Apranga Group

Annual Report (ESEF) • Apr 30, 2024

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As well we confirm that by our knowledge Consolidated Annual Report for the year 2023 includes a fair review of the development and performance of the business and the position of APB Apranga and Apranga Group in relation to the description of the main risks and contingencies faced thereby. Apranga Group General Manager Rimantas Perveneckas Apranga Group Chief Financial Officer Gabrielius Morkūnas T A B L E OF C O N T E N T APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius 3 Translation note: This version of the accompanying documents is a translation from the original, which was prepared in the Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the accompanying documents takes precedence over this translation. 1 FINANCIAL STATEMENTS 4-7 1.1 Statements of comprehensive income 4 1.2 Statements of financial position 5 1.3 Statements of changes in equity 6 1.4 Statements of cash flows 7 2 NOTES TO THE FINANCIAL STATEMENTS 8-40 3 CONSOLIDATED ANNUAL REPORT 41-135 3.1 Consolidated Annual Report 41-53 Renumeration Report 50-51 3.2 Governance Report 54-81 3.3 Social Responsibility Report 82-135 S T A T E M E N T S OF C O M P R E H E N S I V E I N C O M E 1 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 4 STATEMENTS OF COMPREHENSIVE INCOME GROUP COMPANY Year ended Year ended 31 December 31 December Note 2023 2022 2023 2022 Revenue from contracts with customers 6 269 696 242 899 104 443 96 797 Cost of sales 5 (145 554) (131 555) (60 500) (54 992) GROSS PROFIT 124 142 111 344 43 943 41 805 Selling (costs) 5 (80 768) (73 462) (24 530) (24 474) General and administrative (expenses) 5 (21 932) (18 803) (12 902) (11 439) Other income 6 59 790 10 311 16 193 OPERATING PROFIT 21 501 19 869 16 822 22 085 Finance income 7 269 37 284 50 Finance (costs) 7 (1 438) (1 161) (1 003) ( 540) PROFIT BEFORE INCOME TAX 20 332 18 745 16 103 21 595 Income tax (expense) 8 (3 559) (3 110) ( 904) ( 887) PROFIT FOR THE YEAR 4 16 773 15 635 15 199 20 708 Other comprehensive income - - - - TOTAL COMPREHENSIVE INCOME 16 773 15 635 15 199 20 708 Total comprehensive income attributable to: 16 773 15 635 15 199 20 708 Owners of the Company 16 773 15 635 15 199 20 708 Non-controlling interests - - - - Basic and diluted earnings per share (in EUR) 11 0,30 0,28 0,27 0,37 The notes on pages 8 to 40 are an integral part of these financial statements. These financial statements were approved by Management Board on 3 April 2024 and signed by: _____ _____ Rimantas Perveneckas Gabrielius Morkūnas General Director Chief Financial Officer S T A T E M E N T S OF F I N A N C I A L P O S I T I O N 1 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) STATEMENTS OF FINANCIAL POSITION GROUP COMPANY ASSETS As at 31 December As at 31 December NON-CURRENT ASSETS Note 2023 2022 2023 2022 Property, plant and equipment 12 24 052 20 992 12 019 11 614 Intangible assets 13 1 483 1 072 1 441 1 044 Investments in subsidiaries 14 - - 5 095 5 095 Prepayments 16 142 273 63 134 Trade and other receivables 19 528 2 409 80 40 Right-of-use assets 25 58 785 53 281 24 455 23 830 Other financial assets 17 2 600 2 600 2 600 2 600 Total non-current assets 87 590 80 627 45 753 44 357 CURRENT ASSETS Inventories 15 50 607 41 386 27 297 22 206 Prepayments 16 1 525 1 503 1 524 1 375 Trade and other receivables 19 2 638 1 781 10 482 10 701 Cash and cash equivalents 20 17 665 22 978 7 974 8 375 Total current assets 72 435 67 648 47 277 42 657 TOTAL ASSETS 160 025 148 275 93 030 87 014 EQUITY AND LIABILITIES GROUP COMPANY EQUITY Note 2023 2022 2023 2022 Ordinary shares 21 16 035 16 035 16 035 16 035 Legal reserve 22 1 604 1 604 1 604 1 604 Foreign currency translation reserve ( 53) ( 53) - - Retained earnings 46 072 44 781 31 721 32 004 Total equity 63 658 62 367 49 360 49 643 NON-CURRENT LIABILITIES Deferred tax liabilities 9 2 301 2 194 366 407 Non-current lease liabilities 25 47 629 43 465 19 765 19 639 Non-current employee benefits 194 132 194 132 Total non-current liabilities 50 124 45 791 20 325 20 178 CURRENT LIABILITIES Borrowings 23 - - 6 360 2 032 Current lease liabilities 25 14 306 12 717 5 616 5 018 Current income tax liability 579 701 320 591 Trade and other payables 24 31 358 26 699 11 049 9 552 Total current liabilities 46 243 40 117 23 345 17 193 Total liabilities 96 367 85 908 43 670 37 371 TOTAL EQUITY AND LIABILITIES 160 025 148 275 93 030 87 014 The notes on pages 8 to 40 are an integral part of these financial statements. These financial statements were approved by Management Board on 3 April 2024 and signed by: _____ ____ Rimantas Perveneckas Gabrielius Morkūnas General Director Chief Financial Officer 5 S T A T E M E N T S OF C H A N G E S IN E Q U I T Y 1 . 3 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 6 STATEMENTS OF CHANGES IN EQUITY GROUP Note Share Legal Translation Retained Total capital reserve reserve earnings Balance at 1 January 2022 16 035 1 604 ( 53) 56 792 74 378 Comprehensive income Profit for the year 2022 - - - 15 635 15 635 Total comprehensive income - - - 15 635 15 635 Transactions with owners Dividends 10, 22 - - - (27 646) (27 646) Balance at 31 December 2022 16 035 1 604 ( 53) 44 781 62 367 Comprehensive income Profit for the year 2023 - - - 16 773 16 773 Total comprehensive income - - - 16 773 16 773 Transactions with owners Dividends 10, 22 - - - (15 482) (15 482) Balance at 31 December 2023 16 035 1 604 ( 53) 46 072 63 658 COMPANY Note Share capital Legal reserve Retained earnings Total Balance at 1 January 2022 16 035 1 604 38 942 56 581 Comprehensive income Profit for the year 2022 - - 20 708 20 708 Total comprehensive income - - 20 708 20 708 Transactions with owners Dividends 10, 22 - - (27 646) (27 646) Balance at 31 December 2022 16 035 1 604 32 004 49 643 Comprehensive income Profit for the year 2023 - - 15 199 15 199 Total comprehensive income - - 15 199 15 199 Transactions with owners Dividends 10, 22 - - (15 482) (15 482) Balance at 31 December 2023 16 035 1 604 31 721 49 360 The notes on pages 8 to 40 are an integral part of these financial statements. These financial statements were approved by Management Board on 3 April 2024 and signed by: ____ ____ Rimantas Perveneckas Gabrielius Morkūnas General Director Chief Financial Officer S T A T E M E N T S OF C A S H F L O W 1 . 4 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 7 STATEMENTS OF CASH FLOW GROUP COMPANY Year ended 31 Year ended 31 December December OPERATING ACTIVITIES Note 2023 2022 2023 2022 Profit (loss) before income taxes 20 332 18 745 16 103 21 595 ADJUSTMENTS FOR: Depreciation and amortization 5 19 427 19 037 7 524 7 545 Impairment charge (reversal) 12, 25 ( 74) ( 303) ( 70) ( 208) Write-down (reversal) of inventories to net realisable value 5 719 ( 421) 161 ( 337) Loss (gain) on disposal of property, plant and equipment 6 9 ( 466) ( 2) ( 466) Write-off of property, plant and equipment 105 188 ( 10) 75 Fair value change of financial assets 17 - ( 79) - ( 79) Dividend income 6 ( 33) ( 103) (10 283) (15 503) Interest expenses 7 1 438 1 161 1 003 540 Total 41 923 37 759 14 426 13 162 CHANGES IN OPERATING ASSETS AND LIABILITIES: Decrease (increase) in inventories 15 (9 940) (5 056) (5 252) (3 344) Decrease (increase) in receivables 16, 19 823 1 269 ( 909) 404 Increase (decrease) in payables 24, 26 4 557 4 541 1 538 1 571 Cash generated from operations 37 363 38 513 9 803 11 793 Income taxes paid 8, 9 (3 574) (2 493) (1 216) ( 412) Interest paid 7 (1 438) (1 161) (1 003) ( 540) Net cash from operating activities 32 351 34 859 7 584 10 841 INVESTING ACTIVITIES Interest received 269 37 284 50 Dividends received 6 33 103 10 283 15 503 Loans granted (71 200) (39 000) (77 670) (45 872) Loans repayments received 71 200 39 000 78 430 46 972 Purchases of property, plant and equipment and intangible assets 12, 13 (12 381) (4 458) (3 295) (2 127) Proceeds on disposal of property, plant and equipment 2 640 1 763 21 1 221 Proceeds on disposal of financial assets at fair value 17 - 579 - 579 Investment in subsidiaries 14 - - - ( 132) Net cash from investing activities (9 439) (1 976) 8 053 16 194 FINANCING ACTIVITIES Dividends paid 3 (15 472) (27 596) (15 472) (27 596) Proceeds from borrowings - - 102 201 20 405 Repayments of borrowings 23 - ( 200) (97 873) (23 773) Payment of principal portion of lease liabilities 25 (12 753) (11 852) (4 894) (4 888) Net cash from financing activities (28 225) (39 648) (16 038) (35 852) NET INCREASE (DECREASE) IN CASH (5 313) (6 765) ( 401) (8 817) CASH AND CASH EQUIVALENTS: AT THE BEGINNING OF THE PERIOD 20 22 978 29 743 8 375 17 192 AT THE END OF THE PERIOD 20 17 665 22 978 7 974 8 375 The notes on pages 8 to 40 are an integral part of these financial statements. These financial statements were approved by Management Board on 3 April 2024 and signed by: ____ _______ Rimantas Perveneckas Gabrielius Morkūnas General Director Chief Financial Officer N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 8 1. GENERAL INFORMATION APB Apranga, (hereinafter “the Company”), was incorporated and commenced its operations in March 1993 in Lithuania. The Company’s main office is situated in Ukmerges str. 362, Vilnius, Lithuania. The Company has legal form of public limited liability company under the Law on Companies of Republic of Lithuania. The principal activity of the Company and its subsidiaries (hereinafter “the Group”) is retail trade of apparel in Baltic countries. The share capital of APB Apranga is EUR 16,034,668.40 and it is divided into 55,291,960 ordinary registered shares with a nominal value of EUR 0.29 each, where each share grants to its owner 1 vote (in total 55,291,960 voting shares), all shares are paid in full and give the owners equal rights. All 55 291 960 ordinary shares of nominal value EUR 0.29 each (ISIN code LT0000102337) that comprise Company‘s share capital are listed on Baltic equity list of Nasdaq Vilnius Stock Exchange. At 31 December 2023, the Company had 7 017 shareholders (as per shareholders list prepared in accordance with SRD II directive). At 31 December the Company‘s shareholders were: Number of % of total Number of % of total shares ownership shares ownership Shareholder 2023 2022 UAB MG Investment 36 169 099 65,4 36 187 499 65,4 UAB Minvista 5 795 929 10,5 5 795 929 10,5 Other 13 326 932 24,1 13 308 532 24,1 Total 55 291 960 100,0 55 291 960 100,0 The ultimate parent company whose financial statements are available for public use is UAB MG Grupė. The ultimate controlling individual of the Group is Mr. D. J. Mockus: At 31 December the Group consisted of the Company and the following its wholly owned subsidiaries: Name Country Ownership interest in % Ownership interest in % 31 12 2023 31 12 2022 UAB Apranga LT Lithuania 100% 100% UAB Apranga BPB LT Lithuania 100% 100% UAB Apranga PLT Lithuania 100% 100% UAB Apranga SLT Lithuania 100% 100% UAB Apranga MLT Lithuania 100% 100% UAB Apranga HLT Lithuania 100% 100% UAB Apranga OLT Lithuania 100% 100% UAB Apranga Ecom LT Lithuania 100% 100% SIA Apranga Latvia 100% 100% SIA Apranga LV Latvia 100% 100% SIA Apranga BPB LV Latvia 100% 100% SIA Apranga PLV Latvia 100% 100% SIA Apranga SLV Latvia 100% 100% SIA Apranga MLV Latvia 100% 100% SIA Apranga HLV Latvia 100% 100% SIA Apranga OLV Latvia 100% 100% SIA Apranga Ecom LV Latvia 100% 100% OU Apranga Estonia 100% 100% OU Apranga Estonia Estonia 100% 100% Apranga APB code 121933274 DARIUS JUOZAS MOCKUS 100,0% 65,3% MG grupė UAB code 125459336 34,7% Minvista UAB code 110685692 100,0% MG Investment UAB code 123249022 65,4% 10,5% N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 9 Name Country Ownership interest in % Ownership interest in % 31 12 2023 31 12 2022 OU Apranga BEE Estonia 100% 100% OU Apranga PB Trade Estonia 100% 100% OU Apranga ST Retail Estonia 100% 100% OU Apranga MDE Estonia 100% 100% OU Apranga HEST Estonia 100% 100% OU Apranga Ecom EE Estonia 100% 100% * At 31 December 2023 the Company directly owned 14.91% shares and indirectly through its subsidiary owned the rest 85.09% of shares (At 31 December 2022: 14.91% and 85.09%, respectively) At 31 December the Group‘s number of stores was: Total number of shops Shops, where premises are owned by Group Country 2023 2022 2023 2022 Lithuania 100 100 5 5 Latvia 44 44 - - Estonia 25 24 - - Total 169 168 5 5 At 31 December 2023 the Group and the Company employed 2 249 and 760 people respectively (2022: 2 139 and 740 people respectively). These financial statements were approved by Management Board on 3 April 2024. The shareholders of the Company have a statutory right to approve or not these financial statements and to require preparation of a new set of the financial statements. 2. MATERIAL ACCOUNTING POLICY INFORMATION The material accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are presented in Euro and all values are rounded to the nearest thousand, except when otherwise indicated. The numbers in tables may not coincide due to rounding of particular amounts to EUR thousand. Such rounding differences are not material to these financial statements. 2.1 BASIS OF PREPARATION The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). These financial statements have been prepared under the historical cost convention, except for financial asset at fair value through profit (loss) or other comprehensive income as described in Note 17. These financial statements comprise the Group’s consolidated financial statements and the Company’s separate financial statements. The Group and Company have prepared the financial statements on the going concern basis.. 2.2 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS International Financial Reporting Standards require that in preparing the financial statements, management of the Company and the Group make estimates and assumptions that affect the reported amounts of assets and liabilities and required disclosure at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. There are no areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, except for the following: (a) Impact of war in Ukraine Assessment of the impact of the Russian military invasion of the Republic of Ukraine Russian Federation invaded to Republic of Ukraine on 24 February 2022. The EU and rest of the world, including global bodies, took measures immediatly to respond to the military aggression of the Russian Federation against the Republic of Ukraine. Introduced restrictive measures fueled inflation and soaring utility bills, which indirectly impacted the Company and the Group. However, the management of the Company were able to successfully adapt to the challenges and sustain the business performance. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 10 (b) Revenue recognition Management judgment is needed to determine whether revenue for certain sales transactions should be recorded on a gross basis or on a net basis. Revenue is recognised on a gross basis where the role of the Group/Company is that of principal in a transaction. The gross (without VAT) basis represents sales price after discounts, with any related costs charged to expenses. The Group/Company has concluded that it is the principal in its revenue arrangements including all online sales, because: - The entity controls the goods or services before transferring them to the customer; - The entity is primarily responsible for the supply of goods and services and bears risk of non-performance, all custumers returns are accepted into stores/warehouse; - The entity has latitude in establishing price either directly or indirectly. At the end of each year, the Group/Company also assesses the decrease in accounting income due to customers’ right to return goods after the end of the accounting period. (c) Estimates concerning useful lives of tangible and intangible assets The useful lives of tangible and intangible assets are determined by management at the time the asset is acquired and reviewed on an annual basis for appropriateness. The lives are based on historical experiences with similar assets as well as anticipation of future events, which may impact their useful life. (d) Impairment of property, plant and equipment and right-of-use assets Each shop is considered to represent a separate cash generating unit for impairment test. Cash generating units, which had indications of impairment loss, i.e. suffered operational loss, are tested. The Group and the Company have tested its leasehold improvements, right-of-use assets and other property, plant and equipment, whether those posess impairment loss, in accordance with the accounting policies stated in Note 2.6. The Group and the Company have used “value in use” calculations to test for impairment as information on fair value less costs to sell was not available. These calculations require the use of estimates as described in Note 12 and Note 25. The management reviewed the main assumptions used for the measurement of the recoverable value of property, plant and equipment and right-of-use assets. The Russian military invasion of the Republic of Ukraine has no material impact on the assumptions made for future cash flows. Results of impairment assessment are disclosed in Note 12 and Note 25. (e) Inventory write-down to net realizable value In accordance with the accounting policies stated in Note 2.8 the Group and the Company recognise inventory at the lower of cost and net realizable value less cost to sell. The Group and the Company evaluate whether the value of inventory recognised at cost is not lower that its net realisibale value based on the historical data and actual subsequent results of inventory items sold below costs. Net realisable values are disclosed in Note 15. Management has assessed the level of inventories and determined that the book value of inventories as of 31 December 2023 and 2022 does not exceed the net realisable value. Results of inventories write-down to net realizable value are disclosed in Note 15. (f) Determining the lease term of contracts with renewal and termination options – Company/Group as lessee The Company/Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company/Group has lease contracts that include extension and termination options. The Company/Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company/Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset). (g) Leases - Estimating the incremental borrowing rate The Company/Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company/Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of- use asset in a similar economic environment. The IBR therefore reflects what the Company/Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease. The Company/Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific or country-specific adjustments. IBR used in 2023 varies from 1.0 to 4.7 per cent (from 1.0 to 4.0 per cent in 2022). N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 11 (h) Options granted The Company/Group has options granted for non-financial assets and lease rights, which are not recognized as they do not meet the criteria of a financial instrument. Based on historical information and numerous extentions of the cooperation agreements and intensions of cooperation, the management of the Group believes that the agreement parties will not use any above options. In the unlikely event of happening, the selling price would be approximate fair value of the items/goods. For more details, refer to Note 27. (i) Climate-related risks The Company/Group has assessed climate-related risks and concluded that they does not have a material impact on the business performance, continuity of operations, impairment of assets value or allowances. 2.3 ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS In the current year, the Company and the Group have adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning on 1 January 2023. (a) The following new standards, amendments and interpretations are mandatory for accounting periods beginning on or after 1 January 2023: • IFRS 17: Insurance Contracts Management concluded that the newly adopted IFRS had no impact for financial statements. • IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (Amendments) Management concluded that the newly adopted amendments to IFRS had no impact for financial statements. • IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (Amendments) The Amendments are effective for annual periods beginning on or after January 1, 2023. The amendments provide guidance on the application of materiality judgements to accounting policy disclosures. In particular, the amendments to IAS 1 replace the requirement to disclose ‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. Also, guidance and illustrative examples are added in the Practice Statement to assist in the application of the materiality concept when making judgements about accounting policy disclosures. The Group/Company assessed its accounting policies disclosure and disclosed material accounting policies only. • IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments) The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments narrow the scope of and provide further clarity on the initial recognition exception under IAS 12 and specify how companies should account for deferred tax related to assets and liabilities arising from a single transaction, such as leases and decommissioning obligations. The amendments clarify that where payments that settle a liability are deductible for tax purposes, it is a matter of judgement, having considered the applicable tax law, whether such deductions are attributable for tax purposes to the liability or to the related asset component. Under the amendments, the initial recognition exception does not apply to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. It only applies if the recognition of a lease asset and lease liability (or decommissioning liability and decommissioning asset component) give rise to taxable and deductible temporary differences that are not equal. The impact of the amendments on the financial statements of the Group/Company is disclosed in Note 9. • IAS 12 Income taxes: International Tax Reform - Pillar Two Model Rules (Amendments) The amendments are effective immediately upon issuance, but certain disclosure requirements are effective later. The Organisation for Economic Co-operation and Development’s (OECD) published the Pillar Two model rules in December 2021 to ensure that large multinational companies would be subject to a minimum 15% tax rate. On 23 May 2023, the IASB issued International Tax Reform—Pillar Two Model Rules – Amendments to IAS 12. The amendments introduce a mandatory temporary exception to the accounting for deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules and disclosure requirements for affected entities on the potential exposure to Pillar Two income taxes. The Amendments require, for periods in which Pillar Two legislation is (substantively) enacted but not yet effective, disclosure of known or reasonably estimable information that helps users of financial statements understand the entity’s exposure arising from Pillar Two income taxes. To comply with these requirements, an entity is required to disclose qualitative and quantitative information about its exposure to Pillar Two income taxes at the end of the reporting period. The disclosure of the current tax expense related to Pillar Two income taxes and the disclosures in relation to periods before the legislation is effective are required for annual reporting periods beginning on or after 1 January 2023, but are not required for any interim period ending on or before 31 December 2023. The Group/Company does not expect material impact of the amendments on the the financial statements as effective income tax rate is above 15% in Lithuania and for Latvia and Estonia acruals of deffered tax liabilities are made with 20% effective income tax rate. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 12 (b) The following new standards, amendments to existing standards and interpretations have been issued and adopted by the European Union or are in the process of adoption by the European Union but are not yet effective and have not been early adopted by the Group and the Company: • IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Amendments) The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, and will need to be applied retrospectively in accordance with IAS 8. The objective of the amendments is to clarify the principles in IAS 1 for the classification of liabilities as either current or non-current. The amendments clarify the meaning of a right to defer settlement, the requirement for this right to exist at the end of the reporting period, that management intent does not affect current or non-current classification, that options by the counterparty that could result in settlement by the transfer of the entity’s own equity instruments do not affect current or non-current classification. Also, the amendments specify that only covenants with which an entity must comply on or before the reporting date will affect a liability’s classification. Additional disclosures are also required for non-current liabilities arising from loan arrangements that are subject to covenants to be complied with within twelve months after the reporting period. The Company and the Group have not yet evaluated the impact of the implementation of these amendments. • IFRS 16 Leases: Lease Liability in a Sale and Leaseback (amendments) The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The amendments are intended to improve the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction in IFRS 16, while it does not change the accounting for leases unrelated to sale and leaseback transactions. In particular, the seller-lessee determines ‘lease payments’ or ‘revised lease payments’ in such a way that the seller-lessee would not recognise any amount of the gain or loss that relates to the right of use it retains. Applying these requirements does not prevent the seller-lessee from recognising, in profit or loss, any gain or loss relating to the partial or full termination of a lease. A seller-lessee applies the amendment retrospectively in accordance with IAS 8 to sale and leaseback transactions entered into after the date of initial application, being the beginning of the annual reporting period in which an entity first applied IFRS 16. The Company and the Group have not yet evaluated the impact of the implementation of these amendments. • IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments Disclosure - Supplier Finance Arrangements (Amendments) The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The amendments supplement requirements already in IFRS and require an entity to disclose the terms and conditions of supplier finance arrangements. Additionally, entities are required to disclose at the beginning and end of reporting period the carrying amounts of supplier finance arrangement financial liabilities and the line items in which those liabilities are presented as well as the carrying amounts of financial liabilities and line items, for which the finance providers have already settled the corresponding trade payables. Entities should also disclose the type and effect of non- cash changes in the carrying amounts of supplier finance arrangement financial liabilities, which prevent the carrying amounts of the financial liabilities from being comparable. Furthermore, the amendments require an entity to disclose at the beginning and end of the reporting period the range of payment due dates for financial liabilities owed to the finance providers and for comparable trade payables that are not part of those arrangements. The amendments have not yet been endorsed by the EU. The Company and the Group have not yet evaluated the impact of the implementation of these amendments. • IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (Amendments) The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with earlier application permitted. The amendments specify how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking. A currency is considered to be exchangeable into another currency when an entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations. If a currency is not exchangeable into another currency, an entity is required to estimate the spot exchange rate at the measurement date. An entity’s objective in estimating the spot exchange rate is to reflect the rate at which an orderly exchange transaction would take place at the measurement date between market participants under prevailing economic conditions. The amendments note that an entity can use an observable exchange rate without adjustment or another estimation technique. The amendments have not yet been endorsed by the EU. The Company and the Group have not yet evaluated the impact of the implementation of these amendments. • Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015 the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. The amendments have not yet been endorsed by the EU. The Company and the Group have not yet evaluated the impact of the implementation of these amendments. The Group plans to adopt the above mentioned standards and interpretations on their effectiveness date provided they are endorsed by the EU. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 13 2.4 CONSOLIDATION The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in euro, which is the functional currency of the Company and the Group, and the presentation currency for the consolidated financial statements. 2.5 INTANGIBLE ASSETS Intangible assets expected to provide economic benefit to the Company and the Group in future periods are measured at cost less subsequent accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis to write off the cost of each asset over the estimated useful life as follows: Software 3-5 years Licences and rights acquired 5-9 years Amortisation is accounted for as selling expense. The Group and the Company have no intangible assets with indefinite useful life. 2.6 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment (hereinafter “PPE”) is stated at historical cost, less accumulated depreciation and impairment losses. Leasehold improvements, that meet definition of PPE, are capitalised in the statement of financial position and depratiated over the lease term. Compensation received from shopping malls in connection with the setting up of shops is related to the compensation of PPE, not to rent fees, and consequently the cost of acquisition of property, plant and equipment is reduced. Compensations that do meet the definition of lease incentive, are accounted for under IFRS 16, see Note 2.13. The Company and the Group did not received such compensations in 2023 and 2022. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation is charged so as to write-off the cost of PPE to their residual value over their estimated useful lives, using the straight-line method, on the following basis: Buildings 15-50 years Plant and equipment 5-20 years Leasehold improvements 4-10 years Other PPE 3-6 years All depreciation of property, plant and equipment is recognised in the statement of comprehensive income and accounted for as selling expenses. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of the reporting period. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount (Note 2.2). Impairment of PPE as well as reversals of impairment during the year are included into selling costs caption in the statement of comprehensive income. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in other income caption in the statement of comprehensive income. The Group and the Company capitalise borrowing costs that relate to assets that take more than 12 months to get ready for use. Otherwise borrowing costs are recognised as expenses of the current reporting period. As at 31 December 2023 and at 31 December 2022 the Group and the Company did not have such qualifying assets and did not capitalize interest. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 14 2.7 INVESTMENTS IN SUBSIDIARIES In the Company’s separate financial statements investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. Dividends received are credited to the Company’s statement of comprehensive income. 2.8 INVENTORIES Inventories are stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Net realizable value represents the estimated selling price less all estimated costs to be incurred in selling. Unrealisable inventory has been fully written-off. Impairment losses are recognized as an expense immediately (under cost of sales caption). 2.9 FINANCIAL ASSETS AND LIABILITIES A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s/Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component, the Group/Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component are measured at the transaction price determined under IFRS 15. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s/Company’s business model for managing financial assets refers to how the Group/Company manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. A regular way purchases or sales of financial assets are recognised on the trade date, i.e., the date that the Group/Company commits to purchase or sell the asset. Subsequent measurement After initial recognition, the Group/Company measures a financial asset at: a) Amortised cost (debt instruments), see Note 17; b) Fair value through other comprehensive income (OCI) with recycling of cumulative gains and losses upon derecognition (debt instruments), see Note 17; c) Fair value through other comprehensive income (OCI) with no recycling of cumulative gains and losses upon derecognition (equity instruments). The Group/Company did not have such items as at 31 December 2023 and 2022; d) Fair value through profit or loss, see Note 17. Financial assets at amortised cost (debt instruments) The Group/Company measures financial assets at amortised cost if both of the following conditions are met: i) The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in the statement of comprehensive income when the asset is derecognised, modified or impaired. The Group’s/Company’s financial assets at amortised cost includes cash and cash equivalents, trade, other current and non- current receivables/payables and loans granted. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 15 Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model.. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in other income caption in the statement of comprehensive income. The Group/Company in order to make efficient use of the available free cash, in 2018 acquired collective investment scheme (fund units), which fair value (level 3) as at 31 December 2023 and as at 31 December 2022 is EUR 2 600 thousand (Note 17). Impairment of financial assets Following IFRS 9, the Group/Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. At the end of every reporting period it is assessed whether credit risk significantly increased from initial recognition taking into account change in probability of default during the life-time of the instrument. During this process the Group/Company classifies debt instruments into stages 1, 2 and 3: • Stage 1: on initial recognition the Group/Company recognizes a 12-month ECL. Stage 1 debt instruments include instruments which credit risk improved and which were transferred back from Stage 2. • Stage 2: When a loan has shown a significant increase in credit risk since origination, the Group/Company records an allowance for the lifetime ECL. Stage 2 debt instruments include instruments which credit risk improved and which were transferred back from Stage 3. Group/Company considers that significant increase in credit risk when debt is overdue more than 30 days or when it is visible from financial information that debtor is experiencing financial difficulties. • Stage 3: For loans considered credit-impaired, the Group/Company recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the probability of default set at 100%.. In 2022 and 2023 there were no transfers between the different stages. In 2022 and 2023 there were no financial instruments which credit risk significantly increased. For loans granted the Group/Company calculates ECLs based on an expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to the Group/Company in accordance with the contract and the cash flows that the Group/Company expects to receive. The Group/Company did not recognize allowance for loans granted because based on probability of default, loss given default, exposure at default and forward looking information the allowance is not material. For trade receivables, the Group/Company applies a simplified approach in calculating ECLs. Therefore, the Group/Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. For that purpose the Group/Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The Group/Company considers a financial asset in default when contractual payments are 90 days past due or when indications exist that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. The Group/Company did not recognize allowance for trade receivables, intercompany trade receivables, loans and other receivables because based on historical as well as forward looking information the allowance is not material. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings and payables. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s/Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and finance lease liabilities. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 16 Loans, borrowings and other payables After initial recognition, loans, borrowings and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of comprehensive income, when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of comprehensive income. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, i.e. to realise the assets and settle the liabilities simultaneously. Derecognition of financial instruments Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s/Company’s statement of financial position) when: i) The rights to receive cash flows from the asset have expired or ii) The Group/Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group/Company has transferred substantially all the risks and rewards of the asset, or (b) the Group/Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group/Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group/Company continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group/Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group/Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group/Company could be required to repay (amount of the guarantee). Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income. 2.10 SHARE CAPITAL (a) Ordinary shares Ordinary shares are stated at their par value. Consideration received for the shares sold in excess over their par value is shown as share premium. Incremental external costs directly attributable to the issue of new shares are accounted for as a deduction from share premium. 2.11 RESERVE (a) Foreign currency translation reserve The foreign currency translation reserve is used for translation differences arising on consolidation of financial statements of foreign subsidiaries. Exchange differences are classified as equity in the consolidated financial statements until disposal of the investment. Upon disposal of the corresponding assets, the cumulative revaluation of translation reserves is recognised as income or expenses in the same period when the gain or loss on disposal is recognised. (b) Legal reserves Legal reserve is included into other reserves. Legal reserve is compulsory under the Lithuanian regulatory legislation. Annual transfers of 5 per cent of net result are required until the reserve reaches 10 per cent of share capital. The legal reserve cannot be used for payment of dividends and it is established to cover future losses only. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 2.12 INCOME TAX (a) Current income tax The Group companies are taxed individually irrespective of the overall results of the Group. The Group companies in Lithuania may transfer the estimated tax losses (or part thereof) to another Group company in Lithuania, which has a right to reduce the taxable profit with the respective amount of the tax looses transferred for the same taxable period. The charge for taxation included in these financial statements is based on the calculation made by the management in accordance with tax legislation of the respective country in which group entity operates. The tax currently payable is based on taxable profit for the reporting period. For companies operating in Lithuania tax losses can be carried forward for indefinite period, except for the losses incurred as a result of disposal of securities and/or derivative financial instruments not designated for hedging. Starting from 1 January 2014 the transferable tax loss cannot cover more than 70% of the taxable profit of the current year. Such carrying forward is disrupted if the company changes its activities due to which these losses were incurred except when the company does not continue its activities due to reasons which do not depend on the company itself. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s and the Company’s liability for current tax is calculated using tax rates that have been enacted at the end of the reporting period. The income tax rate applied for the Company and subsidiaries operating in Lithuania was 15 per cent in 2022 and in 2023. In Latvia and Estonia income tax rate on reporting period and prior taxable profits is nil. In Latvia and Estonia, the taxation of profit of operating subsidiaries is deferred until the profit appropriation moment, i.e. payment of dividends. The dividends paid by the Group’s companies in Latvia and Estonia are taxed at the withholding tax rate of 20% of their gross amounts as at 31 December 2023 (20% as at 31 December 2022). Amendments to the Estonian Income Tax Act that entered into force on 1 January 2018 enable companies to use a 14% reduced tax rate for regular dividend payments. The 14% reduced tax rate can be applied to dividends distributed on or after 1 January 2019 as follows: the 14% rate is applicable to the amount equal to a third of the last financial year's dividend distribution, while the portion of the distribution exceeding this threshold shall remain taxable at 20%. The reduced rate can be used on the share of the distribution equal to the company's last three years' average profit distributions. (b) Deferred income tax Deferred income tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred income tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group and the Company are able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred income tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred income tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis. 2.13 LEASES The Company or the Group as lessee The Company/Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company/Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company/Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use assets The Company/Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows: • Premises 1 to 15 years • Motor vehicles 1 to 5 years If ownership of the leased asset transfers to the Company/Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in Note 2.9, Impairment of non- financial assets. 17 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 18 Lease liabilities At the commencement date of the lease, the Company/Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company/Group and payments of penalties for terminating the lease, if the lease term reflects the Company/Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company/Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. The Company’s/Group’s lease liabilities are included in Non-current lease liabilities and Current lease liabilities (see Note 25). Short-term leases and leases of low-value assets The Company/Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value (below EUR 5 thousand). Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term. 2.14 EMPLOYEE BENEFITS (a) Social security contributions The Company and the Group pay social security contributions to the state Social Security Fund (the Fund) on behalf of its employees based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under which the Group and the Company pay fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period. Social security contributions are recognised as expenses on an accrual basis and included in payroll expenses. (b) Long-term employee benefits According to the requirements of Lithuanian Labor Code, each employee leaving the Group at the age of retirement is entitled to a one-off payment in the amount of 2 months’ salary. The actuarial gains and losses are recognized in the statement of other comprehensive income. The past service costs are recognised as an expense on a straight line basis over the average period until the benefits become vested. Any gains or losses appearing as a result of curtailment and/or settlement are recognised in the statement of comprehensive income as incurred. The past service costs are recognized in the statement of comprehensive income as incurred. The above mentioned employee benefit obligation is calculated based on actuarial assumptions, using the projected unit credit method. Obligation is recognized in the statement of financial position and reflects the present value of these benefits on the date of the statement of financial position. Present value of the non-current obligation to employees is determined by discounting estimated future cash flows using the discount rate which reflects the interest rate of the Government bonds of the same currency and similar maturity as the employment benefits. Actuarial gains and losses are recognized in the statement of other comprehensive income as incurred. In 2023 and 2022 there were no material amounts. (c) Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company and the Group recognise termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. (d) Bonus plans The Company and the Group recognise a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 19 2.15 RECOGNITION OF REVENUE AND RELATED EXPENSES Revenue recognition Revenue from contracts with customers is recognised when control of the services or goods are transferred to the customer at an amount that reflects the consideration to which the Group/Company expects to be entitled in exchange for those services or goods. The Group/Company has concluded that it is the principal in its revenue arrangements, because: - The entity controls the goods or services before transferring them to the customer; - The entity is primarily responsible for the supply of goods and services and bears risk of non-performance; - The entity has latitude in establishing price either directly or indirectly. Sales of goods are recognized when the Company or another Group entity sells a product to the customer. Retail sales are usually in cash or by credit card. The recorded revenue includes credit card fees payable for the transaction. Such fees are included in operating expenses. Online sales of goods are recognized when the Company or another Group entity sends a product to the customer. Every sale of goods that the Group/Company makes is a separate performance obligation with separately identifiable fixed price. The Group/Company does not have any customer loyalty progammes. The Company recognises revenue from management services provided to subsidaries over time, based on expenses incured to measure provision of the services, because the customer simultaneously receives and consumes the benefits provided by the Company. Other occasional revenue from the sale of property, plant or equipment is recognised at a point in time, when sold items are delivered to client and control is transfered. Dividend income is recognised when the right to receive payment is established. In addition the management considers the effect of other matters to the revenue recognition such as the existence of significant financing components, non-cash consideration, consideration payable to the customer and warranties. None of these are present in the Group’s/Company‘s contracts with the customers. Assets and liabilities arising from rights of return Right of return assets A right-of-return asset is recognised for the right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods and any potential decreases in value. The Group/Company updates the measurement of the asset for any revisions to the expected level of returns and any additional decreases in the value of the returned products. Refund liabilities A refund liability is recognised for the obligation to refund some or all of the consideration received (or receivable) from a customer. The Group’s/Company’s refund liabilities arise from customers’ right of return. The liability is measured at the amount the Group/Company ultimately expects it will have to return to the customer. The Group/Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. The Group/Company does not incur material costs to acquire or fulfill the contract. 2.16 DIVIDEND DISTRIBUTION Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s and Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. 2.17 EARNINGS PER SHARE Basic earnings per share are calculated by dividing net profit attributed to the shareholders of the Company and the Group from average weighted number of ordinary registered shares in issue, excluding ordinary registered shares purchased by the Group and the Company and held as treasury shares, if any. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 20 3. FINANCIAL RISK MANAGEMENT (a) Financial risk factors The risk management function within the Group and the Company are carried out in respect of financial risks (credit, market (which consist of currency, interest rate and price) and liquidity). The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimize operational and legal risks. The financial risks relate to the following financial instruments: financial assets at fair value through profit or losstrade receivables, cash and cash equivalents, trade and other payables, borrowings and guarantees provided on behalf of the Company to goods suppliers and guarantees issued by the Company to lessors of premises. The accounting policy with respect to these financial instruments is described in previous section. Credit risk Credit risk is managed by Group management. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutionsas well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties (or subsidiaries of such parties) with high credit ratings are accepted. Sales to wholesale customers are rare and immaterial, therefore risk control only assesses the credit quality of the customer, taking into account its financial position, past experience and future factors. Sales to retail customers are settled in cash or using major credit cards, therefore there is no credit risk. Company’s credit risk arising from trade receivables from subsidiaries, loans to subsidiaries and guarantees issued for the benefit of subsidaries is managed by controlling financial performance of subsidiaries on a monthly basis. All the subsidiaries having Company’s loans have been profitable during the financial year, generated strong positive cash flows, historically none of them had liquidity issues. Management has also assessed the projected future information that will not have a material adverse effect on the Company’s subsidiaries. Therefore, in the management’s opinion, the credit risk is low. The Company and the Group have no significant concentration of credit risk, except for cash which is held in two banks, which parent companies having high credit ratings, and loans granted to subsidiaries. Liquidity risk Liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group and the Company treasury maintain flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Group’s and the Company’s liquidity reserve (comprises undrawn borrowing facility (Note 23) and cash and cash equivalents (Note 20) on the basis of expected cash flow. This is generally carried out at local level in the operating companies of the Group in accordance with practice set by the Group. In addition, the Group’s and the Company’s liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these; and maintaining debt financing plans. The table below analyses the Group’s and the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. GROUP Less than 1 Between 1 and Between 1 and More than 3 Total month 12 months 3 years years As at 31 December 2023 Borrowings - - - - - Lease liabilities 1 222 13 084 22 743 30 804 67 853 Trade and other payables 13 957 3 775 - - 17 732 Total 15 179 16 859 22 743 30 804 85 585 As at 31 December 2022 Borrowings - - - - - Lease liabilities 1 076 11 640 21 225 23 302 57 243 Trade and other payables 12 489 3 908 - - 16 397 Total 13 565 15 548 21 225 23 302 73 640 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 21 COMPANY Less than 1 Between 1 and Between 1 and More than 3 Total month 12 months 3 years years As at 31 December 2023 Borrowings - 6 360 - 6 360 Lease liabilities 476 5 140 9 415 12 510 27 541 Trade and other payables 3 767 1 800 - - 5 567 Total 4 243 13 300 9 415 12 510 39 468 As at 31 December 2022 Borrowings - 2 032 - 2 032 Lease liabilities 423 4 595 8 709 11 349 25 076 Trade and other payables 3 537 1 650 - - 5 187 Total 3 960 8 277 8 709 11 349 32 295 Change in liabilities arising from financing activities: As at 31 Dividends Dividends Proceeds Repayments As at 31 GROUP December declared paid from of December 2022 borrowings borrowings 2023 Borrowings - - - - - - Dividends payable 166 15 482 (15 472) - 176 Total 166 15 482 (15 472) - - 176 As at 31 Dividends Dividends Proceeds Repayments As at 31 COMPANY December declared paid from of December 2022 borrowings borrowings 2023 Borrowings 2 032 - - 102 201 (97 873) 6 360 Dividends payable 166 15 482 (15 472) - 176 Total 2 198 15 482 (15 472) 102 201 (97 873) 6 536 As at 31 Dividends Dividends Proceeds Repayments As at 31 GROUP December declared paid from of December 2021 borrowings borrowings 2022 Borrowings 200 - - - ( 200) - Dividends payable 116 27 646 (27 596) - 166 Total 316 27 646 (27 596) - ( 200) 166 As at 31 Dividends Dividends Proceeds Repayments As at 31 COMPANY December declared paid from of December 2021 borrowings borrowings 2022 Borrowings 5 400 - - 20 405 (23 773) 2 032 Dividends payable 116 27 646 (27 596) - 166 Total 5 516 27 646 (27 596) 20 405 (23 773) 2 198 Changes in lease liabilities are disclosed in Note 25. Market risk Cash flow and fair value interest rate risk The Company has loans to subsidiaries with floating interest rates, but the cash flow risk is mitigated by applying the same variable element of interest rate on those loans as the banks are charging the Company. Loans granted and received at variable rates expose the Group to cash flow interest rate risk, which horewer has no material impact on profit or equity of the Group. Loans granted and received at fixed rates expose the Company to fair value interest rate risk, which horewer has no material impact on profit or equity of the Company. The Company’s and Group’s borrowings consist of loans with floating interest rate, which are related to EURIBOR and EONIA. The Company and the Group did not use any derivative financial instruments in order to control the risk of interest rate changes. Trade and other receivables and payables are interest-free and have settlement dates within one year. The Group’s and the Company’s cash flow and fair value interest rate risk is periodically monitored by the Group’s management. It analyses its interest rate exposure on a dynamic basis taking into consideration refinancing, renewal of N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 22 existing positions, alternative financing. Based on these scenarios, the Group and the Company calculate the impact on profit and loss of a defined interest rate shift. The scenarios are run only for receivables and liabilities that represent the major interest-bearing positions. Based on the performed simulations, the Company's management believes that if the interest rate increases or decreases by 1 percent, the Group's profit for the period or equity for the period would not change in 2023 (in 2022 - 0 euros), while the Company's would change by EUR 46 thousand (in 2022 – EUR 15 thousand). Foreign exchange risk The Company and the Group have a policy to synchronize the cash flows from expected sales in the future with the expected purchases and other expenses in each foreign currency. Substantially all the Group’s payables and receivables are short-term and in addition expenses in foreign currencies are insignificant (less than 10%) as compared to those in Euro. The Group operates in Lithuania, Latvia and Estonia, and during the reporting period used Euro currency. Since Estonia, Latvia and Lithuania introduced the Euro (respectively, since 1st January 2011, 1st January 2014 and 1st January 2015), so there is no exchange rate fluctuations. (b) Capital risk management The Group’s and the Company’s objectives when managing capital, which includes ordinary shares, legal reserve, foreign currency translation reserve and retained earnings, are to safeguard the Group’s and the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group and the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group and the Company monitor capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt. Pursuant to the Lithuanian Law on Companies the authorised share capital of a public limited liability company must be not less than EUR 40 thousand and of a private limited liability company must be not less than EUR 2.5 thousand. In addition, for all entities the shareholders’ equity should not be lower than 50 per cent of the company’s registered share capital. As at 31 December 2023 and at 31 December 2022 UAB Apranga Ecom LT did not comply with the requirements. Business activities of UAB Apranga Ecom LT are terminated since 2019 November month. Pursuant to the Latvian Commercial Law the authorised share capital of a private limited liability company must be not less than EUR 2.8 thousand. As at 31 December 2023 and 31 December 2022, all of the Company’s Latvian subsidiaries complied with these requirements. Pursuant to the Estonian Commercial Code the authorised share capital of a private limited liability company must be not less than EUR 2.5 thousand. In addition, the shareholders’ equity should not be lower than 50 per cent of the company’s share capital. As at 31 December 2023 and as at 31 December 2022 all of the Company’s Estonian subsidiaries complied with these requirements. In addition, the Group has to comply with the total equity over total assets covenant imposed in the agreement with Luminor Bank AS. As at 31 December 2023 and as at 31 December 2022, the Group complied with the covenant. (c) Fair value estimation Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group and the Company determine whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. No transfers occurred in 2022 and 2023. Fair value measurements are disclosed in Note 17. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 23 4. SEGMENT INFORMATION Management has determined the operating segments based on the reports reviewed by the General Director and other 6 Directors (responsible for managing, sales and marketing, human resources, purchases, development and finance) that are used to make strategic decisions. The Directors consider the business from both a geographic and product perspective to certain extent. From product perspective Directors review only sales volume and gross margin, as presented in the statment of the comprehensive income by brand name. Gross margins of different brands are not significantly different, therefore can be aggregated into one reportable segment. Geographically, Directors separately consider operations in Lithuania, Latvia and Estonia depending on where the stores are located. Different legislation, consumer habits and economic situation substantially affect the average sales and expenses in each country, therefore Directors believe that each country represents a separate reportable segment. All financial information, including the measure of profit and total assets, is analysed on a country basis. Liabilities are measured on a Group basis only and are not individually measured on a country basis. The segment information provided to the Chief Operating Decision Makers for the reportable segments for the year ended 31 December is as follows: Inter- Total in 31 December 2023 Lithuania Latvia Estonia Total company consolidated elimina- financial tions statements Total segment revenue 182 689 66 272 42 291 291 252 - Inter-segment revenue (20 270) ( 643) ( 643) (21 556) - Stores income from external customers 162 419 65 629 41 648 269 696 - 269 696 (note 6) Gross profit margin 45,6% 46,4% 47,1% 46,0% 46,0% Other income (expenses): Rent (Note 25) (5 303) (2 377) ( 967) (8 647) ( 33) (8 680) Utilities (1 374) ( 627) ( 385) (2 386) (2 386) Renumeration and social security (26 906) (8 045) (5 470) (40 421) (40 421) contributions Depreciation and amortisation (11 527) (4 879) (3 021) (19 427) (19 427) Impairment (charges) 93 287 ( 306) 74 74 Other income 7 355 - - 7 355 (7 296) 59 Other (expenses) (22 046) (10 177) (6 966) (39 189) 7 329 (31 860) Finance income 464 151 64 679 ( 410) 269 Finance (costs) (1 333) ( 256) ( 259) (1 848) 410 (1 438) Income tax (expense) (2 140) (1 124) ( 295) (3 559) (3 559) Profit (loss) for the year 11 348 3 401 2 024 16 773 - 16 773 Total assets 120 938 35 553 19 173 175 664 (15 639) 160 025 Additions to non-current assets (except for leases) 5 800 5 706 875 12 381 - 12 381 Inter- Total in 31 December 2022 Lithuania Latvia Estonia Total company consolidated elimina- financial tions statements Total segment revenue 164 735 59 280 37 634 261 649 - Inter-segment revenue (17 431) ( 692) ( 627) (18 750) - Stores income from external customers 147 304 58 588 37 007 242 899 - 242 899 (note 6) Gross profit margin 45,6% 46,0% 46,6% 45,8% 45,8% Other income (expenses): Rent (Note 25) (4 972) (2 120) ( 939) (8 031) ( 30) (8 061) Utilities (2 445) ( 660) ( 581) (3 686) (3 686) N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 24 Inter- Total in 31 December 2022 Lithuania Latvia Estonia Total company consolidated elimina- financial Renumeration and social security tions statements contributions (23 866) (6 864) (4 680) (35 410) (35 410) Depreciation and amortisation (11 273) (4 716) (3 048) (19 037) (19 037) Impairment (charges) 185 183 ( 65) 303 303 Other income 6 978 65 50 7 093 (6 303) 790 Other (expenses) (18 449) (8 326) (5 931) (32 706) 6 333 (26 373) Finance income 57 11 3 71 ( 34) 37 Finance (costs) ( 760) ( 208) ( 227) (1 195) 34 (1 161) Income tax (expense) (1 900) ( 865) ( 345) (3 110) (3 110) Profit (loss) for the year 10 700 3 446 1 489 15 635 - 15 635 Total assets 109 696 31 840 18 597 160 133 (11 858) 148 275 Additions to non-current assets (except for leases) 2 371 255 1 832 4 458 - 4 458 inter-segment revenue consists of sales of the Company's goods to subsidiaries Apranga SIA and Apranga OU and subsidiaries sale of remnants of goods to the Company. In 2023, the Group’s profitability before taxes decreased to 7.5% (2022: 7.7%): in Lithuania decreased to 8.3% (2022: 8.6%), in Latvia decreased to 6.9% (2022: 7.4%), in Estonia increased to 5.6% (2022: 5.0%). The profitability before taxes is calculated as follows: profit (loss) for the year before income tax divided by store income from external customers. The total carrying value of non-current assets located in Lithuania is EUR 57 440 thousand (2022: EUR 54 378 thousand), and the total of these non-current assets located in other countries is EUR 30 150 thousand (2022: EUR 26 049 thousand). 5. EXPENSES BY NATURE For the year ended 31 December cost of sales consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Cost of goods sold 144 835 131 976 60 343 55 325 Write-down (reversal) of inventories to net realisable 719 ( 421) 157 ( 333) value Total cost of sales 145 554 131 555 60 500 54 992 For the year ended 31 December selling costs consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Rent 8 680 8 061 2 351 2 268 Utilities 2 386 3 686 873 1 529 Remuneration 27 804 24 603 10 171 9 686 Social security contributions 2 916 2 486 185 175 Depreciation and amortization 19 427 19 037 7 524 7 545 Impairment charge (reversal) ( 74) ( 303) ( 70) ( 208) Advertising and marketing 2 714 2 722 1 819 1 941 Franchise expenses 11 357 7 884 102 100 Bank commissions 1 614 1 279 392 347 Labelling, packing and repairing 895 1 096 455 490 Logistics and distribution 2 397 2 466 299 303 Business trips 652 445 429 298 Total selling costs 80 768 73 462 24 530 24 474 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 25 For the year ended 31 December general and administrative expenses consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Remuneration 9 277 7 949 7 311 6 145 Social security contributions 424 372 131 109 Other personnel related expenses 1 669 1 136 772 553 IT and communications 1 527 1 430 950 937 Repair and maintenance 3 710 3 300 1 617 1 514 Taxes (excluding income tax) 380 231 195 131 Consulting expense 221 234 212 231 Audit fee 201 166 47 42 Other expenses 4 523 3 985 1 667 1 777 Total general and administrative expenses 21 932 18 803 12 902 11 439 6. REVENUE FROM CONTRACTS WITH CUSTOMERS For the year ended 31 December revenue from contracts with customers consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Stores income 269 540 242 534 77 355 73 684 Wholesale income 38 35 19 731 16 610 Management fees - - 7 291 6 173 Other income 118 330 66 330 Total revenue from contracts with customers 269 696 242 899 104 443 96 797 For the year ended 31 December stores income consisted of the following: GROUP COMPANY Chain 2023 2022 2023 2022 Economy 26 041 25 714 16 715 16 557 Youth 65 516 57 789 17 117 15 298 Footwear 3 521 3 870 1 896 2 135 Business 51 260 44 731 15 797 14 921 Luxury 26 461 24 229 15 421 14 334 Zara 84 992 74 366 - - Outlets 11 749 11 835 10 409 10 439 Total 269 540 242 534 77 355 73 684 For the year ended 31 December other income consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Rent income 23 21 26 24 Gain from disposal of PPE, net 3 466 2 466 Changes in fair value of financial assets, net - 200 - 200 Dividends 33 103 10 283 15 503 Total other income 59 790 10 311 16 193 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 26 7. FINANCE INCOME AND COSTS For the year ended 31 December finance income consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Interest income 269 37 284 50 Total finance income 269 37 284 50 For the year ended 31 December finance costs consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Interest on bank borrowings 48 100 48 100 Interest expense on lease liabilities 1 390 1 061 560 419 Interest on borrowings from subsidiaries - - 395 21 Total finance costs 1 438 1 161 1 003 540 8. INCOME TAX EXPENSE Domestic income tax is calculated at 15 per cent of the estimated profit for the year. The total income tax charge can be reconciled to the accounting profit before tax as follows: GROUP COMPANY 2023 2022 2023 2022 Profit before tax 20 332 18 745 16 103 21 595 Tax at the domestic income tax rate 3 050 2 812 2 415 3 239 Tax effect of income not subject to tax ( 111) ( 57) (1 626) (2 382) Tax effect of expenses that are not deductible in determining 249 47 115 30 taxable profit Effect of different tax rates of foreign subsidiaries 371 308 - - Tax expense 3 559 3 110 904 887 Effective income tax rate 17,5% 16,6% 5,6% 4,1% For the year ended 31 December income tax expense consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Current income tax expense 3 451 2 983 945 869 Deferred tax 108 127 ( 41) 18 Total income tax expense 3 559 3 110 904 887 9. DEFERRED INCOME TAX The movement in deferred income tax liabilities account was as follows: GROUP COMPANY 2023 2022 2023 2022 At beginning of year (2 194) (2 067) ( 407) ( 389) Comprehensive income statement (charge) credit ( 107) ( 127) 41 ( 18) At end of year (2 301) (2 194) ( 366) ( 407) In 2023 and 2022 deferred income tax asset and liability related to the entities operating in Lithuania were calculated at 15 per cent rate. Deferred income tax liability related to the entities operating in Latvia and Estonia were calculated at 20 per N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 27 cent rate as at 31 December 2023 and as at 31 December 2022 for the accrued undistributed profit of these subsidiaries, since these undistributed profits are planned to be paid out as dividends during the coming years (Note 2.16). The 20 percent rate applies to gross dividends (25 per cent to net dividends). Deferred tax assets and liabilities recognised as follows: GROUP COMPANY 2023 2022 2023 2022 Deferred tax assets: Lease liabilities IFRS 16 5 835 5 712 3 770 3 855 Inventory write down 456 387 270 246 Accruals 133 17 71 13 Impairment of property, plant and equipment 24 12 2 8 Total deferred tax assets 6 448 6 128 4 113 4 122 Deferred tax liability: Right-of-use assets IFRS 16 (5 740) (5 712) (3 702) (3 855) Undistributed profits of subsidiaries (2 073) (1 936) - - Depreciation of property, plant and equipment ( 936) ( 674) ( 777) ( 674) Total deferred tax liabilities (8 749) (8 322) (4 479) (4 529) Total deferred tax (liabilities) assets, net (2 301) (2 194) ( 366) ( 407) As at 1 January 2022 deferred tax asset from lease liabilities IFRS 16 was equal to deffered tax liability from right-of-use assets IFRS 16 for the Group and the Company amounted to EUR 6 174 thousand and EUR 4 179 thousand, respectively. 10. DIVIDENDS PER SHARE 2023 2022 Approved dividends 15 482 27 646 Weighted average number of ordinary shares in thousand (Note 21) 55 292 55 292 Approved dividends per share, EUR 0.28 0.50 In 2023, the Annual Shareholder’s Meeting approved to pay dividends 0.28 cent per share to the shareholders for 2022 year. In respect of the current 2023 year, the Board of Directors propose to pay 0.24 EUR dividend per share to the shareholders (Note 22). This dividend is subject to approval by the shareholders at the Annual Shareholder’s Meeting and has not been included as a liability in these financial statements. 11. EARNINGS PER SHARE GROUP COMPANY 2023 2022 2023 2022 Profit (loss) for the year 16 773 15 635 15 199 20 708 Weighted average number of ordinary shares in thousand (Note 21) 55 292 55 292 55 292 55 292 Basic and diluted earnings per share, EUR 0.30 0.28 0.27 0.37 The Company has no dilutive potential ordinary shares, therefore, the diluted earnings per share are the same as basic earnings per share. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 28 12. PROPERTY, PLANT AND EQUIPMENT At 31 December property, plant and equipment consisted of the following: Plant and Leasehold Construction GROUP Buildings equipment improve- Other PPE in progress Total ments Cost At 31 December 2021 9 807 2 124 11 628 44 289 187 68 035 Additions 423 42 645 631 2 080 3 821 Disposals and write-offs (1 267) ( 40) (3 283) (2 745) - (7 335) Transfers - - 858 975 (1 833) - At 31 December 2022 8 963 2 126 9 848 43 150 434 64 521 Additions 104 35 686 2 140 8 783 11 748 Disposals and write-offs - ( 7) (2 853) (6 333) - (9 193) Transfers - - 4 758 4 449 (9 207) - At 31 December 2023 9 067 2 154 12 439 43 406 10 67 076 Accumulated depreciation At 31 December 2021 4 323 663 6 687 30 935 - 42 608 Charge for the year 211 135 1 579 4 340 - 6 265 Disposals and write-offs ( 518) ( 40) (2 607) (2 687) - (5 852) At 31 December 2022 4 016 758 5 659 32 588 - 43 021 Charge for the year 254 140 1 470 3 962 - 5 826 Disposals and write-offs - ( 7) ( 168) (6 094) - (6 269) At 31 December 2023 4 270 891 6 961 30 456 - 42 578 Impairment charge At 31 December 2021 - - 293 234 - 527 Charge for the year (reversal) ( 95) 76 ( 19) At 31 December 2022 - - 198 310 - 508 Charge for the year (reversal) 53 ( 115) ( 62) At 31 December 2023 - - 251 195 - 446 Carrying amount At 31 December 2021 5 484 1 461 4 648 13 120 187 24 900 At 31 December 2022 4 947 1 368 3 991 10 252 434 20 992 At 31 December 2023 4 797 1 263 5 227 12 755 10 24 052 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 29 Plant and Leasehold Construction COMPANY Buildings equipment improve- Other PPE in progress Total ments Cost At 31 December 2021 9 807 2 124 6 618 12 998 - 31 547 Additions 423 42 7 466 567 1 505 Disposals and write-offs (1 267) ( 40) (1 937) (1 398) - (4 642) Transfers - - 432 - ( 432) - At 31 December 2022 8 963 2 126 5 120 12 066 135 28 410 Additions 104 34 28 1 334 1 190 2 690 Disposals and write-offs - ( 7) - (1 468) - (1 475) Transfers - - 1 104 211 (1 315) - At 31 December 2023 9 067 2 153 6 252 12 143 10 29 625 Accumulated depreciation At 31 December 2021 4 323 663 3 738 9 539 - 18 263 Charge for the year 211 135 872 1 070 - 2 288 Disposals and write-offs ( 518) ( 40) (1 862) (1 391) - (3 811) At 31 December 2022 4 016 758 2 748 9 218 - 16 740 Charge for the year 254 140 838 978 - 2 210 Disposals and write-offs - ( 7) - (1 353) - (1 360) At 31 December 2023 4 270 891 3 586 8 843 - 17 590 Impairment charge At 31 December 2021 - - 70 49 - 119 Charge for the year (reversal) ( 36) ( 27) ( 63) At 31 December 2022 - - 34 22 - 56 Charge for the year (reversal) ( 24) ( 16) ( 40) At 31 December 2023 - - 10 6 - 16 Carrying amount At 31 December 2021 5 484 1 461 2 810 3 410 - 13 165 At 31 December 2022 4 947 1 368 2 338 2 826 135 11 614 At 31 December 2023 4 797 1 262 2 656 3 294 10 12 019 The Group's and the Company's depreciation expense is recognized in the statements of comprehensive income under selling costs. At 31 December 2023 the Group’s and the Company’s buildings with the carrying amount of EUR 4 314 thousand (2022: EUR 4 947 thousand) have been pledged as security for outstanding loans from financial institutions (Note 23). As of December 31 2023 and as of December 31 2022, the Company has leased one premises to third parties. At 31 December the acquisition cost of the fully depreciated property, plant and equipment still in use was as follows: GROUP COMPANY 2023 2022 2023 2022 Plant and equipment 998 1 002 983 987 Leasehold improvements 276 42 66 - Other PPE 12 337 15 891 4 896 4 941 Total 13 611 16 935 5 945 5 928 The main cash generating unit of the Group and the Company is a store. The Group and the Company have tested PPE used in stores operations for impairment in accordance with the accounting policies stated in Note 2.6. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 30 Estimation of the value in use was based on the discounted post-tax cash flows (DCF) of the latest available business plan. DCF was estimated over remaining useful life of leasehold improvements (vast majority of premises are leased). For the calculation of future cash flows in 2024 and in later years, each cash generating unit was assessed individually. Net sales and personnel costs growth rates were established on brand or country level. The weighted average cost of capital (further – WACC) of 13-14 per cent post-tax (WACC of 13 per cent post-tax - in 2022) was used for value in use estimation. Based on the calculations performed the management concluded that impairment in the amount of EUR 446 thousand for the Group (2022: EUR 508 thousand) and EUR 16 thousand for the Company (2022: EUR 56 thousand) should be recorded against PPE in the statement of financial position. The Group and the Company in 2023 reversed impairment losses of EUR 62 thousand and EUR 40 thousand respectively (2022: reversed impairment losses of EUR 19 thousand and EUR 63 thousand for the Group and the Company respectively). Impairment losess reversed in the period were mostly related to non-current assets of CGUs, which were closed during the year, as well as to the decrease of carrying value of non-current assets associated to operating CGUs due to depreciation. However, a slight increase in WACC has offset some of the effect. If future operating cash flows in 2024 and in later years were reduced by 5 per cent, the Group and the Company in 2023 would have recognized additional PPE impairment amounting to EUR 12 thousand and EUR 10 thousand, respectively. If the estimated post-tax discount rate applied to the discounted cash flows for cash generating units had been 1 percentage point higher than management estimates (for example 14-15 per cent instead of 13-14 per cent), neither the Group nor the Company in 2023 would have recognised additional impairment against PPE. The Management does not expect material changes in estimations made in the near future, except those disclosed in Note 2.2 (a). 13. INTANGIBLE ASSETS At 31 December intangible assets consisted of the following: GROUP COMPANY Licenses Licenses and rights Software Total and rights Software Total acquired acquired Cost At 31 December 2021 502 1 336 1 838 392 1 316 1 708 Additions 123 514 637 108 514 622 Write-offs - ( 42) ( 42) - ( 42) ( 42) At 31 December 2022 625 1 808 2 433 500 1 788 2 288 Additions 89 544 633 90 515 605 Write-offs - ( 5) ( 5) - ( 1) ( 1) At 31 December 2023 714 2 347 3 061 590 2 302 2 892 Accumulated amortisation At 31 December 2021 277 925 1 202 189 905 1 094 Charge for the year 92 109 201 83 109 192 Write-offs - ( 42) ( 42) - ( 42) ( 42) At 31 December 2022 369 992 1 361 272 972 1 244 Charge for the year 75 147 222 66 142 208 Write-offs - ( 5) ( 5) - ( 1) ( 1) At 31 December 2023 444 1 134 1 578 338 1 113 1 451 Carrying amount At 31 December 2021 225 411 636 203 411 614 At 31 December 2022 256 816 1 072 228 816 1 044 At 31 December 2023 270 1 213 1 483 252 1 189 1 441 The Group's and the Company's amortisation expense is recognized in the statements of comprehensive income under selling costs. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 31 At 31 December the acquisition cost of fully amortized intangible assets still in use was as follows: GROUP COMPANY 2023 2022 2023 2022 Licenses 159 159 84 84 Software 822 781 808 764 Total 981 940 892 848 14. INVESTMENTS IN SUBSIDIARIES The Company’s investments in subsidiaries at 31 December are as follows: Name Country of Ownership, Cost Ownership, incorporation 2023 2022 % % UAB Apranga LT Lithuania 724 100 724 100 UAB Apranga BPB LT Lithuania 145 100 145 100 UAB Apranga PLT Lithuania 87 100 87 100 UAB Apranga SLT Lithuania 87 100 87 100 UAB Apranga MLT Lithuania 87 100 87 100 UAB Apranga HLT Lithuania 75 100 75 100 UAB Apranga OLT Lithuania 50 100 50 100 UAB Apranga Ecom LT Lithuania 10 100 10 100 SIA Apranga Latvia 2 175 100 2 175 100 SIA Apranga LV Latvia 153 100 153 100 SIA Apranga BPB LV Latvia 86 100 86 100 SIA Apranga PLV Latvia 86 100 86 100 SIA Apranga SLV Latvia 85 100 85 100 SIA Apranga MLV Latvia 86 100 86 100 SIA Apranga HLV Latvia 50 100 50 100 SIA Apranga OLV Latvia 50 100 50 100 SIA Apranga Ecom LV Latvia 3 100 3 100 OU Apranga * Estonia 447 100 447 100 OU Apranga Estonia Estonia 128 100 128 100 OU Apranga BEE Estonia 96 100 96 100 OU Apranga PB Trade Estonia 221 100 221 100 OU Apranga ST Retail Estonia 96 100 96 100 OU Apranga MDE Estonia 2 100 2 100 OU Apranga HEST Estonia 50 100 50 100 OU Apranga Ecom EE Estonia 17 100 17 100 Total investments 5 095 5 095 * At 31 December 2023 the Company directly owned 14.91% shares and indirectly through its subsidiary owned the rest 85.09% of shares (At 31 December 2022: 14.91% and 85.09%, respectively). The changes in investments are as follows: 2023 2022 Beginning of the year 5 095 4 963 Increase in share capital of UO Apranga PB Trade - 125 Increase in share capital of OU Apranga Ecom EE - 7 At end of the year 5 095 5 095 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 32 15. INVENTORIES GROUP COMPANY 2023 2022 2023 2022 Goods for resale 53 320 43 844 28 323 23 220 Write-down of goods for resale to net realisable value (4 332) (3 613) (1 798) (1 637) Return assets 879 507 184 66 Goods in transit 131 135 131 135 Packaging and other materials 609 513 457 422 Total 50 607 41 386 27 297 22 206 Acquisition cost of write-down of goods for resale to net 20 514 18 024 10 372 9 022 realisable value At 31 December 2023 inventories of the Group and the Company have been pledged as security for outstanding loans from financial institutions (Note 23). The total carrying amount of Group’s pledged inventories as at 31 December 2023 was EUR 11 296 thousand, Company’s - EUR 7 896 thousand (EUR 11 296 thousand and EUR 7 896 thousand as at 31 December 2022, respectively). 16. PREPAYMENTS At 31 December prepayments consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Prepayments 1 667 1 776 1 587 1 509 Less non-current portion of prepayments ( 142) ( 273) ( 63) ( 134) Current portion of prepayments 1 525 1 503 1 524 1 375 The major share of prepayments are prepayments to suppliers for goods, which are subsequently used to settle amounts due. 17. FINANCIAL INSTRUMENTS BY CATEGORY The accounting policies for financial instruments have been applied to the line items at 31 December below: GROUP COMPANY Category - Financial Category - Financial assets at amortised cost assets at amortised cost Assets as per statement of financial position: 2023 2022 2023 2022 Trade and other receivables 3 166 4 190 10 562 10 741 Cash and cash equivalents 17 665 22 978 7 974 8 375 Total 20 831 27 168 18 536 19 116 Category - at fair value Category - at fair value Shares of Verslo Trikampis UAB (level 3) 2 600 2 600 2 600 2 600 Long-term Government bonds (level 1) - - - - Total 2 600 2 600 2 600 2 600 Total financial assets 23 431 29 768 21 136 21 716 In 2014, the Company has acquired the long-term bonds issued by the Lithuanian Government, which were recorded as financial assets at fair value through other comprehensive income. In May 2022, upon maturity long-term bonds issued by the Lithuanian Government were redeemed from the Company for EUR 579 thousand, due to which the Company incurred a loss of EUR 121 thousand. The Group and the Company did not possess any state securities as at 31 December 2023 as and at 31 December 2022. In June 2018, the Company acquired shares of the investment company UAB Verslo trikampis (formerly UAB LIM Verslo Trikampio NT Fondas), which are recognized as financial assets at fair value through profit or loss. Refer to the accounting policies in Note 2.9, Financial assets and liabilities. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 33 In 2022, the Group and the Company recognized profit of EUR 200 thousand from increase in value of investments in shares of UAB Verslo Trikampis. In 2023, the management concluded that fair value of the investment in shares of UAB Verslo Trikampis corresponded to the book value, therefore the Group and the Company did not recognize any gain from change in value in 2023. GROUP COMPANY Category - Financial Category - Financial liabilities measured at liabilities measured at amortised cost amortised cost 2023 2022 2023 2022 Liabilities as per statement of financial position: Borrowings - - 6 360 2 032 Lease liabilities 61 935 56 182 25 381 24 657 Trade and other payables 17 732 16 397 5 567 5 187 Total 79 667 72 579 37 308 31 876 The following methods and assumptions are used to estimate the fair value of each class of financial instruments: a) The carrying amount of current trade and other accounts receivable, current trade and other accounts payable and current borrowings approximates their fair value due to short term maturities (Level 3); b) The value of investment in Verslo trikampis UAB fund is calculated as the number of fund units held multiplied by the value of the fund unit as at reporting date (Level 3). The valuation of the fund is performed using DCF model. 18. CREDIT QUALITY OF FINANCIAL ASSETS Total credit risk exposure of the Group and the Company is provided below. Since there are no material overdue or with increased credit risk items, provision matrix is not provided in these financial statements. GROUP COMPANY 2023 2022 2023 2022 Financial assets at fair value 2 600 2 600 2 600 2 600 Trade and other receivables with no history of counterparty 3 145 4 190 1 388 956 defaults Receivables from related parties (Note 26) 21 - 9 174 9 785 Cash at bank or their parent companies that have high credit 13 089 19 388 7 164 7 690 ratings (cash on hand or in transit is excluded) Total 18 855 26 178 20 326 21 031 19. TRADE AND OTHER RECEIVABLES At 31 December trade and other receivables consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Trade receivables from subsidiaries (Note 26) - - 8 183 9 575 Loans to subsidiaries (Note 26) - - 970 210 Loans and other receivables from related parties (note 26) 21 - 21 - Trade receivables from unrelated parties 271 470 135 217 Other receivables 2 874 3 720 1 253 739 Total 3 166 4 190 10 562 10 741 Less non-current portion of other receivables ( 528) (2 409) ( 80) ( 40) Current portion 2 638 1 781 10 482 10 701 The major share of other receivable are deposits related to internet sales and receivables from suppliers for returned goods. There were no expected significant credit lossess identified and, consequently, no allowance was accounted for as at 31 December 2023 and 2022. There were no receivables past due in 2023 and 2022. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 34 The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above,. The Group and the Company do not hold any collateral as security. All the Company’s loans granted to subsidiaries are denominated in EUR currency. The interest rate at 31 December 2023 is 2.5 per cent (2022: 2.5 per cent), maturity date – 31 December 2024 (2022: 31 December 2023). 20. CASH AND CASH EQUIVALENTS At 31 December cash and cash equivalents consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Cash at bank 13 089 19 388 7 164 7 690 Cash on hand 644 817 254 181 Cash in transit 3 932 2 773 556 504 Total 17 665 22 978 7 974 8 375 Cash in certain bank accounts and future cash inflows into these accounts were pledged to banks as security for credit facilities granted. At 31 December 2023, the cash balances of the Group and the Company in the pledged accounts amounted to EUR 7 163 thousand (2022: EUR 7 686 thousand) (Note 23). Cash and cash equivalents include the following for the purposes of the cash flow statement: GROUP COMPANY 2023 2022 2023 2022 Cash and cash equivalents 17 665 22 978 7 974 8 375 Total 17 665 22 978 7 974 8 375 Presented below is the analysis of the credit quality of balances of cash and cash equivalents, except cash on hand and cash in transit, based on ratings established by the rating agency S&P (parent banks of the banks in whose accounts the Group's revenues are collected): GROUP COMPANY 2023 2022 2023 2022 A+ 13 089 19 388 7 164 7 690 Total 13 089 19 388 7 164 7 690 21. SHARE CAPITAL At 31 December 2023 issued share capital of the Company consisted of 55 291 960 (2021 and 2022: 55 291 960) ordinary shares at par value of EUR 0.29 each. All issued shares are fully paid. Subsidiaries did not hold any shares of the Company as of 31 December 2023 and 2022. The Company did not hold its own shares as of 31 December 2023 and 2022. 22. LEGAL RESERVE AND PROFIT DISTRIBUTION Under Lithuanian Law on Companies the Company has to allocate 1/20 of its net profit to the legal reserve until it reaches 1/10 of the Company’s authorised capital (up to EUR 1 604 thousand as at 31 December 2023 and 31 December 2022). Legal reserve is fully formed. On 27 April 2023 the Company’s shareholders’ meeting resolved to pay EUR 15 482 thousand in dividends (EUR 0.28 per one share) for 2022 year. On 28 April 2022 the Company’s shareholders’ meeting resolved to pay EUR 27 646 thousand in dividends (EUR 0.50 per one share) for 2021 year. In respect of the current year, the Board of directors propose a dividend of EUR 13 270 thousand to be paid to the shareholders. This dividend amount is subject to approval by shareholders at the Annual Shareholder’s Meeting. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 35 23. BORROWINGS At 31 December the carrying amounts of the borrowings consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Long term borrowings Bank credit lines and loans - - - - Total - - - - Short term borrowings Bank credit lines and loans - - - - Borrowings from subsidiaries - - 6 360 2 032 Total - - 6 360 2 032 Total borrowings - - 6 360 2 032 The bank credit lines are secured by cash in certain of bank accounts (Note 20), some of buildings (Note 12) and part of inventories (Note 15). At 31 December all amounts of the borrowings are denominated in EUR currency. The weighted average interest rates at the end of the reporting period were as follows: GROUP COMPANY 2023 2022 2023 2022 Bank credit lines and loans 5-6% 3-4% 5-6% 3-4% Bank overdraft 5-6% 3-4% 5-6% 3-4% Borrowings from subsidiaries - - 4,0% 2,0% Exposure of the Group’s and the Company’s borrowings to interest rate changes and the contractual repricing dates fall into period of 6 month or less. The Group’s and the Company’s borrowing facilities contracted but undrawn as at the end of the reporting period were EUR 10 282 thousand (2022: EUR 16 705 thousand), and can be utilised until 31 May 2025. The Group has to comply with financial covenants imposed in the agreements with Luminor Bank AS and SEB bankas AB, such as equity to assets, financial debt to EBITDA as well as net financial debt to EBITDA. As at 31 December 2023 and as at 31 December 2022, the Group complied with all financial covenants. Definition of EBITDA is provided in the section No. 11 “Alternative Performance Indicators” of annual report and on the Group’s website. 24. TRADE AND OTHER PAYABLES At 31 December trade and other payables consisted of the following: GROUP COMPANY 2023 2022 2023 2022 Payables to subsidiaries - - - - Payables to other related parties 115 113 115 113 Trade payables 11 267 10 029 3 111 2 922 Employee benefits and related payables 6 449 5 571 3 417 3 022 Contract liabilities 721 667 182 175 Refund liabilities 1 394 841 314 128 Taxes, except income taxes, payable 5 062 4 064 1 569 1 168 Accrued expenses and other payables 6 350 5 414 2 341 2 024 Total 31 358 26 699 11 049 9 552 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 36 25. LEASES Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period: GROUP COMPANY Premises Vehicles In total Premises Vehicles In total As at 1 January 2023 53 012 269 53 281 23 596 234 23 830 Additions 18 643 228 18 871 5 484 216 5 700 Impairment (charge) reversal 12 - 12 30 - 30 Depreciation (expense) (13 215) ( 164) (13 379) (4 966) ( 139) (5 105) As at 31 December 2023 58 452 333 58 785 24 144 311 24 455 GROUP COMPANY Premises Vehicles In total Premises Vehicles In total As at 1 January 2022 63 933 261 64 194 27 839 221 28 060 Additions 1 220 155 1 375 559 131 690 Impairment (charge) reversal 284 - 284 145 - 145 Depreciation (expense) (12 425) ( 147) (12 572) (4 947) ( 118) (5 065) As at 31 December 2022 53 012 269 53 281 23 596 234 23 830 The Group and the Company have tested right-of-use assets for impairment in accordance with the accounting policies stated in Note 2.6. Estimation of the value in use was calculated using the same method and using the same indicators as in Note 12. Based on the calculations performed the management concluded that impairment in the amount of EUR 572 thousand for the Group (As at 31 December 2022: EUR 584 thousand) and EUR 53 thousand for the Company (As at 31 December 2022: EUR 83 thousand) should be recorded against right-of-use assets in the statement of financial position as at 31 December 2023. The Group in 2023 have recognised the impairment reversal of right-of-use assets of EUR 12 thousand (impairment reversal of EUR 284 thousand was recognized in 2022), the Company have recognised the impairment reversal of right-of-use assets of EUR 30 thousand (impairment reversal of EUR 145 thousand was recognized in 2022). Impairment of right-of-use assets is recognized in the statement of comprehensive income under selling costs. Impairment losess reversed in the period were mostly related to non-current assets of CGUs, which were closed during the year, as well as to the decrease of carrying value of non-current assets associated to operating CGUs due to depreciation. However, a slight increase in WACC has offset some of the effect. If future operating cash flows in 2024 and in later years were reduced by 5 per cent, the Group and the Company in 2023 would have recognized additional right-of-use assets impairment amounting to EUR 33 thousand and EUR 23 thousand, respectively. If the estimated post-tax discount rate applied to the discounted cash flows for cash generating units had been 1 per cent higher than management estimates (for example 14-15 per cent instead of 13-14 per cent), the Group and the Company in 2023 would have recognised by EUR 1 thousand higher impairment against right-of-use assets. Set out below are the carrying amounts of lease liabilities (presented under “Current lease liabilities” and “Non-current lease liabilities”) and the movements during the period: Group Company As at 1 January 2023 56 182 24 657 Additions 18 871 5 700 Accretion of interest 1 390 560 Payments (14 354) (5 525) Rent discounts ( 154) ( 11) As at 31 December 2023 61 935 25 381 Current 14 306 5 616 Non-current 47 629 19 765 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 37 GROUP COMPANY As at 1 January 2022 67 075 28 858 Additions 1 375 690 Accretion of interest 1 061 419 Payments (12 913) (5 307) Rent discounts ( 416) ( 3) As at 31 December 2022 56 182 24 657 Current 12 717 5 018 Non-current 43 465 19 639 As at 31 December 2023 present value of payments for leases which are not yet commenced but to which the Group and the Company are committed amounted to EUR 3 306 thousand and EUR 0 (as at 31 December 2022 amounted to EUR 10 113 thousand and EUR 1 670 thousand respectively). The following are the amounts recognized in profit or loss: GROUP COMPANY 2023 Depreciation expense of right-of-use assets (included in selling costs) 13 379 5 105 Interest expense on lease liabilities (included in finance costs) 1 390 560 Expenses relating to short-term leases (included in selling costs) 407 278 Impairment charge (reversal), (included in selling costs) ( 12) ( 30) Variable lease payments (included in selling costs) 8 427 2 085 Rent discounts (included in selling costs) ( 154) ( 11) Total amount recognized in profit or loss 23 437 7 987 GROUP COMPANY 2022 Depreciation expense of right-of-use assets (included in selling costs) 12 572 5 065 Interest expense on lease liabilities (included in finance costs) 1 061 419 Expenses relating to short-term leases (included in selling costs) 17 17 Impairment charge (included in selling costs) ( 284) ( 145) Variable lease payments (included in selling costs) 8 460 2 254 Rent discounts (included in selling costs) ( 416) ( 3) Total amount recognized in profit or loss 21 410 7 607 The Company/Group has lease contracts for Premises that contain variable payments based on the turnover of stores located in those Premises. Management’s objective is to align the lease expense with the revenue earned. The Company/Group accounted short-term leases and rent discounts as variable lease payments. The following provides information on the Company’s/Group’s variable lease payments in 2023 and 2022, including the magnitude in relation to fixed payments: GROUP COMPANY Fixed Variable In total Fixed Variable In total payments payments payments payments Year ended 31 December 2023 Fixed payments 2 082 2 082 1 765 1 765 Variable rent with minimum payment 12 215 5 904 18 119 3 700 1 979 5 679 Variable rent only - 2 776 2 776 - 373 373 Total 14 297 8 680 22 977 5 465 2 352 7 817 Year ended 31 December 2022 Fixed payments 1 969 1 969 1 650 1 650 Variable rent with minimum payment 11 346 5 558 16 904 3 660 1 963 5 623 Variable rent only - 2 486 2 486 - 288 288 Total 13 315 8 044 21 359 5 310 2 251 7 561 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 38 26. RELATED PARTY TRANSACTIONS The parties are considered related when one party has the possibility to control the other or have significant influence over the other party in making financial and operating decisions. There is no allowance for intercompany receivables as expected credit losses are immaterial. The Company’s and the Group’s transactions with related parties and balances arising from these transactions as of 31 December were as follows: Accounts payable Accounts receivable Income Purchases Related parties and loans granted 2023 2022 2023 2022 2022 2023 2022 UAB MG Grupė 12 13 - - - - 123 108 (the ultimate parent company) As per ultimate parent company associated companies: UAB Mineraliniai vandenys - - - - - - 29 36 UAB Mediafon Technology 11 8 - - - - 112 75 UAB MG Investment - 4 - - - - 31 53 UAB Minvista - - 21 - 224 25 - - LNK Group 1 1 - - - 2 - - UAB Eminta 91 87 - - - - 905 865 UAB MV GROUP - - - - - - - Total 115 113 21 - 224 27 1 200 1 137 2023 Prevailing types of related party contracts are rent, management service fee, advertising, centralised services (telecommunications, utilities and etc.). The Company’s transactions with subsidiaries and balances arising from these transactions as of 31 December were as follows: Borrowings and Loans and accounts Income Purchases Subsidiaries accounts payable receivable 2023 2022 2023 2022 2023 2022 2023 2022 UAB Apranga LT 2 500 748 94 86 3 940 6 206 197 102 UAB Apranga BPB LT 700 250 53 24 916 1 544 43 23 UAB Apranga PLT 500 169 28 17 754 867 25 11 UAB Apranga SLT 400 - 39 19 902 1 097 28 20 UAB Apranga MLT 1 500 865 126 36 999 2 018 69 34 UAB Apranga HLT 760 - 60 22 633 1 030 21 2 UAB Apranga OLT - - 74 8 301 560 7 3 UAB Apranga Ecom LT - - - - - - - - SIA Apranga - - 4 836 5 734 14 195 12 537 120 101 SIA Apranga LV - - 39 47 1 979 1 837 89 61 SIA Apranga BPB LV - - 9 7 304 479 9 8 SIA Apranga PLV - - 2 8 288 328 8 5 SIA Apranga SLV - - 11 6 355 528 10 7 SIA Apranga MLV - - 36 18 878 802 33 16 SIA Apranga HLV - - 25 11 341 308 5 1 SIA Apranga OLV - - 14 8 276 49 6 2 SIA Apranga Ecom LV - - - - - - - - OU Apranga - - 3 593 3 444 8 475 6 615 48 50 OU Apranga Estonia - - 32 39 1 473 987 51 40 OU Apranga BEE - - 3 6 63 56 10 5 OU Apranga PB Trade - - 54 197 64 60 4 2 OU Apranga ST Retail - - 4 4 55 44 9 4 OU Apranga MDE - - 9 35 287 266 13 7 OU Apranga HEST - - 12 9 317 305 5 - OU Apranga Ecom EE - - - - - - - - Total 6 360 2 032 9 153 9 785 37 795 38 523 810 504 Prevailing types of intra-group transactions are centralised supplies of goods for resale, management service fees, centralised purchasing of services (telecommunications, IT, utilities and etc.), financing, distribution of earnings. Dividend income received from the subsidiaries is presented in ‘Income received’ together with other income. In 2023, the Company received EUR 10 N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 39 250 thousand dividend income from subsidiaries (in 2022 - EUR 15 400). This article also accounted for sales of goods to subsidiaries SIA Apranga and OU Apranga, which in 2023 amounted to EUR 11 934 thousand and EUR 7 758 thousand respectively (EUR 10 755 thousand and EUR 5 820 thousand in 2022, respectively). The debts of Group companies are offset each month, and the remaining portion of the debt is paid no later than in 30 days. The Company’s/Group’s and related parties debts are paid within 30 days. The Company has concluded short-term loan agreements with its subsidiaries, which, in case of need, are borrowed for 1 month Euribor plus margin interests. Guarantees provided on behalf of related parties Guarantees provided on behalf of related parties are disclosed in Note 27. Compensation of key management personnel The General Director and other Directors of the Company are considered to be the key management of the Group. There were 7 members of the key management as at 31 December 2023 (7 members of the key management as at 31 December 2022). 2 of them also belong to the Management Board, which consists of 6 members. GROUP COMPANY 2023 2022 2023 2022 Remuneration 3 261 2 984 3 174 2 904 Social security 58 52 56 51 Average number of key managers 7 7 7 7 On 27 April 2023 and on 28 April 2022 the Company’s shareholders’ meetings decided not to pay out annual bonuses to the key management. 27. COMMITMENTS AND CONTINGENCIES Legal proceedings As of 31 December 2023 and 2022 the Company and the Group were not involved in any legal process, which in the opinion of management, could have a material impact on the financial statements. Guarantees As of 31 December 2023, guarantees issued by the credit institutions on behalf of the Company to secure the obligations of its subsidiaries to their goods suppliers totaled EUR 15 447 thousand (31 December 2022: EUR 13 698 thousand). The letters of credit and guarantees provided to goods suppliers by the credit institutions on behalf of the Group as of 31 December 2023 amounted to EUR 16 718 thousand (31 December 2022: EUR 15 295 thousand). As of 31 December 2023, the Company’s guarantees issued to secure the obligations of its subsidiaries to their landlords totaled EUR 474 thousand (31 December 2022: EUR 482 thousand). As of 31 December 2023 and 2022 the Company had no guarantees to the credit institutions issued to secure the borrowings of subsidiaries. The management of the Group believes that the subsidiaries on behalf of which guarantees were issued will meet their liabilities to the creditors, therefore, no provisions in respect of these guarantees were accounted for in the financial statements as at 31 December 2023 and 31 December 2022. Options granted Options for assets The Group issued irrevocable call options to INDITEX Group granting the right to purchase assets (leasehold improvements and PPE located in the premises of shops and inventory) of subsidiaries UAB Apranga LT, UAB Apranga BPB LT, UAB Apranga PLT, UAB Apranga SLT, UAB Apranga MLT, UAB Apranga HLT, UAB Apranga OLT, SIA Apranga LV, SIA Apranga BPB LV, SIA Apranga PLV, SIA Apranga SLV, SIA Apranga MLV, SIA Apranga OLV, SIA Apranga HLV, OU Apranga Estonia, OU Apranga BEE, OU Apranga PB Trade, OU Apranga ST Retail, OU Apranga MDE and OU Apranga HEST operating brands of INDITEX Group (ZARA, ZARA HOME, BERSHKA, PULL AND BEAR, STRADIVARIUS, MASSIMO DUTTI and OYSHO). The options are exercisable in 2025 and are firmly and irrevocably granted thus the Group cannot waive them. The Group also issued irrevocable call options to ALDO Group granting the right to purchase assets (PPE located in the premises of shops and inventory) of Company and subsidiaries SIA Apranga and OU Apranga operating the brand of ALDO. The options are exercisable in 2027 and are firmly and irrevocably granted thus the Group cannot waive them. N O T E S TO T H E F I N A N C I A L S T A T E M E N T S 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 40 Options for lease rights Subsidiaries UAB Apranga LT, UAB Apranga BPB LT, UAB Apranga PLT, UAB Apranga SLT, UAB Apranga MLT, UAB Apranga HLT, UAB Apranga OLT, SIA Apranga LV, SIA Apranga BPB LV, SIA Apranga PLV, SIA Apranga SLV, SIA Apranga MLV, SIA Apranga OLV, SIA Apranga HLV, OU Apranga Estonia, OU Apranga BEE, OU Apranga PB Trade, OU Apranga ST Retail, OU Apranga MDE and OU Apranga HEST operating brands of INDITEX Group (ZARA, ZARA HOME, BERSHKA, PULL AND BEAR, STRADIVARIUS, MASSIMO DUTTI and OYSHO) granted irrevocable options exercisable in 2025 by virtue of which INDITEX Group might acquire the lease rights and might become lessee in all or part of the lease agreements for the premises where ZARA, ZARA HOME, BERSHKA, PULL AND BEAR, STRADIVARIUS, MASSIMO DUTTI and OYSHO stores are located. Company and its subsidiaries SIA Apranga and OU Apranga operating brand ALDO granted irrevocable options exercisable in 2027 by virtue of which ALDO Group might acquire the lease rights and might become lessee in the lease agreements for the premises where ALDO stores are located. Based on historical information and numerous extentions of the cooperation agreements and terms of cooperation the management of the Group believes that the agreement parties will not use any above options. 28. EVENTS AFTER THE REPORTING PERIOD After the end of the reporting period, there were no events that had a significant impact on the activities of the Company and the Group. APB APRANGA Consolidated Annual Report For the year ended 31 December 2023 C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 42 1. GENERAL INFORMATION Consolidated annual report is prepared for the year ended 31 December 2023. Name of the Issuer: public limited liability trade company “Apranga” Legal form: public limited liability company Date and place of registration: 1 st March 1993, Board of Vilnius City Code of Enterprise: 121933274 Registered office: Ukmerges str. 362, Vilnius, LT-14311, Lithuania Telephone number: +370 5 2390808 E-mail address: info@apranga.lt Internet address: www.aprangagroup.com At 31 December 2023 Apranga Group (hereinafter the Group) consisted of the parent company APB Apranga (hereinafter the Company) and its 100 per cent owned 25 subsidiaries. The principal activity of the Company and its subsidiaries is retail trade of apparel in Baltic countries. Structure of the Group at 31 December 2023: For more information on subsidiaries refer to Note 1 and Note 14 to Consolidated financial statements. 2. OPERATING HIGHLIGHTS In 2023, the Group’s priorities were influenced by the restrictive measures imposed amid continuing Russia’s invasion to Ukraine, sustained high inflation, especially in the first half of the year, rapid growth of salaries and utilization of new technologies. 2.1. RETAIL MARKET OVERVIEW The retail turnover (including VAT) of Apranga Group reached EUR 326.4 million in 12 months 2023 and was by 11.3% higher than in 2022. In 2023, the retail turnover of Apranga Group in Lithuania reached EUR 196.9 million and increased by 10.6% year-on- year. In 2023 the retail turnover of Apranga Group in Latvia was EUR 79.5 million and increased by 12.1% year-on-year, in Estonia was EUR 50.0 million and grew by 12.6% year-on-year. According to the data of the official statistics departments of Lithuania, Latvia and Estonia, the market of retail trade, except of motor vehicles and motorcycles, in the Baltic states the year 2023 generated over 39.8 billion euros (without VAT) and grew around 2% at current prices compared to the year 2022. The change of consumer prices in Baltic retail market in the year 2023 compared to the previous year averaged to around 9%. In this period the price index change in Lithuania was 9%, Latvia 10% and Estonia 9%. Consumer confidence index in the Euro area has been consistently increasing throughout the year 2023 and rose from -20.6 to -16,0 (+4,6 p.). Despite minor fluctuations Baltic countries’ consumer confidence index also shows upward trend. In Lithuania the index increased from -5.4 to +2.2(+7.6 p.), Latvia from -32.4 to -17.0 (+15.4 p.), Estonia from -32.7 to -32.4 (+0.3 p.). The companies participating in the textile, clothing and footwear market of the Baltic states generated around 1,9 billion euros (without VAT), which is 7% higher turnover in the year 2023 compared to the previous year 2022. APB "APRANGA" LITHUANIA LATVIA ESTONIA SIA "Apranga" OÜ "Apranga" UAB "Apranga LT" SIA "Apranga LV" OÜ "Apranga Estonia" UAB "Apranga BPB LT" SIA "Apranga BPB LV" OÜ "Apranga BEE" UAB "Apranga PLT" SIA "Apranga PLV" OÜ "Apranga PB Trade" UAB "Apranga SLT" SIA "Apranga SLV" OÜ "Apranga ST Retail" UAB "Apranga MLT" SIA "Apranga MLV" OÜ "Apranga MDE" UAB "Apranga HLT" SIA "Apranga HLV" OÜ "Apranga HEST" UAB "Apranga OLT" SIA "Apranga OLV" UAB "Apranga Ecom LT" SIA "Apranga Ecom LV" OÜ "Apranga Ecom EE" C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 43 The change of consumer prices index in the clothing and footwear industry in Baltic retail market in year 2023 compared to the corresponding period of the previous year averaged to around 6%. In this period the price index change in Lithuania was 3.5%, Latvia 3.6% and Estonia 10.4%. Lithuania remains the largest market of retail trade of textile, clothing and footwear in specialized stores in the Baltic countries, generating about 50% of the Baltic states market turnover. Retail turnover of Group‘s stores by countries (EUR thousand, VAT included): Country 12 months 2023 12 months 2022 12 months 2021 2023/2022, % 2023/2021, % Lithuania 196 884 178 024 146 003 10,6% 34,8% Latvia 79 513 70 900 46 409 12,1% 71,3% Estonia 50 009 44 416 36 010 12,6% 38,9% Total: 326 406 293 340 228 422 11,3% 42,9% Retail turnover of Group‘s stores by countries (EUR thousand, VAT excluded): Country 12 months 2023 12 months 2022 12 months 2021 2023/2022, % 2023/2021, % Lithuania 162 728 147 134 121 017 10,6% 34,5% Latvia 65 716 58 601 38 539 12,1% 70,5% Estonia 41 674 37 016 30 159 12,6% 38,2% Total: 270 118 242 752 189 714 11,3% 42,4% The difference between turnover (VAT excluded) shown in the Annual report and stores income disclosed in Note 6 of the Financial statements is due to return of goods (see Note 24). In 2023, the turnover (VAT included, taking into account actual returns during the calendar year 2023, this ratio is also used in all comments below) of the retail chain operated by Apranga Group amounted to EUR 196.9 million in the main domestic market of Lithuania, or by 10.6% more than in 2022. The share of Lithuanian chain turnover comprised 60.3%, or by 0,4 percentage points less than in 2022. The retail turnover of the Apranga Group chain in foreign markets (Latvia and Estonia) reached EUR 129.5 million in 2023, or by 12.6% more, than in 2022. The foreign turnover share in total Group’s turnover has increased from 39.3% to 39.7% during the year. The retail turnover of Apranga Group by quarters (EUR thousand, VAT included): Q1 Q2 Q3 Q4 Year 2023 65 123 82 517 83 606 95 159 326 406 2022 52 614 75 077 81 130 84 519 293 340 2021 25 547 55 692 76 929 70 253 228 422 2023/2022, % 23,8% 9,9% 3,1% 12,6% 11,3% 2023/2021, % 154,9% 48,2% 8,7% 35,5% 42,9% The retail turnover of Apranga Group by quarters (EUR thousand, VAT excluded): Q1 Q2 Q3 Q4 Year 2023 53 882 68 280 69 180 78 776 270 118 2022 43 539 62 133 67 141 69 939 242 752 2021 21 415 46 328 63 813 58 159 189 714 2023/2022, % 23,8% 9,9% 3,0% 12,6% 11,3% 2023/2021, % 151,6% 47,4% 8,4% 35,4% 42,4% The online turnover of the Group was as follows (EUR thousand, VAT included): 12 months 2023 12 months 2022 12 months 2021 2023/2022, % 2023/2021, % Online turnover 39 860 33 672 48 256 18,4% -17,4% Relative weight in total turnover 12,2% 11,5% 21,1% C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 44 The online turnover of the Group was as follows (EUR thousand, VAT excluded): 12 months 2023 12 months 2022 12 months 2021 2023/2022, % 2023/2021, % Online turnover 33 008 27 884 40 613 18,4% -18,7% Relative weight in total turnover 12,2% 11,5% 21,4% The Group's online turnover increased by 18,4% in the 12 months of the year, and its relative weight in total turnover increased from 11.5% to 12.2% compared to the corresponding period of the previous year. In year 2021, online turnover was significantly higher due to the Covid-19 related temporary closure of physical stores. Retail turnover of Group‘s stores by chains (EUR thousand, VAT included) was as follows: Chain 12 months 2023 12 months 2022 12 months 2021 2023/2022, % 2023/2021, % Economy 1 31 535 31 102 22 524 1,4% 40,0% Youth 2 79 346 69 998 55 064 13,4% 44,1% Footwear 4 263 4 679 3 201 -8,9% 33,2% Business 3 62 064 54 100 42 545 14,7% 45,9% Luxury 4 32 087 29 280 25 263 9,6% 27,0% Zara 102 871 89 853 69 515 14,5% 48,0% Outlets 14 240 14 328 10 310 -0,6% 38,1% Total 326 406 293 340 228 422 11,3% 42,9% 1 Apranga, Promod, s.Oliver, Tom Tailor, Orsay; 2 Aprangos galerija, Moskito, Mango, Bershka, Pull & Bear, Stradivarius, Oysho, A|X Armani Exchange; 3 City, Massimo Dutti, Marella, Pennyblack, Coccinelle, Tommy Hilfiger, Zara Home, Calvin Klein Underwear, Liu Jo, MAX&Co.; 4 Burberry, Emporio Armani, Hugo Boss, Ermenegildo Zegna, MaxMara, Weekend MaxMara, Marina Rinaldi, Mados linija, Nude, Sandro, Maje, Hugo. Retail turnover of Group‘s stores by chains (EUR thousand, VAT excluded) was as follows: Chain 12 months 2023 12 months 2022 12 months 2021 2023/2022, % 2023/2021, % Economy 1 26 094 25 733 18 639 1,4% 40,0% Youth 2 65 650 57 915 45 618 13,4% 43,9% Footwear 3 528 3 873 2 650 -8,9% 33,1% Business 3 51 348 44 761 35 310 14,7% 45,4% Luxury 4 26 567 24 242 21 402 9,6% 24,1% Zara 85 162 74 387 57 553 14,5% 48,0% Outlets 11 768 11 841 8 543 -0,6% 37,8% Total 270 118 242 752 189 714 11,3% 42,4% 1 Apranga, Promod, s.Oliver, Tom Tailor, Orsay; 2 Aprangos galerija, Moskito, Mango, Bershka, Pull & Bear, Stradivarius, Oysho, A|X Armani Exchange; 3 City, Massimo Dutti, Marella, Pennyblack, Coccinelle, Tommy Hilfiger, Zara Home, Calvin Klein Underwear, Liu Jo, MAX&Co.; 4 Burberry, Emporio Armani, Hugo Boss, Ermenegildo Zegna, MaxMara, Weekend MaxMara, Marina Rinaldi, Mados linija, Nude, Sandro, Maje, Hugo. 2.2. DEVELOPMENT AND MODERNIZATION OF THE RETAIL CHAIN In 2019-2023 the dynamics of the number of stores and sales area was as follows: 31 12 2023 31 12 2022 31 12 2021 31 12 2020 31 12 2019 The number of stores 169 168 169 179 186 Stores area (thousand sq. m.) 90,8 90,6 90,6 92,6 93,8 During the year 2023 Apranga Group opened 12 new stores, renovated 8 stores, out of which 5 stores were enlarged and 3 stores were moved to another shopping mall, and closed 11 stores. Currently Apranga Group operates the chain of 169 stores (100 in Lithuania, 44 in Latvia and 25 in Estonia) covering the gross area of 90.8 thousand sq. m., or by 0.2% more than a year ago. The total area of stores by countries was as follows (thousand sq. m): Country 31 12 2023 31 12 2022 31 12 2021 2023/2022, % 2023/2021, % Lithuania 49,4 51,0 51,3 -3,1% -3,7% Latvia 27,9 26,4 26,8 5,6% 4,2% Estonia 13,5 13,2 12,6 2,2% 7,5% Total: 90,8 90,6 90,6 0,2% 0,2% C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 45 The number of stores by countries was as follows: Country 31 12 2023 31 12 2022 31 12 2021 2023/2022, % 2023/2021, % Lithuania 100 100 102 0,0% -2,0% Latvia 44 44 46 0,0% -4,3% Estonia 25 24 21 4,2% 19,0% Total: 169 168 169 0,6% 0,0% At 31 December the number of stores by chains was as follows: Chain 31 12 2023 31 12 2022 31 12 2021 2023/2022, % 2023/2021, % Economy 20 19 26 5,3% -23,1% Youth 46 48 47 -4,2% -2,1% Footwear 10 11 10 -9,1% 0,0% Business 43 41 39 4,9% 10,3% Luxury 32 30 28 6,7% 14,3% Zara 9 10 10 -10,0% -10,0% Outlets 9 9 9 0,0% 0,0% Total 169 168 169 0,6% 0,0% The number of economy chain stores has significantly decreased due to closure of Promod and Orsay brand stores in years 2021 and 2022. Net investments into retail chain expansion and modernization amounted to EUR 9.7 million in 2023. Investments (acquisitions) by assets type are presented in Note 12 (“Property, plant and equipment”) and Note 13 (“Intangible assets”) of Notes to consolidated and Company’s financial statements. Investments (acquisitions) by segments are disclosed in Note 4 (“Segment information”). The Group is not engaged in activities related to research and experimental development, except to the extent of process improvement. Group uses the latest technology and the latest technology processes that meet environmental standards and help reduce the negative impact on the environment. 2.3. MAIN INDICATORS In addition to the key figures defined or specified in the applicable IFRS financial reporting framework, the Group also provides key financial ratios derived from or based on the prepared financial statements. These are known as Alternative Performance Measures (APM). Definitions of APM are provided in the section No. 11 “Alternative Performance Indicators” of this report and on the Group’s website. The Group’s profit before income tax amounted to EUR 20.3 million in 12 months 2023, while profit before taxes was EUR 18.7 million in 12 months of 2022, i.e., 8.5% more than in the corresponding period of the previous year. EBITDA of the Group totalled EUR 40.9 million in 2023, and it was EUR 38.9 million in corresponding previous year period. EBITDA margin has decreased from 16.0% to 15.2% during the year. ROE and ROA ratios increased to 26.2% and 10.4%, respectively. Main Group Indicators 2023 2022 2021 2020 2019 Net sales, EUR thousand 269 696 242 899 189 745 169 958 205 005 Net sales in foreign markets, EUR thousand 107 277 95 595 68 502 71 424 83 197 Gross profit, EUR thousand 124 142 111 344 82 230 71 146 89 210 Gross profit margin, % 46,0% 45,8% 43,3% 41,9% 43,5% Operating profit, EUR thousand 21 501 19 869 14 278 7 038 11 929 Operating profit margin, % 8,0% 8,2% 7,5% 4,1% 5,8% Profit before income tax, EUR thousand 20 332 18 745 13 211 5 961 10 994 Profit before income tax margin, % 7,5% 7,7% 7,0% 3,5% 5,4% Profit (loss) for the period, EUR thousand 16 773 15 635 10 896 4 936 9 240 Profit (loss) for the period margin, % 6,2% 6,4% 5,7% 2,9% 4,5% EBITDA, EUR thousand 40 928 38 906 34 076 27 340 31 006 EBITDA margin, % 15,2% 16,0% 18,0% 16,1% 15,1% Earnings (losses) per share (EPS), EUR 0,30 0,28 0,20 0,09 0,17 Price-to-Earnings ratio (P/E), times 8,8 7,6 10,7 23,6 12,6 Dividend / Profit for the period, % 79,1% 99,0% 182,7% 0,0% 0,0% Return on equity (end of the period), % 26,3% 25,1% 14,6% 7,8% 15,8% Return on assets (end of the period), % 10,5% 10,5% 6,6% 3,1% 6,0% Net debt to equity, % -27,7% -36,8% -39,7% -28,5% -10,1% Current ratio, times 1,6 1,7 2,0 1,9 1,4 * The year 2023 dividends proposed by the Board, not approved. C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 46 The operating expenses of the Group totaled to EUR 102.6 million in 12 months 2023 and increased by 12.2%, comparing to the same period 2022. Operating expenses increased more than sales, which grew by 11,0%. In 2022, the operating expenses of the Group were reduced by EUR 0.45 million due to a positive result of a long-term assets sales. Adjusted for the effect of beforementioned sale, the increase of the operating expenses of the Group in 2023 was 11.7% compared to corresponding period of prior year. Main Group Indicators 2023 2022 Change Net sales, EUR thousand 269 696 242 899 11,0% Net sales in foreign markets, EUR thousand 107 277 95 595 12,2% Gross profit, EUR thousand 124 142 111 344 11,5% Operating expenses (102 641) (91 475) 12,2% Operating profit, EUR thousand 21 501 19 869 8,2% Profit before income tax, EUR thousand 20 332 18 745 8,5% Net profit (losses), EUR thousand 16 773 15 635 7,3% EBITDA, EUR thousand 40 928 38 906 5,2% The Group’s level of inventories during the last 12 months increased by 22.3% to EUR 50.6 million. Company’s inventories increased by 22.9%. The supply of goods for the spring-summer 2024 season started earlier, which contributed to the increase of the Group‘s inventory level by EUR 3.4 million. For additional information on the operations by countries of the Group refer to Note 4 to the Consolidated financial statements. 2.4. PERSONNEL The number of employees on 31 December 2023 and average salary by categories in 2023 were as follows: Group Company Group Company Employee category Number of employees Average monthly salary, EUR Administration 189 130 4 323 4 845 Stores' personnel 1 987 557 1 258 1 377 Logistics 73 73 1 724 1 724 Total 2 249 760 1 533 2 010 In 2023 the number of employees in the Group and the Company has increased by 110 (5.1%) and 20 (2.7%), respectively. The number of employees by education level on 31 December 2023 was as follows: Education level Group Company Higher 490 311 Professional 331 82 Secondary 502 146 Primary 27 12 Student 899 209 Total: 2 249 760 2.5. TRADING INFORMATION The price of the Company shares in 12 months 2023 increased by 23.1% from EUR 2.16 per share to EUR 2.66 per share. The maximum share price for the 12 months period was EUR 2.96 per share, minimum share price - EUR 2.12 per share. The market capitalization of the Company increased from EUR 119 million at the beginning of the year to EUR 147 million at the end of December 2023. The weighted average price of 1 share during the reporting period was EUR 2.58. Company’s share turnover was EUR 10.2 million in 12 months 2023. C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 47 Company and OMX Baltic Benchmark GI index change for the period 2019-2022: C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 48 3. OPERATING PLANS Restrictive measures imposed after Russia‘s invasion of Ukraine on 24 February 2022 had no significant impact on the Company’s and Group‘s performance, no operations had been suspended and no significant direct losses related to the restrictive measures had been incurred, however, the uncertainty exists. In any case, the Company's management is ready to respond promptly to the changing situation by making the necessary decisions to ensure the stability of operations. The Group plans to reach EUR 350 million turnover (including VAT) in 2024, or by 7% higher than actual year 2023 turnover. In 2024, the Group plans to renovate or open 12-15 stores. The net investment is planned to be about EUR 5-7 million. 4. BUSINESS PHILOSOPHY • We work and strive to work only with the fastest-growing, commercially the most successful global brands and chains operating in different markets and acceptable to our market; • We never make compromises in the selection of the best locations for stores (“Location – more important than money”, “We have to be where we can not not to be”; • We aim to install stores according to the highest European design and technology requirements; • We strive to use in best the power of the obvious market leader, as well as rapid development opportunities in competitive environment. 5. ENVIRONMENTAL PROTECTION Group uses the latest technology and the latest technology processes that meet environmental standards and help reduce the negative impact on the environment (for example, the Group uses the paper packaging materials instead of plastic in more than 90% of its stores), promote rational management and use of resources. It constantly seeks way to cut electricity costs at the stores, the headquarters and logistic warehouse. All stores use energy-efficient LED bulbs that not only have a longer service life but also use less electricity. Spaces in the administration building are segmented to use the lighting as efficiently as possible and to have it only in those areas where employees are present. The origin of electricity used in all stores is ensured by the green electricity certificate. The Group choose electricity suppliers based on the sustainable use of natural resources in the production of energy. When upgrading stores, we abide by the principle that, despite the decisions taken, we must introduce technologies that reduce or do not increase resource consumption. More information about the Group’s environmental protection is presented in the Group’s 2023 Consolidated Social Responsibility Report. 6. CONSOLIDATION In order to ensure the fairness of preparation consolidated financial statements and to reduce associated risks, the unified centralised accounting and business information management system has been implemented in all Group companies. All Group companies use the standard chart of accounts and apply unified accounting principles. More information on the principles of preparation of the consolidated financial statements is presented in Note 2.4 to the Consolidated financial statements. 7. SECURITIES The share capital of APB Apranga is EUR 16,034,668.40 and it is divided into 55,291,960 ordinary registered shares with a nominal value of EUR 0.29 each, where each share grants to its owner 1 vote (in total 55,291,960 voting shares), all shares are paid in full and give the owners equal rights. All 55 291 960 ordinary shares of nominal value EUR 0.29 each (ISIN code LT0000102337) that comprise Company‘s share capital are listed on Baltic equity list of Nasdaq Vilnius Stock Exchange. For more information on the share capital of the Company refer to Note 21 to Consolidated financial statements. Neither Company, nor its subsidiaries directly or indirectly acquired own shares. By the knowledge of the Company’s management, there are no restrictions imposed on transfer of Company’s shares. All Company‘s shares give equal rights to shareholders and there are no shareholders with special control rights. By the knowledge of the Company’s management, there are no restrictions imposed on voting rights. By the knowledge of the Company’s management, there are no agreements among shareholders which may limit transfer of shares, or their voting rights. Each owner of the ordinary registered share has the following property rights: 1) To receive part of the company‘s profit (dividend); 2) To receive a part of the assets of the company in liquidation; C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 49 3) To receive shares without payment if the share capital is increased out of the company‘s funds, except the cases specified in the Law on Companies. 4) To have the pre-emption right to acquire the shares or convertible debenture issued by the company, except in cases when General Shareholder‘s Meeting pursuant to Law on Companies decides to withdraw the pre-emption right in acquiring the company‘s issued shares for all shareholders; 5) As provided by laws to lend to the company, however the company borrowing from its shareholders has no right to mortgage or pledge its assets to shareholders. When the company borrows from a shareholder, the interest may not be higher than the average interest rate offered by commercial banks of the locality where the lender has his/her place of residence or business, which was in effect on the day of conclusion of the loan agreement. In such a case the company and shareholders are prohibited from negotiating a higher interest rate; 6) To receive Company‘s funds in event the share capital is decreased on purpose to pay Company‘s funds to shareholders; 7) Shareholders have other property rights provided by laws of the Republic of Lithuania. Each owner of the ordinary registered share has the following non-property rights: 1) To attend and vote in General Shareholder‘s Meetings. One ordinary registered share grants to its owner one vote at the General Shareholders‘ Meeting. The right to vote at the General Shareholder‘s Meeting may be withdrawn or restricted in cases established by laws of the Republic of Lithuania, also in cases when share ownership is contested; 2) To submit to the company in advance the questions related to the issues on the agenda of the general meeting of shareholders; 3) To receive information on the company as provided by Law on Companies; 4) To file a claim to the court requesting compensation of damage to company resulting from non-performance or improper performance of the duties of the Manager of the Company or members of the Board of the company which duties have been prescribed by law and these Articles of Association of the company as well as in other cases as may be prescribed by law; 5) Other non-property rights prescribed by law. At 31 December 2023, the Company had 7 017 shareholders. Company‘s shareholders which owned or had under management more than 5% of share capital were: Shareholder Enterprise code Address Number of shares % of total ownership UAB MG Investment 123249022 Aukštaičių 7, Vilnius, Lithuania 36 169 099 65,4% UAB Minvista 110685692 Aukštaičių 7, Vilnius, Lithuania 5 795 929 10,5% There are no material agreements where the Company is a counterparty and which may come into force, or may change, or may end with the change of control over the Company. Information about related party transactions is provided in the Note 27 to the Consolidated financial statements. At 24 July 2017 the Company concluded an open-ended agreement with SEB bankas AB (entity code: 112021238, address: Konstitucijos av. 24, LT-08105 Vilnius) on supervision of securities accounts. 8. GOVERNANCE REPORT For the Governance Report and the full text of Compliance Report with the Governance Code for the companies listed on the Nasdaq Vilnius stock exchange refer to Annex “Governance Report” to this annual report. 9. CONSOLIDATED SOCIAL RESPONSIBILITY REPORT The Group’s Consolidated Social Responsibility Report is provided in Annex “Social Responsibility Report” to this annual report. C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 50 10. REMUNERATION REPORT The Supervisory Board is not formed in the Company, therefore the Company’s Remuneration Policy applies to the Head of the Company and Members of the Management Board of the Company in accordance with the relevant requirements and essential principles on the basis of which the remuneration is paid. No agreements are concluded with the Members of the Management Board regarding their activities as Members of the Management Board in the Company. Only Independent Members of the Management Board of the Company are remunerated for their work at the Board. The Members of the Management Board of the Company, who are also employees of the Company, receive remuneration only for the direct duties they perform under the employment contract, i.e. their remuneration for direct functions in the Company and being a Member of the Board (performance of the duties of member of the Board) are not related in any way and are not dependent on each other. The Members of the Management Board of the Company, who are not employees of the Company or do not serve as Independent Members of the Management Board, are not additionally incentivised, they are not paid for their work in the Management Board of the Company, therefore, such members of the Board perform their duties of a member of the Management Board of the Company free of charge. The employment contract with the Head of the Company is concluded for an indefinite period. The Head of the Company, as provided by the Law on Companies, is elected and removed from office, his remuneration is determined, his job description is approved, he is promoted and penalized based on the Management Board decision. In his / her activities, the Head of the Company follows the laws, other legal acts, the Company's Articles of Association, decisions of the General Meeting of Shareholders, as well as decisions of the Management Board. The amounts of allowances, notice periods related to the termination of employment or term of office are determined taking into account the requirements established in the specific labour laws. Employment contracts with the Head of the Company are not normally subject to prior agreements on severance pay, supplementary pensions or early retirement arrangements. The remuneration of the Head of the Company consists of: - a fixed part of the remuneration, which is agreed upon and approved by the Management Board of the Company in each individual case and which does not change and is paid to the Head of the Company on a monthly basis, regardless of the Company's performance; - a variable part of remuneration, which depends on the performance of the Company, including its subsidiaries (hereinafter - the Group), i.e. this is a concrete percentage of Group's profit, which is approved by the Management Board of the Company. This variable part of the remuneration is paid once a calendar quarter, based on the Group's results for the previous quarter. The ratio of variable to fixed part depends only on the Group's performance. The amount of variable remuneration (as a percentage of the Group's profit) for the Head of the Company is determined and approved by the Management Board of the Company so as to comply with the Company's and the Group's business strategy, long-term goals and operational interests, to ensure shareholders' interests, to promote sound and efficient management and risk management to the extent of decision making, would help to avoid conflicts of interest, ensure compliance with the code of ethics and conduct. There are no agreements between the Company, members of its management bodies, or its employees regarding special compensations in case of their resignation, or dismiss without legitimate reason, or the end of their duties connected with the change of the Control over the Company. Annual remuneration of the members of the Management Board - the Company's employees, EUR thousand (before taxes): Name, Surname Position Fixed part Variable part Total Variable part, % Darius Juozas Mockus Chairman of the Board - - - Vidas Lazickas Member of the Board - - - Rimantas Perveneckas General Director 271 565 836 68% Ilona Simkuniene Member of the Board, Purchasing Director 161 353 514 69% Ramunas Gaidamavicius Member of the Board, Development Director 111 283 394 72% Jonas Jukštys Member of the Board, independent 12 - 12 - Gintaras Juškauskas Member of the Board, independent 12 - 12 - C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 51 Annual remuneration and Group’s performance in 2019-2023: 2023 2022 2021 2020 2019 Remuneration, EUR thousand Rimantas Perveneckas 836 767 487 430 477 Ilona Šimkūnienė 514 465 307 265 298 Ramūnas Gaidamavičius 394 355 241 204 233 Average Employee Total Remuneration Costs 18,4 17,3 13,1 10,0 13,3 Group performance Net sales, EUR thousand 269 696 242 899 189 745 169 958 205 005 EBT, EUR thousand 20 332 18 745 13 211 5 961 10 994 EBITDA, EUR thousand 40 928 38 906 34 076 27 340 31 006 * Tax reform has been implemented at the beginning of 2019. ** Average employee total remuneration costs ratio is computed using a total headcount, including part-time employees. Part-time employees make up more than half of the total Group‘s employees. The Management Board members and the Head of the Company do not receive any other parts of remuneration, bonuses, premiums, incentives other than those provided for in Remuneration Policy. The Management Board members and the Head of the Company have not received any remuneration from other companies belonging to the Group. C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 52 11. ALTERNATIVE PERFORMANCE MEASURES With regard to the requirements of the European Securities and Markets Authority (ESMA) Guidelines on Alternative Performance Measures, an overview of the Alternative Performance Measures (APM) used, their definition and calculation are provided below and also on Apranga APB website at: https://aprangagroup.lt/en/investors/investor-relations/alternative- performance-measures Performance measure Formula and components used for the calculation Interpretation Net sales A sum of stores income, wholesales and other income from contracts with customers Revenue from contracts with customers EBITDA Profit before finance income and finance costs, income tax, depreciation and amortization EBITDA is used as a relevant measure for investors to be able to understand profit generation before investments in fixed assets. It also shows the ability to repay loans and pay interests Alternative calculation: EBIT before depreciation and amortization. EBITDA margin, % EBITDA divided by net sales Shows the profitability of the company and is used to compare companies in the same business sector EBIT Profit before finance income and finance costs and income tax A business performance indicator that shows the company's ability to make a profit, regardless of the method of financing (then determines the optimal use of debt vs. equity) EBIT margin, % EBIT divided by net sales Shows the profitability of the company and is used to compare companies in the same business sector Net investment Purchases of long-term assets – Disposal of long-term assets In the activities of Apranga APB, part of the investment into installation of the store is often disposed to the owner of the premises. Therefore, to reflect the real impact on cash flows and operating costs (depreciation), it is appropriate to use the net investment measure Net debt Borrowings - Cash and cash equivalents Shows the level of real debt to financial institutions (Non-current and current borrowings, excluding IFRS 16 lease liabilities, less cash and cash equivalent) Net debt to equity Net debt / Equity (at the end of the reporting period) Shows the level of financial debts compared to equity. The ratio is used to evaluate a company's financial leverage. The debt/equity ratio is also referred to as a risk or gearing ratio. The higher the value of this ratio, the lower the solvency of the company Earnings per share (EPS) Profit for the period / Number of shares Earnings per share serve as an indicator of a company's profitability. It shows the portion of a company's profit allocated to each share of common stock Price-to-Earnings ratio (P/E) Share price (at the end of the reporting period) / Earnings per share (EPS) The price-earnings ratio indicates the price investors pay for one euro of the company’s earnings. This ratio is very versatile and is suitable for comparing not only for companies of the same sector but also very different companies Dividend payout ratio, % Dividend / Profit for the period Shows which the part of the company's profit is paid by dividends Return on equity (ROE) Profit for the period / Equity (at the end of the reporting period) The ratio shows the percentage return the company earns from equity. Higher ROE ratio is considered as better Return on assets (ROA) Profit for the period / Assets (at the end of the reporting period) The ratio shows the percentage return the company earns from assets. The higher the ratio, the more efficient use of assets Current ratio Current Assets (at the end of the reporting period) / Current Liabilities (at the end of the reporting period) The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations C O N S O L I D A T E D A N N U A L R E P O R T 3 . 1 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 53 12. PUBLICLY ANNOUNCED INFORMATION The Company in 2023 publicly announced and broadcasted through Nasdaq Vilnius Globe Newswire and own webpage the following information: Date Title 2023.01.03 Turnover of Apranga Group in December 2022 and total year 2022 2023.02.01 Turnover of Apranga Group in January 2023 2023.02.28 Apranga Group interim information for 12 months of 2022 2023.03.01 Turnover of Apranga Group in February 2023 2023.04.03 Turnover of Apranga Group in March 2023 2023.04.04 Notice of the Annual General Meeting of APB „APRANGA“ shareholders 2023.04.04 Draft resolutions of the Annual General Meeting of APB APRANGA shareholders to be held on April 27th, 2023 2023.04.26 Apranga Group interim report for three months of 2023 2023.04.27 Resolutions of the Annual General Meeting of Apranga APB shareholders 2023.04.27 Apranga APB annual report 2022 2023.05.02 Turnover of Apranga Group in April 2023 2023.05.05 Ex-dividend date and procedure for the payment of Apranga APB dividends for the year 2022 2023.06.01 Turnover of Apranga Group in May 2023 2023.06.23 Notification on manager's related party transactions 2023.06.27 Notification on manager's related party transactions 2023.06.27 Notification on manager's related party transactions 2023.06.28 Notification on manager's related party transactions 2023.06.28 Notification on manager's related party transactions 2023.07.03 Turnover of Apranga Group in June 2023 2023.07.27 Apranga Group interim report for 6 months of 2023 2023.08.01 Turnover of Apranga Group in July 2023 2023.08.28 Notification on Apranga APB manager's related party transactions 2023.08.29 Notification on Apranga APB manager's related party transactions 2023.08.30 Notification on Apranga APB manager's related party transactions 2023.09.01 Turnover of Apranga Group in August 2023 2023.09.12 Notification on Apranga APB manager's related party transactions 2023.10.02 Turnover of Apranga Group in September 2023 2023.10.26 Apranga Group interim information for the 9 months of 2023 2023.10.26 Correction: Apranga Group interim information for the 9 months of 2023 2023.11.03 Turnover of Apranga Group in October 2023 2023.12.01 Turnover of Apranga Group in November 2023 2023.12.14 The turnover and expansion plans of Apranga Group in 2024 2023.12.22 Apranga Group investor's calendar for the year 2024 Contents of above mentioned announcements can be obtained on Nasdaq Vilnius Stock Exchange webpage https://nasdaqbaltic.com/statistics/en/instrument/LT0000102337/news? and on Company‘s webpage http://aprangagroup.lt/en/investors/news-and-material-events. 202 3 G O V E R N A N C E R E P O R T G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 55 The public trade company APRANGA (hereinafter referred to as the “Company”) essentially follows the Corporate Governance Code for the Companies Listed on the Nasdaq Vilnius stock exchange adopted and valid as on 31 December 2023. Corporate Governance Code is publicly available at: https://nasdaqbaltic.com/market-regulation/nasdaq-vilnius-rules/ RISKS In its activities the Group is exposed to various risks (regulatory, operational, investment, market, competition, economic cycle, macroeconomic factors, etc.), but only some of which may significantly affect the Group's results. The Group's activities are significantly influenced by overall economic situation (and especially by the economic cycles) in countries where the Group operates. Considering risks related to Russia’s invasion to Ukraine, the restrictive measures imposed had no significant impact on the Company’s performance, no operations had been suspended and no significant direct losses related to the restrictive measures had been incurred, however, the risk remains and will be monitored and managed closely. The competition-related risk. In its activities the Group is exposed to increasingly intense competition in the clothing market. The Group, in order to manage this risk and to meet the customer service quality standard requirements, continuously carries out chain expansion and modernization, improves its sales and marketing strategies, carries out market research, improves customer service and implements a consistent business process optimization and cost reduction program. In its activities, the Group consistently follows the principles of transparency and fair competition. Weather conditions influences the Group's activity and results to some extent as well. The Group's operating results are planned assuming that the weather conditions will be normal, i.e., usual for the Baltic region. Unfavorable weather conditions may negatively affect the Group's turnover, at the same time, financial performance and inventories level. The main features of the Group’s internal control and risk management systems related to preparation of consolidated financial statements. The Group’s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. Chief financial officer (CFO) of the Company and the Audit Committee supervises preparation of the consolidated financial statements, systems of internal control and financial risk management and how the Company follows legal acts that regulate preparation of consolidated financial statements. CFO of the Company is responsible for the preparation supervision and the final revision of the consolidated financial statements. He constantly reviews International Financial Reporting Standards (IFRS) in order to implement in time IFRS changes, analyses Company’s and group’s significant transactions, ensures collecting information from the Group’s companies and timely and fair preparation of this information for the financial statements. In order to ensure that the consolidated financial statements are prepared correctly and on time, the Group has established appropriate rules and the procedures which regulates the principles, methods, and rules of accounting and preparation and presentation of consolidated financial statements. More information on the principles of preparation of the consolidated financial statements is presented in Note 2.4 to the Consolidated financial statements and in part 6 to the Consolidated annual report. The types of financial risks that Group faces and risk management are described in Note 3 to the Consolidated Financial Statements. The latest information on the risks related to the Group is also provided in Note 2.2 and Note 27 to the Consolidated Financial Statements. CORPORATE GOVERNANCE The management bodies of the Company specified in the Articles of Association are as follows: General Shareholders' Meeting, a collegial management body – Board, and a single-person management body – Manager of the Company. The Law of the Republic of Lithuania on Companies provides that Lithuanian companies at their discretion could have only one collegial governing body. There is no Supervisory Council in the Company. The Board consists of six members who are elected for the term of four years, represents the shareholders, and performs supervision and control functions. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 56 Competence of General Shareholders‘ Meeting is the same as specified by the Law on Companies. The General Meeting shall have the exclusive right to: 1) Amend the Articles of Association of the Company; 2) Change the registered office of the Company; 3) Elect the members of the Board; 4) Remove the Board or its members; 5) Select and remove the firm of auditors, set the conditions for auditor remuneration; 6) Take a decision on the approval of the Remuneration policy; 7) Determine the class, number, nominal value and the minimum issue price of the shares issued by the Company; 8) Take a decision regarding conversion of shares of one class into shares of another class, approve share conversion procedure; 9) Take a decision to change the number of shares of the same class issued by the Company and the nominal value of the share, without changing the size of the authorized capital; 10) Approve the set of annual financial statements; 11) Take a decision on profit/loss appropriation; 12) Take a decision on the formation, use, reduction and liquidation of reserves; 13) Approve a set of interim financial statements compiled in order to make a decision on the allocation of dividends for a period shorter than the financial year; 14) Take a decision on the allocation of dividends for a period shorter than the financial year; 15) Take a decision to issue convertible debentures; 16) Take a decision to withdraw for all the shareholders the right of pre-emption in acquiring the shares or convertible debentures of a specific issue of the Company; 17) Take a decision to increase the authorised capital; 18) Take a decision to reduce the authorised capital, except where otherwise stipulated by the Law on Companies; 19) Take a decision on approval of the Rules for granting shares to employees and/or members of bodies; 20) Take a decision for the Company to purchase own shares; 21) Take a decision on the reorganisation or division of the Company and approve the terms of reorganisation or division; 22) Take a decision to transform the Company; 23) Take a decision to restructure the Company; 24) Take a decision to liquidate the Company, cancel the liquidation of the Company, except where otherwise provided by the Law on Companies; 25) Elect and remove the liquidator of the Company, except where otherwise provided by the Law on Companies. Competence of General Shareholders‘ Meeting additionally includes adoption of the resolutions on the composition of the Audit Committee of the Company, including the appointment and removal of individual members of the Audit Committee, and approving the charter of the Audit Committee. General Shareholders' Meeting has a right to amend the Articles of Association under the qualified majority of votes, which may not be less than 2/3 of all votes the shareholders attending at the Meeting, except for the exceptions specified by Law on Companies. For more information on the rights and restrictions granted to shareholders, see Note 7, Securities. The Board, consisting of six members, is elected by General Shareholders' Meeting for a 4 year term. Company‘s Board members election and revocation procedure is the same as specified by Law on Companies. Since supervisory board is not formed in the Company, the Board performs, among other things, the supervisory functions established by the Law on Companies. Company’s Board activity is conducted by chairman of the Board. The Board elects its chairman from among its members. The Board continues in office for the period established in the Articles of Association or until a new Board is elected and assumes the office but not longer than until the annual General Shareholders' Meeting during the final year of its term of office. Board of Company considers and approves: 1) The activity strategy of the Company; 2) The annual and interim report of the Company; 3) The management structure of the Company and the positions of the employees; 4) The positions to which employees are recruited by competition; 5) Regulations of branches and representative offices of the Company; 6) Description of the procedure for participation and voting in the general meeting of shareholders by means of electronic communication. The Board adopts the following resolutions: 1) Resolutions for the Company to become an incorporator or a member of other legal entities; 2) Resolutions to establish branches and representative offices of the Company; 3) Resolutions to invest, dispose of or lease the tangible long-term assets the book value whereof exceeds 1/20 of the share capital of the Company (calculated individually for every type of transaction); 4) Resolutions to pledge or mortgage the tangible long-term assets the book value whereof exceeds 1/20 of the share capital of the Company (calculated for the total amount of transactions); 5) Resolutions to offer surety or guarantee for the discharge of obligations of third persons the amount whereof exceeds 1/20 of the share capital of the Company; 6) Resolutions to acquire the tangible long-term assets the price whereof exceeds 1/20 of the share capital of the Company; 7) Resolutions regarding issuance of debenture of the Company (except issuance of convertible debenture); G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 57 8) Other resolutions within the competence of the Board as prescribed by the Law on Companies, Articles of Association or the resolutions of the General Shareholders' Meeting. The Board analyses and assesses the documents submitted by the Manager of the Company on: 1) The implementation of the activity strategy of the Company; 2) The organisation of the activities of the Company; 3) Financial standing of the Company; 4) The results of economic activities, income and cost estimates, the stocktaking data and other accounting data of changes in the assets. The Board elects and removes from office the Manager of the Company, fixes his/her remuneration and sets other terms of the employment agreement, approves his/her job description, provides incentives and imposes penalties. The Board analyses and assesses the Company's draft set annual financial statement and draft of profit/loss distribution and together with feedback, proposals and with the annual report of the Company submits them to the General Shareholders' Meeting. The Board is responsible for convening and arrangement of the General Shareholders' Meeting in due time. The Board performs the supervisory functions set out in Article 34, Part 11 of the Law on Companies. The Board analyzes and evaluates the draft of the Company's remuneration policy and submits it together with feedback and proposals to the General Meeting of Shareholders. Each member of the Board is entitled to initiate convening of the Board meeting. The Board may adopt resolutions and its meeting shall be deemed to have taken place when the meeting is attended by 2/3 and more of the members of the Board. The resolution of the Board is adopted if more votes for it are received than the votes against it. In the event of a tie, the Chairman of the Board shall have the casting vote. The member of the Board is not entitled to vote when the meeting of the Board discusses the issue related to his/her activities on the Board or the issue of his/her responsibility. The Manager of the Company – General Director - is a single-person management body of the Company. The Manager of the Company acts at his/her own discretion in relation of the Company with other persons. The Manager of the Company is elected and removed from office by the Board which also fixes his/her salary, approves his/her job description, provides incentives and imposes penalties. The employment agreement is concluded with the Manager of the Company and is signed on behalf of the Company by the Chairman of the Board or other person authorized by the Board. In his/her activities the Manager of the Company complies with laws and other legal acts, Articles of Association, General Shareholders' Meeting resolutions, Board resolutions, his/her job descriptions. The Manager of the Company acts on behalf of the Company and is entitled to enter into the transactions at his/her own discretion. The Manager of the Company may conclude the following transactions provided that there is a decision of the Board to enter into these transactions: to invest, dispose of or lease the tangible long-term assets the book value whereof exceeds 1/20 of the share capital of the Company (calculated individually for every type of transaction); to pledge or mortgage the tangible long-term assets the book value whereof exceeds 1/20 of the share capital of the Company (calculated for the total amount of transactions); to offer surety or guarantee for the discharge of obligations of third persons the amount whereof exceeds 1/20 of the share capital of the Company; to acquire the tangible long-term assets the price whereof exceeds 1/20 of the share capital of the Company as well as to conclude transactions with related parties as provided by Law on Companies. The Manager of the Company is responsible for: 1) The organization of the Company‘s activity and implementation of its objectives; 2) The drawing up of the set of annual financial statements and the drafting of the annual report of the Company; 3) Preparation of the draft description of the procedure for participation and voting in the general meeting of shareholders by means of electronic communication; 4) The drawing up of a draft of procedure of the assessment and conditions for transactions with related parties that are concluded under normal market conditions in the course of normal economic activity; 5) The drawing up of a draft remuneration policy; 6) The drawing up of a draft remuneration report; 7) Public announcement of the remuneration policy and remuneration report on the Company's website; 8) Concluding an agreement with the auditor or firm of auditors; 9) Submission of information and documents to the shareholders, General Shareholders' Meeting and the Board in cases prescribed by Law on Companies or at their request; 10) Submission of the documents and data of the Company to manager of the Register of Legal Entities; 11) Submission of documents to the Bank of Lithuania and Central Securities Depository; 12) Public announcement of information prescribed by Law on Companies in a source indicated in Articles of Association; 13) Submission of information to shareholders; 14) Preparation of the draft decision of the distribution of dividends for the period, shorter than a financial year, composition of the set of the interim financial reports and the preparation of the interim report for the decision of the distribution of dividends for the period, shorter than a financial year; G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 58 15) Notification to the shareholders and the Board about the most important events that have a significance for the company's activities 16) Preparation of draft rules for granting shares; 17) The performance of other duties prescribed by laws as well as in the Articles of Association and the job descriptions of the Manager of the Company. The Manager of the Company organizes daily activities of the Company, hires and dismisses employees, concludes and terminates employment contracts with them, provides incentives and imposes penalties. The Manager of the Company is responsible for preparation of the draft share subscription agreement and its data correctness. The Manager of the Company issues authorizations and procuration within the scope of its competence. The Manager of the Company is accountable and regularly reports to the Board on the implementation of Company‘s activity strategy, the organization of the Company‘s activity, the financial standing of the Company, the results of economic activity, the income and cost estimates, the stocktaking data and other accounting data of changes in the assets. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 59 MANAGEMENT OF THE COMPANY BOARD OF THE COMPANY On 28 April 2022 the Annual General Meeting of Company shareholders elected Company‘s members of the Board for new 4- year term. 27 th April 2026 is the end term for Company‘s Board. Company’s Board consist of six members, two of them are independent. Darius Mockus Chairman of the Board Darius Mockus (born in 1965) - Chairman of the Board since 2 May 2002 (member of the Board since 23 March 1995). Education: Vilnius University, Faculty of Economics, Industrial Planning. He has no Company shares. With related companies Minvista UAB (Code of Enterprise: 110685692; Registered office: Aukštaičių g. 7, Vilnius) and MG Investment UAB (Code of Enterprise: 123249022; Registered office: Aukštaičių g. 7, Vilnius) he has 41 965 028 shares, representing 75.90% of the share capital and votes. Information on current management positions in other companies: Company name Company code Registered office Current position UAB MG grupė 125459336 Aukštaičių g. 7, Vilnius, Lithuania President - the main position UAB MV GROUP 125313192 Aukštaičių g. 7, Vilnius, Lithuania Chairman of the Board UAB DARNU GROUP 123010339 Aukštaičių g. 7, Vilnius, Lithuania Chairman of the Board Information on shareholdings in other companies above 5%: MG Grupė UAB - 100% of the share capital; Minvista UAB – 100% of the share capital. Information about participation in other organizations: President of Honour of the Lithuanian Tennis Union. Ilona Šimkūnienė Member of the Board, Purchasing Director Ilona Šimkūnienė (born in 1963) - Apranga group Purchasing Director, Member of the Board of APB Apranga since 27 March 1998, in the Company since 1985. Education: Vilnius University, Faculty of Trade, specialization in Trade Economics. She has no Company shares. Information on positions in other companies: Company name Company code Registered office Current position UAB Apranga LT 300021271 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga BPB LT 300509648 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga PLT 300551572 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga SLT 301519684 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga MLT 302627022 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga HLT 304042131 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga OLT 304757395 Ukmergės 362, Vilnius, Lithuania Chairman of the Board UAB Apranga Ecom LT 304184173 Ukmergės 362, Vilnius, Lithuania Chairman of the Board Apranga LV SIA 40003672631 Elizabetes iela 51, Riga, Latvia Chairman of the Board Apranga BPB LV SIA 40003887840 Elizabetes iela 51, Riga, Latvia Chairman of the Board G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 60 Company name Company code Registered office Current position Apranga PLV SIA 40003887747 Elizabetes iela 51, Riga, Latvia Chairman of the Board Apranga SLV SIA 50103201281 Elizabetes iela 51 - 1A, Riga, Latvia Chairman of the Board Apranga MLV SIA 40103486301 Elizabetes iela 51 - 1A, Riga, Latvia Chairman of the Board Apranga HLV SIA 40203202205 Elizabetes iela 51 - 1A, Riga, Latvia Chairman of the Board Apranga OLV SIA 50203162031 Elizabetes iela 51 - 1A, Riga, Latvia Chairman of the Board Apranga Ecom LV SIA 40103972857 Elizabetes iela 51 - 1A, Riga, Latvia Chairman of the Board Apranga Estonia OU 11026132 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga BEE OU 11419148 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga PB Trade OU 11530250 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga ST Retail OU 11530037 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga MDE OU 12617929 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga HEST OU 14075697 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga Ecom EE OU 14004869 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Has no shareholdings in other companies above 5%. Vidas Lazickas Member of the Board Vidas Lazickas (born in 1965) - Member of the Board of APB Apranga since 29 April 2011. Education: Vilnius University, Faculty of Economics, specialization in Production Management and Organization. He has 265 138 shares of the Company, representing 0.48% of the share capital and votes. Information on current management positions in other companies: Company name Company code Registered office Current position UAB MG Grupė 125459336 Aukštaičių g. 7, Vilnius, Lithuania Economics and Finance Director - the main position UAB MG Investment 123249022 Aukštaičių g. 7, Vilnius, Lithuania General Director UAB Eminta 303140423 Aukštaičių g. 7, Vilnius, Lithuania Director UAB Euvalda 123248988 Aukštaičių g. 7, Vilnius, Lithuania Director UAB MG Media 211616910 Aukštaičių g. 7, Vilnius, Lithuania General Director UAB Minvista 110685692 Aukštaičių g. 7, Vilnius, Lithuania Director UAB MV GROUP Distribution LT 121702328 Aukštaičių g. 7, Vilnius, Lithuania Chairman of the Board UAB Laisvas ir nepriklausomas kanalas 123026090 Šeškinės g. 20, Vilnius, Lithuania Chairman of the Board UAB Mediafon“ 124424581 Olimpiečių g. 1 - 31, Vilnius, Lithuania Chairman of the Board UAB Mediafon Carrier Services 304065315 Olimpiečių g. 1 - 31, Vilnius, Lithuania Chairman of the Board UAB Mediafon Datapro 304065322 Olimpiečių g. 1 - 31, Vilnius, Lithuania Chairman of the Board UAB MV GROUP 125313192 Aukštaičių g. 7, Vilnius, Lithuania Member of the Board UAB MV GROUP Asset Management 304145213 Aukštaičių g. 7, Vilnius, Lithuania Member of the Board Įmonių grupė Alita AB 302444238 Miškininkų g. 17, Alytus, Lithuania Member of the Board OU MV GROUP Distribution EE 11021347 Kalmari tee 10, Rae vald, Harjumaa, Estonia Member of the Board SIA MV GROUP Distribution LV 40003787568 Medus iela 7, Ryga, Latvia Member of the Board MV GROUP Distribution PL Sp.Zo.o 140330387 22 Annopol Street, 03-236 , Warsaw, Poland Member of the Board AB MV GROUP Production 132082782 Aukštaičių g. 7, Vilnius, Lithuania Member of the Board UAB DARNU GROUP 123010339 Aukštaičių g. 7, Vilnius, Lithuania Member of the Board Has no shareholdings in other companies above 5%. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 61 Ramūnas Gaidamavičius Member of the Board, Development Director Ramūnas Gaidamavičius (born in 1968) - APB Apranga group Development Director, Member of the Board of APB Apranga since 30 April 2010, in the Company since 2002. Education: Vilniaus University of Technology, Faculty of Mechanics, specialization in Machine Building. He has 5 000 shares of the Company, representing 0.01% of the share capital and votes. Information on positions in other companies: Company name Company code Registered office Current position UAB Apranga LT 300021271 Ukmergės 362, Vilnius, Lithuania Member of the Board Apranga SIA 40003610082 Elizabetes iela 51, Riga, Latvia Chairman of the Board Apranga LV SIA 40003672631 Elizabetes iela 51, Riga, Latvia Member of the Board Apranga BPB LV SIA 40003887840 Elizabetes iela 51, Riga, Latvia Member of the Board Apranga PLV SIA 40003887747 Elizabetes iela 51, Riga, Latvia Member of the Board Apranga SLV SIA 50103201281 Elizabetes iela 51 - 1A, Riga, Latvia Member of the Board Apranga MLV SIA 40103486301 Elizabetes iela 51 - 1A, Riga, Latvia Member of the Board Apranga HLV SIA 40203202205 Elizabetes iela 51 - 1A, Riga, Latvia Member of the Board Apranga OLV SIA 50203162031 Elizabetes iela 51 - 1A, Riga, Latvia Member of the Board Apranga Ecom LV SIA 40103972857 Elizabetes iela 51 - 1A, Riga, Latvia Member of the Board Apranga OU 11274427 Rotermanni mnt 18/1, Tallinn, Estonia Chairman of the Board Apranga Estonia OU 11026132 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Apranga BEE OU 11419148 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Apranga PB Trade OU 11530250 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Apranga ST Retail OU 11530037 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Apranga MDE OU 12617929 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Apranga HEST OU 14075697 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Apranga Ecom EE OU 14004869 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Has no shareholdings in other companies above 5%. Jonas Jokštys Member of the Board, independent Jonas Jokštys (born in 1982) – Member of Board of APB Apranga since 29 th April 2021. Education: Stocholm School of Economics in Riga (2000-2003) Bachelor of Economics and Business Administration and London School of Economics and Political Science (2005-2006) Master of Philosophy and Political Science. He has no Company shares. Information on positions in other companies: Company name Company code Registered office Current position UAB Elmoris VG 305710509 Titnago g. 13A, Vilnius, Lithuania Member of the Board UAB Vendos 304472649 S. Konarskio g. 2-29, Vilnius, Lithuania Director APB Imum 305646914 S. Konarskio g. 2-29, Vilnius, Lithuania Director UAB Žemaitijos žemė 305704335 Vaidilutės g. 61, Vilnius, Lithuania Director Has no shareholdings in other companies above 5%. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 62 Gintaras Juškauskas Member of the Board, independent Gintaras Juškauskas (born in 1970) - Member of Board of APB Apranga since 29th April 2021. Education: Vilnius University, Finance faculty (1998-2003), Master of Economics and Vilnius University, Law faculty (2010-2013), Master of Law. He has no Company shares. Information on positions in other companies: Company name Company code Registered office Current position Gintaro Juškausko IĮ 302720373 Vanaginės g. 87, Vilnius, Lietuva Director UAB Merits 301678932 Gedimino pr. 54B-1, Vilnius, Lietuva Associate Partner Has no shareholdings in other companies above 5%. MANAGEMENT OF THE COMPANY AND THE GROUP The key management members of the Company and the Group as of 31 December 2023: Name, Surname Position Number of shares owned Part in the share capital Start at company Rimantas Perveneckas General Director 800 770 1,45% 1983 Ilona Šimkūnienė Purchasing Director - - 1985 Ramūnas Gaidamavičius Development Director 5 000 0,01% 2002 Gabrielius Morkūnas Chief Financial Officer - - 2021 Aušra Tartilienė Inditex chain Director - - 1989 Irma Marcinkienė Sales and Marketing Director 1 863 0,003% 2000 Audronė Martinkutė Personnel Director 360 0,001% 2002 * with related parties Information about General director of the Company and the Group: Rimantas Perveneckas General Director Rimantas Perveneckas (born in 1960) - APB Apranga group General Director, Member of the Board of APB Apranga since 23 February 1993, in the Company since 1983. Education: Vilnius University, Faculty of Trade, specialization in Trade Economics. He has 800 770 shares of the Company, representing 1.45% of the share capital and votes. Has no positions in other companies. Has no shareholdings in other companies above 5%. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 63 Information about CFO of the Company and the Group: Gabrielius Morkūnas Chief Financial Officer Gabrielius Morkūnas (born in 1990) - Apranga Group Finance and Economics Director, in the Company since 2021. Education: Mykolo Romerio University, Bachelor of Economics and Finance. Information on positions in other companies: Company name Company code Registered office Current position UAB Apranga BPB LT 300509648 Ukmergės 362, Vilnius, Lithuania Member of the Board UAB Apranga PLT 300551572 Ukmergės 362, Vilnius, Lithuania Member of the Board UAB Apranga SLT 301519684 Ukmergės 362, Vilnius, Lithuania Member of the Board UAB Apranga MLT 302627022 Ukmergės 362, Vilnius, Lithuania Member of the Board UAB Apranga HLT 304042131 Ukmergės 362, Vilnius, Lithuania Member of the Board UAB Apranga OLT 304757395 Ukmergės 362, Vilnius, Lithuania Member of the Board UAB Apranga Ecom LT 304184173 Ukmergės 362, Vilnius, Lithuania Member of the Board Apranga OU 11274427 Rotermanni mnt 18/1, Tallinn, Estonia Member of the Board Has no shareholdings in other companies above 5%. AUDIT COMMITTEE The Audit Committee consists of 3 members, 2 of them are independent. The Audit Committee is elected for a 4-year term. Committee members are appointed and dismissed by the Company's general meeting of shareholders at the proposal of the Management Board The main functions of the Audit Committee are: - To inform the General Director of the Company of the outcome of the statutory audit; - To monitor the financial reporting process and submit recommendations to ensure its integrity; - To monitor the effectiveness of the Company’s internal quality control and risk management systems, having impact on the financial reporting of the Company; - To monitor the statutory audit of the annual and consolidated financial statements; - To review and monitor the independence of the statutory auditors or the audit firms; - To be responsible for the procedure for the selection of statutory auditor(s) or audit firm(s). The General Shareholders Meeting hold on 27 April 2017 approved the new Charter of the Audit Committee. The General Shareholders Meeting hold on 27 April 2021 approved three members of the Audit Committee for the new 4-year term: Rita Zakalskienė (the independent member of the Committee, Chair of the committee), Justina Puškorė (the independent member of the Committee) and Rasa Rulevičiūtė (an employee of the Company). In 2023, 2 Audit Committee meetings were held. Following issues were discussed during the meetings of the Committee: discussing the notes of the external auditors' to the financial statements for 2022; also planned for 2023 the scope of the audit and the terms of the audit; and other issues. Information on major share packages controlled either directly or indirectly Details of the shares are provided in Note 14 to the Consolidated financial statements, Investments In Subsidiaries. Information on transactions with related parties No transactions with related parties as provided for in art. 37(2) of the Law on Companies of the Republic of Lithuania were concluded in 2023. Information on shareholders having special control rights All shares of the Company are of one class ordinary registered shares granting their owners (shareholders) equal rights. Details of the shares are provided in Note 7 to the Consolidated financial statements, Securities . Information of amendments to the Company‘s Articles of Association In 2023, there were no amendments of the Company‘s Articles of Association. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 64 Information on all agreements between shareholders The Company does not have any information on agreements between shareholders. Information on the varied policy applicable to the election of the Company‘s chief manager, the members of governing and supervisory boards The Company does not have the variety policy applicable to the election of the chief manager and the members of governing and supervisory bodies. During the procedure of selection of candidates to the Company‘s board of directors, governing and supervisory boards, the candidates shall be subject to requirements that do not discriminate a candidate on grounds of age, sex,education, or professional experience. During the selection of a candidate, the Company does not set any restrictions for nomination of a candidature on grounds of sex or age. Considering the specificity of the Company‘s business activity and the status of a state-owned company, unbiased requirements which are only related to the functions and competences of the members of a governing boards and the professional experience and education proportionate to these functions and competences are set. Disclosure of Compliance with the Corporate Governance Code for the Companies Listed son NASDAQ Vilnius The public trade company APRANGA (hereinafter referred to as the “Company”), acting in compliance with Article 12(3) of the Law of the Republic of Lithuania on Securities and paragraph 24.5 of the Listing Rules of AB NASDAQ OMX Vilnius, hereby discloses how it complies with the Corporate Governance Code for the Companies listed on Nasdaq Vilnius as well as its specific provisions or recommendations. In case of non-compliance with this Code or some of its provisions or recommendations, the specific provisions or recommendations that are not complied with must be indicated and the reasons for such non-compliance must be specified. In addition, other explanatory information indicated in this form must be provided. Summary of the Corporate Governance Report: Apranga APB is the parent company of the Group, registered in the Republic of Lithuania. At the end of 2023, it managed 25 daughter companies established in the three Baltic States. The Group’s core business is the retail sale of clothing. Of the 26 companies that make up the Group, 23 represent specific brands (Zara, Bershka, Pull&Bear, Stradivarius, Massimo Dutti, Zara Home and Oysho) on the basis of franchise agreements concluded with Inditex, a leader in the global apparel retail market. Three companies (APB Apranga, SIA Apranga and OÜ Apranga) represent brands other than Inditex (single-brand stores) as well as their own retail chains (multi-brand stores): Apranga, Apranga Galerija, City, Mados Linija, etc. Corporate governance activities are concentrated in the Group’s parent company, APB Apranga, which coordinates finances, legal, strategic planning and control, human resources and training, business management and development, information technology, ordering and pricing, marketing and advertising, and other general areas within the Group’s companies. The Group uses a centralized management model, and practically all management functions are concentrated at the Group’s headquarters in Vilnius. The Group’s main company, APB Apranga, has been listed on the Nasdaq Vilnius Stock Exchange since 1997. The company has been on the Baltic Main List since 2005. The share capital of APB Apranga is EUR 16,034,668.40 and it is divided into 55,291,960 ordinary registered shares (ISIN code LT0000102337) with a nominal value of EUR 0.29 each, where each share grants to its owner 1 vote (in total 55,291,960 voting shares), all shares are paid in full and give the owners equal rights. On 31 December 2023, APB Apranga had 7 017 shareholders. The main parent company, whose financial statements are made public, is UAB MG grupė. The main person controlling the Group is Mr. D. J. Mockus, who, together with related companies, holds 41 965 028 APB Apranga shares, accounting for 75.90% of the authorized capital and total votes. According to the Company’s articles of association, the bodies of the Company are the general meeting of shareholders, the collegial management body – the management board, and the sole management body – the manager of the Company. A supervisory board is not formed at the Company. Six members are elected to the management board by the general meeting of shareholders for a maximum period of four years. The Company’s management board is made up of board chair D.J. Mockus and board members Ilona Šimkūnienė, Vidas Lazickas, Gintaras Juškauskas (independent), Jonas Jokštys (independent) and Ramūnas Gaidamavičius. The management board elects and removes the manager of the Company – the general director. The Company has an audit committee consisting of three members, two of whom are independent. The audit committee is elected for a period of four years. The members of the committee are appointed and removed by the Company’s general meeting of shareholders on the recommendation of the Company’s management board. On 27 April 2017, the authority of the audit committee and the composition of the audit committee consisting of three (3) members were approved by the decision of the general meeting of shareholders. Members of the audit committee: Rita Zakalskienė (the independent member of the Committee, Chair of the committee) and Justina Puškorė (the independent member of the Committee), Rasa Rulevičiūtė (an employee of the Company). G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 65 Structured table for disclosure: PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY Principle 1: General meeting of shareholders, equitable treatment of shareholders, and shareholders’ rights The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate governance framework should protect the rights of shareholders. 1.1. All shareholders should be provided with access to the information and/or documents established in the legal acts on equal terms. All shareholders should be furnished with equal opportunity to participate in the decision-making process where significant corporate matters are discussed. Yes The Company adheres to the Information Disclosure Guidelines and provides important information to investors in a timely, accurate, clear and comprehensive manner on its website https://aprangagroup.lt/lt/investuotojams, in the Nasdaq Vilnius Information Disclosure System, in the Central Storage Facility, and in presentations to investors by the manager and senior management of the Company, thus providing equal access to it to all of the Company’s shareholders. The Company complies with the requirements provided in the Law on Companies concerning the right of shareholders to information and the provision thereof. The Company adheres to the decision-making procedures prescribed to the competence of the general meeting of shareholders by the Law on Companies as well as the Company’s articles of association, and gives shareholders equal opportunities to vote on the adoption of relevant decisions at general meetings of shareholders (it is permitted to vote by completing a ballot, represent a shareholder by proxy, etc.; information about upcoming general meetings of shareholders and related material is also published in English). 1.2. It is recommended that the company’s capital should consist only of the shares that grant the same rights to voting, ownership, dividend and other rights to all of their holders. Yes The Company’s capital only consists of ordinary registered intangible shares, which grant each shareholder equal voting, ownership, dividend and other rights, depending on the number of shares held. 1.3. It is recommended that investors should have access to the information concerning the rights attached to the shares of the new issue or those issued earlier in advance, i.e. before they purchase shares. Yes The Company provides information concerning the rights attached to newly or previously issued shares in preliminary prospectuses, in its annual and interim reports, and on its website. 1.4. Exclusive transactions that are particularly important to the company, such as transfer of all or almost all assets of the company which in principle would mean the transfer of the company, should be subject to approval of the general meeting of shareholders. No Decisions on the transfer, lease, investment, pledge or mortgage of fixed assets with a book value of more than 1/20 of the authorized capital in accordance with the Company’s articles of association, which were approved by decision the general meeting of shareholders, are taken by the Company’s management board. The competence of the general meeting of shareholders provided for in the Company’s articles of association does not differ from its competence as provided for in the Law on Companies. In any event, under the Law on Companies, approval of the general meeting of shareholders does not relieve the management board of responsibility for decisions made. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 66 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 1.5. Procedures for convening and conducting a general meeting of shareholders should provide shareholders with equal opportunities to participate in the general meeting of shareholders and should not prejudice the rights and interests of shareholders. The chosen venue, date and time of the general meeting of shareholders should not prevent active participation of shareholders at the general meeting. In the notice of the general meeting of shareholders being convened, the company should specify the last day on which the proposed draft decisions should be submitted at the latest. Yes Shareholders are informed about upcoming general meetings of shareholders in accordance with the requirements of legislation and the Company’s articles of association – adhering to the notification deadlines and methods and means of announcement. The opportunity to participate in the meeting is supplemented by the option of voting by ballot or authorizing another person to represent the shareholder. All shareholders are also notified about upcoming general meetings of shareholders in advance on the Investor Calendar. The general meeting of shareholders is always held at the Company’s headquarters. A working day is always chosen for the date, and the time is always during the first half of the day or around lunchtime, so public transport can also be used to attend. In the notice of the general meeting of shareholders being convened, the Company does not restrict the right of shareholders to submit new draft decisions either before or during the meeting, and this is clearly stated in the notice of the general meeting of shareholders being convened in both Lithuanian and English. 1.6. With a view to ensure the right of shareholders living abroad to access the information, it is recommended, where possible, that documents prepared for the general meeting of shareholders in advance should be announced publicly not only in Lithuanian language but also in English and/or other foreign languages in advance. It is recommended that the minutes of the general meeting of shareholders after the signing thereof and/or adopted decisions should be made available publicly not only in Lithuanian language but also in English and/or other foreign languages. It is recommended that this information should be placed on the website of the company. Such documents may be published to the extent that their public disclosure is not detrimental to the company or the company’s commercial secrets are not revealed. Yes The notice of the general meeting of shareholders being convened, draft decisions, the general voting ballot, and other related documents (for example, when amending the articles of association – the articles of association and the proposed amendments) are published/presented not only in Lithuanian, but in English as well (thus far, there has not been a need to prepare documents in other foreign languages). Minutes of the general meeting of shareholders (decisions taken during the meeting) are also published on the Company’s website in English (for example: https://aprangagroup.lt/en/investors/corporate- governance/shareholders-meetings/3755-resolutions-of- the-annual-general-meeting-of-apranga-apb- shareholders-9) 1.7. Shareholders who are entitled to vote should be furnished with the opportunity to vote at the general meeting of shareholders both in person and in absentia. Shareholders should not be prevented from voting in writing in advance by completing the general voting ballot. Yes Shareholders are furnished with these opportunities – information is provided about them in advance in the notice of the general meeting of shareholders being convened. The general voting ballot can also be completed in English. 1.8. With a view to increasing the shareholders’ opportunities to participate effectively at general meetings of shareholders, it is recommended that companies should apply modern technologies on a wider scale and thus provide shareholders with the conditions to participate and vote in general meetings of shareholders via electronic means of communication. In such cases the security of transmitted information must be ensured and it must be possible to identify the participating and voting person. No Shareholders are not yet provided with these conditions because the security of transmitted information and identification of the participating and voting person must first be ensured by necessary and proportionate means. The Company has not yet introduced such electronic means of communication. We believe that these opportunities to vote at the meeting: - voting in person at the meeting; - voting by proxy; - voting upon concluding a voting trust agreement; voting in advance by completing the general voting ballot (in English as well), including its transmission to the Company via electronic means of communication; are versatile and sufficient, and that shareholders’ rights to participate and vote at the meeting are properly implemented. 1.9. It is recommended that the notice on the draft decisions of the general meeting of shareholders being convened should specify new candidatures of members of the collegial body, their proposed remuneration and the proposed Yes If these issues are on the agenda of the general meeting of shareholders, new candidatures of members of the collegial body, information about his/her educational background, work experience and other managerial positions held and the proposed audit company are specified in the draft G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 67 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY audit company if these issues are included into the agenda of the general meeting of shareholders. Where it is proposed to elect a new member of the collegial body, it is recommended that the information about his/her educational background, work experience and other managerial positions held (or proposed) should be provided. decisions of the general meeting of shareholders. Remuneration of collegial body members is determined by the Remuneration Policy approved by the general meeting of shareholders. All candidates for members of the Company’s collegial body also inform the general meeting of shareholders what position they hold and where, and how their other activities are related to the Company and other legal entities related to the Company, as defined in Article 19(9) of the Law on Companies. All information about elected management board members is provided on the Companys website. 1.10. Members of the company’s collegial management body, heads of the administration 1 or other competent persons related to the company who can provide information related to the agenda of the general meeting of shareholders should take part in the general meeting of shareholders. Proposed candidates to member of the collegial body should also participate in the general meeting of shareholders in case the election of new members is included into the agenda of the general meeting of shareholders. Yes Members of the Company’s collegial body, heads of the administration, or other competent persons related to the Company take part in the general meeting of shareholders if they can provide information related to the agenda of the general meeting of shareholders. Proposed candidates for members of the collegial body also participate whenever possible. Principle 2: Supervisory board 2.1. Functions and liability of the supervisory board The supervisory board of the company should ensure representation of the interests of the company and its shareholders, accountability of this body to the shareholders and objective monitoring of the company’s operations and its management bodies as well as constantly provide recommendations to the management bodies of the company. The supervisory board should ensure the integrity and transparency of the company’s financial accounting and control system. 2.1.1. Members of the supervisory board should act in good faith, with care and responsibility for the benefit and in the interests of the company and its shareholders and represent their interests, having regard to the interests of employees and public welfare. Not applicable A supervisory board is not formed at the Company. 2.1.2. Where decisions of the supervisory board may have a different effect on the interests of the company’s shareholders, the supervisory board should treat all shareholders impartially and fairly. It should ensure that shareholders are properly informed about the company’s strategy, risk management and control, and resolution of conflicts of interest. Not applicable 2.1.3. The supervisory board should be impartial in passing decisions that are significant for the company’s operations and strategy. Members of the supervisory board should act and pass decisions without an external influence from the persons who elected them. Not applicable 2.1.4. Members of the supervisory board should clearly voice their objections in case they believe that a decision of the supervisory board is against the interests of the company. Independent 2 members of the supervisory board should: a) maintain independence of their analysis and Not applicable 1 For the purposes of this Code, heads of the administration are the employees of the company who hold top level management positions. 2 For the purposes of this Code, the criteria of independence of members of the supervisory board are interpreted as the criteria of unrelated parties defined in Article 31(7) and (8) of the Law on Companies of the Republic of Lithuania. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 68 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY decision-making; b) not seek or accept any unjustified privileges that might compromise their independence. 2.1.5. The supervisory board should oversee that the company’s tax planning strategies are designed and implemented in accordance with the legal acts in order to avoid faulty practice that is not related to the long-term interests of the company and its shareholders, which may give rise to reputational, legal or other risks. Not applicable 2.1.6. The company should ensure that the supervisory board is provided with sufficient resources (including financial ones) to discharge their duties, including the right to obtain all the necessary information or to seek independent professional advice from external legal, accounting or other experts on matters pertaining to the competence of the supervisory board and its committees. Not applicable 2.2. Formation of the supervisory board The procedure of the formation of the supervisory board should ensure proper resolution of conflicts of interest and effective and fair corporate governance. 2.2.1. The members of the supervisory board elected by the general meeting of shareholders should collectively ensure the diversity of qualifications, professional experience and competences and seek for gender equality. With a view to maintain a proper balance between the qualifications of the members of the supervisory board, it should be ensured that members of the supervisory board, as a whole, should have diverse knowledge, opinions and experience to duly perform their tasks. Not applicable 2.2.2. Members of the supervisory board should be appointed for a specific term, subject to individual re-election for a new term in office in order to ensure necessary development of professional experience. Not applicable 2.2.3. Chair of the supervisory board should be a person whose current or past positions constituted no obstacle to carry out impartial activities. A former manager or management board member of the company should not be immediately appointed as chair of the supervisory board either. Where the company decides to depart from these recommendations, it should provide information on the measures taken to ensure impartiality of the supervision. Not applicable 2.2.4. Each member should devote sufficient time and attention to perform his duties as a member of the supervisory board. Each member of the supervisory board should undertake to limit his other professional obligations (particularly the managing positions in other companies) so that they would not interfere with the proper performance of the duties of a member of the supervisory board. Should a member of the supervisory board attend less than a half of the meetings of the supervisory board throughout the financial year of the company, the shareholders of the company should be notified thereof. Not applicable G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 69 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 2.2.5. When it is proposed to appoint a member of the supervisory board, it should be announced which members of the supervisory board are deemed to be independent. The supervisory board may decide that, despite the fact that a particular member meets all the criteria of independence, he/she cannot be considered independent due to special personal or company- related circumstances. Not applicable 2.2.6. The amount of remuneration to members of the supervisory board for their activity and participation in meetings of the supervisory board should be approved by the general meeting of shareholders. Not applicable 2.2.7. Every year the supervisory board should carry out an assessment of its activities. It should include evaluation of the structure of the supervisory board, its work organization and ability to act as a group, evaluation of the competence and work efficiency of each member of the supervisory board, and evaluation whether the supervisory board has achieved its objectives. The supervisory board should, at least once a year, make public respective information about its internal structure and working procedures. Not applicable Principle 3: Management Board 3.1. Functions and liability of the management board The management board should ensure the implementation of the company’s strategy and good corporate governance with due regard to the interests of its shareholders, employees and other interest groups. 3.1.1. The management board should ensure the implementation of the company’s strategy approved by the supervisory board if the latter has been formed at the company. In such cases where the supervisory board is not formed, the management board is also responsible for the approval of the company’s strategy. Yes/No The Company does not prepare or approve a separate Company strategy. The Company prepares, approves and publishes the Company’s one-year operational plans. Company’s objectives are disclosed in the Company’s annual reports and notifications of material events, which are published in the same sources as provided in the answer to 1.1. 3.1.2. As a collegial management body of the company, the management board performs the functions assigned to it by the Law and in the articles of association of the company, and in such cases where the supervisory board is not formed in the company, it performs inter alia the supervisory functions established in the Law. By performing the functions assigned to it, the management board should take into account the needs of the company’s shareholders, employees and other interest groups by respectively striving to achieve sustainable business development. Yes As a collegial management body of the Company, the management board performs the functions assigned to it by the Law and in the articles of association of the Company. Since supervisory board is not formed in the Company, the board performs, among other things, the supervisory functions established by the Law on Companies. In performing the functions assigned to it, the management board takes into account the needs of the Company, shareholders, employees and other interest groups; the objective of the management board is essentially to achieve sustainable business development. At the end of the year, the Company’s management board approves next year’s budget, considering not only expansion and planned investments, but also potential staff salary increases, allocation of investments for employee training and development, implementation of IT systems and security, etc. 3.1.3. The management board should ensure compliance with the laws and the internal policy of the company applicable to the company or a group of companies to which this company belongs. It should also establish the respective risk management and control measures aimed at ensuring regular and direct liability of managers. Yes/No Compliance with the provisions of laws and the Company’s internal policies is ensured by the management board, as well as by the person or persons delegated by the management board, and department heads and/or jurists, within the scope of activities of the laws/policies. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 70 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 3.1.4. Moreover, the management board should ensure that the measures included into the OECD Good Practice Guidance 3 on Internal Controls, Ethics and Compliance are applied at the company in order to ensure adherence to the applicable laws, rules and standards. Yes/No Some of the measures are applied. In 2019, the management board approved and published the Code of Ethics and Conduct, which contains, in addition to the OECD Good Practice Guidance, other rules and principles relevant to the Company’s operations. At the very beginning of 2024, Rules on Implementation of the Corruption Prevention Policy were approved in the Companys group, which, among other things, include the obligation to declare private interests in the group companies, appoints a person responsible for corruption prevention in the group, and training materials to update the information were shared with the employees of the Company's group. 3.1.5. When appointing the manager of the company, the management board should take into account the appropriate balance between the candidate’s qualifications, experience and competence. Yes When appointing the manager of the Company, the management board takes into account the appropriate balance between the candidate’s qualifications, experience and competence. 3.2. Formation of the management board 3.2.1. The members of the management board elected by the supervisory board or, if the supervisory board is not formed, by the general meeting of shareholders should collectively ensure the required diversity of qualifications, professional experience and competences and seek for gender equality. With a view to maintain a proper balance in terms of the current qualifications possessed by the members of the management board, it should be ensured that the members of the management board would have, as a whole, diverse knowledge, opinions and experience to duly perform their tasks. Yes/No (due to gender equality) The management board is made up of persons of different professional experience and competences. The management board is composed of experts in corporate governance, economics and finance, taxes, procurement, expansion and development who possess the diverse knowledge, opinions and experience necessary for the proper and effective functioning of the management board and the interests of the Company. All members of the management board are closely acquainted with the activities of the Company, and two out of six members of the management board are employees of the Company – heads of administration. Even though only one of the six members of the management board is a woman, there are no requirements for the composition of the management board that may discriminate on the basis of sex in any way. 3.2.2. Names and surnames of the candidates to become members of the management board, information on their educational background, qualifications, professional experience, current positions, other important professional obligations and potential conflicts of interest should be disclosed without violating the requirements of the legal acts regulating the handling of personal data at the meeting of the supervisory board in which the management board or individual members of the management board are elected. In the event that the supervisory board is not formed, the information specified in this paragraph should be submitted to the general meeting of shareholders. The management board should, on yearly basis, collect data provided in this paragraph on its members and disclose it in the company’s annual report. Yes The names and surnames of the candidates to become members of the management board, information on their educational background, qualifications, professional experience, current positions, other important professional obligations and potential conflicts of interest are disclosed to the general meeting of shareholders in accordance with the requirements of the legislation regulating the processing of personal data and the internal legislation approved by the Company establishing the principles of data protection and processing, in all cases with the prior informed consent of the individual. The aforementioned data are presented in the Company's annual report. 3.2.3. All new members of the management board should be familiarized with their duties and the structure and operations of the company. Yes New members of the management board are familiarized with their duties, the structure and operations of the Company, and other information relevant to the activities of a management board member. 3.2.4. Members of the management board should be appointed for a specific term, subject to individual re-election for a new term in office in Yes The members of the management board are appointed for a four-year term or, when electing individual members – until the end of the term of office of the current 3 Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti-bribery/44884389.pdf G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 71 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY order to ensure necessary development of professional experience and sufficiently frequent reconfirmation of their status. management board. Members of the management board who have responsibly carried out their duties, devoted time to the work of the management board, and participated in meetings, and who would like to continue to play an active role in the activities of the management board, always have the opportunity to be nominated and re-elected. 3.2.5. Chair of the management board should be a person whose current or past positions constitute no obstacle to carry out impartial activity. Where the supervisory board is not formed, the former manager of the company should not be immediately appointed as chair of the management board. When a company decides to depart from these recommendations, it should furnish information on the measures it has taken to ensure the impartiality of supervision. Yes The chair of the management board is a person who has never been the manager of the Company. The chair of the Company’s management board is not an employee of the Company and is a shareholder representative. It is the Company’s belief that these facts are sufficient to state that the chair of the management board is capable of acting impartially and taking decisions which represent and protect the rights of shareholders. 3.2.6. Each member should devote sufficient time and attention to the performance of duties as a member of the management board. If a member of the management board has attended less than half of the meetings of the management board over the course of the Company’s financial year, the Company’s supervisory board – or, if a supervisory board is not formed at the Company, the general meeting of shareholders – should be informed. Yes The Company believes that each member devotes sufficient time and attention to their duties as member of the management board, actively participates in the meetings of the management board, and devotes time to prepare for them. Thus far, there have been no members who have attended less than half of the meetings of the management board over the course of the Company’s financial year, but such information could be submitted to the general meeting of shareholders. 3.2.7. In the event that the management board is elected in the cases established by the Law where the supervisory board is not formed at the company, and some of its members will be independent 4 , it should be announced which members of the management board are deemed as independent. The management board may decide that, despite the fact that a particular member meets all the criteria of independence established by the Law, he/she cannot be considered independent due to special personal or company-related circumstances. Yes In cases when management board is elected, it is announced, which members of the management board are deemed as independent. 3.2.8. The general meeting of shareholders of the company should approve the amount of remuneration to the members of the management board for their activity and participation in the meetings of the management board. Yes Remuneration Policy, which indicates the amount of remuneration to the members of the board (at the moment to the independent ones only), is approved by the general meeting of shareholders of the company. 3.2.9. The members of the management board should act in good faith, with care and responsibility for the benefit and the interests of the company and its shareholders with due regard to other stakeholders. When adopting decisions, they should not act in their personal interest; they should be subject to no-compete agreements and they should not use the business information or opportunities related to the company’s operations in violation of the company’s interests. Yes/No The Company believes that the members of the management board act in good faith, with care and responsibility for the benefit and the interests of the Company and its shareholders with due regard to other stakeholders, and that they do not act in their personal interest when adopting decisions. The Company is of the opinion that the duties of confidentiality that the members of the management board are subject to by law are sufficient to ensure their loyalty and trustworthiness, so non-compete agreements are not concluded with the members of the management board and their activities are not additionally restricted by such agreements. Members of the management board are introduced to the list of confidential information and trade secrets approved by the management board. The members of the Company’s management board are prohibited by law from using the business information or opportunities related to the Company’s operations in 4 For the purposes of this Code, the criteria of independence of the members of the board are interpreted as the criteria of unrelated persons defined in Article 33(7) of the Law on Companies of the Republic of Lithuania. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 72 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY violation of the company’s interests and by the Rules on Implementation of the Corruption Prevention Policy of the Company`s group. 3.2.10. Every year the management board should carry out an assessment of its activities. It should include evaluation of the structure of the management board, its work organization and ability to act as a group, evaluation of the competence and work efficiency of each member of the management board, and evaluation whether the management board has achieved its objectives. The management board should, at least once a year, make public respective information about its internal structure and working procedures in observance of the legal acts regulating the processing of personal data. No The management board does not carry out an annual assessment of its activities. Principle 4: Rules of procedure of the supervisory board and the management board of the company The rules of procedure of the supervisory board, if it is formed at the company, and of the management board should ensure efficient operation and decision-making of these bodies and promote active cooperation between the company’s management bodies. 4.1. The management board and the supervisory board, if the latter is formed at the company, should act in close cooperation in order to attain benefit for the company and its shareholders. Good corporate governance requires an open discussion between the management board and the supervisory board. The management board should regularly and, where necessary, immediately inform the supervisory board about any matters significant for the company that are related to planning, business development, risk management and control, and compliance with the obligations at the company. The management board should inform he supervisory board about any derogations in its business development from the previously formulated plans and objectives by specifying the reasons for this. Not applicable A supervisory board is not formed at the Company. 4.2. It is recommended that meetings of the company’s collegial bodies should be held at the respective intervals, according to the pre- approved schedule. Each company is free to decide how often meetings of the collegial bodies should be convened but it is recommended that these meetings should be convened at such intervals that uninterruptable resolution of essential corporate governance issues would be ensured. Meetings of the company’s collegial bodies should be convened at least once per quarter. Yes Meetings of the management board are held at the respective intervals, according to the pre-approved schedule, usually once per quarter. 4.3. Members of a collegial body should be notified of the meeting being convened in advance so that they would have sufficient time for proper preparation for the issues to be considered at the meeting and a fruitful discussion could be held and appropriate decisions could be adopted. Along with the notice of the meeting being convened all materials relevant to the issues on the agenda of the meeting should be submitted to the members of the collegial body. The agenda of the meeting should not be changed or supplemented during the meeting, unless all members of the collegial body present at the meeting agree with such change or supplement to the agenda, or Yes The members of the management board are notified of the meeting of the management board being convened in advance so that they have sufficient time for proper preparation for the issues to be considered at the meeting and a fruitful discussion can be held. Along with the notice of the meeting being convened, all materials relevant to the issues on the agenda of the meeting are submitted to the members of the management board, and the members of the management board can always request additional information if they consider that the information provided is inadequate. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 73 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY certain issues that are important to the company require immediate resolution. 4.4. In order to coordinate the activities of the company’s collegial bodies and ensure effective decision-making process, the chairs of the company’s collegial supervision and management bodies should mutually agree on the dates and agendas of the meetings and close cooperate in resolving other matters related to corporate governance. Meetings of the company’s supervisory board should be open to members of the management board, particularly in such cases where issues concerning the removal of the management board members, their responsibility or remuneration are discussed. Not applicable A supervisory board is not formed at the Company. Principle 5: Nomination, remuneration and audit committees 5.1. Purpose and formation of committees The committees formed at the company should increase the work efficiency of the supervisory board or, where the supervisory board is not formed, of the management board which performs the supervisory functions by ensuring that decisions are based on due consideration and help organise its work in such a way that the decisions it takes would be free of material conflicts of interest. Committees should exercise independent judgment and integrity when performing their functions and provide the collegial body with recommendations concerning the decisions of the collegial body. However, the final decision should be adopted by the collegial body. 5.1.1. Taking due account of the company- related circumstances and the chosen corporate governance structure, the supervisory board of the company or, in cases where the supervisory board is not formed, the management board which performs the supervisory functions, establishes committees. It is recommended that the collegial body should form the nomination, remuneration and audit committees 5 . Yes/No Nomination and remuneration committees are not formed at the Company, as the Company believes that the management board, in performing its functions, partially performs the functions of the said committees. The Company’s management board selects and appoints the manager of the Company and makes recommendations to the manager of the Company on the appointment of senior management. The management board will provide feedback and suggestions on the remuneration policy approved in the Company under the valid legislation. The Company’s management board approves the Company’s strategic and budget plans and controls their implementation and analyzes and evaluates the reports of the Company’s manager and senior management on implementation of the Company’s approved budget plans and the use of funds. In compliance with the requirements of the Law on the Audit of Financial Statement (Official Gazette, 2008, No. 82-3233), the Company has formed an audit committee consisting of three members, two of whom are independent. The audit committee is elected for a period of four years. The members of the committee are appointed and removed by the Company’s general meeting of shareholders on the recommendation of the Company’s management board. On 27 April 2017, the authority of the audit committee was approved by the decision of the general meeting of shareholders. 5.1.2. Companies may decide to set up less than three committees. In such case companies should explain in detail why they have chosen the alternative approach, and how the chosen approach corresponds with the objectives set for the three different committees. Yes See answer to 5.1.1. 5 The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of Financial Statements of the Republic of Lithuania provides that public-interest entities (including but not limited to public limited liability companies whose securities are traded on a regulated market of the Republic of Lithuania and/or of any other Member State) are under the obligation to set up an audit committee (the legal acts provide for the exemptions where the functions of the audit committee may be carried out by the collegial body performing the supervisory functions). G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 74 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 5.1.3. In the cases established by the legal acts the functions assigned to the committees formed at companies may be performed by the collegial body itself. In such case the provisions of this Code pertaining to the committees (particularly those related to their role, operation and transparency) should apply, where relevant, to the collegial body as a whole. Yes See answer to 5.1.1. 5.1.4. Committees established by the collegial body should normally be composed of at least three members. Subject to the requirements of the legal acts, committees could be comprised only of two members as well. Members of each committee should be selected on the basis of their competences by giving priority to independent members of the collegial body. The chair of the management board should not serve as the chair of committees. Yes/No Yes, as far as the audit committee is concerned. See answer to 5.1.1. The chair of the audit committee is not the chair of the management board; furthermore, the chair of the audit committee is an independent member of the audit committee. 5.1.5. The authority of each committee formed should be determined by the collegial body itself. Committees should perform their duties according to the authority delegated to them and regularly inform the collegial body about their activities and performance on a regular basis. The authority of each committee defining its role and specifying its rights and duties should be made public at least once a year (as part of the information disclosed by the company on its governance structure and practice on an annual basis). In compliance with the legal acts regulating the processing of personal data, companies should also include in their annual reports the statements of the existing committees on their composition, the number of meetings and attendance over the year as well as the main directions of their activities and performance. Yes/No The authority of the audit committee laying down the procedure for the formation of the committee, the number and composition of members and requirements for members, the period of membership of the committee, the rights and obligations of the committee, the procedure for organizing meetings and making decisions, the scale of the information provided to the committee and the procedure for its provision, etc. are approved by the body that elected this body (its members) – the general meeting of shareholders. The members of the audit committee are presented to the meeting by the management board. The authority of the audit committee defining its role and specifying its rights and duties was made public after it was approved in 2017, and is not additionally published by the Company every year if there are no changes. The information provided for in this paragraph is published annually in the annual report. 5.1.6. With a view to ensure the independence and impartiality of the committees, the members of the collegial body who are not members of the committees should normally have a right to participate in the meetings of the committee only if invited by the committee. A committee may invite or request that certain employees of the company or experts would participate in the meeting. Chair of each committee should have the possibility to maintain direct communication with the shareholders. Cases where such practice is to be applied should be specified in the rules regulating the activities of the committee. Yes It is the audit committee’s right and prerogative to decide who to invite to participate in meetings of the management board (excerpts from the Audit Committee Charter): “4.3. The Company’s general director, the chair of the management board and/or members of the management board and external auditors may participate in the meetings of the Committee. In addition, the Company’s finance and economics director and other employees of the Company may be invited to participate in the meetings of the Committee.” “3.8. The Committee shall be accountable to the Company’s general meeting of shareholders. The Committee shall submit an activity report to the general meeting of shareholders together with the complete set of financial statements submitted by the management board for approval.” G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 75 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 5.2. Nomination committee 5.2.1. The key functions of the nomination committee should be the following: 1) to select candidates to fill vacancies in the membership of supervisory and management bodies and the administration and recommend the collegial body to approve them. The nomination committee should evaluate the balance of skills, knowledge and experience in the management body, prepare a description of the functions and capabilities required to assume a particular position and assess the time commitment expected; 2) assess, on a regular basis, the structure, size and composition of the supervisory and management bodies as well as the skills, knowledge and activity of its members, and provide the collegial body with recommendations on how the required changes should be sought; 3) devote the attention necessary to ensure succession planning. Not applicable See answer to 5.1.1. 5.2.2. When dealing with issues related to members of the collegial body who have employment relationships with the company and the heads of the administration, the manager of the company should be consulted by granting him/her the right to submit proposals to the Nomination Committee. Not applicable See answer to 5.1.1. 5.3. Remuneration committee The main functions of the remuneration committee should be as follows: 1) submit to the collegial body proposals on the remuneration policy applied to members of the supervisory and management bodies and the heads of the administration for approval. Such policy should include all forms of remuneration, including the fixed-rate remuneration, performance-based remuneration, financial incentive schemes, pension arrangements and termination payments as well as conditions which would allow the company to recover the amounts or suspend the payments by specifying the circumstances under which it would be expedient to do so; 2) submit to the collegial body proposals regarding individual remuneration for members of the collegial bodies and the heads of the administration in order to ensure that they would be consistent with the company’s remuneration policy and the evaluation of the performance of the persons concerned; 3) review, on a regular basis, the remuneration policy and its implementation. Not applicable See answer to 5.1.1. The remuneration policy is drafted and approved as provided by the amendments to the Law on Companies. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 76 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 5.4. Audit committee 5.4.1. The key functions of the audit committee are defined in the legal acts regulating the activities of the audit committee 6 . Yes 5.4.2. All members of the committee should be provided with detailed information on specific issues of the company’s accounting system, finances and operations. The heads of the company’s administration should inform the audit committee about the methods of accounting for significant and unusual transactions where the accounting may be subject to different approaches. Yes The approved Audit Committee Charter provides for the following: “3.3. The Committee shall be entitled: 3.3.1. to obtain any information or documents when performing the Committee’s duties; 3.3.2. to obtain full information related to the specific features of the Company’s accounting, finances and operations. At the request of the members of the Committee or at its own initiative, the Company’s administration should inform the Committee about the methods of accounting for significant and unusual transactions where the accounting may be subject to different approaches, as well as about activities in preferential trade areas and/or activities carried out through special-purpose entities (companies, organizations) in order to determine whether these activities are justified. 3.4. The Committee shall submit requests for information or documents to the Company’s general director. The Company’s general director shall provide the Committee member(s) with access to the information or documents.” The Audit Committee Charter does not provide for any exceptions in which information may be withheld. The audit committee or its members may exercise these established rights without restriction. 5.4.3. The audit committee should decide whether the participation of the chair of the management board, the manager of the company, the chief finance officer (or senior employees responsible for finance and accounting), the internal and external auditors in its meetings is required (and, if required, when). The committee should be entitled, when needed, to meet the relevant persons without members of the management bodies present. Yes The audit committee is free to choose who to invite to its meetings, or to meet without inviting anyone to the meeting. The participation of members of the management bodies is only possible at the direction of the audit committee. Since there is one employee of the Company on the audit committee, the committee may, if necessary, arrange a meeting with the necessary employee of the Company without members of the management bodies present. The committee is free to decide on meetings with other necessary persons (not employees) and acts independently. See also answer to 5.1.1. 5.4.4. The audit committee should be informed about the internal auditor’s work program and should be furnished with internal audit reports or periodic summaries. The audit committee should also be informed about the work program of external auditors and should receive from the audit firm a report describing all relationships between the independent audit firm and the company and its group. Not applicable /Yes The Company does not have any internal auditors. The audit committee is informed about the work program of external auditors and receives from the audit firm a report describing all relationships between the independent audit firm and the Company and its group. 6 Issues related to the activities of audit committees are regulated by Regulation No. 537/2014 of the European Parliament and the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities, the Law on the Audit of Financial Statements of the Republic of Lithuania, and the Rules Regulating the Activities of Audit Committees approved by the Bank of Lithuania. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 77 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 5.4.5. The audit committee should examine whether the company complies with the applicable provisions regulating the possibility of lodging a complaint or reporting anonymously his/her suspicions of potential violations committed at the company and should also ensure that there is a procedure in place for proportionate and independent investigation of such issues and appropriate follow-up actions. No The procedure for reporting suspicions of potential violations committed at the Company is established and posted on the Company’s website, as regulated by the Law on Whistleblower Protection. There is an internal channel for the proportionate and independent investigation of such issues and appropriate follow-up actions, and there are reporting rules in place (link below). In the rules, the audit committee is not designated as a supervisory body for compliance with the relevant provisions of the Company and has not done so thus far. More about reports: https://aprangagroup.lt/lt/investuotojams/bendroves- valdymas/apb-apranga-valdymo-principai 5.4.6. The audit committee should submit to the supervisory board or, where the supervisory board is not formed, to the management board its activity report at least once in every six months, at the time that annual and half-yearly reports are approved. No The committee is accountable to the Company’s general meeting of shareholders. The committee submits an activity report to the general meeting of shareholders together with the complete set of financial statements submitted by the management board for approval. Principle 6: Prevention and disclosure of conflicts of interest The corporate governance framework should encourage members of the company’s supervisory and management bodies to avoid conflicts of interest and ensure a transparent and effective mechanism of disclosure of conflicts of interest related to members of the supervisory and management bodies. Any member of the company’s supervisory and management body should avoid a situation where his/her personal interests are or may be in conflict with the company’s interests. In case such a situation did occur, a member of the company’s supervisory or management body should, within a reasonable period of time, notify other members of the same body or the body of the company which elected him/her or the company’s shareholders of such situation of a conflict of interest, indicate the nature of interests and, where possible, their value. Yes As of the beginning of 2024 the Rules on the Implementation of the Corruption Prevention Policy were approved and are valid and applicable to the management bodies of the Company. The Rules, among other things, provide for the obligation to declare private interests in the event of circumstances that may cause a conflict of interests. Prior to the adoption of the aforementioned Rules, the general principles of avoiding conflicts of interest provided for in the Code of Ethics and Conduct of the Company's group were followed. To the Company’s knowledge, the members of the Company’s management body avoid situations in which their personal interests are or may be in conflict with those of the Company. The members of the Company’s management body are informed of their duty to report, within a reasonable period of time, such a conflict of interest to the other members of the same body, or to the body of the Company that elected them, or to the shareholders of the Company and from now also to the person responsible for the corruption prevention in the group. Principle 7: Remuneration policy of the company The remuneration policy and the procedure for review and disclosure of such policy established at the company should prevent potential conflicts of interest and abuse in determining remuneration of members of the collegial bodies and heads of the administration, in addition it should ensure the publicity and transparency of the company’s remuneration policy and its long- term strategy. 7.1. The company should approve and post the remuneration policy on the website of the company; such policy should be reviewed on a regular basis and be consistent with the company’s long-term strategy. Yes https://aprangagroup.lt/en/investors/corporate- governance/principles-of-corporate-governance G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 78 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 7.2. The remuneration policy should include all forms of remuneration, including the fixed-rate remuneration, performance-based remuneration, financial incentive schemes, pension arrangements and termination payments as well as the conditions specifying the cases where the company can recover the disbursed amounts or suspend the payments. Yes/No The remuneration policy is drafted and adopted in accordance with the requirements of the Law on Companies and actual situation in the Company. The remuneration policy does not cover factors that are not applied in the Company or for which there is no established practice or generally applicable principles in the Company. 7.3. With a view to avoid potential conflicts of interest, the remuneration policy should provide that members of the collegial bodies which perform the supervisory functions should not receive remuneration based on the company’s performance. Yes According to the Remuneration Policy, remuneration for work in the board is received only by independent members of the board and is fixed. 7.4. The remuneration policy should provide sufficient information on the policy regarding termination payments. Termination payments should not exceed a fixed amount or a fixed number of annual wages and in general should not be higher than the non-variable component of remuneration for two years or the equivalent thereof. Termination payments should not be paid if the contract is terminated due to inadequate performance. No Severance pay policy is not established in the remuneration policy. The amount of severance pay would be decided on a case-by-case basis, taking into account the Company's interests, principles of reasonableness, proportionality, fairness and integrity as well as consensus reached between the parties, contribution to the Company's activities and reasons for dismissal. 7.5. In the event that the financial incentive scheme is applied at the company, the remuneration policy should contain sufficient information about the retention of shares after the award thereof. Where remuneration is based on the award of shares, shares should not be vested at least for three years after the award thereof. After vesting, members of the collegial bodies and heads of the administration should retain a certain number of shares until the end of their term in office, subject to the need to compensate for any costs related to the acquisition of shares. No No financial incentive scheme, as defined by the Law on Markets in Financial Instruments, is applied at the Company. 7.6. The company should publish information about the implementation of the remuneration policy on its website, with a key focus on the remuneration policy in respect of the collegial bodies and managers in the next and, where relevant, subsequent financial years. It should also contain a review of how the remuneration policy was implemented during the previous financial year. The information of such nature should not include any details having a commercial value. Particular attention should be paid on the major changes in the company’s remuneration policy, compared to the previous financial year. Yes The remuneration report is published together with the Company's annual report how the content requirements of such a report are provided by the Law on Corporate Financial Statements. 7.7. It is recommended that the remuneration policy or any major change of the policy should be included on the agenda of the general meeting of shareholders. The schemes under which members and employees of a collegial body receive remuneration in shares or share options should be approved by the general meeting of shareholders. Yes Approval of the remuneration policy or any major change of the policy is within the competence of the general meeting of shareholders. G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 79 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY Principle 8: Role of stakeholders in corporate governance The corporate governance framework should recognize the rights of stakeholders entrenched in the laws or mutual agreements and encourage active cooperation between companies and stakeholders in creating the company value, jobs and financial sustainability. In the context of this principle the concept “stakeholders” includes investors, employees, creditors, suppliers, clients, local community and other persons having certain interests in the company concerned. 8.1. The corporate governance framework should ensure that the rights and lawful interests of stakeholders are protected. Yes The Company respects the rights of different stakeholders and their rights entrenched in the laws. 8.2. The corporate governance framework should create conditions for stakeholders to participate in corporate governance in the manner prescribed by law. Examples of participation by stakeholders in corporate governance include the participation of employees or their representatives in the adoption of decisions that are important for the company, consultations with employees or their representatives on corporate governance and other important matters, participation of employees in the company’s authorized capital, involvement of creditors in corporate governance in the cases of the company’s insolvency, etc. Yes The Company has never prohibited or restricted the right, and always strives to create conditions for stakeholders to participate in corporate governance in the manner prescribed by law. For example, a work council has been formed at the Company which represents the interests of employees and participates in corporate governance within its competence. 8.3. Where stakeholders participate in the corporate governance process, they should have access to relevant information. Yes 8.4. Stakeholders should be provided with the possibility of reporting confidentially any illegal or unethical practices to the collegial body performing the supervisory function. No The company has a general procedure for reporting violations, see the answer to 5.4.5, as established by the Law on Whistleblower Protection. Principle 9: Disclosure of information The corporate governance framework should ensure the timely and accurate disclosure of all material corporate issues, including the financial situation, operations and governance of the company. 9.1. In accordance with the company’s procedure on confidential information and commercial secrets and the legal acts regulating the processing of personal data, the information publicly disclosed by the company should include but not be limited to the following: _ The information referred to below in this recommendation is disclosed in notifications of material events published through the Nasdaq Vilnius Information Disclosure System, the Company’s website, and the Company’s annual and interim information documents, to the extent required by legislation and the International Financial Reporting Standards applicable in the European Union. The information is also disclosed in presentations to investors by the manager and senior management of the Company. 9.1.1. operating and financial results of the company; Yes 9.1.2. objectives and non-financial information of the company; Yes 9.1.3. persons holding a stake in the company or controlling it directly and/or indirectly and/or together with related persons as well as the structure of the group of companies and their relationships by specifying the final beneficiary; Yes G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 80 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY 9.1.4. members of the company’s supervisory and management bodies who are deemed independent, the manager of the company, the shares or votes held by them at the company, participation in corporate governance of other companies, their competence and remuneration; Yes 9.1.5. reports of the existing committees on their composition, number of meetings and attendance of members during the last year as well as the main directions and results of their activities; Yes/No See the answer given in 5.1.5. 9.1.6. potential key risk factors, the company’s risk management and supervision policy; Yes 9.1.7. the company’s transactions with related parties; Yes 9.1.8. main issues related to employees and other stakeholders (for instance, human resource policy, participation of employees in corporate governance, award of the company’s shares or share options as incentives, relationships with creditors, suppliers, local community, etc.); Yes/No Most of this information is disclosed in the Company’s corporate social responsibility report (Annex 2). 9.1.9. structure and strategy of corporate governance; Yes/No The Company’s governance structure and management principles are published on the Company’s website and in its financial statements. One-year operational plans are publicly disclosed. 9.1.10. initiatives and measures of social responsibility policy and anti-corruption fight, significant current or planned investment projects. This list is deemed minimum and companies are encouraged not to restrict themselves to the disclosure of information included into this list. This principle of the Code does not exempt companies from their obligation to disclose information as provided for in the applicable legal acts. Yes 9.2. When disclosing the information specified in paragraph 9.1.1 of recommendation 9.1, it is recommended that the company which is a parent company in respect of other companies should disclose information about the consolidated results of the whole group of companies. Yes Information is disclosed about the Company and the consolidated results of its daughter companies. 9.3. When disclosing the information specified in paragraph 9.1.4 of recommendation 9.1, it is recommended that the information on the professional experience and qualifications of members of the company’s supervisory and management bodies and the manager of the company as well as potential conflicts of interest which could affect their decisions should be provided. It is further recommended that the remuneration or other income of members of the company’s supervisory and management bodies and the manager of the company should be disclosed, as provided for in greater detail in Principle 7. Yes All information is on the Company’s website; also see the answers to 3.2.2 and 7.1. 9.4. Information should be disclosed in such manner that no shareholders or investors are discriminated in terms of the method of receipt and scope of information. Information should be disclosed to all parties concerned at the same time. Yes All information is disclosed as provided for in 9.1 and related answers; no shareholders or investors are discriminated in terms of the method of receipt and scope of information. Information is disclosed to all parties concerned at the same time. Information is disclosed in accordance with the applicable legislation of the Republic of Lithuania. The Company makes information publicly available through the Nasdaq Vilnius Information Disclosure System, thus ensuring simultaneous G O V E R N A N C E R E P O R T 3 . 2 APB APRANGA, Company’s code 121933274, Ukmerges 362, Vilnius FOR THE YEAR ENDED 31 DECEMBER 2023 (all tabular amounts are in EUR thousands unless otherwise stated) 81 PRINCIPLES/ RECOMMENDATIONS YES / NO/ NOT APPLICABLE COMMENTARY disclosure to investors. Information is also immediately placed in the Central Storage Facility. Notifications of material events are disclosed in Lithuanian and English, before or after the Nasdaq Vilnius Stock Exchange trading session. The Company also publishes the information published through the Nasdaq Vilnius Information Disclosure System and placed in the Central Storage Facility on the Company’s designated investor website http://apranga.lt/lt/investuotojams, where the information is presented in Lithuanian and English. Principle 10: Selection of the company’s audit firm The company’s audit firm selection mechanism should ensure the independence of the report and opinion of the audit firm. 10.1. With a view to obtain an objective opinion on the company’s financial condition and financial results, the company’s annual financial statements and the financial information provided in its annual report should be audited by an independent audit firm. Yes An independent audit firm audits the complete set of consolidated financial statements for the Company and its group of companies in accordance with the International Financial Reporting Standards applicable in the European Union. The audit firm also performs an audit of the annual report. 10.2. It is recommended that the audit firm would be proposed to the general meeting of shareholders by the supervisory board or, if the supervisory board is not formed at the company, by the management board of the company. Yes The audit firm is proposed to the general meeting of shareholders by the Company’s management board. 10.3. In the event that the audit firm has received remuneration from the company for the non- audit services provided, the company should disclose this publicly. This information should also be available to the supervisory board or, if the supervisory board is not formed at the company, by the management board of the company when considering which audit firm should be proposed to the general meeting of shareholders. Not applicable The Company’s audit firm did not provide non-audit services to the Company during the reporting year and did not receive remuneration from the Company for this. S O C I A L R E S P O N S I B I L I T Y R E P O R T 2 0 2 3 SUSTAINABILITY WITHIN THE GROUP 9 10 11 13 15 20 SUSTAINABILITY PRINCIPLES AND COMMITMENTS SUSTAINABILITY MANAGEMENT RISK MANAGEMENT EU TAXONOMY FOR SUSTAINABLE ACTIVITIES STAKEHOLDER INVOLVEMENT MATERIALITY OF SUSTAINABILITY TOPICS KEY SUSTAINABILITY DIRECTIONS 22 23 ENVIRONMENT 26 ENERGY AND CLIMATE SETTING UP ECO-FRIENDLY STORES 28 32 PACKAGING OPTIMISATION AND WASTE REDUCTION 33 SOCIAL FACTORS 35 WORKING CONDITIONS AND EMPLOYEE WELLBEING EMPLOYEE TRAINING AND DEVELOPMENT 37 42 EMPLOYEE HEALTH AND SAFETY 43 CONTENT ECONOMIC (GOVERNANCE) AREA 45 BUSINESS ETHICS AND COMPLIANCE RESPONSIBILITY IN THE SUPPLY CHAIN 46 48 RESPONSIBILITY TO SOCIETY 49 51GRI INDEX ABOUT THE APRANGA GROUP 4 3 ABOUT THE SOCIAL RESPONSIBILITY REPORT BUSINESS MODEL 7 STRUCTURE OF GROUP COMPANIES IN 2023 8 TRANSPORT OF GOODS AND LOGISTICS 34 HUMAN RIGHTS 44 KEY FIGURES 6 Social Responsibility Report 2023 2 ABOUT THE SOCIAL RESPONSIBILITY REPORT The Sustainability Report is prepared for the period from 1 January 2023 to 31 December 2023 and covers the activities of Apranga Joint Stock Company (hereafter referred to as "the Group"; registration address Ukmergės 362, Vilnius) in Lithuania, Latvia and Estonia. The sustainability report is published as part of the Consolidated Annual Report. The Sustainability Report is prepared for the second year in a row in accordance with the Global Reporting Initiative (GRI) standards (the newest GRI version of 2021). The report shows how our activities contribute to the United Nations Sustainable Development Goals. In this report, we aim to disclose all known information and explain the circumstances where certain indicators are not available or are insufficiently detailed by the standard requirements. The content of the report is based on a materiality matrix of sustainability topics, highlighting the ones that all stakeholders found the most relevant. The materialitymatrix was developed in 2022 and revised in 2023 while preparing this report. A double materiality assessment is foreseen in 2024, and the material topics will be updated. The disclosures also follow the guidelines and recommendations of the Bank of Lithuania, Nasdaq and the European Commission on the disclosure of non-financial information, and comply with the requirements of the legislation of the Republic of Lithuania. The social responsibility report is subject to statutory audit requirements. The Group's Corporate Social Responsibility (Sustainability) Report is publishedtogether with the Financial Statements in accordance with the requirements applicable to issuers on the Group's website www.aprangagoup.lt and is publicly available. No comments were received on the previous year's report, but it is noted that the Bank of Lithuania's guidance on the Taxonomy disclosure requirements was received and taken into account while preparing this report. With our Sustainability Report we are committed to being open and disclosing all known and relevant information. Our disclosures are intended to provide a basis for the assessment of our performance and the achievement of our objectives. 3 GRI 2-1 GRI 2-3 GRI 2-5 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 ABOUT THE APRANGA GROUP Apranga Group is the leading clothing retailer in the Baltics, striving to implement the principles of leadership in its direct business activities and in its relations with all stakeholders. In our performance we are committed to a future in which our core values become the unquestionable standards of business ethics. Since 1993, when the first Apranga store was opened in Vilnius, we have been growing every year and creating a retail chain that meets the expectations and requirements of today's shoppers. We have grown from one store to a Group with hundreds of outlets operating in the three Baltic States by meeting our own mmm standards of quality and customer service. Our experience includes cooperation with the world's most renowned leaders in the fashion business, the adoption and application of best practices in the local market, and the application of high standards of business ethics not only for ourselves but also for our partners. Our future lies in a constant desire to improve, finding a way to balance the enthusiasm that drives us forward with the lessons we have already learned. Our leadership and importance in society is not only about our market share but also about how we contribute to the common well-being. INTEGRITY TRANSPARENCY RESPONSIBILITY are the everyday principles that guide our relationships with all stakeholders. 4 GRI 2-6 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 CEO LETTER When it is time to take stock of the past year, the best feeling is that the new goals and objectives for this year are already taking shape in one's mind. That is our habit and our strength - our drive to outperform competitors and delight our customers. Every year, we set new goals, celebrate the results, and learn from the challenges we have faced. Valuing the lessons learned takes time but is perhaps even more important than achieving all your goals every year. I want us to reflect on the past year, which we consider a record year in terms of achievements, not just for our successes but also for the valuable experience gained. Each year is the foundation on which we build our common future. The more diverse this base is, beyond just light shades, the more sustainable our future will be. We consistently strive to ensure that our present actions contribute to a future where we will not have to lament, 'We failed to learn this lesson.' Together with every employee, manager and the Group's entire management team, we understand that responsibility is a personal one - and that each of us must see the commitments we make as a task for the organisation and ourselves. Apranga Group is more than 30 years old. We have achieved a lot, perhaps more than we could have hoped for, but as we look to the future, we see how much more we can do. By building on our strengths and combining our individual efforts, we have become a community that is ready for any challenge. CEO of Apranga Group Rimantas Perveneckas 5 GRI 2-22 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 KEY FIGURES 20222023 168 STORES 169 STORES 200 BRANDS 200 BRANDS 3 COUNTRIES 2139 EMPLOYEES 2249 EMPLOYEES 270 MILLION EUR GROUP REVENUE (EXCLUDING VAT) 6 3 COUNTRIES 243 MILLION EUR GROUP REVENUE (EXCLUDING VAT) CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 GRI 2-2 BUSINESS MODEL The business model of Apranga Group (the Group) remained unchanged last year. The number of companies remained unchanged – the Group consists of the parent company APB (joint stock trading company) Apranga, established and operating in Lithuania, and 25 subsidiaries established in Lithuania, Latvia and Estonia. No new companies were established last year. The Group has no associates to co- manage. The core activity of all Group companies is clothing retailing. The parent company APB Apranga has been listed on the Nasdaq Vilnius Stock Exchange since 1997. It has been listed on the Baltic Main List since 2005. APB Apranga is a member of the Lithuanian Association of Trading Companies (LPĮA). No new associations or organisations were joined last year. The previous reports did not mention that APB Apranga is a member of the Vilnius Chamber of Commerce, Industry and Crafts. Subsidiaries are divided into two groups: Franchisees are supplied by the Inditex Group. SIA Apranga and OÜ Apranga (non-franchised companies) operating on the Latvian and Estonian markets, are supplied by APB Apranga (except for rare exceptions where goods are delivered directly from suppliers). The non-franchised companies sell their goods in the Latvian and Estonian markets, while in Lithuania the goods are sold by APB Apranga itself. The pattern of subsidiaries has remained unchanged over the past year. The Group's sales revenue consists of revenue from its retail chain (169 stores in Lithuania, Latvia and Estonia) and revenue from online sales. As in previous years, more than 95% of sales revenue comes from the clothing category (including online sales). The remaining sales revenue comes from sales of footwear and household goods in the respective specialised stores. In 2023, the Group continued the development of its multi-channel strategy, based on the integration of bricks-and-mortar and online stores. In 2023, the COVID-19 pandemic did not have a significant impact on the Group's operations and online trading, resulting in an online sales revenue of approximately 12.2% during the reporting period, in line with the overall multi-year trend, except for the periods of active trading restrictions. The core business functions and management are concentrated in the parent company APB Apranga. Subsidiaries carry out only a small number of functions. Meanwhile, APB Apranga employs the vast majority of the Group's administrative staff, as well as all logistics and warehouse employees. (Zara, Bershka, Pull&Bear, Stradivarius, Massimo Dutti and Zara Home operators in each of the three Baltic States and Oysho in Lithuania and Latvia, as well as e-commerce companies representing Inditex brands in the three Baltic States), which represent a specific brand and operate under franchise agreements with the world's largest clothing supplier, the Inditex Group (hereafter referred to as "franchisees"). (SIA Apranga, OÜ Apranga) which do not operate under franchise agreements or with a relatively small number of franchise agreements (hereafter referred to as "non- franchised companies"). 23 2 7 GRI 2-6 companies companies CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 STRUCTURE OF GROUP COMPANIES IN 2023 8 GRI 2-6 OÜ „Apranga Estonia“ OÜ „Apranga BEE“ OÜ „Apranga PB Trade“ OÜ „Apranga ST Retail“ OÜ „Apranga MDE“ OÜ „Apranga HEST“ OÜ „Apranga“ APB „APRANGA“ LITHUANIA LATVIA ESTONIA UAB „Apranga LT“ UAB „Apranga BPB LT“ UAB „Apranga PLT“ UAB „Apranga SLT“ UAB „Apranga MLT“ UAB „Apranga HLT“ UAB „Apranga OLT“ UAB „Apranga Ecom LT“ SIA „Apranga LV“ SIA „Apranga BPB LV“ SIA „Apranga PLV“ SIA „Apranga SLV“ SIA „Apranga MLV“ SIA „Apranga HLV“ SIA „Apranga“ SIA „Apranga OLV“ SIA „Apranga Ecom LV“ OÜ „Apranga Ecom EE“ CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 GRI 2-23 SUSTAINABILITY WITHIN THE GROUP In 2023, the Group drafted its Sustainability Strategy and Policy documents, based on the stakeholder survey performed and materiality matrix created in 2022. All the Group's top managers were involved in the preparation of the documents. The documents set out the Group's long-term objectives and an action plan to achieve them consistently. These documents have not been submitted to the Board for approval given that the Group plans to carry out a double materiality assessment in 2024 in accordance with the European Sustainability Reporting Standards and to adjust its Sustainability Strategy and Policy documents on the basis of the results. Nevertheless, the work carried out has allowed for a more detailed definition of the agenda for the reporting period and for the planning of future work, as it is anticipated that the Group's long-term objectives and commitments will not change significantly following the double materiality assessment, and should new material topics arise, they will be included and disclosed in the Group's Annual Report. This report has been prepared in accordance with the GRI standards and the requirements for compliance with the Taxonomy Regulation as adopted by the European Commission. A list of GRI disclosures is provided in the Annex to the report (GRI Index). All information is collected centrally, ensuring that it is reviewed by a responsible person at the submission stage. The data collected is double-checked with the involvement of top managers responsible for the relevant operational areas. The information contained in the report is approved by the CEO. The Group's activities are guided by national legislation and key human rights instruments, as well as by the Code of Ethics and Conduct, which sets out, enshrines and explains the fundamental principles by which the Group seeks to ensure integrity, transparency and accountability. They are binding on all employees of the Group. The Group also has a Remuneration Policy, a Violence and Harassment Prevention Policy, a Whistleblowing Policy and other internal documents. During the reporting period, the Group's Gifts Policy was developed. The Company pays great attention to the protection of data, including personal data; all related requirements are enshrined in internal documents, such as the Personal Data Protection Policy and other internal documents, which describe in more detail the obligations to ensure the protection of data (including personal data). 9 GRI 2-24 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 We commit ourselves to sustainable development at the choice of our partners. We are market leaders and use our strenghts to drive change for a better future. IMPLEMENTATION GRI 2-23 SUSTAINABILITY PRINCIPLES AND COMMITMENTS This report has been prepared in an open and good faith manner, with the aim of being informative and useful to all stakeholders. It is guided by the principles we openly declare: 10 GRI 2-24 We never compromise on decisions that will affect the well-being of our employees, the commonwealth and the impact on the environment. We are open - we want to learn from best practices and share our knowledge. We strive to equip our stores to create the best working and service conditions. When thinking of our employees and customers we choose optimality and the highest European standards of innovation and technology. DECISIONS RESULTS IMPACT The Group's Sustainability Report consists of an introductory section and three main chapters - Environmental, Social and Governance - covering all the material topics identified by stakeholders. For more on their identification and disclosure, see the section Materiality of sustainability topics. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 GRI 2-17 SUSTAINABILITY MANAGEMENT Organisation increasingly considers sustainability management each year, and during the reporting period, we drafted the Group's Sustainability Strategy and Policy documents. Currently, sustainability management is the responsibility of the company's CEO and the Board, to whom he/she reports on the company's overall performance. The governance of the Company is based on the provisions of the Civil Code of the Republic of Lithuania, the Company Law of the Republic of Lithuania and the Company Statute. The CEO of the company, together with the Board, also takes strategic decisions on sustainability management. The Board is composed of six members (1 woman, 5 men), two of whom are independent, to ensure that it represents the widest possible range of stakeholders. The CEO of the company is not the chairman of the Board. The Board is elected by the General Meeting of Shareholders for a term of four years, in accordance with the Company Law of the Republic of Lithuania and Company Statute. During the reporting period, the company had no diversity policy for the election of its governance and supervisory bodies, but there is no discrimination on the basis of age, gender, education or professional experience. During the reporting period, the company had no job position for sustainability management, but it would consider the necessity for such a position in the future. The responsibility for setting and implementing the sustainability objectives currently lies with the management team in their respective areas of activity. Sustainability indicators are reviewed once per calendar year, normally after the end of the reporting period. The review and approval of the information provided, including material topics, is the mmm 11 GRI 2-18 responsibility of the company's CEO and designated staff. The Chief Executive Officer is accountable and reports regularly to the Board on the implementation of the Company's business strategy. The Company's Annual Report (together with the Sustainability Report) is presented by the Company's CEO to the Board and then submitted to the General Meeting of Shareholders for approval. Potential conflicts of interest in the management of sustainability topics are governed by the organisation's Code of Ethics and Conduct, and each responsible person has an obligation to declare potential conflicts of interest if they are involved in the planning, implementation, or reporting on sustainability topics. In order to identify potential conflicts of interest, the Group's Code of Ethics and Conduct and internal documents provide for the obligation to complete a declaration of interests, which is updated at least once every 2 calendar years, or in the event of any changes that may give rise to a conflict of interest. Conflicts of interest are disclosed on the basis of declarations of interest submitted and internal Group documents, without an exhaustive list of specific criteria. There were no critical concerns related to sustainability topics during the reporting period. Each member of the Board shall have the right of initiative to convene a meeting of the Board, if necessary or if such concerns are received. During the reporting period, there were no measures in place to enhance the knowledge and experience of the highest governance body (Board and top management) in the field of sustainable development, nor was there an evaluation of their performance in this area. Stakeholders can submit concerns or reports related to sustainability management either directly to the responsible persons or through the anonymous Whistleblower channel at pranesk@apranga.lt. Alternatively, any communications may be made to the general email address info@apranga.lt. GRI 2-13 GRI 2-14 GRI 2-9 GRI 2-10 GRI 2-19 GRI 2-16 GRI 2-15 GRI 2-15 GRI 2-11 GRI 2-12 GRI 2-26 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX GRI 2-25 Social Responsibility Report 2023 SUSTAINABILITY MANAGEMENT The General Meeting of Shareholders approves the Company's Remuneration Policy. The members of the Board are not remunerated for their service on the Board, except for the independent members of the Board. The remuneration of a company's CEO consists of: 12 Remuneration policy for the Board and the CEO a fixed remuneration component agreed, approved and amended by the Board on a case-by-case basis with the CEO, which shall be fixed and paid to the CEO on a monthly basis, irrespective of the Company's performance; a variable remuneration component that depends on the performance of the Company, including its subsidiaries (the Group), i.e. on the profit of the Group, the amount of which - a specific percentage - shall be approved by the Board. This variable amount is paid once per calendar quarter, based on the Group's performance in the previous quarter. The ratio between the variable and fixed components depends solely on the performance of the Group. The amount of the variable remuneration component (percentage of the Group's profit) for the Company's CEO shall be determined and approved by a decision of the Company's Board of Directors in such a way as to be consistent with the business strategy, long- term objectives and operational interests of the Company and the Group, to safeguard the interests of shareholders, to promote sound and effective Company governance and risk management in the scope of the decisions taken, to avoid conflicts of interest, and to ensure adherence to the Code of Ethics and Conduct. The Board and the CEO of the Company do not receive any other remuneration, bonuses, allowances or incentives. Depending on the content of the reports received, they are dealt with by the responsible department, always involving the legal department, which ensures that the report is dealt with competently. The company is covered by operational and other insurances and, where necessary, the insurer is involved in compensation proceedings. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 RISK MANAGEMENT The identification and assessment of risks is carried out by the highest governance body of the organisation - the Board, together with the company's top managers who make up the Directorate. This assessment informs the organisation's planning and provides the means to manage risks or the potential consequences of unmanaged or inadequately managed risks. Geopolitical security risks. Amidst the ongoing conflict initiated by Russia in Ukraine, geopolitical security continues to be a significant concern in 2023. The organization remains unaffected directly, as it has no operations in Russia or Ukraine and no ties to any third country in regions experiencing active hostilities. "However, the lingering uncertainty stemming from Russian aggression remains a prominent factor influencing the economic and security landscape across all the Baltic States. Public health risks, previously defined as epidemiological risks, continue to be monitored, although the Group did not experience any related restrictions in 2023. However, all risks related to public health are deemed relevant, as government regulations may have a significant impact on the Group's business model. The management of these risks is based on experience and proven actions to respond to potential risk factors. The Group complies with the requirements and recommendations of the authorities in all operational markets, actively encourages employees to take care of their own health, and strives to ensure safe conditions for both employees and customers. Economic risk. The main risks are: the high cost of raw materials for producers, the unpredictable price of energy resources, rising supply chain costs and potential disruptions, and the general economic situation. In 2023, while inflation risk stabilized and did not significantly affect business performance, its associated factors may have influenced the economic situations of both employees and customers. The cost of energy resources has bbb 13 also stabilised relatively well, and the Group's investments in renewable energy have additionally lessened the impact of this factor. Unemployment rates, the purchasing power parity index and retail sales in the Baltics remained among the most relevant indicators. Risks of climate change impacts. Climate change is a persistent and increasingly significant risk in the Group's operations. The textile manufacturing industry has an impact on the environment and is exposed to environmental change, therefore we aim to make the impact of climate change one of our priority risk areas. The Group's business model does not include manufacturing processes, but it is dependent on textile production by third parties. The Group aims to implement the principles of sustainable operations while at the same time ensuring its partners' responsibility to reduce their impact on climate change. We understand our responsibilities and potential risks not only in our direct operations but also along the entire value chain. The Group is working to ensure that goods entering the market are sustainably collected at the end of their life cycle, thus contributing to waste reduction. Increasing regulation in the textile manufacturing sector may affect the Group's business model. However, this should not be seen as a risk, but rather as an opportunity to invest time and effort to prepare in advance and anticipate changes in the business model to allow for adaptation. Competition risks. Despite growing competition, especially in the e-commerce segment, the Group confidently maintains its position as the leading clothing retailer in the Baltic States. The Group's strategy is based on a multi-channel strategy and it is actively investing in its e-commerce activities, as well as in the renewal and efficiency of the bricks and mortar store network and in the integration of the two channels with each other. We constantly monitor the market situation and make sure that competition is fair for all parties. Recent changes in the market have led to a more open market with more e-commerce CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 RISK MANAGEMENT players entering the market, but this change has had no significant impact as the Group further invests and competes actively in this segment. For the sector as a whole, we see our competitors as partners with whom we can achieve more by working together on regulatory, social or environmental issues than we can by working alone. We are open to cooperation and constructive dialogue, and are committed to a relationship based on mutual respect and in compliance with all applicable legislation. Employee-related risks. The year 2023 was not notable for atypical indicators relating to employees and employee turnover. The Group invests in employee well-being, training and integration to mitigate any potential risks to its operations or performance. The organisation considers the well-being of its employees to be one of itscore values and strives to improve working conditions by providing additional benefits and career opportunities. The main long-term risks related to staff remain: 14 Strengthening our relationship with our employees and building a corporate culture remains our priority. As in previous periods, the risk assessment is carried out by listing extensive factors and ranking the most significant ones. The principle is not only to list priority risks and plan their possible management, but also to discuss other less likely factors to ensure a rapid response if needed. staff recruitment and hiring; seamless integration into work processes; staff retention, turnover reduction; improving employee satisfaction. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 EU TAXONOMY FOR SUSTAINABLE ACTIVITIES 15 The European Union (EU) Taxonomy (Taxonomy Regulation (EU) 2020/852 and the delegated acts adopted thereon) is a classification system for sustainable economic activities, which aims to channel private investment into environmentally sustainable activities that contribute to the EU Green Deal for Europe to become the first climate-neutral continent. The Taxonomy defines criteria based on scientific evidence to assess the sustainability of operations. Taxonomy-eligible economic activities are defined as activities described in the delegated acts of the Taxonomy Regulation that have the potential to contribute to one or more of the EU's environmental objectives: Climate change mitigation Climate change adaptation The sustainable use and protection of water and marine resources The transition to a circular economy Pollution prevention and control The protection and restoration of biodiversity and ecosystems Today, many economic activities are not yet defined in the Taxonomy, but this does not mean that they cannot be carried out in an environmentally sustainable way. The classification of activities as either taxonomy- eligible or non-eligible does not inherently indicate their sustainability or lack thereof. Taxonomy-aligned activity is defined as meeting the technical screening criteria of the Taxonomy, i.e. making a significant contribution to at least one of the six environmental objectives and causing no significant harm to the other five. In this overview, we provide information on the taxonomy-eligible activities conducted and their compliance with the Taxonomy criteria according to the main indicators: revenue, capital expenditure (CapEx) and operating mmm expenses (OpEx) - disclosed in the tables provided further. Given the potential for differing interpretations of the Taxonomy's wording and terminology, alongside the ongoing process of clarifying these aspects, we offer our interpretation of activity assessment within the Taxonomy framework. This interpretation is informed by external expert guidance and the best information currently available. Our disclosures and methodology for calculating the indicators may change in the future, depending on possible new official interpretations of the EU Taxonomy. Calculation of Taxonomy indicators Revenue. Currently, our core business activities do not fall within the sectors covered by the EU Taxonomy. The delegated acts of the Taxonomy Regulation do not describe either the Group's primary or secondary economic activities. Consequently, the Group is deemed not to generate any income from taxonomy-eligible activities, eliminating the need for further analysis. However, the Group has identified a number of investment-related activities that we believe can be included in the CapEx indicator under the Regulation. CapEx. In 2023, certain long-term asset additions made by the Group may be associated with the following activities as defined in the Taxonomy: Installation, maintenance and repair of energy efficiency equipment (acquisitions of lighting, HVAC systems). Installation, maintenance and repair of renewable energy technologies (extension of the solar power plant). Transport by motorbikes, passenger cars and light commercial vehicles (acquisitions of cars). CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 15 These investments can contribute to climate change mitigation and adaptation objectives. There were no investments in the Group in 2023 that could contribute to the other four environmental targets under the Taxonomy. The calculation of the CapEx denominator is defined in the Taxonomy. In applying the definition, we have included in the denominator the total amount of additions to long-term assets during 2023, encompassing right-of-use assets (which are non-taxonomy- eligible) accounted for under IFRS 16, constituting the largest portion of our acquisitions. OpEx. The Group's expenses attributable to taxonomy-eligible activities, such as car repairs and air-conditioning maintenance, which meet the Taxonomy's definition of an OpEx indicator, amount to less than 1%. Therefore, this indicator is deemed insignificant within our business model, and the operational expenditure (OpEx) value for taxonomy-eligible activities is recorded as €0. Apranga Group predominantly rents individual premises for its operations, owning very few buildings. The maintenance of these rented premises would not qualify as a taxonomy-eligible activity. The Group's total OpEx, according to Taxonomy (denominator), comprises repair, maintenance, short-term lease, cleaning of premises, repair and maintenance of IT assets costs, which include expenses related to taxonomy-non-eligible activities. Technical screening of activities Our evaluation of the technical screening criteria applicable to our activities/investments indicates that we only partially fulfill them. The Group has not conducted any climate risk and vulnerability assessment at either the Group level or within individual projects. Consequently, the activities/investments fail to meet one of the criteria for causing no significant harm, specifically in terms of adaptation to climate change. In this case, the compliance of the activities with the remaining criteria becomes irrelevant - the activity is overall defined as not meeting the criteria. We aim to contribute to the EU's environmental objectives and align our activities with best sustainability practices. mm Minimum safeguards The Group applies minimum safeguards in its operations to ensure the protection of employees and human rights, the fair payment of taxes, anti-corruption, and fair competition and complies with all applicable legislation. The Group's commitments are described in more detail in other sections of the Social Responsibility Report. According to the Taxonomy, economic activities can only be considered environmentally sustainable if they are carried out in compliance with minimum safeguards as defined by the Organisation for Economic Co-operation and Development, the United Nations, and other international agreements (see more in the Taxonomy Regulation). 16 Hence, we intend to take the Taxonomy Regulation into account in our future investment planning, so that as much as possible of our investments/activities will be classified as taxonomy-aligned. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 17 Revenue according to Taxonomy, 2023 Substantial contribution criteria Do no significant harm criteria Economic activity NACE code(s) Absolute revenue 2023 Proportion of revenue 2023 Climate change mitigation Climate change adaptation Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards Taxonomy- aligned proportion of revenue 2023 Category (enabling) Category (transitional) thousand Eur % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. Taxonomy-eligible activities: A.1. Environmentally sustainable activities (Taxonomy-aligned) Revenue of environmentally sustainable activities (Taxonomy- aligned) (A.1) 0 0% - - - - - - - - - 0% - - A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Not applicable - 0 0% Revenue of Taxonomy- eligiblebut not environmentally sustainable activities (not Taxonomy- aligned activities)(A.2) 0 0% Total: A.1 + A.2 0 0% B. Taxonomy-non-eligible activities Revenue of Taxonomy-non- eligible activities (B) 270,024 100% TOTAL: A + B 270,024 100% CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Capital Expenditure (CapEx) according to Taxonomy, 2023 Substantial contribution criteria Do no significant harm criteria Economic activity NACE code(s) Absolute Taxonomy CapEx in 2023 Percentage of capital expenditure, 2023 Climate change mitigation Climate change adaptation Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards Taxonomy- aligned proportion of Taxonomy CapEx, 2023 Category (enabling) Category (transitional) thousand Eur % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. Taxonomy-eligible activities: A.1. Environmentally sustainable activities (Taxonomy-aligned) Taxonomy CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) 0 0% - - - - - - - - - 0% - - A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 7.3. Installation, maintenance and repair of energy efficiency equipment F42, F43, M71, C16, C17, C22, C23, C25, C27, C28, S95, C33 272 0.95% 7.6. Installation, maintenance and repair of renewable energy technologies F42, F43, M71, C16, C17, C22, C23, C25, C27, C28 104 0.36% 6.5. Transport by motorbikes, passenger cars and light commercial vehicles H49, N77 228 0.80% Taxonomy CapEx of Taxonomy- eligiblebut not environmentally sustainable activities (not Taxonomy-aligned activities)(A.2) 604 2.11% Total: A.1 + A.2 604 2.11% B. Taxonomy-non-eligible activities Taxonomy CapEx of Taxonomy-non- eligible activities (B) 28,008 97.89% TOTAL: A + B 28,612 100% 18 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 19 Operating Expenditure (OpEx) according to Taxonomy, 2023 Substantial contribution criteria Do no significant harm criteria Economic activity NACE code(s) Absolute operating expenses in 2023 Percentage of operating expenses, 2023 Climate change mitigation Climate change adaptation Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards Taxonomy- aligned percentage of operating expenses, 2023 Category (enabling) Category (transitional) thousand Eur % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. Taxonomy-eligible activities: A.1. Environmentally sustainable activities (Taxonomy-aligned) Operating expenses of environmentally sustainable activities (taxonomy- aligned) (A.1) 0 0% - - - - - - - - - 0% - - A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Not applicable - 0 0% Operating expenses of taxonomy- eligible,but environmentally unsustainable (not taxonomy- aligned) activities (A.2) 0 0% Total: A.1 + A.2 0 0% B. Taxonomy-non-eligible activities Operating expenses of taxonomy-non- eligible activities (B) 3,175 100% TOTAL: A + B 3,175 100% CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Stakeholder Description How we engage and communicate Key sustainability topics How we meet expectations Employees Administrative and logistics staff and sales staff in the three Baltic countries Email, HR management system, intranet, face-to-face conversations, meetings, information boards in common areas Occupational health and safety; Employee training and development; Working conditions and employee well- being Improved working conditions, supplementary health insurance, training, career opportunities (both horizontal and vertical), flexible working hours Consumers Lithuanian, Latvian, Estonian residents, tourists Newsletters, social networks, media Organic products, sustainable packaging, product quality Eliminating plastic bags, taxing a part of paper bags (with proceeds going to charity), expanding sustainable assortment, and responsible handling of defective products Shareholders and the Board Board members and shareholders or their representatives Shareholders' meetings, board meetings Occupational health and safety; Attracting talent; Working conditions and employee well- being; Innovation and technology We invest in eco-friendly stores, reduce CO2 emissions, invest in renewable energy, reduce staff turnover by investing in training and improving working conditions Business partners Main partners in the markets in which the company operates, selected on the basis of turnover per calendar year Email, meetings, teleconferencing, calls Energy and climate; Occupational health and safety; Business ethics and compliance We follow a code of ethics and conduct, comply with the law in the markets in which we operate, invest in renewable energy, and set sustainability targets for our partners STAKEHOLDER INVOLVEMENT To ensure that the Group's activities meet all stakeholders' expectations for sustainable performance and to ensure continuous implementation of the best possible sustainability practices, it is essential for us to regularly consult and engage with our stakeholders. We consider our stakeholders to be those groups that are significantly affected by our activities and/or find them highly relevant or those that have a significant impact on our Group. This report is based on the 2022 materiality assessment described further (in 2023, materiality assessment was not carried out). A double materiality assessment is foreseen for mm 2024, including an analysis of financial materiality. At the end of 2022, to assess the relevance of the sustainability criteria to the Group's operations, we conducted a stakeholder survey and an analysis of the retail sector on sustainability topics. An electronic survey was sent to stakeholders, in which respondents indicated their priorities and made suggestions. Stakeholders were defined in terms of their ability to collect responses and their representativeness, a list that is planned to be expanded in the future. The survey identified the following groups of stakeholders: GRI 2-29 20 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Stakeholder Description How we engage and communicate Key sustainability topics How we meet expectations Regulators Controlling authorities setting the rules of conduct in the markets for public limited companies Email correspondence, meetings Business ethics and compliance We follow a code of ethics and conduct and comply with the law in the markets in which we operate Future generations Children of employees aged 12 and over Media, direct communication to employees Occupational health and safety; Diversity, equality and inclusion; Innovation and technology Involving family members in the company's activities. Social campaign "when I grow up I will be", where children try out their parents' professions, giving them the opportunity to try out a career from the age of 17 in a job at the stores Associations Organisations participated by Group's companies Meetings, email, remote meetings Preventing corruption; Setting up eco-friendly stores; Sustainable assortment; Optimising packaging and reducing waste Code of Ethics and Conduct, other procedures Beneficiaries and social partners Organisations with beneficiary status being granted support during the calendar year; Non- governmental organisations joined in joint activities Email, calls, meetings, remote meetings Eco-friendly store design; Sustainable assortment; Packaging optimisation and waste reduction; Working conditions and employee well- being; Climate change and energy consumption Investing in eco-friendly stores, reducing CO2 emissions, investing in renewable energy, reducing staff turnover by investing in training and improving working conditions, running a second-hand clothing collection programme, setting priorities for the Group's sponsorship policy Media Media outlets in the Baltic States Press releases, meetings, emails Working conditions and employee well- being, Preventing corruption, Ecofriendly products, Sustainable packaging, Product quality We follow the Code of Ethics and Conduct, comply with the law, disclose information openly and clearly, strive to develop good practices in our communication with the media, so that all stakeholders have access to information on equal terms Environment Social factors Good governance Packaging optimisation and waste reduction Energy and climate Animal welfare Setting up eco-friendly stores Transport and logistics impact Occupational health and safety Employee training and development Human rights Involvement in communities and society Diversity, equality and inclusion Working conditions and employee wellbeing Talent attraction Product safety and quality Prevention of corruption Business ethics and compliance Responsibility in the supply chain (social and environmental) Data privacy Protection of consumer rights Management practices Marketing and labelling Sustainable assortment Innovation and technology The survey included topics on the environment, social factors and good governance, respondents ranked them according to their priorities and could suggest their topics. During the reporting period, the Group has made preparations for a double materiality assessment and expects to complete this exercise in 2024. After the new assessment, material topics will be reviewed, potentially prompting adjustments to the Group's Sustainability Strategy and Policy. 21 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 MEDIUM HIGH IMPORTANT MODERATELY IMPORTANT VERY IMPORTANT LOW IMPORTANCE FOR STAKEHOLDERS IMPACT ON SOCIETY, ENVIRONMENT AND APRANGA GROUP'S PERFORMANCE Occupational health and safety Working conditions and employee wellbeing Packaging optimisation and waste reduction Employee training and development Community and society engagement Diversity, equality and inclusion Animal welfare Innovation and technology Human rights Attracting talent Setting up eco-friendly stores Energy and climate Business ethics and compliance Prevention of corruption Data privacy Protecting consumer rights Governance practices Marketing and labelling Transport and logistics impact Responsibility in the supply chain Sustainable assortment - environmental; - social; - governance/economic Packaging optimisation and waste reduction Setting up eco-friendly stores Energy and climate Transport and logistics impact Occupational health and safety Working conditions and employee wellbeing Employee training and development Business ethics and compliance Responsibility in the supply chain (social and environmental) Sustainable assortment MATERIALITY OF SUSTAINABILITY TOPICS Based on the results of the survey, the sector analysis and the recommendations of the Bank of Lithuania as the supervisory authority, a materiality matrix was developed which took into account the views of all stakeholders. The management principles for all material mmmmm sustainability topics are described in accordance with GRI requirements in this report, in chapters arranged by topic. A total of 10 material topics were identified in the areas of the environment, social factors and good governance. The Group's 10 key sustainability topics are: GRI 3-1 GRI 3-2 GRI 3-3 22 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 KEY SUSTAINABILITY DIRECTIONS In 2023, the organisation has drafted its Sustainability Policy and Strategy documents, setting out short- and long-term objectives and an action plan to achieve them. However, in the light of the changing regulatory environment and the new requirements coming into force in the short term in relation to the Corporate mmm Sustainability Reporting Directive, the documents have not been finalised. Nevertheless, the organisation continues to be active in achieving the project's objectives and presents its key sustainability directions in this report: Reducing environmental impact - reducing the environmental impact of all activities: CO2 emissions, energy consumption, waste generation Employee well-being - looking after the health and emotional well-being of employees, encouraging their development and providing career opportunities within the company Sustainable and responsible business development - fostering a culture of ethical business, ensuring transparency and regulatory compliance Circular fashion initiative - contributing to the promotion of responsible fashion consumption and the transition to a circular economy through various means 23 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Sustainability area Material topic Strategic (long-term) sustainability directions Sustainable development goals Environmental Energy and climate Aiming to reduce the CO2 footprint by 30% by 2030 Aiming forclimate neutrality, including suppliers. Ensuring that the Group uses only green electricity. Transport and logistics impact Ensuring that at least 50% of new car purchases each year are hybrid or electric. Ensuring that at least 90% of the car fleet is made up of hybrid and electric cars by 2030. Organising the transportation of goods to ensure the most efficient use of resources. Setting up eco- friendly stores Continuing investments in energy-efficient technologies when building new or refurbishing present stores. Obliging suppliers responsible for setting up or refurbishing shops to use sustainable materials and to comply with internationally recognised environmental standards. Packaging optimisation and waste reduction Reducing the use of customer shopping bags per turnover and/or sales receipts by 40% (compared to 2022 figures). Eliminating the use of plastic bags. Aiming for at least 90% of bags offered to customers at stores to be priced. To direct the profits from shopping bag sales towards charity. Replacing packaging with more eco-friendly alternatives: packaging from recycled and other sustainably sourced materials. Further developing and promoting projects that encourage consumers to return second-hand clothes to shops for reuse or recycling. Social Working conditions and employee wellbeing Ensuring the mental and emotional well-being and satisfaction of staff, and improving work-life balance. Extending supplementary health insurance coverage to workers in all locations. Adding a Diversity Policy to Group's policies or expanding existing policies to address diversity issues more broadly. Zero incidents of discrimination in the workplace. Occupational health and safety Further ensuring occupational safety and promoting employee health. Zero accidents or injuries each year. Implementing measures to improve occupational health, monitoring, staff safety and culture and to create a safe and clean working environment. Employee training and development Continue to organise presentations of various types for company staff with external speakers. Developing the e-learning platform - including and updating specific learning topics. Ensuring that each employee is provided with a minimum of 6 hours per year for training and development. Human rights Surveying suppliers and ensuring that not only does the organisation live up to its publicly declared commitments, but also demands it from its suppliers and partners. All sustainability topics identified as material are considered strategic and their implementation is aligned with the United Nations Sustainable Development Goals framework. 24 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Sustainability area Material topic Strategic (long-term) sustainability directions Sustainable development goals Economic (governance) Responsibility in the supply chain Introducing supplier surveys for all existing and new suppliers to ensure that they are committed to environmental, social and good governance issues. Sustainable assortment Ensuring that a growing portion of the assortment is labeled as sustainable, demonstrating to customers that the products comply not only with required legislation but also with environmental, social, and governance standards. Ensuring transparency of the products sold and to the greatest possible extent disclosing the value chain to the end user. Business ethics and compliance Developing a detailed anti-corruption policy or expanding on it in the organisation's Code of Ethics and Conduct. Adopting an anti-corruption training programme for staff and updating the knowledge of Board members and top management on anti- corruption. Ensuring that at least 90% of administrative staff and employees in managerial positions are familiar with anti-corruption policy. Developed supplier questionnaire should be delivered to suppliers and partners together with the information on procedures and policies adopted by the organisation and with a consistent access to the content. Zero confirmed cases of corruption. Zero significant instances of non-compliance with the law. 25 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 ENVIRONMENT When publishing the Group's greenhouse gas (GHG ) emissions each year, we aim to make the calculations as detailed as possible andinclude all relevant factors. As before, we disclose in this report that the calculations we publish are estimated emissions and do not reflect all CO2 equivalent emissions associated with the Group's activities. We strive tobe as accurate as possible, so we take into account the latest methodologies and guidelines to calculate GHG emissions clearly and accurately. In the 2022 report, we have disclosed our emissions calculations for the first time and consider this year as the base year from which the strategic targets are set. Where new factors are introduced, methodologies are changed or significant circumstances arise, we will reflect this in the calculations and benchmarks accordingly. The verification of the 2022 indicators revealed that electricity consumption was not properly accounted for, with all of it being attributed to green electricity. Errors were found in the assessment of the origin of electricity purchased indirectly (through intermediaries from whom the commercial space is rented). When it became clear that the origin of indirectly purchased electricity could not be accurately assessed due to geopolitical reasons and the resulting energy crisis, a decision was taken to classify all indirectly purchased electricity as non-green. All the electricity purchased directly by APB Apranga is certified as green electricity. In view of the inaccuracies identified, this report recalculates the GHG emissions in 2022 related to purchased electricity. Derivatives of energy consumption indicators have been adjusted accordingly. The Apranga Group's business is exclusively clothing retailing in brick-and-mortar and online stores. The Group is not involved in any processes related to the production, nevertheless it is aware that its activities are an integral part of the global textile industry. The Group emphasizes its adherence to high environmental standards and its commitment to reduce its ecological footprint. The environmental topics are selected on the basis of relevance and include Energy and climate, mm GRI 2-4 Setting up eco-friendly stores, Transport and logistics of goods, and Optimising packaging and waste management. 27 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Direct (Scope 1) GHG emissions Energy indirect (Scope 2) GHG emissions Other indirect (Scope 3) GHG emissions Fuel for energy Transport Gas leaks/freons Purchased electricity Purchased thermal energy Waste Raw materials purchased Business travel Energy losses and fuel recovery Upstream transport services Downstream transport services ENERGY AND CLIMATE n this report, the Apranga Group publishes the estimated greenhouse gas (GHG) emissions of its activities in CO2 equivalent. This publication identifies the emission sources and their calculation methodologies, indicating the Scope to which the emission source belongs. No additional sources were assessed, but factors were updated if they were found to be overestimated. In 2023, the methodology for the assessment of purchased heat consumption was revised in cooperation with owners of rented premises. The Scope 2 emission factors for 2022 have also been updated, once the values for the respective years have become available. The knowledge and methodologies of market- based financial institutions and energy mmmmm suppliers were used to calculate GHG emissions. The publication of estimated emissions follows the standards and recommendations of the Greenhouse gas protocol (GHG) and the Global Reporting Initiative (GRI). The calculation of emissions includes not only CO2, but also other greenhouse gases (CO2, NH4, CH4, HFCs) emitted during the activities, converting the gases to CO2 equivalents according to standard coefficients, and indicating the final total number as CO2 equivalent. Emission consolidation method: operational control. For Scope 2 emissions, all GHGs were considered, but the details in the emission factor sources were not always available. 28 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Due to its extremely low impact, the Group has not included water (a water borehole used in the administration and logistics centre using electricity accounted for in the total electricity) among the factors in the calculation of GHG emissions. These indicators have no impact on the final result. Nevertheless, the Group is actively promoting a culture of responsible consumption, encouraging efforts to reduce printed documents, reuse paper, and promptly report potential plumbing issues to the persons in charge. GHG emissions Measurement units 2022⁵ 2023 Change 2023/2022, % Change 2023/2022, t CO2 eq. Direct (Scope 1)² GHG emissions t CO2 eq. 388.2 345.2 -11% -43.0 Energy indirect (Scope 2)³ GHG emissions t CO2 eq. 6 228.5¹ 3 714.61¹ -40% -2 513.9 Other indirect (Scope 3)⁴ GHG emissions t CO2 eq. 1 570.2 1 803.2 +15% +233.0 Viso: t CO2 eq. 8 186.9 5 863.0 -28% -2 323.9 Notes: ¹Calculated using the "market based method", based on actual electricity purchases. If calculated using the "location based method", i.e. based on the country-specific nature of energy production, the Company's indirect (Scope 2) GHG emissions would be 3,817.5 tCO2eq. in 2022 and 3,939.9 tCO2eq. in 2023. Sources of emission factors and global warming potential (GWP) indicators: ²IPCC, EEA/EMEP Guidebook 2019; ³AIB, emission factors provided by heat suppliers, ⁴DEFRA, IPCC, IEA, Cornell Hotel Sustainability Benchmarking (CHSB) index 2021 ⁵This report recalculates the GHG emissions in 2022 related to purchased electricity. Derivatives have been adjusted accordingly. We have assessed key intensity indicators for our operational emissions (Scopes 1+2+3), which will also allow us to more effectively compare our performance and the goals we are aiming at in the future. GHG emissions intensity 2022¹ 2023 Change 2023/2022, % t CO2 eq./EUR 1 million turnover 33.74 21.73 -36% t CO2eq/thousand sq m of retail space 90.36 64.86 -28% Note: ¹This report recalculates the GHG emissions in 2022 related to purchased electricity. Derivatives have been adjusted accordingly. GRI 305-1 GRI 305-2 GRI 305-3 GRI 305-4 GRI 305-5 29 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 In 2023, the Group experienced one incident related to the operation of autonomous energy generation devices. This incident involved the use of a fuel that is typically utilized for energy generation in our own facilities. The Administration and Logistics Complex is equipped with back-up generators using diesel or natural gas, and it was the latter fuel that was usedwhen the electricity supply was interrupted through no fault of the organisation. This incident consumed 300 cubic metres of natural gas. The Group does not have autonomous devices at other sites where it operates that directly use fuel for energy. Vehicle emissions were calculated by taking an inventory of the car fleet owned and analysing the amount of fuel purchased and kilometres driven. The Group's car fleet totals 73 vehicles. Their average age at the end of the reporting period is 4.2 years (3.7 at the end of 2022). The average age of the cars increased due to fewer new car purchases, and longer delivery times which resulted in some ordered cars not being delivered by the end of the reporting period. Last year, the Group'soperations no longer consisted of the lowest standard (EURO4) vehicles - the entire fleet now consists of EURO5 and EURO6 vehicles. 16 of the vehicles in use are hybrids. In total, the Group consumed 139 thousand litres of fuel (diesel and petrol) during the year, a 5% decrease compared to the previous year, and drove 1,794 thousand kilometres (2,248 thousand kilometres in 2022). On average, one mm Direct GHG emissions Gas leaks/freons are materials that boil and evaporate at low temperatures and are used for heat transfer. The Group uses them in the ventilation and air conditioning systems of its administrative and commercial premises. To estimate the GHG emission equivalent, the annual amount of refill refrigerant was calculated in kilograms, with an emission factor assigned to the type of material. It is estimated that 2 kg of R-410A refrigerant was used for refill per year, with a CO2 emission equivalent of 4 t or 50% less than in 2022. Note: Freon use is mainly influenced by the technical need to upgrade equipment and is little impacted by the Group's performance in the absence of unusual incidents. Energy indirect GHG emissions From 2022, the Group accurately accounts for the electricity consumed at all owned or leased facilities. During the reporting period, total electricity consumption was 14,635 MWh, almost 9% less than the previous year (16,017 MWh). In 2023, all directly purchased electricity had green energy certificates. Together with indirectly purchased electricity, green energy accounted for 60% of the Group's electricity consumption. The Group is working towards the goal that all electricity consumed for its own use should have green certificates of origin. Purchased electricity 2023 Directly Indirectly LITHUANIA Green energy 1 693 545 4 901 592 Without certificate or origin unknown  1 753 036 LATVIA Green energy  1 748 858 Without certificate or origin unknown  2 413 650 ESTONIA Green energy  473 236 Without certificate or origin unknown  1 650 791 TOTAL (kWh)  14 634 708 30 car drove 24.5 thousand kilometres per year. Total calculated car fleet emissions are 340 t. CO2 equivalent, which is 10.3% lower than in the same period a year ago. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Until 2023, the Group did not assess the heat energy consumed to heat the commercial premises, except in cases where the heat energy was purchased directly. The 2023 report includes a heat factor in the calculation of GHG emissions, which is calculated according to the cost approach for district heating, taking into account the local factor. In 2022, the organisation installed a 0.55MW solar power plant on the roof of its administration and logistics centre in Vilnius, which will provide clean energy for a large part of the building's electricity needs. A total of 1,325 modules have been installed on the complex, covering a total area of 2,732 square metres. The installation of the solar power plant was designed to maximise efficiency, so the most advanced solutions were chosen to mmmm ensure the performance of the plant. The project is estimated to pay-off in 4-5 years and to make a significant contribution to reducing emissions over its planned 40-year lifetime. 2023 was the first year in which the solar power plant operated for a full season, generating 653 MWh of electricity. Most of it was consumed by the Group. Each year, we invest in state-of-art technologies to reduce our consumption of natural resources and to contribute to their preservation. In developing the Group's store network, we not only take into account technological solutions, but also educate our staff on the benefits and importance of saving resources. GRI 302-1 Direct and indirect energy consumption Direct fuel consumption from non-renewable sources: Measurement units 2022 2023 Diesel and petrol TJ 5.0 4.56 Natural gas TJ 0 0.01 Energy purchased and consumed, of which: TJ 58.0 53.22 Electricity TJ 57.7 52.68 Heat TJ 0.4 12.82 Total energy consumption in the organisation: TJ 63.0 70.08 Note: Total energy consumption is calculated according to the GRI 302-1 formula. Conversion factors from convert-measurement-units.com are used to convert energy quantities to TJ. * The 2022 calculations do not include consumption of district heating. Energy intensity 2022 2023 TJ / million EUR of revenue 0.26 0.26 TJ / thousand sq. m. of retail space 0.70 0.78 Note: The energy intensity is calculated according to the GRI 302 Energy methodology. GRI 302-3 Other indirect GHG emissions The factors analysed in Scope 3 were waste, raw material procurement, business travel and accommodation, energy losses and fuel extraction, upstream and downstream mmmmm transport services. The total emissions of these factors are 1,803.2 t CO2 equivalent. Each of these factors is discussed in more detail in the following chapters of this report. 31 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 The Group generates waste from its various operational processes and from the use of materials for its own purposes. The Group accounts responsibly for the waste generated by its activities and ensures that the amount of waste recycled corresponds to the legal requirements, in accordance with the agreements with waste handlers. The following managed waste was declared on the Lithuanian market during the reporting period: Waste generated in Lithuania during the use of materials for Group's own purposes (2023) Total (t) Of which recycled waste (t) Remaining waste (t) Metal 0.79 0.79 Fractions not otherwise specified 202.32 202.32 Bulky waste 1.82 1.82 Paper and cardboard packaging 93.733 92.588 1.145 Mixed construction and demolition waste 31.8 31.8 Other plastic packaging 81.231 81.133 0.098 Industrial lead-acid batteries (hazardous waste) 0.369 0.369 Screens, monitors and their equipment (hazardous waste) 0.492 0.492 Small IT and telecommunications equipment (hazardous waste) 0.08 0.08 Small equipment 0.216 0.216 Small IT and telecommunications equipment 0.672 0.672 Total 413.523 173.721 239.802 SETTING UP ECO- FRIENDLY STORES We use only state-of-art technologies in new and refurbished stores, in line with best practice environmental standards. We follow them not only when choosing the equipment for our retail spaces, but also during the installation process. All stores use energy- saving LED bulbs with higher efficiency and longer lifetime. In the Administration Building, the spaces are segmented to ensure that lighting is used as efficiently as possible and only in areas occupied by employees. The administration and logistics complex uses geothermal heating energy, the emissions of which are accounted for together with the total electricity consumed. When renovating our stores, we do our best to follow the principle that despite decisions already made we must implement technologies that reduce or do not increase our resource consumption. Last year saw the opening of 4 new stores, 8 store expansions and renovations or partial renovations. The Group renovated ~7 thousand square metres of retail space, while 11 stores were closed. in 2023 the Group opened 4 new stores, expanded and renovated or partially renovated 8 stores. GRI 2-4 GRI 306-1 9 out of 169 stores have collection points where customers can bring their used textiles Notes: Waste is sent for recycling under contracts with waste handlers, but the Group cannot guarantee that all or part of the waste will actually be recycled. The quantities of waste reported and recycled in the 2022 report were inaccurately defined as they included packaging placed on the market. From 2023 onwards, the quantities of waste generated in internal operations are identified through the waste log, so it is not appropriate to compare this year's data with the previous period. Packaging placed on the market is also accounted for and managed in accordance with legislation. * Due to the absence of national waste accounting procedures in Latvia and Estonia, it is not possible to report the quantities of waste generated in these markets in the same level of detail. The Take Back Project is implemented in partnership with NGOs in Lithuania, Latvia and Estonia. 49 Inditex stores have collection points where customers can bring their used textiles. They are then diverted for recycle/upcycle, charity or energy recovery. GRI 306-2 GRI 306-3 GRI 306-4 TURINYS 32 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Type of bags Number of stores in 2023 Number of stores in 2022 Change 2023/2022 Share of stores in the Group in 2023 Paper 158 157 +1 93.5 Plastic 4 4 0 2.4 Both types 7 7 0 4.1 Total 169 168 +1 100% failure to phase out the use of plastic bags on time, as bag consumption decreased, which in turn prevented the Group from disposing of the purchased bags in time. It is estimated that charging for the shopping bags reduces their consumption by ~40%. More detailed calculations are planned for the end of the next reporting period, when information for the full period is available. Packaging waste placed on the market in Lithuania is accounted for by a commitment to manage at least 80% of the packaging placed on the market by the contracted waste manager, or by the payment of statutory waste management and recycling fees. PACKAGING OPTIMISATION AND WASTE REDUCTION While keeping our promise to reduce waste and optimise packaging, we remain committed to eliminating the use of plastic shopping bags in our stores. The target to eliminate the use of these bags by 2024 has not been met, the reasons for which are set out below. Within the Group, 93.5% of stores use paper bags exclusively, the same as a year ago, taking into account the change in the total number of operated stores. In 2023, the Group introduced a chargeable bag policy to further reduce waste and raise consumer awareness. In total, chargeable bags are offered at 91 of the stores - more than half of all Group's retail outlets. It was the decision to charge for shopping bags that led to the mmm Paper, 93.5% Plastic, 2.4% Both, 4.1% of stores in the Group use only paper bags 93.5 % 33 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 In 2023, employees spent a total of 1,174 nights in hotels during their business trips (mostly in Lithuania, Latvia and Estonia), with a GHG Protocol based CO2 emission equivalent of 13.25 tonnes. In 2022, 1,635 nights were recorded, with an estimated emission of 23.68 tonnes. TRANSPORT OF GOODS AND LOGISTICS The Group operates a car fleet of 73 vehicles. It is regularly maintained and updatedto reduce its GHG emissions. In total, there are 7 trucks and 66 cars, 16 of which are hybrids. The fleet of hybrid cars has more than doubled (in 2022, there were 7 such vehicles). The Group's car fleet is now limited to EURO5 and EURO6 vehicles. The Group's transport and logistics activities are not limited to the car fleet it manages, but are largely carried out by third parties that provide transport services from suppliers as well as delivery services to customers. It is difficult to estimateall emissions related to logistics, so a cost accounting approach was applied in this case, which showed that these emissions are the main sources of emissions in our operations, amounting to 340.5 and 977 t CO2 equivalent respectively. In this context, the Group has put in placemeasuresto reduce emissions from these sources, including a supplier questionnaire to ensure partner commitment in the value chain (not yet implemented during the reporting period). During the year, the Group's employees travelled 1,091 thousand kilometres by plane for work purposes, almost the same as theprevious year. The trips were about acquiring new collections, maintaining relationships with partners and coordinating work between different countries. A significant share of these trips are flights between Vilnius-Riga-Tallinn airports, necessary for the Group's daily operations in other countries. In all cases, the necessity of such trips is assessed and, where possible, alternative travel arrangements are made. The estimated CO2 emission equivalent of all trips is 166.35 tonnes (158.85 tonnes in 2022). Travel by taxi amounted to 7,974 kilometres (8,400 km in 2022) and added another 1.66 tonnes of CO2 equivalent (1.75 tonnes in 2022). 73 vehicles, of which are: Hybrids cars, 16 Trucks, 7 34 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 SOCIAL FACTORS We aim to strengthen our relationships each year not only with our employees and their families but also with society at large. We are part of society and it is our responsibility to strengthen the segments of society that are relevant to our activities. We recruit a lot of young people, our staff is prevailed by women, and young professionals choose us at the start of their careers and then decide which career path to take. Our aim is to provide them with opportunities, choices and information and to do our best to encourage some of them connect their future with a career at Apranga. Apranga Group does not tolerate any violation of human rights, advocates full equality and promotes the integration of the most vulnerable groups of people. We are constantly reviewing and improving our remuneration policy and aim to create a remuneration system that is transparent and fair, regardless of gender, nationality, race, religion or other beliefs. We comply with all local laws and respect and follow international agreements. We offer work opportunities to people of all ages, backgrounds and experience without prejudice. 36 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 New employees Employee turnover Total number in each category, 2023 Number of new employees Rate per category (%) Employee turnover Rate per category (%) By gender: Women 2 062 2 038 99% 1 961 96% Men 187 157 84% 146 78% By age: Up to 30 1 587 1 681 -% 1 629 -% 30-50 510 185 -% 122 -% Over 50 152 12 -% 21 -% By location: Lithuania 1 420 1 361 96% 1 320 93% Latvia 520 517 99% 452 87% Estonia 309 317 102% 335 108% WORKING CONDITIONS AND EMPLOYEE WELLBEING In 2023 , the number of employees in the Group increased, mainly in the retail division. As of 31 December 2023, the Group had 2,249 employees, an increase of 110 employees compared to the previous year (2,139). This indicator covers both full-time and part-time employees. The head count method was used to calculate the indicator at the end of the reporting period. In 2023, a total of 2,195 new workers were recruited, most of them aged under 30. This confirms that we are often one of the first career stops for young people, and we strive to provide them with a supportive and comfortable working environment. Notes: According to the definition by GRI Standards, employee turnover includes employees who leave the organization voluntarily or due to dismissal, retirement, or death in service. The rate per category is calculated according to the GRI Standards: the number of new staff / staff who left the organisation in a given category divided by the total number of staff in that category. This information has been reported for the first time. * For the breakdown of new employees by age group, workers in Estonia were not included in the calculations due to lack of information. Accordingly, the share and change by category were not calculated by age group. GRI 401-1 37 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Employee Turnover Ratio is one of the most important factors in our business (calculated as the number of employees whi left the organisation during the reporting period divided by the total number of employees at the end of the period). We try to meet the needs of all our employees, but given the Group's position in society, we realise that many young people will choose us and only some of them will go on to have a career with our organisation. In this context, we monitor if the Employee Turnover Ratio is changing abnormally in terms of the long-term average and assess the reasons behind it. The staff turnover rate in 2023 was 93%, 26 percentage points lower thanin 2022, when it was 119%. However, it should be noted that in 2023, in line with GRI standards and usingnew accounting tools, the employee turnover indicator has been removed from the intra- corporate turnover rate, whereby an employee's employment with one Group company is terminated and started with another one. This could have had a significant impact, as the organisation always tries to take into account the employee's preferences regarding the job or position whenever possible. The organisation encourages the development of staff competences and career progression through a variety of means, and always provides opportunities for its employees to progress to higher level positions. Eliminating intra-group turnover from the calculations, it is clear that a significant amount of job position changes are taking place within the Group, confirming that employees are given the conditions and opportunities to choose their preferred job position. Country Employee turnover in 2023 Employee turnover in 2022 Change 2023/2022, percentage points Lithuania 93% 92% +1% Latvia 87% 136% -49% Estonia 108% 128% -20% Group: 93% 119% -26% The employee turnover rate for 2023 is lower than the multi-annual average for the reasons outlined above. It is, therefore, not appropriate to compare it with previous periods, but the adjustments made will allow this year's indicator to be used as a benchmark for the future. Last year, the highest staff turnover was recorded in the retail division (104%), which is in line with the general trend over previous periods. It is worth noting that turnover in administration (19%) and logistics (57%) has been declining, but is little different from 2022. Employee turnover 2023 2022 Administration 19% 28% Logistics 57% 60% Retail 104% 122% The Group continues to invest consistently in improving its Employee Turnover Ratio performance. In the exit surveys, the main reason for leaving remains needs of one of the largest groups of employees (students) for vocational training or exercising their profession. Changing of residence was also often cited as a reason. The organisation always tries to offer a job in another location if the employee requests it. All employees in Lithuania who have completed the required period of service (3 months) are covered by supplementary health insurance at the employer's expense. For those who have worked formore than five years, a higher amount of cover is provided as a reward for loyalty to the company. In Latvia, supplementary health insurance is available for administrative staff in accordance with statutory requirements. In Estonia, employees are entitled to reimbursement of gym fees. It is envisaged that the supplementary health insurance scheme will be expanded across the Group, taking into account the needs of employees according totheir location. Looking at the total number of employees in Lithuania, Latvia and Estonia at the end of the period, the biggest change was recorded in the retail chain division with 1,987 employees - 96 more than a year ago. The Group's retail employees account for 88% of thetotal workforce. GRI 2-4 GRI 401-2 38 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Unit Number of employees in 2023 Number of employees in 2022 Change 2023/2022 Administration 189 183 +6 Logistics 73 65 +8 Retail 1987 1891 +96 Total 2249 2139 +110 Location 2023 2022 Women Men Women Men Lithuania, Latvia and Estonia together 2 062 (93%) 187 (7%) 1 948 (91%) 191 (9%) Lithuania 1 296 (92%) 124 (8%) 1 221 (91%) 135 (9%) Latvia 471 (91%) 49 (9%) 423 (91%) 42 (9%) Estonia 295 (95%) 14 (5%) 304 (95%) 14 (5%) The expansion and optimisation of the retail network has had no significant impact on employee numbers or turnover. In all cases of store closing, relocating or refurbishing, their existing employees were offered alternative jobs. Their turnover ratio is also reflected in the Ratio, as is the number of employees who have changed their job positions within the organisation in all commercial, logistics and administrative departments. If an employee's function becomes redundant for reasons related to the Group's activities, a notice period of 1 month applies (2 weeks notice if the employment relationship lasts up to 1 year). The duration doubles if the employee has less than 5 years to retire, triples if he or she has a child under 14 or a disabled child under 18 as well as for pregnant, disabled employees, employees with a sickness certificate and if the employee has less than 2 years left until retirement. The Group (the business transferor) must inform employees of the reorganisation, restructuring and transfer of the business or part of it at least 10 days in advance. In cases where employees choose a different career path, we always ask for feedback on their experience at Apranga. Based on the responses, we aim to improve our organisational culture and respond to the needs of our employees not only to retain staff but also to improve existing working conditions. The number of employees in the administration and logistics departments increased slightly, to the extent necessary to cope with the increase in workload, taking into account the Group's increase in revenues. The number of employees in the retail division increased by 96, also due to the increase in workload. In terms of efficiency in retail management, the number of employees per 100 square metres of retail space in 2023 is approximately 2.2 (2.1 in 2022). In this regard it can be said that the efficiency of the management of the retail chain has remained largely unchanged. The gender distribution of the workforce remained unchanged last year, with women making up the majority of the workforce (93%), as in the previous reporting period. This ratio remains stable, with 1 to 2% fluctuations, and is in line with the several years' average. Retail, 1987 Administration, 189 Logistics, 73 GRI 2-7 GRI 402-1 39 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Lithuania Latvia Estonia Total number, 2023 Women Men Women Men Women Men Permanent staff (permanent contract) 1 295 124 469 49 295 14 2 246 Temporary agents (fixed-term contracts) 1 0 2 0 0 0 3 Non-guaranteed hours employees 0 0 0 0 0 0 0 Full-time employees 543 71 82 14 113 4 827 Part-time employees 753 53 389 35 182 10 1422 The gender distribution of the Directorate of Administration (Directors of the main divisions and the CEO) has remained stable and is close to balance, with 4 women and 3 men . The gender distribution of the highest governance body, the Board, is 5 men and 1 woman . Women are the CEOs of major companies in Latvia and Estonia. Apranga highly values the importance of the family for the public good and is aware of its duty to do its best to help address the potential difficulties in the labour market after having children. We always secure their job positions for employees on maternity or paternity leave and try to offer flexible working conditions if needed. During the reporting period, 65 employees (64 women and 1 man) became entitled to parental leave. During the same period, 41 women and 1 man returned to work after parental leave. By collecting data on employees who have returned from parental leaveand are still working 12 months after their return, we found that as of 31 December 2023, the Group employed 16 women and 1 man who meet this definition. This indicator will be further refined in future disclosures as the information available does not cover all locations. A breakdown of the number of employees by location and gender shows that the majority of employees in all countries work on permanent contracts. The distribution of positions by contract types shows that a significant number of staff choose to work part-time to meet their needs. GRI 2-7 Women, 92 Men, 8 GRI 401-3 Employees by gender, % 40 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 Education 2023 2022 Change 2023/2022 % Higher education 499 552 -10% Professional 322 247 +30% Secondary 529 588 -11% Student 899 752 +20% Total 2 249 2 139 +5% The average age of employees in the Group decreased to 26 years and 8 months. Number of employees in the Group by education at 31 December 2023: 499 322 529 899 Higher education Professional Secondary Student Over the past year, we have continued our Employee Ambassadorship project. After noticing the high level of employee engagement and the value they bring, we have intensified our focus on the project. In the last year, 25 participants started the project, of which 16 continued after more than 3 months. We informed our employees about the project and sought to increase its visibility on all social media networks. We prefer our employees to be our ambassadors, sharing their stories, experiences, and career paths. We also actively encourage them to engage more on social media. With the Diverse but United (liet. "Skirtingi, bet vieningi") campaign we want to emphasise that we value all our employees regardless of their age, gender or position. We want to be an organisation where the employee is the greatest value. We strive to maintain a good work/leisure balance by allowing employees to choose both their working hours and workload. We have always strived to ensure that all employees have equal opportunities to arrange work schedules that suit their personal or family needs, full-time study or vocational training, and administrative staff was further given the opportunity to choose their own individual start and end times in agreement with their line manager. 1000 600 800 0 400 200 41 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 EMPLOYEE TRAINING AND DEVELOPMENT Continuing our intensive training programme, we have continued to use a hybrid training model for staff, i.e. with both face-to-face and remote training. The total duration of training in the organisation, counting only training hours and excluding the number of participants, was 581 hours per year. We counted that employees received training in various formats 2,503 times. The total duration of the training was 254 hours in Lithuania, 194 hours in Latvia and 133 hours in Estonia. Accordingly, employees registered for training 1,397 times in Lithuania, 684 times in Latvia and 422 times in Estonia. The average number of training hours per employee has not been calculated. The Group has identified positions where employees' performance and career progression are regularly reviewed: store managers and responsible employees have at least two interviews per year (mid-term and annual) to assess their performance and career progression. Interviews are only waived when a change of manager leads to a shorter evaluation period than required. In 2023, a total of 170 annual interviews (excluding mid-term interviews) took place, of which 106 in Lithuania, 44 in Latvia and 20 in Estonia. It is no coincidence that 90% of store managers started their careers with the Group, mostly as sales consultants, which shows that the organisation is creating the conditions for its employees to move up the ranks. Other retail staff members are also subject to annual and interim interviews, but no statistics are kept. Annual interviews discuss and evaluate employees' competences as well as the achievement of objectives and agree on further work and individual objectives. The mid- term interviews discuss the first half of the year - the challenges and achievements, and the mm GRI 404-2 GRI 404-3 objectives set. Organised by HR managers, the aim is to listen to employees, share feedback and work together to improve. Try a Career project We also continued the Talent Academy's project Try a Career aiming to provide employees with the opportunity to grow and prepare for/sample their desired position in the store. On average, the project lasts about half a year and is carried out twice a year. The project selects talent who then learn on-the-job in- store and through in-house training and remote meetings with the HR manager. The project is based on the principle of 70% practice - learning by doing, 20% reflection and 10% knowledge. The implementation of the project coincided with the end of the calendar year, so we do not have the final results yet. Preliminarydata shows that 8 out of 22 candidates in Lithuania have successfully completed the project, indicatinga success rate of 36%. E-learning system Another important tool that helps both the mentor and the new employee is the E- learning system. It contains basic theoretical material that is important and interesting to learn. This mentoring programme allows you to train a new sales consultant within 2 months. New mentors receive periodic training on mentoring, how to train and how to use the tools developed by the company. The same logic is used to prepare for higher positions in the store. Each position has a specific form which is adapted to the situation and learning priorities. 42 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 2023 Minor accidents at work 6 Total number of hours worked per year by all employees 3,101,727 Number of minor accidents (injuries) per million hours worked 1.93 Health risk factors Administrative department Logistics and retail departments Repetitive movements Working posture Working with video terminals Repetitive movements Working posture Working with video terminals Manual handling of loads EMPLOYEE HEALTH AND SAFETY Ensuring safe working conditions and taking care of employees' health has always been a priority for the organisation. We start from day one with training, regular health checks and providing tools to take care of one's health. We have clear rules and responsibilities to create safe working conditions for everyone, because we believe it is everyone's right. All employees in Lithuania with 3 months' service are covered by supplementary health insurance at the employer's expense; those with more than five years' service are given a higher amount of cover as a reward for their loyalty to the company. It is envisaged that the supplementary health insurance scheme will be extended across the Group. Employees are legally obliged to undergo periodic health checks and can only be present at workplace with proof of this. No additional health and safety management system is in place. To ensure the safety of our employees when travelling on business trips and when using company transport in general,we regularly maintain the technical condition of the car fleet we manage. The logistics department can be considered the most hazardous in terms of occupational safety in our operations, so we have very clear requirements and controls in place. It features a conveyor system that eliminates the need to lift inventory to higher heights, thus avoiding both potential injuries and the risk of tipping. Safety zones are marked in all areas where electric lifting equipment is used. Employees are provided with natural daylight and disinfection stations. GRI 403-1 GRI 403-6 In March 2023, the Group underwent an occupational safety audit organised by an independent assessor. It assessed workplace safety in administrative, logistics and retail departments. In response to the audit recommendations, new occupational safety documentation for all departments was prepared in 2023. All staff in the retail and logistics department were briefed on the new safety rules as soon as possible, and a briefing process was also carried out in the administration department. In response to the recommendations, the Group organised occupational safety training and reinforced the responsibility of managers to ensure compliance with occupational safety rules. In 2023, the Group recorded 6 minor workplace accidents. All of them have been reported to the relevant public authorities and measures have been taken to identify and prevent their causes. In all cases, the accidents were found not to be the fault of the employer. We have a zero-tolerance approach to occupational safety violations and consider an employee's right to feel safe to be a fundamental value. Note: The rate of minor accidents per million hours worked is calculated according to the GRI standards formula: the number of accidents is divided by the total number of hours worked by all workers per year and multiplied by one million. This information has been reported for the first time. Of the total, 2 582 959 hours were worked by retail department staff, 148 118 hours by logistics staff and 370 650 hours by administrative staff. The number of hours worked by logistics and administrative staff is an estimate based on the number of full-time equivalent (FTE) employees on 31 December 2023. GRI 403-9 43 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 HUMAN RIGHTS We consider human rights to be an unquestionable value and are committed to taking action to guarantee them throughout the whole value chain. In the markets in which we operate, we comply with all local laws and international agreements defining human rights and freedoms. We do not restrict employees' rights of expression, speech and other rights in any way. Our activities have no negative impact on the protection of human rights, and employees are encouraged to report and discuss any possible future threats. No such reports were received during the reporting period. The Group does not discriminate against its employees or third parties on the basis of race, sex, nationality, political or religious beliefs, health or any other grounds. The organisation does not operate in countries or territories where there is a higher risk of child or forced labour, and many of its suppliers and overseas partners are registered in EU countries that are also outside the area of increased risk. Nevertheless, the organisation holds itself and its partners to the highest standards of human rights protection, and does not tolerate child labour, forced labour or other restrictions on employees rights. No such incidents were reported during the reporting year, either in the organisation's operations or among suppliers. The organisation believes that the principles of human rights enshrined in the European Union must be respected in all suppliers' activities. As part of its commitment to human rights, the organisation intends to introduce a supplier mm GRI 406-1 GRI 408-1 GRI 409-1 GRI 407-1 GRI 414-1 GRI 308-1 44 questionnaire to ensure the protection of fundamental human rights in the activities of all suppliers. During the reporting period, the supplier questionnaire has not yet been applied. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 ECONOMIC (GOVERNANCE) AREA The Group is guided by a Code of Ethics and Conduct. Its provisions shall be reviewed and updated as necessary. Procedures are also in place for the Submission of Whistleblowing Information, which ensures that staff can safely submit material information relating to or mmm Shareholder Share of votes, % MG investment, UAB 65.4 Minvista, UAB 10.5 Total number, head count Share, % Administrative staff who are informed about the anti- corruption policy (Code of Ethics and Conduct) and/or have received anti-corruption training 189 100 Managing staff who are informed about the anti-corruption policy (Code of Ethics and Conduct) and/or received anti-corruption training 9 100 BUSINESS ETHICS AND COMPLIANCE GRI 2-27 Board members have received anti- corruption training 100% We advocate open and honest communication with shareholders and fairness in information provided to the market. We always strive to be an example of how the Group can shape good business practice through disclosure. In 2023, APB Apranga distributed profits and announced the share of profits to be paid to shareholders. The structure of major shareholders remained unchanged last year. APB Apranga is majority- owned by investment holding MG investment, UAB. Shareholders of the company who control more than 5% of the votes at the shareholders' meeting: In 2023, there were no material changes in the Board of APB Apranga, the Group's parent company. Six members of the Board, two of whom are independent, continued to govern the company in 2023. All Board members have received anti-corruption training, and all new employees are made aware of the organisation's Code of Ethics and Conduct, work rules and other binding documents. helping to prevent possible irregularities. It should be noted that there were no confirmed reports in the previous year. The Group remains publicly and openly committed to complying with all laws and regulations and to behaving ethically both internally and with third parties. Our aim is to minimise , by all means , any damage that may arise from the intentional or unintentional actions of the persons involved. During the reporting period, the Group did not experience any significant instances of non-compliance with laws and regulations. No specialised corruption prevention and compliance training was provided during the reporting period. The vast majority of top level and departmental managers are familiar with the training material and have acquired the competences to deal responsibly with any form of corruption. All new employees are informed of the Group's Code of Ethics and Conduct and undertake to comply with it. To date, the Group's anti-corruption policy is defined by the Code of Ethics and Conduct, but a separate, comprehensive Anti-Corruption Policy will be developed in 2024, applicable for all Group employees. The Group's legal department regularly reviews and updates information on significant legislation to combat potential corruption. Notes: Total number of administrative and managing staff in 2023 - 189. * Including two top managers in Latvia and Estonia who are classified as local staff. GRI 205-2 46 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 GRI 205-3 GRI 418-1 The protection of personal data is also enshrined in our Code of Ethics and Conduct, which applies not only to employees, but also to related parties, further strengthening security. The Group has a Personal Data Protection Officer who not only ensures compliance with the rules, but also informs employees of changes in key legislation or preventive actions in the event of threats to personal data. In 2023, there were no incidents related to the protection of personal data or violations of personal privacy. 47 We are committed to transparent and ethical business and aim to prevent any potential corruption in our operations. The Group is strongly opposed to all forms of corruption and bribery, active or passive, including the promise, offer or consideration of a payment or gift to an intermediary, business partner, official, political party, foreign official in international business transactions, or any other third party, with the intent to bribe the recipient, supplier, or other third party, to improperly perform functions, duties, or decisions, and vice versa. The group advocates fair and transparent communication with public authorities. In 2023, the administration reminded over 100 suppliers across all Baltic countries about ethical business principles and the gift policy. They encouraged suppliers to opt for tangible gifts and informed them of the mandatory rules for giving and accepting gifts by employees. Within the company, fair business policies and transparent communication with customers, suppliers, contractors, subcontractors and other third parties are encouraged. The company always follows the "four eyes" principle when purchasing goods, thus preventing any appearance of unfair practices. In 2023, the Group recorded 5 cases related to the protection of tangible assets. In all cases, the zero tolerance principle was applied. There were no cases of any other form of corruption or bribery. To protect the privacy of our customers and to ensure their legitimate expectations, we carefully comply with the European Union's General Data Protection Regulation (GDPR). We instruct the staff responsible for processing the data on how to use the information entrusted to us by our customers in a responsible and secure way. HR and IT professionals maintain and manage personal data related to target marketing and other functions used in retail and online commerce with the utmost care and responsibility, following strict procedures. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 RESPONSIBILITY IN THE SUPPLY CHAIN GRI 308-1 The Group recognises that its activities also have indirect impacts on nature, people and communities along the value chain and must take responsibility for reducing them. Although our core business is clothing retailing, the pathway starts with the growing, preparation and processing of raw materials, which are highly sensitive in an overall ESG context. In the downstream process of production environmental, social and economic sustainability indicators are equally important. Together with the whole logistics chain, we must recognise that our obligations go beyond our direct activities and we must therefore implement policies responsibly to manage the risks of this topic. One of the measures envisaged is a supplier questionnaire to be adopted as an integral part of the sustainability strategy, which will help to ensure that we not only make our own commitments, but also make efforts to make our values relevant to all the parties involved. To date, the Group's suppliers have not been assessed on environmental and/or social criteria. The 2024 report is expected to include the results of the assessment of sustainability- related risks in the supply chain. By working with the largest and most globally recognised fashion brands, we aim not only to meet their sustainability policy commitments, but also to serve as an example to others who have not yet embarked on this path. We believe that our positive example of taking a non- coercive approach to partner selection, while educating and enlightening, will help to ensure that more and more of our partners, both in the local market and abroad, will take their sustainability commitments seriously. GRI 414-1 48 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 RESPONSIBILITY TO SOCIETY The Group is guided by its own donor framework, which identifies the main areas and priorities for donor support. Each year is based on long-term priorities, but also takes into account the overall situation. 2023 The group has joined an initiative with partner Inditex to donate the proceeds from the sale of the shopping bags to the World Wildlife Fund (WWF), an international organisation fighting climate change. More than €100 thousand has been earmarked for this purpose. To promote an active lifestyle and health, the Group continued its cooperation with the Lithuanian Basketball League, supported the Lithuanian Padel Federation and the Dalia Kutkaitė Artistic Gymnastics Academy. Last year, we supported homes for the elderly and children's charities to reduce social exclusion and help the most vulnerable in society. Together with Children's Dreams, we made 100 children's dreams of warm clothes come true, and provided financial support to NGO "Gydytojai klounai" (Clown Doctors) and NGO "Gerų darbų dirbtuvės" (Good Deed Workshop), which aim to brighten the daily lives of sick children and help premature babies. The Group has focused on emotional health by expanding and strengthening its cooperation with NGOs, and has become a supporter of the "Jaunimo linija" and "Vaikų linija" organisations that provide such support. We collaborate with these organizations to establish donation boxes at our stores, providing customers with the chance to support their initiatives. The Group's own employees have also contributed to the organisation's support. A cake day was organised, where staff donated to the NGO "Gydytojai klounai". The total amount of support granted during the reporting period was €152 thousand. In 2022, the total amount of support was €132 thousand, and in 2021 - €76,491. 49 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 The Group's tax bill amounted to €67.4 million, 13% higher than the €59.7 million in2022. The main reason for the increase in tax payable was the Group's growing turnover. The staff wage bill grew last year, with an average increase of 12% in the fixed part oftheirsalaries. Salaries were reviewed for all staff, taking into account their current salary and seniority. Tax payable 42.7 2016 mln. Eur Change, % 2017 2018 2019 2020 2021 2022 2023 -20 80 0 60 70 50 30 40 20 10 -10 45.7 7 44.7 -2.2 8.2 48.4 39.2 -19 44.9 14.5 59.7 28 67.4 13 50 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 GRI INDEX 51 Statement of use Apranga Group, APB has reported in accordance with the GRI Standards for the period from 1 January to 31 December 2023. GRI 1 used GRI 1: Foundation 2021 Applicable GRI Sector Standards Not applicable GRI 2: General Disclosures 2021 Disclosure Location 1. The organisation and its reporting practices 2-1 Organizational details 3 p. 2-2 Entities included in the organization’s sustainability reporting 7 p. 2-3 Reporting period, frequency and contact point 3, 54 p. 2-4 Restatements of information 27, 32, 38 p. 2-5 External assurance 3 p. 2. Activities and workers 2-6 Activities, value chain and otherbusiness relationships 4, 7, 8 p. 2-7 Employees 39, 40 p. 2-8 Workers who are not employees Information not available. Such statistics are not maintained as the Group has outlets in its own and leased premises, where certain facilities and maintenance services are provided by landlords and their third parties. 3. Governance 2-9 Governance structure and composition 11 p. 2-10 Nomination and selection of the highest governance body 11 p. 2-11 Chair of the highest governance body 11 p. 2-12 Role of the highest governance body in overseeing the management of impacts 11 p. 2-13 Delegation of responsibility for managing impacts 11 p. 2-14 Role of the highest governance body in sustainability reporting 11 p. 2-15 Conflicts of interest 11 p. 2-16 Communication of critical concerns 11 p. 2-17 Collective knowledge of the highest governance body 11 p. 2-18 Evaluation of the performance of the highest governance body Not applicable 2-19 Remuneration policies 11 p. 2-20 Process to determine remuneration The Group's Remuneration Policy is not publically disclosed 2-21 Annual total compensation ratio Non-disclosure of information is in accordance with the General Data Protection Regulation and the Personal Data Protection Policy adopted by the organisation CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 52 Disclosure Location 4. Strategy, policies and practices 2-22 Statement on sustainable development strategy 5 p. 2-23 Policy commitments 9, 10 p. 2-24 Embedding policy commitments 9, 10 p. 2-25 Processes to remediate negative impacts 11 p. 2-26 Mechanisms for seeking advice and raising concerns 11 p. 2-27 Compliance with laws and regulations 46 p. 2-28 Membership associations The Group is a member of the Lithuanian Association of Trading Companies (LPĮA). 5. Stakeholder engagement 2-29 Approach to stakeholder engagement 20 p. 2-30 Collective bargaining agreements The Group has no a collective agreement with employees GRI 3: Key Sustainability Themes 2021 3-1 Process to determine material topics 22 p. 3-2 List of material topics 22 p. 3-3 Management of material topics 22 p. Economic topics GRI 205: Anti-corruption 2016 205-2 Communication and training about anti-corruption policies and procedures 46 p. 205-3 Confirmed incidents of corruption and actions taken 47 p. Environmental topics GRI 302: Energy 2016 302-1 Energy consumption within the organisation 31 p. 302-3 Energy intensity 31 p. GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions 29 p. 305-2 Energy indirect (Scope 2) GHG emissions 29 p. 305-3 Other indirect (Scope 3) GHG emissions 29 p. 305-4 GHG emissions intensity 29 p. 305-5 Reduction of GHG emissions 29 p. GRI 306: Waste 2020 306-1 Waste generation and significant waste-related impacts 32 p. 306-2 Management of significant waste-related impacts 32 p. 306-3 Waste generated 32 p. 306-4 Waste diverted from disposal 32 p. GRI 308: Supplier Environmental Assessment 2016 308-1 414-1 New suppliers that were screened using environmental criteria 44, 48 p. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 53 Disclosure Location Social topics GRI 401: Employment 2016 401-1 New employee hires and employeeturnover 37 p. 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees 38 p. GRI 402: Labor/Management Relations 2016 402-1 Minimum notice periods regarding operational changes 39 p. GRI 403: Occupational health and safety 2018 403-1 Occupational health and safety management system 43 p. 403-6 Promoting employee health 43 p. 403-9 Work-related injuries 43 p. GRI 404: Training and Education 2016 404-2 Programs for upgrading employee skills and transition assistance programs 42 p. 404-3 Percentage of employees receiving regular performance and career development reviews 42 p. GRI 406: Non-discrimination 2016 406-1 Incidents of discrimination and corrective actions taken 44 p. GRI 407: Freedom of Association and Collective Bargaining 2016 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk 44 p. GRI 408: Child labour 2016 408-1 Operations and suppliers at significant risk for incidents of child labour 44 p. GRI 409: Forced or Compulsory Labor 2016 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labour 44 p. GRI 414: Supplier Social Assessment 2016 414-1 414-1 New suppliers that were screened using social criteria 44, 48 p. GRI 418: Customer Privacy 2016 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data 47 p. CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023 INFORMATION ON COMMENTS TO THE REPORT The Sustainability (Social Responsibility Report) provides the Group's non-financial information to stakeholders. The report is produced once a year and is submitted together with the Annual report. The report is made publicly available on the company's website in both Lithuanian and English. The report has been prepared in accordance with the requirements of the Law on Consolidated Financial Reporting by Groups of Undertakings of the Republic of Lithuania, the European Commission's Guidelines on Non- Financial Reporting, and the Bank of Lithuania's recommendations on non-financial reporting. Comments and queries on the report can be submitted to marketingas@apranga.lt. No comments were received on the 2022 Social Responsibility Report, except for the Bank of Lithuania's recommendations on the disclosure of EU Taxonomy indicators, which have been taken into account in this report. GRI 2-3 54 CONTENT ABOUT THE SOCIAL RESPONSIBILITY REPORT ABOUT THE APRANGA GROUP SUSTAINABILITY WITHIN THE GROUP ENVIRONMENT SOCIAL FACTORS ECONOMIC (GOVERNANCE) AREA GRI INDEX Social Responsibility Report 2023