƚŚĞŽŵƉĂŶLJ’sĂďŝůŝƚLJƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘/ĨǁĞ conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to ƚŚĞƌĞůĂƚĞĚĚŝƐĐůŽƐƵƌĞƐŝŶƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽƌ͕ŝĨƐƵĐŚĚŝƐĐůŽƐƵƌĞƐĂƌĞŝŶĂĚĞƋƵĂƚĞ͕ƚŽŵŽĚŝĨLJŽƵƌ opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. ,ŽǁĞǀĞƌ͕ĨƵƚƵƌĞĞǀĞŶƚƐŽƌĐŽŶĚŝƚŝŽŶƐŵĂLJĐĂƵƐĞƚŚĞŽŵƉĂŶLJƚŽĐĞĂƐĞƚŽĐŽŶƚŝŶƵĞĂƐĂŐŽŝŶŐĐŽŶĐĞƌŶ͘ • ǀĂůƵĂƚĞƚŚĞŽǀĞƌĂůůƉƌĞƐĞŶƚĂƚŝŽŶ͕ƐƚƌƵĐƚƵƌĞĂŶĚĐŽŶƚĞŶƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ŝŶĐůƵĚŝŶŐƚŚĞ ĚŝƐĐůŽƐƵƌĞƐ͕ĂŶĚǁŚĞƚŚĞƌƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƌĞƉƌĞƐĞŶƚƚŚĞƵŶĚĞƌůLJŝŶŐƚƌĂŶƐĂĐƚŝŽŶƐĂŶĚĞǀĞŶƚƐŝŶĂ ŵĂŶŶĞƌƚŚĂƚĂĐŚŝĞǀĞƐĨĂŝƌƉƌĞƐĞŶƚĂƚŝŽŶ͘ 249 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶƚŚĞƵĚŝƚŽĨƚŚĞ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ;ĐŽŶƚŝŶƵĞĚͿ Auditors’ Responsibilities for the Audit of the Financial Statements (continued) tĞĐŽŵŵƵŶŝĐĂƚĞǁŝƚŚƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞƌĞŐĂƌĚŝŶŐ͕ĂŵŽŶŐŽƚŚĞƌŵĂƚƚĞƌƐ͕ƚŚĞƉůĂŶŶĞĚƐĐŽƉĞĂŶĚƚŝŵŝŶŐ ŽĨƚŚĞĂƵĚŝƚĂŶĚƐŝŐŶŝĨŝĐĂŶƚĂƵĚŝƚĨŝŶĚŝŶŐƐ͕ŝŶĐůƵĚŝŶŐĂŶLJƐŝŐŶŝĨŝĐĂŶƚĚĞĨŝĐŝĞŶĐŝĞƐŝŶŝŶƚĞƌŶĂůĐŽŶƚƌŽůƐƚŚĂƚǁĞŝĚĞŶƚŝĨLJ ĚƵƌŝŶŐŽƵƌĂƵĚŝƚ͘ tĞĂůƐŽƉƌŽǀŝĚĞƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞǁŝƚŚĂƐƚĂƚĞŵĞŶƚƚŚĂƚǁĞŚĂǀĞĐŽŵƉůŝĞĚǁŝƚŚƌĞůĞǀĂŶƚĞƚŚŝĐĂů ƌĞƋƵŝƌĞŵĞŶƚƐƌĞŐĂƌĚŝŶŐŝŶĚĞƉĞŶĚĞŶĐĞ͕ĂŶĚĐŽŵŵƵŶŝĐĂƚĞǁŝƚŚƚŚĞŵĂůůƌĞůĂƚŝŽŶƐŚŝƉƐĂŶĚŽƚŚĞƌŵĂƚƚĞƌƐƚŚĂƚŵĂLJ ƌĞĂƐŽŶĂďůLJďĞƚŚŽƵŐŚƚƚŽďĞĂƌŽŶŽƵƌŝŶĚĞƉĞŶĚĞŶĐĞ͕ĂŶĚǁŚĞƌĞĂƉƉůŝĐĂďůĞ͕ĂĐƚŝŽŶƐƚĂŬĞŶƚŽĞůŝŵŝŶĂƚĞƚŚƌĞĂƚƐŽƌ ƐĂĨĞŐƵĂƌĚƐĂƉƉůŝĞĚ͘ &ƌŽŵƚŚĞŵĂƚƚĞƌƐĐŽŵŵƵŶŝĐĂƚĞĚǁŝƚŚƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞ͕ǁĞĚĞƚĞƌŵŝŶĞƚŚŽƐĞŵĂƚƚĞƌƐƚŚĂƚǁĞƌĞŽĨŵŽƐƚ ƐŝŐŶŝĨŝĐĂŶĐĞŝŶƚŚĞĂƵĚŝƚŽĨƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞĐƵƌƌĞŶƚƉĞƌŝŽĚĂŶĚĂƌĞƚŚĞƌĞĨŽƌĞƚŚĞŬĞLJĂƵĚŝƚŵĂƚƚĞƌƐ͘tĞ ĚĞƐĐƌŝďĞƚŚĞƐĞŵĂƚƚĞƌƐŝŶour auditors’ report unless law or regulation precludes public disclosure about the matter or ǁŚĞŶ͕ŝŶĞdžƚƌĞŵĞůLJƌĂƌĞĐŝƌĐƵŵƐƚĂŶĐĞƐ͕ǁĞĚĞƚĞƌŵŝŶĞƚŚĂƚĂŵĂƚƚĞƌƐŚŽƵůĚŶŽƚďĞĐŽŵŵƵŶŝĐĂƚĞĚŝŶŽƵƌƌĞƉŽƌƚ ďĞĐĂƵƐĞƚŚĞĂĚǀĞƌƐĞĐŽŶƐĞƋƵĞŶĐĞƐŽĨĚŽŝŶŐƐŽǁŽƵůĚƌĞĂƐŽŶĂďůLJďĞĞdžƉĞĐƚĞĚƚŽŽƵƚǁĞŝŐŚƚŚĞƉƵďůŝĐŝŶƚĞƌĞƐƚďĞŶĞĨŝƚƐ ŽĨƐƵĐŚĐŽŵŵƵŶŝĐĂƚŝŽŶ͘ ZĞƉŽƌƚŽŶKƚŚĞƌ>ĞŐĂůĂŶĚZĞŐƵůĂƚŽƌLJZĞƋƵŝƌĞŵĞŶƚƐ tĞǁĞƌĞĂƉƉŽŝŶƚĞĚďLJƚŚŽƐĞĐŚĂƌŐĞĚǁŝƚŚŐŽǀĞƌŶĂŶĐĞŽŶϭϴ:ƵůLJϮϬϮϰƚŽĂƵĚŝƚƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨ WůĂƐƚŝŬĚ͘Ě͘ĨŽƌƚŚĞLJĞĂƌĞŶĚĞĚϯϭĞĐĞŵďĞƌϮϬϮϰ͘KƵƌƚŽƚĂůƵŶŝŶƚĞƌƌƵƉƚĞĚƉĞƌŝŽĚŽĨĞŶŐĂŐĞŵĞŶƚŝƐĨŝǀĞLJĞĂƌƐ͕ĐŽǀĞƌŝŶŐ ƚŚĞƉĞƌŝŽĚĨƌŽŵϯϭĞĐĞŵďĞƌϮϬϮϬƚŽϯϭĞĐĞŵďĞƌϮϬϮϰ͘ tĞĐŽŶĨŝƌŵƚŚĂƚ͗ • ŽƵƌĂƵĚŝƚŽƉŝŶŝŽŶŝƐĐŽŶƐŝƐƚĞŶƚǁŝƚŚƚŚĞĂĚĚŝƚŝŽŶĂůƌĞƉŽƌƚƉƌĞƐĞŶƚĞĚƚŽƚŚĞƵĚŝƚŽŵŵŝƚƚĞĞŽĨƚŚĞ ŽŵƉĂŶLJĚĂƚĞĚϮϰƉƌŝůϮϬϮϱ͖ • ĨŽƌƚŚĞƉĞƌŝŽĚƚŽǁŚŝĐŚŽƵƌƐƚĂƚƵƚŽƌLJĂƵĚŝƚƌĞůĂƚĞƐǁĞŚĂǀĞŶŽƚƉƌŽǀŝĚĞĚĂŶLJƉƌŽŚŝďŝƚĞĚŶŽŶͲĂƵĚŝƚ ƐĞƌǀŝĐĞƐ;E^ƐͿƌĞĨĞƌƌĞĚƚŽŝŶƌƚŝĐůĞϰϰŽĨƚŚĞƵĚŝƚĐƚ͘tĞĂůƐŽƌĞŵĂŝŶĞĚŝŶĚĞƉĞŶĚĞŶƚŽĨƚŚĞĂƵĚŝƚĞĚ ĞŶƚŝƚLJŝŶĐŽŶĚƵĐƚŝŶŐƚŚĞĂƵĚŝƚ͘ The engagement partner on the audit resulting in this independent auditors’ report is Domagoj Hrkać. 250 Independent Auditors’ Report to the ƐŚĂƌĞŚŽůĚĞƌƐŽĨWůĂƐƚŝŬĚ͘Ě͘;ĐŽŶƚŝŶƵĞĚͿ ZĞƉŽƌƚŽŶŽŵƉůŝĂŶĐĞǁŝƚŚƚŚĞ^&ZĞŐƵůĂƚŝŽŶ /ŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐŽĨƌƚŝĐůĞϰϲϮƉĂƌĂŐƌĂƉŚϱŽĨƚŚĞĂƉŝƚĂůDĂƌŬĞƚĐƚ͕ǁĞĂƌĞƌĞƋƵŝƌĞĚƚŽĞdžƉƌĞƐƐ ĂŶŽƉŝŶŝŽŶŽŶĐŽŵƉůŝĂŶĐĞŽĨƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽĨƚŚĞŽŵƉĂŶLJĂƐĂƚĂŶĚĨŽƌƚŚĞLJĞĂƌĞŶĚĞĚϯϭ ĞĐĞŵďĞƌϮϬϮϰ, as included in the attached electronic file “ĂĚƉůĂƐƚŝŬͲĚƌƵƐƚǀŽͲϮϬϮϰͲϭϮͲϯϭͲϬͲĞŶ͘njŝƉ”, ǁŝƚŚƚŚĞ ƌĞƋƵŝƌĞŵĞŶƚƐŽĨƚŚĞŽŵŵŝƐƐŝŽŶĞůĞŐĂƚĞĚZĞŐƵůĂƚŝŽŶ;hͿϮϬϭϵͬϴϭϱŽĨϭϳĞĐĞŵďĞƌϮϬϭϴƐƵƉƉůĞŵĞŶƚŝŶŐŝƌĞĐƚŝǀĞ ϮϬϬϰͬϭϬϵͬŽĨƚŚĞƵƌŽƉĞĂŶWĂƌůŝĂŵĞŶƚĂŶĚŽĨƚŚĞŽƵŶĐŝůǁŝƚŚƌĞŐĂƌĚƚŽƌĞŐƵůĂƚŽƌLJƚĞĐŚŶŝĐĂůƐƚĂŶĚĂƌĚƐŽŶƚŚĞ specification of a single electronic reporting format (the “RTS on ESEF”). ZĞƐƉŽŶƐŝďŝůŝƚŝĞƐŽĨDĂŶĂŐĞŵĞŶƚĂŶĚdŚŽƐĞŚĂƌŐĞĚǁŝƚŚ'ŽǀĞƌŶĂŶĐĞ DĂŶĂŐĞŵĞŶƚŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶĂĚŝŐŝƚĂůĨŽƌŵĂƚƚŚĂƚĐŽŵƉůŝĞƐ ǁŝƚŚƚŚĞZd^ŽŶ^&͘dŚŝƐƌĞƐƉŽŶƐŝďŝůŝƚLJŝŶĐůƵĚĞƐ͗ • ƚŚĞƉƌĞƉĂƌĂƚŝŽŶŽĨƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶƚŚĞĂƉƉůŝĐĂďůĞdž,dD>ĨŽƌŵĂƚĂŶĚƚŚĞŝƌƉƵďůŝĐĂƚŝŽŶ͖ • ƚŚĞƐĞůĞĐƚŝŽŶĂŶĚĂƉƉůŝĐĂƚŝŽŶŽĨĂƉƉƌŽƉƌŝĂƚĞŝyZ>ƚĂŐƐ͕ƵƐŝŶŐũƵĚŐŵĞŶƚǁŚĞƌĞŶĞĐĞƐƐĂƌLJ͖ • ĞŶƐƵƌŝŶŐĐŽŶƐŝƐƚĞŶĐLJďĞƚǁĞĞŶĚŝŐŝƚŝƐĞĚŝŶĨŽƌŵĂƚŝŽŶĂŶĚƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƉƌĞƐĞŶƚĞĚŝŶ ŚƵŵĂŶͲƌĞĂĚĂďůĞĨŽƌŵĂƚ͖ĂŶĚ • ƚŚĞĚĞƐŝŐŶ͕ŝŵƉůĞŵĞŶƚĂƚŝŽŶĂŶĚŵĂŝŶƚĞŶĂŶĐĞŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůƌĞůĞǀĂŶƚƚŽƚŚĞĂƉƉůŝĐĂƚŝŽŶŽĨƚŚĞZd^ŽŶ ^&͘ Those charged with governance are responsible for overseeing the Company’s ESEF reporting, as a part of the financial ƌĞƉŽƌƚŝŶŐƉƌŽĐĞƐƐ͘ ƵĚŝƚŽƌƐΖZĞƐƉŽŶƐŝďŝůŝƚŝĞƐ KƵƌƌĞƐƉŽŶƐŝďŝůŝƚLJŝƐƚŽĞdžƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽŶǁŚĞƚŚĞƌƚŚĞƐĞƉĂƌĂƚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĐŽŵƉůLJ͕ŝŶĂůůŵĂƚĞƌŝĂů ƌĞƐƉĞĐƚƐ͕ǁŝƚŚƚŚĞZd^ŽŶ^&͕ďĂƐĞĚŽŶƚŚĞĞǀŝĚĞŶĐĞǁĞŚĂǀĞŽďƚĂŝŶĞĚ͘tĞĐŽŶĚƵĐƚĞĚŽƵƌƌĞĂƐŽŶĂďůĞĂƐƐƵƌĂŶĐĞ ĞŶŐĂŐĞŵĞŶƚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ/ŶƚĞƌŶĂƚŝŽŶĂů^ƚĂŶĚĂƌĚŽŶƐƐƵƌĂŶĐĞŶŐĂŐĞŵĞŶƚƐϯϬϬϬ;ZĞǀŝƐĞĚͿ͕ƐƐƵƌĂŶĐĞ ŶŐĂŐĞŵĞŶƚƐKƚŚĞƌƚŚĂŶƵĚŝƚƐŽƌZĞǀŝĞǁƐŽĨ,ŝƐƚŽƌŝĐĂů&ŝŶĂŶĐŝĂů/ŶĨŽƌŵĂƚŝŽŶ;/^ϯϬϬϬͿŝƐƐƵĞĚďLJƚŚĞ/ŶƚĞƌŶĂƚŝŽŶĂů ƵĚŝƚŝŶŐĂŶĚƐƐƵƌĂŶĐĞ^ƚĂŶĚĂƌĚƐŽĂƌĚ͘ 251 252 SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 The accompanying accounting policies and notes form an integral part of these separate financial statements. Notes 2024 2023 Sales 4 111,152 89,388 Other income 5 4,877 5,060 Total income 116,029 94,448 Increase/(decrease) in the value of work in progress and finished products 41 (85) Cost of raw material and supplies 6 (45,904) (45,059) Cost of goods sold 7 (27,850) (11,922) Service costs 8 (8,354) (8,900) Staff costs 9 (24,175) (22,708) Depreciation and amortisation 10 (8,290) (7,293) Other operating expenses 11 (4,155) (2,278) Provisions for risks and charges, net 12 (1) 136 Impairment of loans and trade receivables (240) (192) Total operating expenses (118,928) (98,301) Loss from operations (2,899) (3,853) Financial income 13 4,065 5,337 Financial expenses 14 (1,323) (672) Profit from financing activities 2,742 4,665 (Loss)/profit before taxation (157) 812 Income tax expense 15 554 228 Profit for the year 397 1,040 Other comprehensive income - - Total comprehensive income for the year 397 1,040 (All amounts are expressed in thousands of euros) www.adplastik.hr 253 SEPARATE STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2024 ASSETS Note 31.12.2024 31.12.2023 Non-current assets Intangible assets 16 9,278 8,788 Property, plant and equipment 17 69,067 66,491 Right-of-use assets 18 2,146 2,113 Investment property 19 3,217 3,256 Investments in subsidiaries and associates 20 12,987 14,980 Given long-term loans 21 13,709 16,353 Long-term receivables 22 2,222 2,318 Deferred tax assets 15 2,777 2,223 Total non-current assets 115,403 116,522 Current assets Inventories 23 11,294 21,660 Trade receivables 24 21,916 17,029 Other receivables 25 1,977 4,092 Given short-term loans 26 3,267 2,354 Cash and cash equivalents 27 3,046 1,025 Prepaid expenses 476 503 Accrued income 325 343 Total current assets 42,301 47,006 TOTAL ASSETS 157,704 163,528 (All amounts are expressed in thousands of euros) www.adplastik.hr 254 SEPARATE STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2024 (CONTINUED) The accompanying accounting policies and notes form an integral part of these separate financial statements. Note 31.12.2024 31.12.2023 Share capital 28 54,595 54,595 Capital and other reserves 35,762 35,480 Retained earnings/(loss brought forward) 1,188 1,040 Total shareholders’ equity 91,545 91,115 Long-term provisions 29 369 385 Long-term borrowings 30 16,178 27,899 Deferred revenue 31 1 38 Lease liabilities 32 1,200 1,346 Total non current liabilities 17,748 29,668 Advances received 33 878 5,339 Trade payables 34 18,630 16,906 Short-term borrowings 35 24,466 17,053 Other current liabilities 36 2,622 1,936 Lease liabilities 32 985 793 Short-term provisions 29 830 718 Total current liabilities 48,411 42,745 Total liabilities 66,159 72,413 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 157,704 163,528 (All amounts are expressed in thousands of euros) www.adplastik.hr 255 Share capital Capital reserves General and legal reserves Reserves for own (treasury) shares Own (treasury) shares Retained earnings (loss brought forward) Total Balance at 31 December 2022 55,738 25,402 7,694 2,773 (921) (642) 90,044 Loss for the year - - - - - 1,040 1,040 Total comprehensive (loss) for the year - - - - - 1,040 1,040 Coverage of the previous year’s loss - (642) - - - 642 - Disposal of own (treasury) shares - (19) - - 50 - 31 Correction of the Share capital due to EUR conversion (1,143) 1,143 - - - - - Transactions with the owners of the Company (1,143) 482 - - 50 642 31 Balance at 31 December 2023 54,595 25,884 7,694 2,773 (871) 1,040 91,115 Share capital Capital reserves General and legal reserves Reserves for own (treasury) shares Own (treasury) shares Retained earnings Total Balance at 31 December 2023 54,595 25,884 7,694 2,773 (871) 1,040 91,115 Profit for the year - - - - - 397 397 Total comprehensive income for the year - - - - - 397 397 Release of reserves for own (treasury) shares - - - (1,979) - 1,979 - Disposal of own (treasury) shares - (45) - - 78 - 32 Transactions with the owners of the Company - (45) - (1,979) 78 1,979 32 Reserves for not written off costs of development - - 2,229 - - (2,229) - Balance at 31 December 2024 54,595 25,839 9,923 794 (794) 1,188 91,545 SEPARATE STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024 (All amounts are expressed in thousands of euros) The accompanying accounting policies and notes form an integral part of these separate financial statements. www.adplastik.hr 256 SEPARATE STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2024 (All amounts are expressed in thousands of euros) CASH FLOWS FROM OPERATING ACTIVITIES Notes 2024. 2023. Profit for the year 397 1,040 Adjusted for: Income tax 15 (554) (228) Depreciation and amortisation 10 8,290 7,293 Tangible assets write-off 17 151 138 Intangible assets impairment/write-off 16 - 43 Interest expense and exchange rates recognized in profit or loss 14 1,322 652 Dividend income 13 (3,470) (4,960) Gain from sale of property, plant and equipment and intangible assets 5 (2,055) (3,455) Value adjustments of investment in property 5 - (329) Interest income 13 (595) (377) Decrease in long-term and short-term provisions, (net) 97 (201) Impairment of loans given (net) 232 164 Impairment of trade receivables 8 27 Obsolete stock write-off 6 188 364 Impairment of related parties investment 11 1,993 - Profit from operations before working capital changes 6,004 171 Decrease/(increase) in inventories 23 10,178 (8,991) (Increase) in current trade receivables (1,093) (5,549) Decrease/(increase) in other receivables 25 2,116 (2,090) Increase in trade payables 1,720 2,913 (Decrease)/increase of advances received 33 (4,461) 1,958 Increase in other current liabilities 783 85 Decrease of accrued income and prepaid expenses 46 213 Interest paid (1,352) (563) Cash flows from operating activities 13,942 (11,853) www.adplastik.hr 257 SEPARATE STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2024 (CONTINUED) (All amounts are expressed in thousands of euros) CASH FLOWS FROM INVESTING ACTIVITIES Notes 2024 2023 Interest received - 121 Cash receipts from repayment of loans 2,093 1,125 Purchase of property, plant and equipment 17 (8,359) (3,937) Purchase of intangible assets 16 (2,989) (3,412) Proceeds from sale of property, plant and equipment and intangible assets 2,092 4,492 Dividends received 618 4,341 Cash from/(used) from investing activities (6,545) 2,730 Cash flows from financing activities Notes 2024 2023 Proceeds from borrowings 35 21,398 34,051 Repayment of borrowings 35 (26,172) (25,874) Repayment of lease principal 32 (995) (1,015) Cash from/(used) in financing activities (5,769) 7,162 Unrealised exchange rate differences in respect of cash and cash equivalents - - - Increase/(decrease) in cash and cash equivalents 27 1,627 (1,961) Cash and cash equivalents at the beginning of the year 27 418 2,378 Cash and cash equivalents at the end of the year 27 2,045 418 The accompanying accounting policies and notes form an integral part of these separate financial statements. www.adplastik.hr 258 The following new standards, interpretations, and amend- ments to existing standards are mandatory for periods begin- ning on 1 January 2024: ■ Amendments to IAS 1 Presentation of Financial State- ments: Classification of Liabilities as Current or Non-cur- rent, Long-term Liabilities in Agreements ■ Amendments to IFRS 16 Leases: Lease Liability in Sale and Leaseback Transactions ■ Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Ar- rangements The adoption of these standards did not have a significant im- pact on the amounts recognized in the statement of financial position or the statement of comprehensive income, nor on the disclosed accounting policies. The following new standards, interpretations, and amend- ments to existing standards issued by the IASB and adopt- ed by the EU are still not in effect or have not been adopted by the EU. If applicable, the Company intends to adopt these standards when they become effective. ■ Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Exchangeability Issues ■ Amendments to the Classification and Measurement of Fi- nancial Instruments (IFRS 7 and IFRS 9): Classification of Financial Assets, Payment Settlement via Electronic Means ■ IFRS 1, IFRS 7, IFRS 9, IFRS 10, IAS 7 Annual Improvements to IFRS Standards 2011-2013 Cycle: Clarifications, Simpli- fications, Corrections, and Amendments to Improve Con- sistency of the aforementioned IFRSs ■ IFRS 18 Presentation and Disclosure in Financial State- ments: New Standard ■ IFRS 19 Parent-Subsidiary Relations with No Public Ac- countability - Disclosures: New Standard Set out below are the principal accounting policies consist- ently applied in the preparation of the financial statements for the current and prior year. 2.1 STATEMENT OF COMPLIANCE The separate financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the European union. 2.2 BASIS OF PREPARATION The Company maintains its accounting records in the Croatian language, in euro and in accordance with Croatian laws and the accounting principles and practices observed by enterprises in Croatia. The preparation of the separate financial statements requires from the Management Board to make estimates and assump- tions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 1. NEW STANDARDS AND AMANDMENTS TO EXISTING NOT YET ADOPTED NOTES TO THE SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES www.adplastik.hr 259 2.2 BASIS OF PREPARATION (CONTINUED) These estimates are based on the information available as at the date of preparation of the separate financial statements, and actual results could differ from those estimates. The separate financial statements of the Company represent aggregate amounts of assets, liabilities, capital and reserves of the Company as of 31 December 2024, and the results of operations for the year then ended. The Company also prepares its consolidated financial state- ments in accordance with International Financial Reporting Standards adopted by EU, which include the financial state- ments of the Company, as the parent, and the financial state- ments of the subsidiaries controlled by the Company. In these financial statements, investments in entities controlled by the Company or in which the Company has significant influence are carried at cost less impairment, if any. For a full under- standing of the financial positions of the Company and its subsidiaries, as a group, and of the results of their operations and their cash flows for the year, users are advised to read the consolidated financial statements of the Group AD Plastik d.d. Details of the investments in subsidiaries and associates are presented in Note 20. The financial statements are presented in euro (EUR). All amounts presented in the financial statements are expressed in thousands of euros unless otherwise stated, and there may be differences of 1 in the totals due to rounding. 2.3 REVENUE RECOGNITION Revenue is measured based on the consideration specified in a contract with a customer. Contract exists only if it is legally enforceable and meets all of the following criteria: ■ the contract is approved and the parties are committed to their obligations, ■ the rights to goods and services and payment terms can be identified, ■ the contract has commercial substance, and ■ collection of consideration is probable. Definition of contract as stated above is by combining the clauses of following documentation: Buyer’s General Terms and conditions, Nomination letter, Purchase agreement and Purchase order. The Company has contracts with Buyers (OEM) as Tier 1, with buyer’s suppliers as Tier 2, with subsid- iaries and associates. Contracts exists for sales of following goods and services: ■ product sale, ■ tooling sale, ■ R&D activities ■ royalty services, ■ technical and engineering services Contracts do not commit the customer to a specified quan- tity of products; however, the Company is generally required to fulfill its customers’ purchasing requirements for the pro- duction life of the vehicle. Contracts do not typically become a performance obligation until the Company receives either a purchase order for a specific number of parts at a speci- fied price. Long-term agreements with customers for specific product may range from five to seven years, contracts may be terminated by customers at any time, while occurred very rarely. The Company’s customers pay for products received in ac- cordance with payment terms that are customary in the in- dustry, typically 60 to 120 days. The Company’s contracts with its customers do not have significant financing compo- nents. Tooling and product sales may be contracted in separate agreements, or concluded at different points in time, or may be contracted in one agreement. In either case any binding obligation for the customer with respect to parts is created only upon issuance of purchase orders. Revenue from tooling sale and product sale is recognized at point in time when the control is passed on Buyer. The Company has determined that royalty and technical sup- port services, tooling and the delivery of product parts are separate and distinct for the customer and therefore consti- tute separate performance obligations under IFRS 15, when the ownership is transferred. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 260 The prices agreed in the contracts for the single performance obligations are considered to be the stand-alone. The company, in contracts with variable consideration, as- sesses whether there is an obligation to return the consider- ation to the customer and includes a portion of the variable consideration only if it is highly probable that there will not be a significant reversal of the total recognized revenue after resolving the uncertainties related to the variable consider- ation. The company considers a contract modification to have oc- curred when there is a change in the scope or price of the contract, or both, which is approved by the contracting par- ties. The company considers that a contract modification ex- ists when the contracting parties approve a modification that establishes new enforceable rights and performance obliga- tions, or changes the existing ones. The company recognizes a contract modification as a separate contract if the scope of the contract increases due to the addition of promised goods or services that are distinct from the previous ones, and if the contract price increases by an amount of consideration that reflects the selling prices of the additional promised goods or services and all appropriate adjustments to that price to reflect the circumstances of the contract. The company rec- ognizes a contract modification as part of the existing con- tract if the remaining goods or services are not distinct and therefore form part of a single performance obligation, which is partially fulfilled on the date of the contract modification Revenue from sale of products Product sales are recognized when the products are delivered to, and accepted by the customer and when the control of a product is transferred to the customer. Sales to customers with whom self- invoicing has been arranged are recognized upon receiving from such a customer the confirmation of de- livery, i.e. when control is transferred to the customer. Each delivery is considered as performance obligation that is satis- fied at point in time. Some of the Company’s contracts include variable consideration which take a form of year-to-year price reductions („productivity“), but Company has concluded that those discounts do not give rise to a material right as those decreases are consistent with pricing pattern in automotive industry which takes into consideration learning curve effect. Some contracts with customers include warranty clauses for repair of faulty goods during a specified long term period and cover of only a product’s compliance with agreed specifica- tions. Such warranties granted by the Company are in most cases assurance type warranties recognized in accordance with IAS 37 when the control of product transfers to custom- ers. Revenue from tools Revenues from tools are matched with contracts that are specifically concluded for developing an asset, or a group of assets, closely linked and interdependent on the design, technology and function or their final use or application. The company estimates that the transfer of control of tools, gaug- es and other devices is met at the time of „SOP“ (Start Of Pro- duction), i.e. start of the mass production on them. At that point Company recognizes revenue from the sale of tools. Costs of modification, completion and similar tool costs Com- pany recognizes as an increase in inventory value. Revenue from royalty and technical services Company generates revenues from licenses by concluding contracts with affiliates to whom it sells the right to use in- tellectual property calculated on the amount of products pro- duced by these companies, and for which products the Com- pany has carried out development activities. Revenue from licenses is recognized at the time of execution, according to the quantities of products produced by the cus- tomer. Company generates revenues from technical services on the basis of contracts it has with affiliated companies to which it provides technical-administrative consulting services. Revenue from royalty is recognized at the time of execution based on the generated sales of customers while revenue for technical-administrative support and consultancy services is recognized over time based on when the service is rendered. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.3 REVENUE RECOGNITION (CONTINUED) www.adplastik.hr 261 2.4 BORROWING COSTS Borrowing costs directly attributable to the acquisition, con- struction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs that cannot be directly attributable to ac- quisition, construction or production of qualifying asset, are capitalised applying a capitalisation rate. Capitalisation rate is weighted average of borrowing costs applicable to the gen- eral borrowings, excluding borrowing costs that are directly attributable for acquisition of qualifying asset, until substan- tially all the activities necessary to prepare that asset for its intended use or sale are completed. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for cap- italisation. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. 2.5 FOREIGN-CURRENCY TRANSACTIONS Transactions in foreign currencies are translated into euros at the rates of exchange in effect at the dates of the trans- actions. Cash, receivables and payables denominated in for- eign currencies are retranslated at the rates of exchange in effect at the date of the statement of financial position. Gains and losses arising on translation are included in the statement of comprehensive income for the year. 2.6 INCOME TAX Current taxes Income tax expense is based on taxable profit for the year and represents the sum of the tax currently payable and deferred tax. Income tax is recognized in the statement of comprehensive income, except where it relates to items rec- ognized directly in equity, in which case it is also recognized in equity. Current tax represents tax expected to be paid on the basis of taxable profit for the year, using the tax rates en- acted at the date of the statement of financial position, ad- justed by appropriate prior-period tax liabilities. The income tax rate for year 2024 and 2023 amounts to 18%. Deferred taxes Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial re- porting purposes and the amounts used for taxation purpos- es. Deferred tax assets and liabilities are measured at the tax rate expected to apply to taxable profit in the period in which the liability is expected to be settled or the asset real- ised, based on the tax rates in effect at the date of the state- ment of financial position. The income tax rate applicable to deferred tax assets is 18 %. The measurement of deferred tax liabilities and assets re- flects the amount that the Company expects, at the date of the statement of financial position, to recover or settle the carrying amounts of its assets and liabilities. Deferred tax assets and liabilities are not discounted and are classified in the statement of financial position as non-cur- rent assets and/or non-current liabilities. Deferred tax as- sets are recognized only to the extent that it is probable that the related tax benefit will be realized. At each date of the statement of financial position, the Company reviews the unrecognized potential tax assets and the carrying amount of the recognized tax assets. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company in- tends to settle its current tax assets and liabilities. In the case of a business combination, the tax effect is tak- en into account in calculating goodwill or in determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent lia- bilities over cost. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 262 Property, plant and equipment as well as intangible assets are recognized at purchase cost and subsequently reduced by accumulated depreciation. Intangible asset represent capitalized development costs of all Company’s projects. Intangible assets Projects (which mainly refers to mod- els, designs, and prototypes for auto parts developed by the Company) is depreciated according to its useful life which varies from 2 to 7 years. The purchase cost com- prises the purchase price, import duties and non-refund- able sales taxes (for property, plant and equipment) and any directly attributable costs of bringing an asset to its working condition and location for its intended use, such as employee remuneration, professional fees directly aris- ing from putting an asset into its working condition, test costs (for intangible assets), as well as all other costs di- rectly attributable to bringing an asset to a condition for its intended use. Maintenance and repairs, replacements and improvements of minor importance are expensed as incurred. Where it is obvious that expenses incurred result- ed in an increase of expected future economic benefits to be derived from the use of an item of property, plant and equipment or intangible assets in excess of the original- ly assessed standard performance of the asset, they are added to the carrying amount of the asset. Gains or losses on the retirement or disposal of property, plant and equip- ment or intangible assets are included in the statement of comprehensive income in the period in which they occur. Depreciation commences on putting an asset into use. The Company reviews the estimated useful life of assets at the end of each year. Depreciation is provided so as to write down the cost or revalued amount of an asset other than land, property, plant and equipment and intangible assets under develop- ment over the estimated useful life of the asset using the straight-line method as follows: Depreciation rates in 2024 (%) Depreciation rates in 2023 (%) Buildings 1.50 1.50 Machinery 7.00 – 10.00 7.00 – 10.00 Tools, furniture, office and laboratory equipment, measuring and control instruments 7.00 – 50.00 7.00 – 50.00 Vehicles 20.00 20.00 IT equipment 10.00 – 20.00 10.00 – 20.00 Others 10.00 10.00 Intangible assets - Projects 14.29 – 50.00 14.29 – 33.33 Software 20.00 – 50.00 20.00 – 50.00 2.7. PROPERTY, PLANT, EQUIPMENT AND INTANGIBLE ASSETS 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 263 2.8 IMPAIRMENT OF NON-FINANCIAL ASSETS At each reporting date the Company reviews the carrying amounts of its impairment of non-financial assets (In- ventories and Defferred Tax Asset excluded) to determine whether there is an indication that the assets have suf- fered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recovera- ble amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of al- location can be identified, The Company’s assets are also allocated to individual cash-generating units or, if this is not possible, they are allocated to the smallest group of cash-generating units for which a reasonable and consist- ent allocation basis can be identified. 2.9 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES A subsidiary is an entity over which the Company has ef- fective control over financial and operating policy deci- sions of the Company. The results, assets and liabilities of subsidiaries are incorporated in these separate financial statements using the cost method of accounting. An associate is an entity over which the Company has sig- nificant influence and usually an ownership interest from 20 to 50 percent, but no control over the entity. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is not con- trol or joint control over those policies. The results of op- erations of associates are incorporated in these financial statements using the cost method of accounting. 2.10 INVENTORIES Inventories of raw material and spare parts are stated at the lower of cost and net realisable value, whichever is lower. Cost is determined using the weighted-average cost method. Net realisable value represents the estimated sell- ing price in the ordinary course of business less all variable selling costs. Small inventory is written off when put in use. The cost of product inventories i.e. the production price is based on direct material used, the cost of which is determined us- ing the weighted average cost method, then direct labour costs and fixed overheads at the actual level of produc- tion which approximates the normal capacities, as well as variable overheads that are based on the actual use of the production capacities. Inventories of goods are recognized at the cost of acquiring the inventories, which include the purchase price, import duties and other non-recoverable taxes, transportation costs, and other costs directly attrib- utable to the acquisition of finished goods or materials. 2.11 OTHER TRADE RECEIVABLES AND PREPAYMENTS Other trade receivables and prepayments represent receiv- ables and prepayments that are not included in financial instruments, and they are carried at nominal amounts less an appropriate allowance for impairment for estimated ir- recoverable amounts. The Company impairs the carrying amount of receivables in the same way as the impairment of financial assets. 2.12 CASH AND CASH EQUIVALENTS Cash comprises account balances with banks, cash in hand, and deposits at call or with maturities of less than three months. 2.13 PROVISIONS Provisions are recognized when the Company has a pres- ent obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources will be required to settle the obliga- tion, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each date of the statement of financial position and adjusted to reflect the current best estimate. Where the effect of discounting is material, the amount of the provision is the present value of the ex- penditures expected to be required to settle the obligation, determined using the estimated interest rate specific for obligation as the discount rate. Where discounting is used, the reversal of such discounting in each year is recognized as a financial expense and the carrying amount of the pro- vision increases in each year to reflect the passage of time. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 264 The amount recognized as a provision is the best estimate of the consideration required to settle the present obliga- tion at the date of the statement of financial position, tak- ing into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Provisions for litigation losses represents provisions relat- ing to litigation against the Company from regular commer- cial operations and from disputes with former employees. Provisions for unused vacation days are calculated on the basis of the remaining days of the vacation days that employees have made in the current year, multiplied by amount of gross daily wage. 2.14 TERMINATION, LONG-SERVICE AND OTHER EMPLOYEE BENEFITS (a) Pension-related obligations In the normal course of business, the Company makes pay- ments, through salary deductions, to mandatory pension funds on behalf of its employees, as required by law. The contributions paid to the mandatory pension funds are recognized as salary expense when accrued. The Compa- ny does not have any other retirement benefit plan and, consequently, has no other obligations in respect of the retirement benefits for its employees. In addition, the Com- pany is not obliged to provide any other post-employment benefits. (b) Long-term employee benefits Long-term employee benefits represent jubilee awards and post employment benefit obligations. Post employment benefit obligations falling due more than 12 months after the reporting date are discounted to their present value. Jubilee awards are paid in intervals according to time that employee was working for Company. The cost of providing benefits is determined using the Pro- jected Unit Credit Method, with actuarial valuations be- ing carried out at each reporting date. Actuarial gains and losses are recognized in the period in which they arise. Past service cost is recognized immediately to the extent that entitlement to benefits has already been acquired. Otherwise, it is amortized proportionately over a period of time until the right to receive benefits is acquired. 2.15 FINANCIAL INSTRUMENTS Financial assets Trade receivables are initially recognized when they are origi- nated. All other financial assets are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade re- ceivable without a significant financing component is initially measured at the transaction price. On initial recognition, a financial asset is classified as meas- ured at amortized cost. Financial assets are not reclassified subsequent to their in- itial recognition unless the Company changes its business model for managing financial assets, in which case all affect- ed financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial assets is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: ■ it is held within a business model whose objective is to hold assets to collect contractual cash flows; ■ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.13 PROVISIONS (CONTINUED) www.adplastik.hr 265 Business model assessment The Company makes an assessment of the objective of the business model in which a financial asset is held at a port- folio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: ■ the stated policies and objectives for the portfolio and the operation of those policies in practice. These in- clude whether management’s strategy focuses on earn- ing contractual interest income, maintaining a particular interest rate profile, matching the duration of the finan- cial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets; ■ how the performance of the portfolio is evaluated and reported to the Company’s management; ■ the risks that affect the performance of the business model (and the financial assets held within that busi- ness model) and how those risks are managed; ■ how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; ■ the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity. Accounts re- ceivable are held in the business model of holding for collection. Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, relevant for the pur- pose of classifying financial assets at amortized cost, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associ- ated with the principal amount outstanding during a par- ticular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing the main criterion, i.e. whether the contrac- tual cash flows are solely payments of principal and inter- est, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. The structure of the Company’s financial assets is simple and primarily relates to trade receivables without a signifi- cant financial component and loans given. Subsequent measurement and gains and losses Financial assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, for- eign exchange gains and losses and impairment are recog- nized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. Financial liabilities Debt securities are initially recognized when they are orig- inated. All other financial liabilities are initially recognized when the Company becomes a party to the contractual pro- visions of the instrument. A financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are direct- ly attributable to its acquisition or issue. Financial liabilities are measured at amortized cost. A fi- nancial liability is classified as measured at amortized cost using the effective interest method. Interest expenses and exchange differences are recognized within profit or loss. Any gain or loss on derecognition is also recognized within profit or loss. 2.15 FINANCIAL INSTRUMENTS (CONTINUED) 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 266 The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liabil- ity when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is rec- ognized at fair value. On derecognition of a financial liability, the difference be- tween the carrying amount extinguished and the consider- ation paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss. Impairment of non-derivative financial assets The Company recognizes loss allowances for expected credit loss (ECLs) on financial assets measured at amor- tized cost. Loss allowances for trade receivables are always meas- ured at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial as- set has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantita- tive and qualitative information and analysis, based on the Company’s historical experience and informed credit as- sessment and including forward-looking information. The Company assumes that the credit risk on a financial asset has increased significantly if early warning indica- tors have been activated in accordance with the Compa- ny’s policy or contractual terms of the instrument. The Company considers a financial asset to be fully or par- tially in default if: ■ the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); ■ the financial asset is more than 360 days past due based on historical experience of average market participant. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instru- ment. 12-month ECLs are the portion of ECLs that result from de- fault events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk. Measurement of expected credit losses In accordance with IFRS 9, assets that are carried at am- ortized cost must have attributed excepted credit losses (ECL). Formula for calculating yearly ECL is the following: Probability od default (PD) x Loss given default (LGD) x Ex- posure at default (EAD). Company used publicly available information to model ECL for loans, as follows: Probability of default: Company used latest available Moody’s Annual Default Study. Marginal PD for automotive industry was used for every year. 2.15 FINANCIAL INSTRUMENTS (CONTINUED) 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 267 Probability of default used in calculation is shown in the table below: Loss given default: Company used latest available Moody’s Annual Default Study. It was calculated using annual default recoveries percentage. LGD used in 2024 is 62.33% (in 2023: 60.53%). Exposure at default: Company calculated it internally tak- ing into account annually repayment schedule for loans for every year of repayment. Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset or liability, and of allocating interest income over the relevant period. The ef- fective interest rate is the rate that exactly discounts es- timated future cash payments through the expected life of the financial asset or liability, or, where appropriate, a shorter period. Impairment of financial assets Financial assets are assessed for indications of impair- ment at each date of the statement of financial position. A financial asset are impaired where there is objective evi- dence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the esti- mated future cash flows of the investment have been im- pacted. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the expected credit losses. Impairment loss on a financial asset is recognized by re- ducing the carrying amount of the asset through the use of an allowance account. When a trade receivable is un- collectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Derecognition of financial assets The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset have expired, when the asset is transferred and when substan- tially all the risks and rewards of ownership of the asset are passed onto another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred as- set, the Company recognizes its retained interest in the as- set and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. Classification as financial debt or equity Debt and equity instruments are classified as either fi- nancial liabilities or as equity in accordance with the sub- stance of the underlying contractual arrangement. Interest income Interest income is recognized on a pro rata temporis basis, using the effective interest method. Interest earned on bal- ances with commercial banks (demand and term deposits) is credited to income for the period as it accrues. Interest on trade receivables is recognized as income when accrued. 2.15 FINANCIAL INSTRUMENTS (CONTINUED) 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) Years Cumulative proba- baility of default Marginal probability of default 1 2.3% 2.3% 2 4.5% 2.3% 3 6.7% 2.2% 4 8.7% 2.0% 5 10.6% 1.9% 6 12.4% 1.8% 7 13.9% 1.6% 8 15.5% 1.5% 9 16.9% 1.4% 10 17.9% 1.0% www.adplastik.hr 268 2.16 CONTINGENCIES Contingent liabilities have not been recognized in these sep- arate financial statements. They are disclosed if the possi- bility of outflow of resources embodying economic benefits is possible. A contingent asset is not recognized in financial statements, but it is disclosed when the inflow of economic benefits becomes probable. 2.17 EVENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION Events after the date of the statement of financial position that provide additional information about the Company’s po- sition at that date (adjusting events) are reflected in the fi- nancial statements. Subsequent events that are not adjust- ing events are disclosed in the notes to the separate financial statements when material. 2.18 SEGMENT REPORTING In separate financial statements the Company discloses sales revenues grouped by country (Note 4). When assessing business performance and making decisions on the allocation of resources in accordance with IFRS 8 the Company’s Management Board uses the division into two op- erating segments: EU, UK and Serbia and Russia. In the con- solidated financial statements the Group’s financial results, assets and liabilities are disclosed for above mentions oper- ating segments. 2.19 LEASES At inception of a contract, Company assesses whether a contract is, or contains lease. A contract is, or contains a lease, if the con- tract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess wheth- er a contract conveys the right to control the use of an identified asset, Company uses the definition of a lease in IFRS 16. Leases are recognized by the present value of the lease pay- ments and showed either as right-of-use assets or together with property, plant and equipment. Company also recognizes a fi- nancial liability representing its obligation to make future lease payments. Lessees are recognized separately interest expense on the lease liability and the depreciation expense on the right- of-use asset. Lessees are also required to re-measure lease liability due to certain events (e.g. a change in lease term, a change in future lease payments, resulting from a change in an index or discount- ing rate). The standard includes two recognition exemptions for lessees: „low-value“ leases (e.g. tablets and personal computers) and „short-term“ leases (leases which ends within 12 months). Low-value leases are considers assets with value lower than EUR 4,000. Right-of-use assets and lease liabilities will be reported sepa- rately in the statement of financial position. The Company has elected not to apply the requirements of IFRS 16 for low-value leases (e.g. printers) and short-term leases (e.g. apartments). Detailed movement of right of use assets are pre- sented in Note 18 and movements of lease liability in Note 33. 2.20 GRANTS Company recognizes grants as income over the period nec- essary to match them with related costs, for which they are intended to compensate on a systematic basis. Receivables from government to reimburse expenses that have already been incurred are recognized in profit or loss in the period in which the receivable is incurred, and these grants are deducted from related expenses in financial state- ments. 2.21 INVESTMENT PROPERTY Investment property is property held by the Company to earn rentals or for capital appreciation or for both, but not for sale in the ordinary course of business or for administrative pur- poses. Investment property is measured initially at its cost, includ- ing transaction costs. Subsequently, investment property is stated at cost less accumulated depreciation and any impair- ment loss. Investment property is depreciated on a straight-line basis at the rate of 1.5%. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 269 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company’s accounting policies, which are described in Note 2, the Management Board is required to make judgements, estimates and assumptions about the carry- ing amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are consid- ered to be relevant. Actual results may differ from those esti- mates. The estimates and underlying assumptions are continual- ly reviewed. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods.The key are- as of estimation in applying the Company’s accounting policies that had a most significant impact on the amounts recognized in the financial statements were as follows: Revenue from the sale of tools Tools are custom made for the customer and cannot be used for other purposes. In accordance with the automotive prac- tice, those contracts may differ with respect to the develop- ment of tools and transfer of the title to the customer. In such cases, the Company determines whether tool arrangements are sale, lease or development of own equipment, whether this is a lease arrangement and whether it is separate from the sale of car parts. The Company has assessed that the sale of car parts is a sep- arate performance obligation from the sale of tools since the customer has the control over the use of tool and uncondi- tional right for payment upon the transfer of control of tool to the customer. Additionally, the development of the tool is not integrated with the production of parts to produce a com- bined output and those two are not interrelated as tool can be Investment property is derecognized when either it has been disposed of or permanently withdrawn from use or no future economic benefits are expected from its disposal. sold without affecting the sale of car parts. The contract for the sale of tools and the contract for the sale of auto parts are separate contracts, which should not be combined because there are two different performance obligations, which can also be seen from the fact that the prices for the tools are not linked to the contract for the sale of auto parts. In addition, although in production of parts the Company may continue to use tools that it sold to customers, the Company has concluded that its arrangements do not contain a lease. Recoverability of investments in subsidiaries At the end of each reporting period, the Company carries out the process of identifying indicators that would indicate that the value of investments in subsidiaries and associates (shown in Note 20) is potentially impaired and, if such indi- cators are identified, the Company assesses the recoverable amount of the investment through impairment testing. When implementing the process of identification of impair- ment indicators, the Company considers a number of factors. Depending on the circumstances, a single factor by itself or several of them in combination may result in an indication of impairment. Unfavourable developments in the industry, such as the recent COVID 19 pandemic or macroeconomic distur- bances due to the war in Ukraine, which led to challenges in supply chains and the lack of necessary quantities of semi- conductors, as a rule, result in the implementation of impair- ment tests if there is noticeable significant impact on the op- erating results of subsidiaries and associates. In addition to the above, the Company monitors the key performance indi- cators of subsidiaries, the most important of which are real- ized operating margins and net assets of subsidiaries. Any gains or losses on the retirement or disposal of invest- ment property are recognized in the income statement in the year of retirement or disposal. 2.21 INVESTMENT PROPERTY (CONTINUED) 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) www.adplastik.hr 270 Operating margins of subsidiaries are annually compared with available market multipliers for the valuation of sim- ilar companies in the industry to determine if they deviate significantly, which would indicate the need to perform a de- tailed impairment test. Additionally, negative or insufficient net assets of a subsidiary also typically indicate the need to perform an impairment test. When the Company concludes for a particular investment that one factor by itself or several of them in combination result in an indication of impairment, a detailed impair- ment test and assessment of the recoverable value of the investment is prepared. As a rule, the discounted cash flow method (DCF method) is used to make an investment as- sessment, which is based on the assumption that the value of the company represents the present value of future net cash flows. When calculating the recoverable amount, as a rule, the Company applies the terminal growth rate of cash flows after a three-year period and discounts such cash flows using a discount rate that reflects the risk of the as- set in question and which, for the purpose of calculating the impairment test, is approximated by the weighted average cost of capital (WACC) related to the primary sales market of individual subsidiary and industry. Impairment tests are also tested for sensitivity to changes in key variables such as the discount rate, growth rate, and similar. During 2024, the Company identified indicators of impair- ment related to its investments in subsidiary companies ADP d.o.o., Mladenovac and AD Plastik Tisza, and conduct- ed detailed impairment tests on the investments and loans provided. The cash flow projections for the company ADP Plastik Tisza included specific estimates for a three-year period, based on new customer contracts that were agreed upon, announced, or under negotiation, considering planned cap- ital investments and required working capital, along with a terminal growth rate after this period. The estimated growth in operating cash flows for the three-year period was 12.24 percent. The terminal growth rate was determined in accordance with market assumptions and was estimated by the Company at 3%, while the discount rate applied was 9.4%. The impairment test did not indicate a need for an im- pairment of the investment. Regarding the sensitivity of the impairment tests to changes in key variables, sensitivity analysis shows that a reasona- bly expected change in one of the key variables (terminal growth rate and weighted average cost of capital), with the other variable remaining unchanged, does not result in an impairment of the investment in the subsidiary ADP Plastik Tisza. A reasonable change in the key variables, as consid- ered by the management, is a change of 50 basis points. An increase in the discount rate used in the impairment model of more than 1.47 percentage points, with other var- iables unchanged, results in the need to decrease the value of the investment in the company ADP Plastik Tisza. By re- ducing the terminal growth rate by 1.36 percentage points with other variables unchanged, it results in the need to re- duce the value of the investment in the company ADP Plas- tik Tisza. The recoverable amount of initial investments and given loans to ADP d.o.o., Mladenovac is equal to the fair value of the net assets, less costs to sell, based on market and com- parable asset prices (level 2 in determining fair value). When estimating the fair value of the asset, prices for comparable assets on the market were used, which were additionally ad- justed taking into account the condition and location of the asset and the Company’s estimate of the total costs that would be required to sell the valued asset. The Company es- timated the costs to sell, depending on the type of asset, based on market conditions, historical experience and other relevant factors. Total effect of the impairment of investments in ADP d.o.o., Mladenovac and loans given to ADP d.o.o., Mlade- novac is presented in the statement of comprehensive in- come as follows: 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED) Impairment item Position in the Profit and Loss Statement Amount Impairment of investment in ADP d.o.o., Mladenovac Other operating expenses – Note 11 1,993 Impairment of loans given to ADP d.o.o., Mladenovac Impairment of loans and trade receivables 292 2,285 www.adplastik.hr 271 Measurement of fair values Certain Company’s accounting policies and disclosures re- quire the measurement of fair values, for non-financial as- sets. The Company has an established control framework with re- spect to fair value measurement which assumes the overall responsibility of the Management Board and finance depart- ment in relation to the monitoring of all significant fair val- ue measurements and consultation with external experts. Fair values are measured using information collected from third parties in which case the Board and the finance depart- ment assess whether the evidence collected from third par- ties support the conclusion that such valuations meet the requirements of IFRSs, including the level in the fair value hierarchy where such valuations should be classified. Fair values are categorised into different level in a fair value hierarchy based on the inputs used in the valuation tech- niques as follows: ■ Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. ■ Level 2 – inputs other than quoted prices included in level 1, that are observable for the asset or liability either di- rectly (ie as prices) or indirectly (ie derived from prices). ■ Level 3 – input variables for assets or liabilities that are not based on observable market data (unobservable in- puts). The fair value of financial instruments traded in active mar- kets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agen- cy, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The fair val- ue of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is deter- mined by using valuation techniques. These valuation tech- niques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in lev- el 2. If one or more significant inputs are not based on observable market data, the fair value estimate is included in level 3. Going concern assumption The Company reported a net profit for the year ended De- cember 31, 2024, of EUR 397 thousand (2023: profit of EUR 1,040 thousand). As of December 31, 2024, the Company’s current liabilities exceeded its current assets by EUR 6,110 thousand (December 31, 2023: current assets exceeded cur- rent liabilities by EUR 4,261 thousand). According to Note 35, it is evident that in 2025, EUR 17,056 thousand of long- term loans will mature, and as a result, the Company has already initiated discussions with banks in 2024 to restruc- ture the maturity of its short-term loan obligations. In Feb- ruary 2025, an agreement was successfully concluded and executed with the Company’s main creditors regarding the maturity of short-term loan obligations totaling EUR 9,390 thousand, which will mature beyond one year. The remaining amount of short-term liabilities under long-term loans will be repaid in 2025 in accordance with the repayment plans, while short-term loans (revolving lines and overdrafts) in the amount of EUR 7,302 thousand will, in accordance with es- tablished practice, be extended for an additional year. The going concern assumption is based on the Manage- ment Board’s assessment that the future cash flows gener- ated by the Company are sufficient to meet the Company’s obligations. The Management Board has included a range of possible outcomes in its estimates and believes that the use of reasonable estimates does not call into question the going concern basis. Given the agreement reached with the Company’s main creditors, over 370 million euros worth of new business contracted in the past three years, expect- ed growth in profitability, and insignificant investments in tangible assets in the coming periods, the Company’s Man- agement Board believes that these financial statements, as- suming a going concern basis, have been properly prepared. 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED) www.adplastik.hr 272 Business risk in Russia The Company has control over the cash flows of its Russian subsidiaries. There is currently a limit on the collection of credit receivables of RUB 10,000 thousand per month per sub- sidiary. There is no limit on the collection amount for other re- ceivables for goods, services and loan interests. ZAO AD Plas- tik Kaluga is operating in a “cold mode”, taking into account the withdrawal of all European customers from the Russian market with whom the Company did business before the start of the Russian-Ukrainian crisis. AO AD Plastik from Togliatti continues to operate with its main customer AutoVaz on the production of several models for Lada vehicles. 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED) 4. SALES Sales segmentation by country: 2024 2023 Slovenia 29,243 24,079 Romania 26,391 18,704 Poland 8,661 5,062 Hungary 7,998 5,776 Serbia 7,852 3,619 France 7,011 10,545 Slovakia 6,020 1,792 Italy 5,208 7,193 Spain 3,491 3,962 Germany 2,526 4,635 Russia 1,667 298 Croatia 868 1,175 Other countries 4,216 2,548 111,152 89,388 2024 2023 Foreign sales 110,284 88,213 Domestic sales 868 1,175 111,152 89,388 Revenues from merchandise consist of revenues from the sale of material and the sale of car parts that are not own production. The largest sales income from companies in the same group, which make more than 25% of sales income in 2024, amounted to EUR 29,936 thousand (2023: EUR 22,681 thousand), while the carrying amount of receivables from this group amounted to EUR 5,267 thousand at 31.12.2024 (31.12.2023: EUR 3,717 thousand). Sales segmentation by type: 2024 2023 Car parts sale 73,985 73,191 Revenue from tools 20,042 1,908 Merchandise 12,036 12,203 Engineering services revenue 2,930 1,314 Licenses fees 1,889 773 Product development services 270 - 111,152 89,388 www.adplastik.hr 273 4. SALES (CONTINUED) 6. COST OF RAW MATERIAL AND SUPPLIES 5. OTHER INCOME 2024 2023 Gain from sale of property, plant and equipment and intangible assets 2,055 3,455 Income from compensation for canceled projects 1,474 - Income from consumption of own products and services 383 23 Rental income and income from the sale of services to tenants 277 559 Income from sales of waste and secondary raw material 116 344 Income from damages and in- surance 49 40 Income from validation, quality control and laboratory testing 15 72 Other operating income 508 567 4,877 5,060 2024 2023 Direct materials 40,573 38,325 Electricity 2,859 3,225 Other raw material and sup- plies 2,284 3,145 Inventory shortage costs and value adjustment of inventory 188 364 45,904 45,059 7. COST OF GOODS SOLD 2024 2023 Cost of tools sold 16,755 1,524 Cost of merchandise 11,054 10,359 Other costs of goods sold 41 39 27,850 11,922 8. SERVICE COSTS 2024 2023 Transport 2,329 3,270 Intelectual service cost 1,345 1,516 Maintenance costs 1,059 983 Software licenses 993 949 Security and fire services 555 447 Communal fee 427 347 Logistic services at distribution warehouses 273 164 Rental costs 259 241 Marketing 156 157 Water 108 109 Engineering services costs 94 97 Telephone, cell phone, internet costs 82 79 Licence fees 14 32 Other service costs 660 509 8,354 8,900 Gain from sale of property, plant and equipment and intan- gible assets in 2024 include gain from sale of intangible as- sets in amount of EUR 2,055 thousand (2023: EUR 2,543 thousand). The second largest sales income from companies in the same group, which make more than 25% of sales income in 2024 amounted to EUR 28,327 thousand (2023: EUR 15,480 thousand), while the carrying amount of receiva- bles from this group amounted to EUR 367 thousand at 31.12.2024 (31.12.2023: EUR 2,785 thousand). During 2024, the Company’s auditors provided the Company with services related to the costs of the statutory audit of the Company’s consolidated and unconsolidated statements and other verification services related to sustainability reporting and reporting on the remuneration of the Management Board and the Supervisory Board in the total amount of EUR 143 thousand (2023: EUR 97 thousand), as well as permitted non-audit services related to financial analysis in the amount of EUR 28 thousand (2023: EUR 51 thousand). www.adplastik.hr 274 9. STAFF COSTS 2024 2023 Net wages and salaries 13,300 12,544 Taxes and contributions on and out of salaries 7,900 7,537 Other staff costs 2,975 2,627 24,175 22,708 Other staff costs comprise jubilee awards, bonuses, ter- mination benefits, commuting costs, cost of student ser- vice and other business-related costs. Company included reversal of provision for termination benefits in amount of EUR 30 thousand, reversal of provision for unused vaca- tion days in amount of EUR 4 thousand, and reversal of provision for jubilee awards in amount of EUR 3 thousand as cost reduction within category “Other staff cost”. Fur- ther, within “Other staff cost” provision for termination benefits is shown in amount of EUR 134 thousand. In the previous period, reversal of provision for jubilee awards in amount of EUR 24 thousand was shown as a cost reduction through „Other staff cost“. Also, in the previous period, provision for unused vacation days in amount of EUR 142 thousand and provision for termina- tion benefits in amount of EUR 18 thousand were shown in other staff cost. 10. DEPRECIATION AND AMORTISATION 2024 2023 Depreciation of property, plant and equipment (Note 17) 5,631 4,850 Amortisation of intangible assets (Note 16) 1,608 1,393 Depreciation of right of use as- sets (Note 18) 1,012 1,017 Depreciation of investment prop- erty (Note 19) 39 33 8,290 7,293 11. OTHER OPERATING EXPENSES 2024 2023 Impairment of related parties investment 1,993 - Business trips 413 357 Membership fees, contributions, municipal utility fees 274 271 Cost of own consumption and goods provided free of charge 241 341 Customer complaints 170 144 Entertainment/representation costs 170 139 Withholding tax 159 265 Insurance premiums 156 169 Non-current tangible assets write off 151 138 Gifts, donations and sponsor- ships 73 110 Professional training costs 63 72 Supervisory Board fees 52 89 Safety at work and health ser- vices 39 48 Other expenses 202 135 4,155 2,278 12. PROVISIONS FOR RISKS AND CHARGES 2024 2023 Provision for possible litigation losses, net (Note 29) 1 (4) Provision for warranties, net - (132) 1 (136) www.adplastik.hr 275 13. FINANCIAL INCOME 14. FINANCIAL EXPENSES 2024 2023 Dividend income from associate 3,470 4,960 Interest income 595 377 4,065 5,337 2024 2023 Interest expense 1,271 623 Interest expense on lease liabil- ities 49 29 Foreign exchange losses, net 3 20 1,323 672 15. INCOME TAX 2024 2023 Current tax - - Deferred tax 554 228 554 228 Income tax comprises the following: Deferred tax, as presented in the statement of financial position, is as follows: 2024 2023 Deffered tax assets Deferred tax liabilities Deffered tax assets Deferred tax liabilities Balance at 1 January 2,604 380 1,996 - Increase 560 6 1,262 380 Usage - - (60) - Reversal - - (594) - Balance at 31 December 3,164 386 2,604 380 2024 Opening bal- ance (Charged)/ credited to statement of comprehensive income, net Closing balance Provisions for jubilee service and termination benefits 83 18 101 Impairement of investment property 329 - 329 Impairment of inventory 66 34 100 Impairment/reversal receivables/loans 66 55 121 Tax loss carryforward 1,675 445 2,120 Lease liabilities 385 8 393 Right of use assets (380) (6) (386) Balance at 31 December 2,224 554 2,778 Movement of Deferred tax assets/ (liabilities) are presented in follow- ing table: www.adplastik.hr 276 2024 2023 Accounting profit/(loss) before tax (156) 812 Tax at the rate of 18% (2023.: 18%) (28) 146 Non-deductible expenses 441 96 Tax exempt revenues (903) (1,064) Changes in estimates from previous years (64) 594 Profit tax expense (554) (228) Effective tax rate 355.06% (28.08%) 15. INCOME TAX (CONTINUED) 2023 Opening bal- ance (Charged)/ credited to statement of comprehensive income, net Closing balance Provisions for jubilee service and termination benefits 84 (1) 83 Impairement of investment property 388 (59) 329 Impairment/reversal receivables/loans - 66 66 Tax loss carryforward 1,524 151 1,675 Impairment of inventory - 66 66 Lease liabilities - 385 385 Right of use assets - (380) (380) Balance at 31 December 1,996 228 2,224 Reconciliation between the accounting and tax results is shown as follows: The effective income tax rate in Republic of Croatia in year 2024 was 18% the same as it was for the year 2023. The amount of EUR 445 thousand was recog- nized as deferred tax assets from recognized tax losses in 2024. The Company is planning to achieve taxable profit in the period from 2025 to 2029, for which forementioned de- ferred tax assets is planned to be used. The tax losses available for carry-forward to the following tax periods are as follows: 2024 2023 Tax losses from 2022 - expire in 2027 8,348 8,348 Tax losses from 2023 - expire in 2028 4,142 4,142 Tax losses from 2024 - expire in 2029 2,473 - 14,963 12,490 The Company did not recognize deferred tax assets on tax loss carryforwards from 2022 in the amount of EUR 594 thousand expiring in 2027. www.adplastik.hr 277 Projects comprise investments in the development of new prod- ucts that are expected to generate economic benefits in future periods. Consequently, the costs are amortized over the period in which the related economic benefits flow into the Company. Intangible assets under development mostly refer to the capital- ized costs of new product development. In 2024, the cost of net salaries and wages of EUR 540 thousand the cost of taxes and contributions from salaries of EUR 210 thousand and the cost of contributions to salaries of EUR 111 thousand were capitalized in intangible assets. In the previous 2023, the capitalized cost of net salaries and wages amounted to EUR 366 thousand the cost of taxes and contributions from salaries amounted to EUR 151 thousand and the cost of contri- butions to salaries amounted to EUR 79 thousand. In 2024, capitalized interest expense in the amount of EUR 20 thousand (2023: EUR 19 thousand) was recognized on intangi- ble assets. 16. INTANGIBLE ASSETS Software Projects Other intangible assets Intangible assets under develop- ment Total Cost Balance at 31 December 2022 1,852 14,472 752 3,416 20,492 Additions - - - 3,412 3,412 Transfer from assets under development 4 1,058 3 (1,065) - Disposals (1) (1,113) - - (1,114) Retirements/Write Offs (28) (303) - - (331) Balance at 31 December 2023 1,826 14,114 756 5,763 22,459 Additions - - - 2,989 2,989 Transfer from assets under development 19 5,609 - (5,629) - Disposals - (891) - - (891) Balance at 31 December 2024 1,846 18,833 756 3,124 24,558 Accumulated amortisation Balance at 31 December 2022 1,568 11,004 539 - 13,111 Charge for the year 91 1,153 150 - 1,393 Write Offs (28) (260) - - (287) Disposal (1) (545) - - (545) Balance at 31 December 2023 1,630 11,353 689 - 13,672 Charge for the year 76 1,471 61 - 1,608 Balance at 31 December 2024 1,706 12,825 750 - 15,280 Net book value At 31 December 2023 197 2,761 67 5,763 8,787 At 31 December 2024 140 6,008 6 3,124 9,278 www.adplastik.hr 278 Land Buildings Plant and equipment Assets under development Total Cost Balance at 31 December 2022 17,366 34,521 76,795 2,592 131,274 Additions - - - 4,635 4,635 Transfer from assets under development - 1,781 2,031 (3,812) - Disposals - - (2,492) - (2,492) Retirements/Write Offs - (215) (284) - (500) Balance at 31 December 2023 17,366 36,087 76,049 3,415 132,916 Additions - - - 8,359 8,359 Transfer from assets under development - 271 8,991 (9,262) - Retirements/Write Offs - (215) (845) - (1,061) Balance at 31 December 2024 17,366 36,142 84,195 2,511 140,214 Accumulated depreciation Balance at 31 December 2022 - 11,404 52,396 - 63,801 Charge for the year (Note 10) - 661 4,189 - 4,850 Disposals - - (1,863) - (1,863) Retirements/Write Offs - (78) (284) - (361) Balance at 31 December 2023 - 11,988 54,437 - 66,425 Charge for the year (Note 10) - 687 4,944 - 5,631 Retirements/Write Offs - (81) (828) - (909) Balance at 31 December 2024 - 12,594 58,553 - 71,147 Net book value At 31 December 2023 17,366 24,099 21,612 3,415 66,491 At 31 December 2024 17,366 23,549 25,642 2,511 69,067 17. PROPERTY, PLANT AND EQUIPMENT From assets mentioned in Note 17 Property, plant and equipment and in Note 19 Investment property, pledged as- sets are lands with book value on the date of 31.12.2024 of (in thousand EUR) 15,405 (31.12.2023: 13,260) and buildings 17,223 (31.12.2023: 16,427). The mentioned as- sets include investment property, land in the net book val- ue of 1,479 and buildings in the net book value of 1,738 (in thousand EUR). www.adplastik.hr 279 18. RIGHT OF USE ASSET Buildings Plant and equipment Total Cost Balance at 31 December 2022 3,549 1,029 4,578 Additions - - - Lease modification, net 1,269 - 1,269 Balance at 31 December 2023 4,818 1,029 5,847 Additions - - - Lease modification, net 11 1,035 1,046 Balance at 31 December 2024 4,829 2,064 6,893 Accumulated depreciation Balance at 31 December 2022 2,086 631 2,717 Charge for the year (Note 10) 699 318 1,017 Balance at 31 December 2023 2,785 949 3,734 Charge for the year (Note 10) 717 295 1,012 Balance at 31 December 2024 3,502 1,244 4,746 Net book value At 31 December 2023 2,033 80 2,113 At 31 December 2024 1,327 820 2,147 Amounts recognised in profit and loss 2024 2023 Depreciation expense on right of use assets 1,012 1,017 Expense relating to leases of low value 175 99 Expense relating to short-term leases 51 42 Interest expense on lease liabilities 49 29 Expenses relating to variable lease payments not includ- ed in the measurement of lease liability 34 100 1,320 1,287 In accordance with IFRS 16, Company has classified leases for buildings and plant and equipment as “Right of use asset”. Within the category “Buildings”, the leases of office buildings and ware- houses used by the Company in busi- ness are positioned. The “Plant and equipment” category includes con- cluded car and forklift rental agree- ments. www.adplastik.hr 280 19. INVESTMENT PROPERTY Income from the rental of the building in 2024 amounts to EUR 110 thousand (2023: EUR 266 thousand), and the depre- ciation charge for the year 2024 amounts to EUR 39 thousand (2023: EUR 33 thousand). At December 31 2024 the carrying amount of investment property approximates fair value, that has been internally determined by the company based on the income capitaliza- tion method which assumes sustainable annual lease income which investment property generates or is able to generate during its ordinary course of business. Land Buildings Total Cost Balance at 31 December 2022 1,479 2,210 3,689 Value increase of investment property - 408 408 Balance at 31 December 2023 1,479 2,618 4,097 Balance at 31 December 2024 1,479 2,618 4,097 Accumulated depreciation Balance at 31 December 2022 - 728 728 Charge for the year (Note 10) - 33 33 Value increase of investment property - 79 79 Balance at 31 December 2023 - 840 840 Charge for the year (Note 10) - 39 39 Balance at 31 December 2024 - 879 879 Net book value Balance at 31 December 2023 1,479 1,778 3,257 Balance at 31 December 2024 1,479 1,739 3,218 www.adplastik.hr 281 20. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES Name of subsidiary Country of incorporation and business Ownership interest in % Amount of equity investment, in EUR 000 31.12. 2024 31.12. 2023 31.12. 2024 31.12. 2023 EURO Auto Plastic Systems Mioveni, Romania 50% 50% 2,887 2,887 2,887 2,887 Total investments in subsidiaries and associates 12,987 14,980 Company has a 50-percent equity share in EURO Auto Plastic Systems, but has no control over the entity. However, the company is treated as an associate. Currently, there is a limit on the loan collection from Russian subsidiaries in the amount of 10,000 thousand rubles on a monthly basis per one subsidiary company. Set out below are details of the Company’s subsidiaries at the end of the reporting period: Name of subsidiary Country of incorporation and business Ownership interest in % Amount of equity investment, in EUR 000 31.12. 2024 31.12. 2023 31.12. 2024 31.12. 2023 AD Plastik Tisza Kft Tiszaújváros, Hungary 100% 100% 9,418 9,418 ADP d.o.o. Mladenovac, Serbia 100% 100% - 1,993 AO AD Plastik Togliatti Samara, Russian Federation 100% 100% 674 674 AD Plastik d.o.o. Novo Mesto, Slovenia 100% 100% 8 8 ZAO AD Plastik Kaluga Kaluga, Russian Federation 100% 100% - - 10,100 12,092 www.adplastik.hr 282 Set out below is a summary of financial information about the subsidiaries and associates: 20. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES (CONTINUED) AO AD Plastik Togliatti, Samara, Russian Federation 31.12.2024 31.12.2023 Current assets 12,886 12,445 Fixed assets 7,947 8,538 Total assets 20,833 20,983 Short-term liabilities (10,784) (12,027) Long-term liabilities and provisions (457) (1,932) Total Liabilities (11,241) (13,959) Net assets 9,592 7,024 AD Plastik Tisza Kft, Tiszaújváros, Hungary 31.12.2024 31.12.2023 Current assets 5,037 4,823 Fixed assets 5,992 6,692 Total assets 11,029 11,515 Short-term liabilities (6,512) (5,713) Long-term liabilities and provisions (1,891) (2,721) Total Liabilities (8,403) (8,434) Net assets 2,626 3,081 ZAO AD Plastik Kaluga, Kaluga, Russian Federation 31.12.2024 31.12.2023 Current assets 1,875 2,733 Fixed assets 3,397 4,107 Total assets 5,272 6,840 Short-term liabilities (2,864) (1,747) Long-term liabilities and provisions (8,960) (9,967) Total Liabilities (11,824) (11,714) Net assets (6,552) (4,874) www.adplastik.hr 283 20. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES (CONTINUED) ADP d.o.o, Mladenovac, Serbia 31.12.2024 31.12.2023 Current assets 4,936 5,684 Fixed assets 6,673 7,343 Total assets 11,609 13,027 Short-term liabilities (6,280) (6,127) Long-term liabilities and provisions (7,537) (7,547) Total Liabilities (13,817) (13,674) Net assets (2,208) (647) AD Plastik d.o.o., Novo Mesto, Slovenia 31.12.2024 31.12.2023 Current assets 483 480 Fixed assets - - Total assets 483 480 Short-term liabilities (23) (20) Long-term liabilities and provisions - - Total Liabilities (23) (20) Net assets 460 460 EURO Auto Plastic Systems 31.12.2024 31.12.2023 Current assets 62,432 38,767 Fixed assets 19,650 19,478 Total assets 82,082 58,245 Short-term liabilities (60,624) (35,959) Long-term liabilities and provisions (1,193) (1,271) Total Liabilities (61,817) (37,230) Net assets 20,265 21,015 www.adplastik.hr 284 21. GIVEN LONG-TERM LOANS Long-term investment loans were granted to the subsidiaries with maturities from one to ten years and an interest rate of 3.25%. During the 2023 loans were granted with the interest rate of 2.40 %. 31.12.2024 31.12.2023 Long-term loans to sub- sidiaries 16,364 18,776 Long-term receivables for interests 729 729 Impairment of given loans (3,384) (3,152) 13,709 16,353 22. LONG-TERM RECEIVABLES 31.12.2024 31.12.2023 ADP d.o.o., Mladenovac, Serbia 2,222 2,318 2,222 2,318 23. INVENTORIES 31.12.2024 31.12.2023 Raw material and supplies on stock 6,448 5,229 Finished products 1,818 1,870 Tools 1,103 9,337 Work in progress 1,071 1,043 Prepayments for tools 595 3,792 Merchandise on stock 259 389 11,294 21,660 The amount of inventories recognized as an expense dur- ing the 2024 was EUR 96,344 thousand (in the 2023 the expense was EUR 77,176 thousand). The amount includes material costs, personnel costs, transportation costs, de- preciation and other indirect costs of producing inventory. Total inventory write – off was EUR 188 thousand in 2024 ( in 2023 it was EUR 364 thousand). The inventories were deemed as obsolete. The inventory write – off is included in note 6 – Cost of raw material and supplies, line „Inven- tory shortage costs and value adjustment of inventory“. www.adplastik.hr 285 31.12.2024 31.12.2023 0 - 90 days past due 968 1,884 91 - 180 days past due 775 347 181 - 365 days past due 1,200 694 Over 365 days past due 983 987 Not due 17,990 13,117 21,916 17,029 24. TRADE RECEIVABLES 31.12.2024 31.12.2023 Trade receivables (unrelated companies) 12,952 13,586 Trade receivables (intra group) 4,599 2,692 Receivables for dividends (as- sociates) 3,470 619 Trade receivables (associates) 1,274 505 Expected credit loss (379) (373) 21,916 17,029 The average credit period on sales is 65 days (2023: 78 days). Movements in the expected credit loss can be presented as follows: 2024 2023 Balance at beginning of the year 373 169 Movements based on IFRS 9 expected credit losses 8 26 Trade receivables impairment - 178 Written off during the year (2) - Total expected credit loss 379 373 Ageing analysis of not impaired receivables can be presented as follows: Most of the receivables past due beyond 365 days comprise amounts owed by the subsidiaries. www.adplastik.hr 286 Amounts due from the State and State institutions com- prise from these receivables: Interest receivables relate to loans given to subsidiaries. 25. OTHER RECEIVABLES 26. GIVEN SHORT-TERM LOANS 31.12.2024 31.12.2023 Receivables from the State and State institutions 1,645 2,881 Foreign prepayments made 205 941 Domestic prepayments made 117 184 Other receivables 10 86 1,977 4,092 31.12.2024 31.12.2023 Interest receivables 2,348 1,754 Receivables per short- term loans 600 600 Receivables for the short- term portion of long-term loans 319 - 3,267 2,354 31.12.2024 31.12.2023 VAT refund receivables 1,560 2,810 Receivables for sick leave 79 65 Other receivables 6 6 1,645 2,881 27. CASH AND CASH EQUIVALENTS 31.12.2024 31.12.2023 Current account balance 3,039 1,013 Foreign account balance 5 9 Cash in hand 3 3 Cash and cash equivalents in statement of financial position 3,046 1,025 Bank overdrafts (1,001) (608) Cash and cash equivalents in statement of cash flows 2,045 417 28. CAPITAL The subscribed share capital amounts to EUR 54,595 thousand and consists of 4,199,584 shares with a nominal value of EUR 13 per share (2023: EUR 54,595 thousand, 4,199,584 shares with a nominal value of EUR 13 each). All shares are ordinary shares with all associated rights, except for treasury shares. These rights include the right to vote at the General Assembly of the Company as well as the right to receive dividends. Capital reserves are the differences between the nominal and selling values of a share. General and legal reserves consist of legal reserves up to 5% of the amount of share capital (defined by the Croatian Company law), and of unwritten development costs. Un- der Croatian Accounting Law, Article 18, Paragraph 12, AD Plastik d.d. has made provisions for not written - off devel- opment costs stated in Assets. The provision was made with the transfer from Retained earnings to the position of General and legal reserves of Company’s equity. Amount od provisions at least amounts capitalized development costs stated in Assets at the end of previous year. Own treasury shares refers to treasury shares of the Company. The company owns 35,008 treasury shares on 31.12.2024. The Company owned 38,428 treasury shares on the date of 31.12.2023. www.adplastik.hr 287 29. LONG-TERM AND SHORT-TERM PROVISIONS Short-term Long-term 31.12.2024 31.12.2023 31.12.2024 31.12.2023 Vacation accrual 513 517 - - Termination benefits 168 36 216 246 Legal cases 127 126 - - Jubilee awards (long-service benefits) 23 39 153 139 831 718 369 385 Key assumptions used in calculating provisions for jubi- lee awards and severance pay in 2024 are the discount rate of 2.32% and the fluctuation rate of 16.59%. Discount rate of 1.85% and the fluctuation rate of 15.41% were used in calculation of the required provisions in the year of 2023. Fluc- tuation rate is based on average fluctuation of employees in the last 5 years. Jubilee Awards Retirement/ termination benefits Legal Cases Vacation Accrual Risks within the warranty period Total Balance at 1 January 2024 178 282 126 517 - 1,103 Increase/(decrease) in provisions,net (3) 103 1 (4) - 97 Balance at 31 December 2024 175 385 127 513 - 1,200 Balance at 1 January 2023 202 264 366 375 132 1,339 Increase/(decrease) in provisions,net (24) 18 (240) 142 (132) (236) Balance at 31 December 2023 178 282 126 517 - 1,103 Movement in provisions was as follows: www.adplastik.hr 288 30. LONG – TERM BORROWINGS Long-term borrowings are used to finance capital invest- ments and development projects. Instruments of collateral provided for the long-term loans include mortgage on real estate and/or equipment and payment instruments. Majori- ty of the long-term loans are repayable on a monthly basis. By the 31.12.2024, the company received the bank’s confir- mation (regarding the long-term loan), according to which it waives the clause of maintaining the DSCR ratio and the ratio of net debt to EBITDA. Book value of the loan amounts to EUR 10,959 thousand. In the event of a breach of financial covenants, the bank has the right to cancel the loan agree- ment and declare it prematurely due. In 2024, the weighted average interest rate on the long-term loans was 2.31 (in the 2023 the average interest rate on the long-term loans was 1.10 %). The Company regularly meets all its obligations arising from the loans and observes all the conditions specified in the underlying contracts. 31.12.2024 31.12.2023 Long-term borrowings 33,234 37,307 33,234 37,307 Current portion of long- term borrowings (Note 35) (17,056) (9,408) Total long-term borrowings 16,178 27,899 31. DEFERRED REVENUE Deferred revenue arose as a result of borrowing from a fi- nancial institution at an interest rate lower than the market rate. 31.12.2024 31.12.2023 Deferred revenue 1 38 Total deferred revenue 1 38 32. LEASE LIABILITIES – IFRS 16 31.12.2024 31.12.2023 Balance at 1 January 2,139 1,905 Additions - - Lease modifications, net 1,041 1,249 Interest expense on lease liabilities 49 29 Principal paid (995) (1,015) Interest paid (49) (29) 2,185 2,139 Long-term liabilities 1,200 1,346 Short-term liabilities 985 793 33. ADVANCES RECEIVED 31.12.2024 31.12.2023 Foreign customers 877 5,338 Domestic customers 1 1 878 5,339 31.12.2024 31.12.2023 Foreign trade payables 12,123 11,097 Domestic trade payables 5,878 4,966 Accrued expenses 630 843 18,631 16,906 34. TRADE PAYABLES The average number of days of payment to suppliers in 2024 was 69 (2023: 75 days). www.adplastik.hr 289 The short-term borrowings were used to finance development pro- jects and for working capital purposes. Instruments of collateral provided for the short-term borrowings are payment instruments. In 2024, the weighted average interest rate on the short-term loans was 3.91% (2.35% in 2023). The Company fulfils all its obligations under the loans regularly. 35. SHORT – TERM BORROWINGS 31.12.2024 31.12.2023 Current portion of long-term bor- rowings (Note 30) 17,056 9,408 Short-term borrowings – princi- pal payable 7,302 7,506 Short-term borrowings – interest payable 108 139 24,466 17,053 The total movement in loans (short-term and long-term) during the year can be shown as follows: 2024 2023 Balance at 1 January 44,952 36,000 Borrowings raised 21,398 34,051 Change in bank overdrafts 396 606 Interest expenses 1,201 572 Interest paid (1,233) (463) Principal repaid (26,172) (25,874) Rest of changes 101 61 Balance at 31 December 40,643 44,952 36. OTHER CURRENT LIABILITIES Grant liabilities arose as a result of borrowing from a financial in- stitution at an interest rate lower than the market rate. 31.12.2024 31.12.2023 Amounts due to employees 1,350 1,229 Due to the State and State institutions 1,213 583 Grant liabilites 36 101 Other current liabilities 22 22 2,622 1,936 www.adplastik.hr 290 Transactions with related companies were as follows:37. RELATED-PARTY TRANSACTIONS Receivables and payables for goods and services Receivables Payables 31.12.2024 31.12.2023 31.12.2024 31.12.2023 ADP d.o.o., Mladenovac, Serbia 3,318 3,531 1,038 926 AO AD Plastik Togliatti, Russia 1,840 819 - - EURO APS, Romania 1,277 507 13 5 AD Plastik Tisza, Hungary 1,015 660 115 195 ZAO AD Plastik Kaluga, Russia 647 - 2 2 AD Plastik d.o.o., Slovenia - - 473 464 8,098 5,517 1,640 1,593 Receivables and payables for loans and interest Receivables Payables 31.12.2024 31.12.2023 31.12.2024 31.12.2023 ZAO AD Plastik Kaluga, Russia 7,814 8,515 - - ADP d.o.o., Mladenovac, Serbia 7,762 7,814 - - AO AD Plastik Togliatti, Russia 768 1,766 - - AD Plastik Tisza, Hungary 633 613 - - Sankt-Peterburgskaya investicionaya kompaniya - - 1,906 2,508 16,976 18,707 1,906 2,508 Receivables for dividends Receivables Payables 31.12.2024 31.12.2023 31.12.2024 31.12.2023 EURO Auto Plastic Systems, Romania 3,470 619 - - 3,470 619 - - During the 2024 in its financial statements Company recognized an impairment of receivables based on expected credit losses (all regarding the impairment of given loans) in the amount of EUR 232 thousand. Total amount of receivables impairment based on ex- pected credit loss on the date of 31 December 2024 is EUR 3,384 thousand and it is related with the Companies - ADP doo Mladen- ovac EUR 681 thousand (2023: EUR 389 thousand) and ZAO ADP Kaluga EUR 2,703 thousand (2023: EUR 2,703 thousand). During the 2024 in its financial statements Company recognized a impair- ment of long-term receivables from ADP doo Mladenovac in the amount of EUR 40 thousand (2023: 40 thousand). Sankt-Peterburgskaya investicionnaya kompaniya is member of Group in which is also company AO Holding Autokomponen- ti. Company AO Holding Autokomponenti holds 30% of shares in Company AD Plastik d.d.. www.adplastik.hr 291 The total remuneration provided to the members of the Supervisory Board, President and members of Management Board and Board Assistants in 2024 amounts to EUR 636 thousand (in 2023 EUR 922 thousand). Of the total operating income in 2024, EUR 1,878 thousand re- fers to profit from the sale of intangible assets (ZAO AD Plastik Kaluga EUR 641 thousand; AO AD Plastik Togliatti EUR 1,236 thousand). Of the total operating income EUR in 2023, 482 thousand refers to profit from the sale of long-term tangible assets (ADP d.o.o. Mladenovac EUR 243 thousand; AD Plas- tik Tisza EUR 1 thousand, EURO Auto Plastic Systems – 238 thousand), and EUR 586 thousand to the profit of intangible assets (ZAO AD Plastik Kaluga EUR 334 thousand; AO AD Plas- tik Togliatti EUR 252 thousand). 37. RELATED-PARTY TRANSACTIONS (CONTINUED) Purchase transactions Operating income and expenses Income Purchases 2024 2023 2024 2023 ADP d.o.o., Mladenovac, Serbia 3,148 3,934 5,486 6,336 EURO Auto Plastic Systems, Romania 2,616 1,518 30 5 ZAO AD Plastik Kaluga, Russia 649 345 - - AO AD Plastik Togliatti, Russia 2,925 567 - - AD Plastik Tisza, Hungary 359 137 101 249 AD Plastik d.o.o., Novo Mesto, Slovenia - - 94 97 9,696 6,501 5,712 6,687 Financial transactions Financial income and expenses Income Purchases 2024 2023 2024 2023 EURO Auto Plastic Systems, Romania 3,470 4,960 - - ZAO AD Plastik Kaluga, Russia 306 252 - - ADP d.o.o., Mladenovac, Serbia 241 70 - - AO AD Plastik Togliatti, Russia 28 40 - - AD Plastik Tisza, Hungary 20 14 - - Sankt-Peterburgskaya investicionaya kompaniya - - 27 30 4,065 5,337 27 30 www.adplastik.hr 292 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Equity consists of share capital, reserves, reserves for own shares, own shares, retained earnings and profit/loss for the year. 38.1 GEARING RATIO The Company’s gearing ratio, expressed as the ratio of net debt to equity, is expressed as follows: 31.12.2024 31.12.2023 Long-term borrowings (Note 30) 16,178 27,899 Short-term borrowings (Note 35) 24,466 17,053 Cash and cash equiva- lents (Note 27) (3,046) (1,025) Net debt 37,598 43,927 Equity 91,545 91,115 Net debt-to-equity ratio 41,07% 48,21% 38.2 CATEGORIES OF FINANCIAL INSTRUMENTS 31.12.2024 31.12.2023 Financial assets 44,494 39,509 Given loans and other financial assets (Notes 21, 26) 16,976 18,707 Trade receivables (Notes 24) 21,916 17,029 Non-current trade receivables (Note 22) 2,222 2,318 Cash and cash equivalents and deposits (Note 27) 3,046 1,025 Accrued income and other re- ceivables 334 430 Financial liabilities 62,717 65,110 Loans and deposits received (Notes 30, 35) 40,644 44,952 Trade and other payables 19,888 18,019 Lease liabilities (Note 32) 2,185 2,139 Accrued income and other receivables in- cludes: accrued income, other receivables less receivables from the State and ad- vances given. Trade and other payables includes amounts from Statement of financial po- sition: trade payables and other current li- abilities less accrued expenses, payables to the State and grants. Probability of default: Company used latest available Moody’s Annual Default Study. Marginal PD for automotive indus- try was used for every year. Lifetime prob- abilities of default are based on historical data published by Moodys rating agency for Automotive industry group. Loss given default (LGD) parameters generally reflect an assumed LGD rate of 62.33% (in 2023: 60.53%). www.adplastik.hr 293 The exposure to credit risk for loans given at amortized cost at the reporting date 31.12.2024 by subsidiary was as follows: Loans given to subsidiaries include interest. The amount of loans given is in the gross amount without an im- pairment allowance. Balance of an im- pairment allowance of in amount of EUR 3,384 thousand (2023: EUR 3,152 thousand) in respect of loans given is recognized in statement of financial position. Collaterals for loans given to subsidiaries are promissory notes. 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) 38.2 CATEGORIES OF FINANCIAL INSTRUMENTS (CONTINUED) 31.12.2024 31.12.2023 ZAO AD Plastik Kaluga (Notes 21, 26) 10,516 11,217 ADP d.o.o.. Mladenovac (Notes 21, 26) 8,443 8,203 AO AD Plastik Togliatti (Notes 21, 26) 768 1,826 AD Plastik Tisza Kft (Notes 21, 26) 633 613 Total 20,360 21,859 38.4. MARKET RISK Fluctuations in demand and changes in trends in the automo- tive industry, such as the transition to electric vehicles and hybrid models, can affect business. The transition to envi- ronmentally friendly technologies requires an adjustment of product and service strategies. Inflation and rising prices of key raw materials can also further threaten profitability, and the emergence of low-cost Chinese manufacturers on the Eu- ropean market further increases pressure on margins, but also opens up new opportunities. The company manages this risk through a focus on diversifying its product portfolio, mon- itoring global and regional trends, including the entry of new manufacturers into the EU market, and close cooperation with customers to adjust prices in line with market changes. 38.3 RISK OF RELYING ON ONE CUSTOMER Historical dependence on one customer has been reduced through diversification of the customer portfolio. However, the consolidation of manufacturers in the automotive in- dustry limits the possibility of further diversification. Risk is managed by contracting with new customers and those with a smaller share of the company’s revenues and by de- veloping long-term relationships with multiple partners to ensure revenue stability. www.adplastik.hr 294 The Company manages this risk by contracting with cus- tomers with a high financial rating and by monitoring the due dates of receivables and acting promptly in case of delays. 38.7. FOREIGN CURRENCY RISK MANAGEMENT Since the euro became the official currency of payment in Croatia on January 1, 2023, the significant currency risk disappeared. The most significant foreign currency expo- sure as of 31.12.2024 is the dividend receivable from the associated company EAPS in the amount of RON 17,251 thousand (EUR 3,470 thousand). 38.8. LIQUIDITY RISK MANAGEMENT This risk represents the risk of the company not being able to convert assets into liquid assets in a short time, ie the inability to fulfill its obligations to creditors. Therefore, Company maintains optimal amounts of funds on the ac- count with secured available credit lines. Cash flow management is of key importance for liquidity risk management. Company, based on operational busi- ness plans, financial liabilities and investment needs, plans its future cash needs on a monthly, quarterly and an- nual basis. Based on that data, Company’s Finance Depart- ment prepares a cash flow plan of the Comany, and makes decisions on timely provision of credit lines for capital in- vestments and project financing, as well as placing surplus funds in deposits or covering the lack of funds from short- term financing sources. The Company issued corporate guarantees to the subsid- iaries in the following amounts: EUR 7,700 thousand to banks and EUR 1,044 thousand to suppliers. The following tables detail the Company’s remaining esti- mated maturity for its non-derivative financial assets and liabilities. The tables have been drawn up based on the un- discounted cash flows of financial assets and liabilities based on the earliest date on which the Company can re- quire payment and can be required to pay. 38.5. INTEREST RATE RISK Rising interest rates can increase financing costs, which reduces profitability and limits the availability of capital for investments. Although interest rates began to decline in 2024 with the repayment of older loans with lower (fixed) interest rates and newer borrowings at higher interest rates, financing costs have increased. Interest rate risk is managed by negotiating more favorable borrowing terms, including variable interest rates in high-interest conditions and fixed rates in low-interest conditions, refinancing ex- isting loan obligations in accordance with market condi- tions, with the aim of optimizing the cost of financing, and transferring a portion of investments in long-term project assets to the buyer. Interest-bearing loans are contracted with variable and fixed interest rates. Loans with variable rates expose the Company to cash flow interest rate risk. As of December 31, 2024, loans contracted with variable interest rates amount to EUR 15,727 thousand (2022: EUR 15,812 thou- sand). Interest rates on bank loans are linked to one-month and three-month EURIBOR. On December 31, 2024, if interest rates on loans with a variable interest rate were 1 percentage point lower/high- er, assuming that other variables remain unchanged, the Company’s net profit would be EUR 166 thousand lower/ higher (2023: EUR 72 thousand ). 38.6. CREDIT RISK The risk of non-payment by customers can lead to cash flow problems and reduce the company’s liquidity. AD Plastik Group cooperates with reputable customers who are financially stable companies, which minimizes the col- lection risk and receivables are realized within the agreed deadlines. The credit risk related to loans granted is un- der the control of the company, since these are loans ap- proved to subsidiaries in which the parent company is the sole owner. 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) www.adplastik.hr 295 38.8. LIQUIDITY RISK MANAGEMENT (CONTINUED) 2024 Weighted average interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total Carrying amount Assets Non-interest bearing - 10,103 9,023 6,171 - - 25,297 25,296 Interest bearing 4.38% 158 329 3,531 7,294 12,716 24,028 19,198 10,261 9,352 9,702 7,294 12,716 49,325 44,494 Liabilities Non-interest bearing - 12,988 5,304 603 - - 18,895 18,895 Interest bearing 2.60% 1,185 8,138 16,874 16,937 - 43,134 41,637 Lease liability 2.00% 99 167 752 1,225 - 2,243 2,185 14,272 13,609 18,229 18,162 - 64,272 62,717 2023 Weighted average interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total Carrying amount Assets Non-interest bearing - 7,345 7,560 3,578 - - 18,483 18,483 Interest bearing 3.25% 52 100 2,832 9,877 12,008 24,869 21,026 7,397 7,660 6,410 9,877 12,008 43,352 39,509 Liabilities Non-interest bearing - 10,714 6,612 693 - - 18,019 18,019 Interest bearing 1.32% 898 1,676 15,544 28,688 771 47,577 44,952 Lease liability 2.00% 88 153 585 1,379 - 2,206 2,139 11,700 8,441 16,822 30,067 771 67,801 65,110 As of 31 December 2024, the Company had a total of EUR 41,637 thousand in interest bearing liabilities and EUR 18,895 thousand in non-interest bearing liabilities. As of 31 December 2023, the Company had EUR 44,952 thousand in interest bearing liabilities and EUR 18,019 thousand in non-in- terest-bearing liabilities. In 2024, lease liabilities amounted to EUR 2,185 thousand. 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) www.adplastik.hr 296 Josip Divić Member of the Management Board Mladen Peroš Member of the Management Board Marinko Došen President of the Management Board 38. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) 38.9 FAIR VALUE OF FINANCIAL IN- STRUMENTS Financial instruments held to maturity in the ordinary course of business are car- ried at the lower of cost and net amount less repaid portion.Fair value is the price that would be generated from the sales of some item of an asset or paid for trans- ferring some liability in a fair transac- tion between market participants at the measurement date, regardless of wheth- er it would be directly visible or evaluated by applying some other valuation tech- nique. At 31 December 2024, the carrying amounts of cash, receivables, short-term liabilities, accrued expenses, short-term borrowings and other financial instru- ments match their fair values. 39. EVENTS AFTER THE REPORTING PERIOD After 31 December 2024, there were no events that would have a significant impact on the financial statements for the year 2024, respectively they are not of such sig- nificance to the Company to require disclosure in the notes to the financial state- ments. Information on the rescheduling of the Company’s credit obligations in 2025 is presented in Note 3. Critical accounting judgments and key sources of estimation uncertainty. The Company’s management has considered the effects of the intro- duction of American tariffs on European car manufacturers and does not expect them to have significant effects on business. Main reason for it comes from the fact that direct exposure to USA market is insignificant for the Company, while most of the vehicles for which Company supplies are predominantly produced for European market. The same situation is with all significant recently won nominations. Based on the Management’s estimate, the Company had no material contingent liabilities at 31 December 2024 which would require to be disclosed in the notes to the financial statements. The Company had no capital expenditure commitments contracted at 31 December 2024 which would require to be disclosed in the notes to the financial statements. As at 31 December 2024 and 2023 there were no ma- terial legal actions outstanding against the Company with an expected negative outcome other than those reflected in these separate financial statements. 40. CONTINGENT LIABILITIES 41. APPROVAL OF THE SEPARATE FINANCIAL STATEMENTS These separate financial statements were approved by the Management Board of AD Plastik d.d. and authorised for issue on 24 April 2025. For AD Plastik d.d., Solin by: 24 April 2025 www.adplastik.hr 297 www.adplastik.hr 298
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