Panevezio Statybos Trestas

Annual Report (ESEF) • Apr 30, 2024

529900O0VPCGEWIDCX352023-01-012023-12-31529900O0VPCGEWIDCX352022-01-012022-12-31529900O0VPCGEWIDCX352023-12-31529900O0VPCGEWIDCX352022-12-31529900O0VPCGEWIDCX352022-12-31ifrs-full:IssuedCapitalMember529900O0VPCGEWIDCX352022-12-31ifrs-full:StatutoryReserveMember529900O0VPCGEWIDCX352022-12-31ifrs-full:RevaluationSurplusMember529900O0VPCGEWIDCX352022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900O0VPCGEWIDCX352022-12-31ifrs-full:RetainedEarningsMemberiso4217:EURiso4217:EURxbrli:shares529900O0VPCGEWIDCX352022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900O0VPCGEWIDCX352022-12-31ifrs-full:NoncontrollingInterestsMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:IssuedCapitalMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:StatutoryReserveMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:RevaluationSurplusMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:RetainedEarningsMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900O0VPCGEWIDCX352023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember529900O0VPCGEWIDCX352023-12-31ifrs-full:IssuedCapitalMember529900O0VPCGEWIDCX352023-12-31ifrs-full:StatutoryReserveMember529900O0VPCGEWIDCX352023-12-31ifrs-full:RevaluationSurplusMember529900O0VPCGEWIDCX352023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900O0VPCGEWIDCX352023-12-31ifrs-full:RetainedEarningsMember529900O0VPCGEWIDCX352023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900O0VPCGEWIDCX352023-12-31ifrs-full:NoncontrollingInterestsMember529900O0VPCGEWIDCX352021-12-31ifrs-full:IssuedCapitalMember529900O0VPCGEWIDCX352021-12-31ifrs-full:StatutoryReserveMember529900O0VPCGEWIDCX352021-12-31ifrs-full:RevaluationSurplusMember529900O0VPCGEWIDCX352021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900O0VPCGEWIDCX352021-12-31ifrs-full:RetainedEarningsMember529900O0VPCGEWIDCX352021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900O0VPCGEWIDCX352021-12-31ifrs-full:NoncontrollingInterestsMember529900O0VPCGEWIDCX352021-12-31529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:IssuedCapitalMember529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:StatutoryReserveMember529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:RevaluationSurplusMember529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:RetainedEarningsMember529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900O0VPCGEWIDCX352022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember CONFIRMATION OF THE GROUP’S RESPONSIBLE PERSONS This confirmation of responsible employees concerning the audited Consolidated Financial Statements. Consolidated Annual Report, Governance Report, Consolidated Social Responsibility and Remuneration Report of Panevezio statybos trestas AB and its subsidiaries (hereinafter ‘the Group’) for the year 2023 is presented in accordance with the Law on Securities of the Republic of Lithuania and the Rules for Preparation and Presentation of Periodic and Additional Information approved by the Resolution of the Board of the Bank of Lithuania. Hereby we confirm that, as to our knowledge, the presented Consolidated Financial Statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of financial position, profit or loss and cash flows of the Group, and that the Company’s and Consolidated Annual Report, Governance Report, Consolidated Social Responsibility and Remuneration Reports fairly state the review of business development and activities, the Group’s position and description of the main risks and uncertainties that are faced. Panevezio statybos trestas AB Panevezio statybos trestas AB Managing Director Chief Accountant Tomas Stukas Danguole Sirvinskiene 9 April 2024 9 April 2024 Panevėžio Statybos Trestas AB Consolidated financial statements for the year ended 2023 prepared in accordance with International Financial Reporting Standards as adopted by the European Union, presented together with the Annual Report AB „Panevėžio statybos trestas“AB Consolidated Financial Statements Contents Parent Company’s Details 3 Consolidated Statement of Comprehensive Income 4 Consolidated Statement of Financial Position 6 Consolidated Statement of Changes in Equity 8 Consolidated Statement of Cash Flows 9 Notes to the Financial Statements 10 Company’s and Consolidated Annual Report, Corporate Governance Report, Consolidated Social Responsibility Report and Remuneration Report 58 Annex 1 Corporate Governance Reporting Form 80 Annex 2 Social Responsibility and Sustainability Report 102 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 3 Parent Company’s Details Panevėžio Statybos Trestas AB Company code: 147732969 Phone: +370 45 505 503 Fax: +370 45 505 520 Address: P. Puzino st. 1, LT-35173 Panevėžys Board Justas Jasiūnas, Chairman Gvidas Drobužas Kristina Mačiulienė Lina Simaškienė Vaidas Grincevičius (01/01/2023-29/10/2023) Darijus Vilčinskas (30/10/2023-31/12/2023) Management Egidijus Urbonas, Managing Director (01/01/2023-30/07/2023) Tomas Stukas, Managing Director (31/07/2023-31/12/2023) Auditor Grant Thornton Baltic UAB Banks Luminor Bank AS SEB Bankas AB Swedbank AB OP Corporate Bank Plc Lithuania Branch Company code: 14773296 Address: P. Puzino st. 1, LT-35173 Panevėžys AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 4 Consolidated Statement of Comprehensive Income For the year ended December 31 EUR thousand Note 2023 2022 Revenue from contracts with customers 5, 6 119,828 115,840 Cost of sales 7 (107,588) (106,310) Gross profit 12,240 9,530 Change in fair value of investment property 11 38 573 Other revenue 11 1,753 1,883 Selling expenses 8 (579) (496) Administrative expenses, total: 9 (11,221) (10,101) Impairment loss on trade debts, contract assets and other receivables 96 4 Other administrative expenses (11,317) (10,105) Other expenses 11 (1,585) (1,800) Operating profit (loss) 646 (411) Finance income, total 12 3,788 1,622 Other finance income 8 489 Reverse of interest charged by the Competition Council 12 0 1,133 Result of subsidiary liquidation 12 3,780 0 Finance expense, total: 12 (1,272) (802) Interest expenses (1,467) (689) Reversal of impairment of contracts in progress 12 341 0 Other finance expenses (146) (113) Profit (loss) before tax 3,162 409 Income tax expense 13 160 116 Net profit (loss) 3,322 525 Other comprehensive income Items that will never be transferred to profit/(loss) 0 1,482 Non-current asset revaluation impact 0 1,744 Deferred income tax on revaluation of non-current assets 0 (262) Items that can or will be transferred to profit/(loss) (3,644) (476) Currency translation effect (3,644) (476) Other comprehensive income (loss), total (3,644) 1,006 Total comprehensive income (loss) (322) 1,531 Net profit/(loss) attributable to: To the equity holders of the Parent 3,324 488 Non-controlling interest (2) 37 3,322 525 Comprehensive income (loss) attributable to: To the equity holders of the Parent (375) 1,388 Non-controlling interest 53 143 (322) 1,531 Basic and diluted earnings/(loss) per share (EUR) 26 0.20 0.03 The notes on pages 10–57 are an integral part of these consolidated financial statements. Company code: 14773296 Address: P. Puzino st. 1, LT-35173 Panevėžys AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 5 Managing director Tomas Stukas 09/04/2024 Chief Accountant Danguolė Širvinskienė 09/04/2024 Company code: 14773296 Address: P. Puzino st. 1, LT-35173 Panevėžys AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 6 Consolidated Statement of Financial Position As at 31 December EUR thousand Note 2023 2022 ASSETS Non-current assets Property, plant and equipment 14 9,631 10,668 Intangible Assets 15 210 235 Investment Property 16 33,841 32,565 Right of use assets 100 123 Non-current trade receivables 18 66 200 Other non-current financial assets 724 742 Deferred tax assets 13 1,079 609 Total non-current assets 45,651 45,142 Current assets Inventories 17 8,969 9,674 Trade receivables 18 16,319 16,759 Contract assets 18 3,143 4,199 Prepayments 1,110 846 Other assets 19 1,104 2,558 Prepaid income tax 13 28 24 Cash and cash equivalents 20 10,047 8,955 Total current assets 40,720 43,015 TOTAL ASSETS 86,371 88,157 The notes on pages 10–57 are an integral part of these consolidated financial statements. Managing director Tomas Stukas 09/04/2024 Chief Accountant Danguolė Širvinskienė 09/04/2024 Company code: 14773296 Address: P. Puzino st. 1, LT-35173 Panevėžys AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 7 Consolidated Statement of Financial Position (continued) As at 31 December EUR thousand Note 2023 2022 EQUITY AND LIABILITIES Equity Issued capital 21 4,742 4,742 Reserves 21 3,788 7,771 Retained earnings 21,764 18,200 Total equity attributable to equity holders of the Parent 30,294 30,713 Non-controlling interest (47) 1,373 Total equity 30,247 32,086 Loans and borrowings 23 21,182 18,862 Provisions 24 583 765 Deferred tax liability 13 1,236 1,088 Non-current lease liabilities 59 33 Other liabilities 663 263 Total non-current liabilities 23,723 21,011 Current liabilities Loans and borrowings 23 4,817 696 Current lease liabilities 51 88 Trade payables 22 17,859 17,083 Contract liabilities 25 2,651 5,927 Provisions 18, 25 306 208 Income tax payable 13 147 132 Other liabilities 25 6,570 10,926 Total current liabilities 32,401 35,060 Total liabilities 56,124 56,071 TOTAL EQUITY AND LIABILITIES 86,371 88,157 The notes on pages 10–57 are an integral part of these consolidated financial statements. Managing director Tomas Stukas 09/04/2024 Chief Accountant Danguolė Širvinskienė 09/04/2024 Company code: 147732969 Address: P. Puzino st. 1, LT-35173 Panevėžys AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 8 Consolidated Statement of Changes in Equity EUR thousand Note Foreign Attributable to currency the equity Non- Issued Revaluation translation Retained holders of the controlling capital Legal reserve reserve reserve earnings Parent interest Total equity Equity as at 31 December 2022 4,742 734 3,355 3,682 18,200 30,713 1,373 32,086 Total comprehensive income for the year Net profit (loss) - - - - 3,324 3,324 (2) 3,322 Currency translation effect - - - (3,699) - (3,699) 55 (3,644) Total other comprehensive income - - - (3,699) 0 (3,699) 55 (3,644) Total comprehensive income for the year - - - (3,699) 3,324 (375) 53 (322) Transactions with owners of the Parent, recognised directly in equity Dividends - - - - - - (24) (24) Repayment of issued capital - - - - - - (1,449) (1,449) Total transactions with owners of the Parent - - - - - - (1,473) (1,473) Depreciation transfer for buildings - - (284) - 240 (44) 0 (44) Equity as at 31 December 2023 4,742 734 3,071 (17) 21,764 30,294 (47) 30,247 Equity as at 31 December 2021 4,742 600 2,008 4,261 17,713 29,324 1,230 30,554 Total comprehensive income for the year Net profit (loss) - - - - 488 488 37 525 Revaluation reserve - - 1,479 - - 1,479 3 1,482 Currency translation effect - - - (579) - (579) 103 (476) Total other comprehensive income - - 1,479 (579) - 900 106 1,006 Total comprehensive income for the year - - 1,479 (579) 488 1,388 143 1,531 Increase in legal reserve - 134 - - (134) - - - Depreciation transfer for buildings - - (132) - 133 1 - 1 Equity as at 31 December 2022 4,742 734 3,355 3,682 18,200 30,713 1,373 32,086 The notes on pages 10–57 are an integral part of these consolidated financial statements. Managing director Tomas Stukas 09/04/2024 Chief Accountant Danguolė Širvinskienė 09/04/2024 Company code: 147732969 Address: P. Puzino st. 1, LT-35173 Panevėžys AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 9 Consolidated Statement of Cash Flows For the year ended December 31 EUR thousand Note 2023 2022 Cash flows from operating activities Net profit (loss) 3,322 525 Adjustments to: Depreciation and amortisation (including impairment) 14, 15 1,198 1,333 Proceeds from disposal of property, plant and equipment (64) (1) Income tax expense 13 (160) (116) Elimination of results from financing activities (3,411) (75) Change in fair value of investment property 11 (178) (573) Other non-cash items (51) (110) Net cash flows from operating activities before changes in working capital 656 983 Changes in working capital: Changes in inventories 17 240 23 Changes in trade receivables and contract assets 18 1,533 (2,649) Changes in prepayments (264) 920 Changes in other assets 19 1,509 (1,446) Changes in trade payables 22 776 1,486 Changes in prepayments received (921) (188) Changes in other liabilities (3,275) (264) Income tax paid (98) (66) Net cash flows from operating activities 156 (1,201) Cash flows used in investing activities Acquisition of intangible assets and property, plant and equipment 14, 15 (1,104) (485) Disposal of property, plant and equipment 99 12 Acquisition of investments (19) - Loans granted - - Collection of loans granted 1 5 Interest and dividends received 2 2 Net cash flows used in investing activities (1,021) (466) Cash flows from/used in financing activities Dividends paid 31 - (1) Repayment of borrowings 31 4,120 (13,465) Loans and borrowings received 31 (672) 12,961 Payment of finance lease liabilities 31 (24) (85) Interest paid (1,467) (676) Net cash flows from/used in financing activities 1,957 (1,266) Net increase/(decrease) in cash and cash equivalents 1,092 (2,933) Effect of foreign exchange on cash - - Cash and cash equivalents at the beginning of the period 8,955 11,888 Cash and cash equivalents at the end of the period 10,047 8,955 The notes on pages 10–57 are an integral part of these consolidated financial statements. Managing director Tomas Stukas 09/04/2024 Chief Accountant Danguolė Širvinskienė 09/04/2024 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 10 Notes to the Financial Statements 1. General information Panevėžio Statybos Trestas AB (hereinafter the “Company”) is a limited liability company registered in the Republic of Lithuania in 1957. The company code is 147732969 and it is registered at P. Puzino st. 1, LT-35173 Panevėžys. As from 13 July 2006, the Company’s ordinary shares are listed on the Official trading list of the Vilnius Stock Exchange (VSE). These consolidated financial statements comprise the financial statements of the Parent and its subsidiaries (hereinafter “the Group”). The Group is primarily involved in the construction of buildings, structures, other facilities and networks, as well as real estate development in Lithuania and abroad. As at 31 December 2023, the Group had 762 employees (2022: 805). As at 31 December 2023 and 2022, the principal shareholders of the Company were as follows: • Hisk AB, S. Kerbedžio st. 7, Panevėžys, company code 147710353, (49.78%) – the ultimate controlling parent; • Clairmont Holdings LTD, Grigori Afxentiou, 27 P.O.6021, CY (4.85%); • The freely traded shares, owned by natural and legal persons (45.38%). No one owns more than 5%. Hisk AB is the ultimate controlling parent which prepares separate and consolidated financial statements in accordance with Lithuanian Financial Reporting Standards (LFRS). Majority of shareholders of Hisk AB is natural persons, none of them holds more than 50% of shares. The shareholders of the Company have a statutory right to either approve these financial statements or not approve them and require a new set of financial statements to be prepared. The Company’s management authorised these financial statements on 9 April 2024. Financial information of the subsidiaries is as follows: (EUR thousand) Country of operation Type of activity Equity as at 31/12/2023 Net profit/(loss) for the year 2023 Equity as at 31/12/2022 Net profit/(loss) for the year 2021 PST Investicijos UAB (subgroup consolidated) Lithuania Real estate development 250 5,502 4,808 33 Vekada UAB Lithuania Construction: electrical installation 813 (182) 988 (63) Hustal UAB (after business combination) Lithuania Wholesale of steel structures 3,038 1,243 2,095 690 Metalo Meistrai UAB (before business combination) Lithuania Construction: steel structures 0 0 1,485 455 Hustal UAB (before business combination) Lithuania Wholesale of steel structures 0 0 376 216 Skydmedis UAB Lithuania Construction: wooden panel houses 1,892 884 1,507 837 Alinita UAB Lithuania Construction: conditioning equipment (251) 18 (265) (241) Kingsbud Sp.z.o.o. Poland Intermediary services 581 141 441 183 SIA PS Trests Latvia Construction (182) 11 (193) (51) Šeškinės Projektai UAB Lithuania Real estate development 8,280 701 7,615 1,337 Ateities Projektai UAB Lithuania Real estate development 619 216 403 204 Aliuminio Fasadai UAB Lithuania Production of aluminium profile systems (198) (8) (191) (120) Tauro Apartamentai UAB Lithuania Real estate development 3 0 3 0 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 11 * In 2023, the General Meeting of Shareholders of PST Investicijos UAB made a decision to pay EUR 4,576 thousand in dividends to the shareholders, by decreasing the issued capital of PST Investicijos UAB. Ownership of subsidiaries: Registration address 2023 2022 PST Investicijos UAB (group) Verkių st. 25C, Vilnius 69.0 % 68.3 % Vekada UAB Marijonų st.36, Panevėžys 95.6 % 95.6 % HUSTAL UAB Tinklų st. 7, Panevėžys 100 % 100 % (former Metalo Meistrai UAB) Skydmedis UAB Pramonės st. 5, Panevėžys 100 % 100 % Alinita UAB Tinklų st. 7, Panevėžys 100 % 100 % Šeškinės Projektai UAB Verkių st. 25C, Vilnius 100 % 100 % Kingsbud Sp. z. o. o. A. Patli st. 12, 16-400 Suwalki, Poland 100 % 100 % Skultes st. 28, Skulte, Marupes mun., 100 % 100 % SIA PS Trests Latvia Tauro Apartamentai UAB Verkių st. 25C-1, Vilnius 100 % 100 % Ateities Projektai UAB Verkių st. 25C-1, Vilnius 100 % 100 % Aliuminio Fasadai UAB Pramonės st. 5, Panevėžys 100 % 100 % The Group’s subsidiary PST Investicijos UAB has the following subsidiary: Type of activity 2023 2022 ZAO ISK Baltevromarket Development of real estate projects in Kaliningrad 100 % ZAO ISK Baltevromarket was removed from the register on 30 May 2023. Joint operations In 2016 the Group made and agreement with limited liability Group SIA ARMS GROUP, Gobu st. 1-129, Baloži, Kekavas municipality, Latvia, regarding joint operations and joint liability for newly established general partnership enterprise PST Un Arms. Under the agreement, 50% of operating expenses and income, assets and liabilities of the joint operations of PST Un Arms belongs to the Group. General partnership enterprise PST Un Arms is established for a certain project developed in Latvia. In 2021, the project was completed. Under this agreement, 50% of operating expenses, assets and liabilities of PST Un Arms belong to the Company and these amounts were included in these financial statements of the Company. Summarised information of PST Un Arms 0 % (EUR thousand) 2023 2022 Total assets 14 14 Total liabilities 3 3 Equity 11 11 Revenue 0 0 Net result 0 (5 ) 2. Basis of Preparation Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (hereinafter “IFRSs”) . Basis of preparation of the Consolidated Financial Statements The consolidated financial statements have been prepared on the historical cost basis except for land and buildings measured using the revaluation model and investment property measured at fair value. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 12 2. Basis of preparation (continued) Functional and presentation currency The consolidated financial statements are presented in the national currency of the Republic of Lithuania, euro (EUR), which is the Parent company’s functional currency as well as of subsidiaries operating in Lithuania and Latvia. The functional currencies of foreign subsidiaries are the respective foreign currencies of the country of residence. Items included in the financial statements of these subsidiaries are measured using their functional currency. The principles of functional currency translation into the currency of the Group’s financial statements are disclosed in Note 3.1. Due to rounding of certain amounts to thousand, figures in the tables may differ. Such rounding bias is immaterial in these financial statements. Judgements and estimates The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty in applying accounting policies that have a significant effect on the amounts recognized in the financial statements and have a significant risk of causing material adjustments to the financial statements in the next financial year is included in the following notes: • Note 4. Classification of the fine imposed by the Competition Council. Given the settlement agreement with the Tax Authority regarding the payment of the fine by installments, the liability is classified as current and non-current in the Groups financial statements. • Note 13: deferred taxes recognition. Deferred tax asset is recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences could be utilised. • Note 14: Fair value of land and buildings which are measured using the revaluation model, useful lives of property, plant and equipment. The Group verifies economic useful lives of property, plant and equipment and intangible assets at least once a year – (Note 3.3). Revaluations are carried out regularly ensuring that the carrying amount of land and buildings do not significantly differ from their fair values as at reporting date. The revaluation was carried out on 31 December 2022. • Note 16: Fair value of investment property. The Group engaged external appraisers to estimate the fair values of these assets. • Note 17: Measurement of net realizable value of inventories. A key factor in estimating the net realizable value of inventories is the recoverability of ongoing construction projects. Therefore, the Group engaged external appraisers to estimate the fair values of these projects based on discounted cash flow or comparable value approach, the Company also relied on the Purchase and Sale Agreement signed with a third party after the reporting date and related information. • Note 18: Impairment of trade receivables and measurement of revenue from contracts with customers as well as contract assets and contract liabilities based on the stage of completion of the construction contracts. The accurate recognition of revenue on contracts in progress is highly dependent on judgement exercised by the management in assessing the completeness and accuracy of the overall costs of the project (estimates) as it is the key assumption in the assessment of the stage of completion of the contracts in progress. Estimating the recoverable amounts of receivables is a process, which requires significant management judgement and estimates, particularly AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 13 2. Basis of preparation (continued) • those that are related to expected credit losses assessment based on the analysis of the historical credit losses, considerations of future factors and other subjective risk factors related to the specific debtor or debtors’ group. Estimates were applied in assessing the amounts to be collected and their timing. • Note 24: Warranty provision is calculated by the Group on a monthly basis based on monthly revenue. Warranty provision is being calculated by taking into account revenue, actual warranty expenses incurred in previous periods, its proportion against actual sales, legal term of warranty and historical information. • Note 27: The management judgements are to predict the outcome of litigations. Provisions are not recognised in the financial statements as based on the management judgement it is more likely than not, that the Group will win the legal disputes mentioned in the Note 27, or it is not possible to assess reliably the possible outcome of the contingency at the moment. 3. Summary of Significant Accounting Policies Basis of consolidation The financial statements of the subsidiaries are prepared for the same reporting year, using consistent accounting policies. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: - The power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); - The right to variable returns from its involvement with the investee; - The ability to use its power over the investee to affect its returns. Generally, there is a presumption that a majority of voting rights result in control. Subsidiaries are consolidated from the date from which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. All intergroup transactions, balances and unrealised gains and losses on transactions among the Group companies have been eliminated. The equity and net income attributable to non-controlling interests, are shown separately in the statement of financial position and the statement of comprehensive income. The losses of subsidiaries are attributable to the non-controlling interest even if that results in a deficit balance on the non-controlling interest. Acquisitions and disposals of non-controlling interest by the Group are accounted as equity transaction: the difference between the value of the net assets acquired from/disposed to the non- controlling interests in the Group’s financial statements and the share purchase/sale prices are accounted directly in equity. Change of ownership share in the subsidiary when control is retained, is accounted for as equity transaction. If the Group loses control of the subsidiary, the Group takes the following actions: • Derecognises the assets (including goodwill) and liabilities of the subsidiary; • Derecognises the carrying amount of non-controlling interest, if any; • Derecognises accumulated currency exchange differences accounted for in equity; • Accounts for consideration received at fair value; • Accounts for retained investment at fair value; • Accounts for arising surplus or deficit in the profit or loss; AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 14 3. Summary of Significant Accounting Policies (continued) Basis for consolidation (continued) Reclassifies the components previously recognized in other comprehensive income and attributable to the parent company to the statement of comprehensive income or retained earnings respectively. Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the acquisition-date fair value of the consideration transferred and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration that is classified as an asset or liability is measured at fair value in accordance with IFRS 9: in either in profit/loss or as a change in other comprehensive income. If contingent consideration is classified as equity, it is not remeasured and its subsequent settlement is accounted for within equity. Acquisition costs incurred are expensed and included in administrative expenses. If the business combination is achieved in stages, the acquirer’s equity interest previously held in the acquiree is measured at fair value at the acquisition date through statement of comprehensive income. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in statement of comprehensive income. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Impairment is assessed annually. Accounted impairment is not restated. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, assigned to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. A joint arrangement is an arrangement of which two or more parties have joint control. These arrangement has the following characteristics: • The parties are bound by a contractual arrangement. • The contractual arrangement gives two or more of those parties joint control of the arrangement. The Group has a joint arrangement that is a joint operation. As a joint operator the Group recognises in relation to its interest in a joint operation: • its assets, including its share of any assets held jointly; • its liabilities, including its share of any liabilities incurred jointly; • its revenue from the sale of its share of the output arising from the joint operation; • its share of the revenue from the sale of the output by the joint operation; and • its expenses, including its share of any expenses incurred jointly. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 15 3. Summary of Significant Accounting Policies (continued) Basis for consolidation (continued) During the reporting period, the Group adopted new standards and amendments to existing standards and their interpretations, which are relevant to the activities and effective for annual periods beginning on or after 1 January 2023. (a) Standards, their amendments and interpretations effective for annual periods beginning on or after 1 January 2023. New standards, amendments and interpretations that are not mandatory for reporting period beginning on 1 January 2023 and have not been early adopted when preparing these financial statements are presented below: IFRS 17 and IFRS 4: Deferral of the effective date of IFRS 17 and IFRS 9 for insurers (issued on 25 June 2020 with effective date of 1 January 2023) The amendments to IFRS 17 are effective, retrospectively, for annual periods beginning on or after 1 January 2023, with earlier application permitted. The amendments aim at helping companies implement the Standard. Overall, the amendments are designed to reduce costs by simplifying some requirements in the standard; make it easier to explain financial performance; and ease transition by deferring the effective date of the standard to 2023 and by providing additional relief to reduce the effort required when applying IFRS 17 for the first time. The amendments to IFRS 4 change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after January 1, 2023. The management has assessed that these amendments will not have any impact on the Group’s financial statements. IFRS 17 Insurance Contracts (issued on 18 May 2017 with effective date of 1 January 2023). The standard is effective for annual periods beginning on or after 1 January 2021 with earlier application permitted if both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments have also been applied. In its March 2020 meeting the IASB decided to defer the effective date to 2023. IFRS 17, Insurance Contracts, establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. It also requires similar principles to be applied to reinsurance contracts held and investment contracts with discretionary participation features issued. The objective is to ensure that entities provide relevant information in a way that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that contracts within the scope of IFRS 17 have on the financial position, financial performance and cash flows of an entity. This Standard will not have any impact on the financial position or performance of the Group as insurance services are not provided. IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments) (issued on 7 May 2021 with effective date of 1 January 2023). 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. The amendments are effective for reporting periods beginning on or after 1 January 2023. IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (Amendments) (issued on 12 February 2021 with effective date of 1 January 2023). The amendments effective for reporting periods beginning on or after 1 January 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, AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 16 3. Summary of Significant Accounting Policies (continued) Basis for consolidation (continued) 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. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (Amendments) (issued on 12 February 2021 with effective date of 1 January 2023). The amendments introduce a new definition of accounting estimates, defined as monetary amounts in financial statements that are subject to measurement uncertainty. Also, the amendments clarify what changes in accounting estimates are and how these differ from changes in accounting policies and corrections of errors. The amendments became effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. (b) Standards issued but not yet effective and not early adopted and their amendments Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current (issued on 23 January 2020 with effective date of 1 January 2024). The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current or non-current. The amendments affect the presentation of liabilities in the statement of financial position and do not change existing requirements around measurement or timing of recognition of any asset, liability, income or expenses, nor the information that entities disclose about those items Also, the amendments clarify the classification requirements for debt which may be settled by the company issuing own equity instruments. The management has not yet evaluated the impact of the implementation of these amendments. Amendments to IAS 1 “Non-current Liabilities with Covenants” (issued on 31 October 2022 with effective date of 1 January 2024): Modify the requirements introduced by Classification of Liabilities as Current or Non-current on how the Group classifies debt and other financial liabilities as current or non-current in particular circumstances: Only covenants with which the Group is required to comply on or before the reporting date affect the classification of a liability as current or non-current. In addition, the Group has to disclose information in the notes that enables users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within twelve months. The amendments are effective for reporting periods beginning on or after 1 January 2024. The amendments are applied retrospectively in accordance with IAS 8 and earlier application is permitted. The management has not yet evaluated the impact of the implementation of these amendments. Amendments to IFRS 16 “Lease Liability in a Sale and Leaseback” with amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale (issued on 22 September 2022 with effective date of 1 January 2024). Amendments to IFRS 16 “Lease Liability in a Sale and Leaseback” require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognise any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognising in profit or loss any gain or loss relating to the partial or full termination of a lease. The amendments become effective for annual reporting periods beginning on or after 1 January 2024 with earlier application AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 17 3. Summary of Significant Accounting Policies (continued) Basis for consolidation (continued) permitted. A seller-lessee applies the amendments retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to sale and leaseback transactions entered into after the date of initial application. The management has not yet evaluated the impact of the implementation of these amendments. Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements (issued in May 2023 with effective date of 1 January 2024, with earlier application permitted): The amendments Supplier Finance Arrangements supplement IAS 7 Statement of Cash Flows and require an entity to disclose the terms and conditions of supplier finance arrangements. The amendments also add supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7 Financial Instruments: Disclosures. The amendments have not yet been endorsed by the EU. The management has not yet evaluated the impact of the implementation of these amendments. Amendments to IAS 21: Lack of Exchangeability (issued in August 2023 with effective date of 1 January 2025, with earlier application permitted): The amendments Lack of Exchangeability supplement IAS 21 The Effects of Changes in Foreign Exchange Rates and require entities to apply a consistent approach in assessing whether a currency can be exchanged into another currency and, when it cannot, in determining the exchange rate to use and the disclosures to provide. The amendments have not yet been endorsed by the EU. The management has not yet evaluated the impact of the implementation of these amendments. 3.1 Foreign currency Transactions in foreign currencies are translated to the functional currency at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate by the European Central Bank ruling at that date. The foreign currency gain or loss on monetary items is recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities denominated in foreign currencies that are measured at cost are translated to the functional currency at the exchange rate at the date that the asset or liability is recognised in statement of financial position. Foreign currency differences arising on translation are recognised in profit or loss. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the presentation currency at exchange rates at the dates of the transactions. The effect of translation is recognized directly in other comprehensive income. When a foreign operation is disposed of, the relevant amount in the foreign currency translation reserve is reclassified to profit or loss. 3.2 Financial instruments Financial instrument: a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 18 3. Summary of Significant Accounting Policies (continued) 3.2 Financial Instruments (continued) Financial assets Initial recognition and measurement At initial recognition, financial asset is classified as either measured at amortised cost, fair value through other comprehensive income or 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 business model for managing them. With the exception of trade receivables and contract assets that do not contain a significant financing component, the Group 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 have a significant financing component are measured at the transaction price identified under IFRS 15. Financial asset is classified and measured at amortised cost or fair value through other comprehensive income, where cash flows arising from financial asset are solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is known as the SPPI test and is performed for each financial instrument. The Group’s business model for managing financial assets refers to how the Group manages its financial assets in order to generate cash flows. The business model determines whether cash flows will be generated by collecting contractual cash flows, by selling this financial asset or by using both options. A regular way purchases or sales of financial assets are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. Subsequent measurement After initial recognition, the Group measures a financial asset at: At amortised cost (debt instruments). At fair value through other comprehensive income with recycling of cumulative gains and losses upon derecognition (debt instruments). The Group did not have such items as at 31 December 2023 and 2022; (c) At fair value through other comprehensive income with no recycling of cumulative gains and losses upon derecognition (equity instruments). The Group did not have such items as at 31 December 2023 and 2022; (d) At fair value through profit or loss. The Group did not have such items as at 31 December 2023 and 2022. Financial asset at amortised cost (debt instruments) The Group 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) Contractual terms and conditions of financial asset allow for obtaining cash flows, on certain dates, which are solely the payments of the principal or the interest on the outstanding principal. Financial assets measured at amortised cost are subsequently accounted for by applying the effective interest method (EIR) less impairment losses. Gain or loss is recognised in the statement of comprehensive income when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost includes trade, other current and non-current receivables and loans granted. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 19 3. Summary of Significant Accounting Policies (continued) 3.2 Financial Instruments (continued) Impairment of financial assets Following IFRS 9, in common case scenario, the Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. (a) Assessment of impairment of trade receivables and contract assets Based on the Group’s management assessment, trade receivables and contract assets do not include a significant financing component and are accordingly measured for impairment using the simplified method, i.e. management makes an individual assessment of expected credit losses for each important customer taking into account its credit history, future factors and subjective risk factors related to the borrower. For all other receivables the Group 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. (b) Estimation of the impairment of loans granted The Group is granting loans under the agreements with defined repayment terms. For assessment of impairment of loans granted the expected 12-months credit losses are assessed and accounted upon issue of the loan. In subsequent periods, given the absence of significant increase in the credit risk associated with the debtor, the Group re-assesses the 12-months ECL balance based on the loan amount still outstanding as of the date of the re-assessment. If it is determined that the financial position of the debtor has significantly deteriorated in comparison with the position when the loan was issued, the Group accounts for ECL over the remaining life of the loan. Loans subject to assessment of lifetime ECLs are considered to be credit-impaired financial assets. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 20 3. Summary of Significant Accounting Policies (continued) 3.2 Financial Instruments (continued) The Group considers that the debtor has defaulted on the obligations associated with the financial assets, if the contractual payments are overdue more than 90 days or when there are indications that the debtor, or the group of debtors, are facing significant financial difficulties, default on the payments of principal amount or interest, and there is a probability that bankruptcy or reorganization procedures will be initiated, as well as when observable data indicates that the decrease of expected future cash flows is likely, e.g. change in the overdue days or change in the economic factors that correlate with the defaults on the obligations. ECLs for loans and trade receivables is accounted for through profit/loss using allowance for doubtful debts. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Financial liabilities Initial recognition and measurement: Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans received and payables. All financial liabilities are recognised initially at fair value and, in the case of loans received and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans received, including bank overdrafts and finance lease liabilities. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Loans received and other payables After initial recognition, loans and other payables are carried at amortised cost using the effective interest method (EIR). Gains and losses are recognised in the statement of comprehensive income, when the liabilities are written off or amortised. Amortised cost is calculated by reference to the discount or premium on acquisition, as well as taxes or costs that are an integral part of the EIR. EIR amortization is included in financial expenses 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 Assets and Liabilities 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 statement of financial position) when: i) the contractual rights to receive cash flows from the financial asset have expired; or ii) The Group 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 has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the financial asset. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 21 3. Summary of Significant Accounting Policies (continued) 3.2 Financial Instruments (continued) When the Group has transferred its rights to receive cash flows from a financial 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 of the asset. When it has neither transferred nor retained substantially all the risks and rewards of ownership of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group 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 has retained. The Group involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay (amount of the guarantee). Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. When a present financial liability is swapped with other liability to the same lessor, although, upon other conditions or when the present liability terms are substantially changed, this change is recognized as initial derecognition and establishment of a new liability. The difference between respective balance values is recognised in the statement of comprehensive income. 3.3 Property, Plant and Equipment Items of property, plant and equipment except for land and buildings are measured at cost less accumulated depreciation and accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Land and buildings are carried at revalued amount which is their fair value as at the revaluation date less subsequently accumulated depreciation and impairment. Revaluations are carried out regularly ensuring that the carrying amount of land and buildings do not significantly differ from their fair values as at reporting date. The fair value of land and buildings is established by certified independent real estate appraisers. The revaluation reserve of land and buildings is reduced by an amount equal to the difference between the depreciation based on the revalued carrying amount and the depreciation based on the original cost of the land and buildings each year and is transferred directly to retained earnings or loss. In case of revaluation, when the estimated fair value of the assets exceeds their residual value, the residual value is increased to the fair value and the amount of increase is included into revaluation reserve of property, plant and equipment as other comprehensive income in equity. However, such increase in revaluation is recognised as income to the extent it does not exceed the decrease of previous revaluation recognised in profit or loss. Depreciation is calculated from the depreciable amount which is equal to acquisition cost or revaluated amount less residual value of an asset. The accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal or recognising regular depreciation charge, any revaluation surplus relating to the particular asset being depreciation or sold is transferred to retained earnings. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of the Group’s self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Borrowing costs related to qualifying assets are capitalised. When components of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 22 3. Summary of Significant Accounting Policies (continued) 3.3 Property, plant and equipment (continued) The cost of replacing component of property, plant and equipment is capitalised only if it is probable that the future economic benefits embodied within the component will flow to the Group and its cost can be measured reliably. The residual value of the replaced component is written-off. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Depreciation is calculated on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. The estimated useful lives of the assets are the following: • Buildings and structures 8–40 years • Plant and equipment 5–10 years • Vehicles 5–10 years • Fixtures and fittings 3–6 years Depreciation methods, residual values and useful lives are reviewed at each reporting date. Gains and losses on disposal are determined by comparing the proceeds from disposal with the residual value of property, plant and equipment and are recognised net within other income or expenses. When revalued assets are sold or reclassified, the amounts included in the revaluation surplus reserve are transferred to retained earnings. 3.4 Intangible assets (other than goodwill) Software and other intangible assets, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful life is 3 years. The Group does not have any intangible assets with infinite useful life. 3.5 Investment Property Investment property of the Group consists of buildings that are held to earn rentals or for capital appreciation, rather than for use in the production, or supply of goods, or services or for administration purposes, or sale in the ordinary course of business. Investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment property are included in the profit or loss in the period in which they arise. Acquisition cost includes expenditure that is directly attributable to the acquisition of the assets. The cost of self-constructed assets includes the cost of raw materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, as well as the costs of dismantling and removing the items and restoring the site on which they are located. Borrowing costs related to qualifying assets are capitalised. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the profit or loss in the period of derecognition. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 23 3. Summary of Significant Accounting Policies (continued) 3.5 Investment Property (continued) Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, plant and equipment, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. 3.6 Leased Assets and Lease Liabilities A. Group as a lessee At inception of a contract, the Group assesses whether the 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 Group (as a lessee) applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. The Group had only few assets (cars) lease contracts that are insignificant at the beginning of 2020, however, a long-term lease agreement for 21 car was effective at the end of 2021. Right of use assets The 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. The cost of right-of-use assets includes the amount of the initial measurement of the lease liability, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. 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: • Cars 3 years If ownership of the leased asset transfers to the 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. Lease liabilities At the commencement date of the lease, the Group recognises 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 Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 24 3. Summary of Significant Accounting Policies (continued) 3.6 Leased Assets and Lease Liabilities (continued) After the commencement date, the amount of lease liabilities is increased to reflect the estimates of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Short-term leases and leases of low-value assets The Group apply the short-term lease recognition exemption to its non-current-asset (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). Lease payments on short term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. B. The Group is a lessor The Group’s buildings that are leased under operating lease agreements are accounted in the statement of financial position as investment property. Lease income is recognised on a straight line basis over the lease period. 3.7 Inventories Capitalised costs related to the real estate development projects for sale in the usual activities of the Group, are classified as inventories and carried at lower of the cost or net realisable value (NRV). Capitalised costs include land, construction, sub-contracting and other project development costs. Other inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out (FIFO) principle, and includes expenditure incurred in acquiring the inventories, production and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Unrealisable inventory is fully written-off. 3.8 Cash and Cash Equivalents Cash includes cash on hand and cash at banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of 3 months or less and that are subject to an insignificant risk of change in value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and in current bank accounts, as well as deposits in bank with original term equal to or less than 3 months. 3.9 Impairment of Non-Financial Assets The carrying amounts of non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount is the greater of the asset’s value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash flows from continuing use that are largely independent of the cash flows of other assets or groups of assets. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 25 3. Summary of Significant Accounting Policies (continued) 3.9 Impairment of Non-Financial Assets (continued) An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. An impairment loss on a non-revalued asset is recognised in profit or loss. However, an impairment loss on a revalued asset is recognised in other comprehensive income to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Such an impairment loss on a revalued asset reduces the revaluation surplus for that asset. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognised. 3.10 Dividends Dividends are recognised as a liability in the period in which they are declared. 3.11 Provisions A provision is recognised in the statement of financial position if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows to their present value at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. A provision for warranties is recognized when the underlying construction services are sold (assurance type warranty), as the Group does not provide additional warranties to customers. The provision is based on historical warranty costs data and probabilities. 3.12 Employee Benefits The Group does not have any defined contribution and benefit plans and has no share based payment schemes. Post-employment obligations to employees retired on pension are borne by the State. Based on the requirements of the Labour Code of the Republic of Lithuania, each employee leaving the Group at the age of retirement is entitled to a one-off payment in the amount of 2-month salary. 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 changes in terms of benefits (curtailment or settlement) are recognised in the statement of comprehensive income as incurred. Current year cost of employee benefits is recognised as incurred in the statement of comprehensive income. The above mentioned employee benefit obligation is calculated based on actuarial assumptions, using the projected unit credit method. Obligation is recognised in the statement of financial position and reflects the present value of these benefits on the preparation 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 recognised in other comprehensive income as incurred. Short-term employee benefits are recognised as a current expense in the period when employees render the services. These include salaries and wages, social security contributions, bonuses, paid holidays and other benefits. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 26 3. Summary of Significant Accounting Policies (continued) 3.13 Revenue Revenue from contracts with customers The majority of the Group’s revenue comes from the construction of buildings, structures, equipment and networks, and the production and assembly of wooden panel houses. In addition, as described in Note 5, the Group earns revenue from the design and manufacturing of metal structures. 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 expects to be entitled in exchange for those services or goods. Generally, the Group has no material variable price components in its contracts with customers. The Group has concluded that generally it is the principal in its construction services contracts even when the subcontractors are used in the implementation of the projects, because: - controls the goods and services before transferring them to the customer; - is responsible for the overall performance of the contract with the customer and is exposed to the risk of default; - the entity has discretion in establishing the price. Performance obligations arising from the construction contracts with customers’, contracts for the assembly of wooden panel houses and the design and production of metal structures are fulfilled over time and respectively revenue from these contracts and installation services are recognized over time if any of the following criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; (b) the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the Group’s performance does not create an asset with an alternative use and the Group has an enforceable right to payment for performance completed to date. When the Group can reasonably measure its progress towards complete satisfaction of the performance obligation, for each contract, the Group recognizes revenue and expenses based on the stage of completion. The stage of completion is assessed based on the proportion of the costs incurred in fulfilling the contract up to date over to the total estimated costs of the contract. When the outcome of a contract cannot be estimated reliably (for example, in the early stages of a contract), only the portion of the contract costs incurred that is expected to be recovered is recognised as revenue. Contract modification (scope or price or both) are accounted for as a separate contract if the scope of the contract increases because of the addition of promised goods or services that are distinct and the price of the contract increases by an amount of consideration that reflects the Group’s stand-alone selling prices of the additional promised goods or services in the circumstances of the particular contract. Otherwise the contract modification is accounted as (a) termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification, or (b) part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The effect that the contract modification has on the transaction price, and on the Group’s measure of progress towards complete satisfaction of the performance obligation, is recognised as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification. Provisions for loss making contracts are recognized when the Group has a present obligation (legal or constructive) to complete the construction contract for the third party for the price that is lower than the total estimated cost to perform the contract as of the date of the financial statements. The difference between the contract price and the total estimated cost of delivery under the contract is recognised in the statement of comprehensive income at the reporting date. When contract costs are likely to exceed contract revenue, a loss is recognized immediately in profit or loss. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 27 3. Summary of Significant Accounting Policies (continued) 3.13 Revenue (continued) When fulfilling the contracts, the Group can receive short term prepayments from its customers. Applying the practical expedient, the Group is not adjusting the price allocation by the financing component, if at the inception of the contract it is expected that the time period from the customer payment for goods/services till the delivery of these goods/services will not exceed one year. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 28 3. Summary of Significant Accounting Policies (continued) 3.13 Revenue (continued) Contract balances Contract assets Contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before the Group’s right to amount of consideration is unconditional, a contract asset is recognised for the earned consideration, except any amounts that are recognized as receivables. Receivables Receivables represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Receivables are accounted for in accordance with IFRS 9 (Note 3.2). Contract liability A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. Contract liabilities are recognised as revenue when the Group performs under the contract. Income from other services or sales of goods is recognised when the control over service/goods is transferred to the customer, although such transactions are relatively not material. 3.14 Finance Income and Expense Finance income comprises mainly interest income and other similar income. Interest income is recognised as it accrues, using the effective interest method. Financial costs comprise interest expense and other financial expenses. All borrowing costs are recognised using the effective interest method. Foreign currency gains and losses are reported on a net basis in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. Other borrowing costs are expensed as incurred. 3.15 Income Tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date. Each company of the Group is taxed individually, irrespective the consolidated Group’s results. Most of the Group’s activities are carried out in Lithuania, where income tax rate of 15% applies. Deferred taxes are calculated using the liability method. Deferred tax is recognised, providing for temporary differences between the carrying values of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantially enacted at the date of the statement of financial position. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 29 3. Summary of Significant Accounting Policies (continued) 3.15 Income Tax (continued) Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Starting from 1 January 2014, the tax loss carried forward cannot exceed 70% of the taxable profit of current financial year 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. Such carrying forward is disrupted if the company changes its activities due to which these losses were incurred except when the entity does not continue its activities due to reasons which do not depend on the Company itself. The losses from disposal of securities and/or derivative financial instruments can be carried forward for 5 consecutive years and can only be used to reduce the taxable income earned from the transactions of the same nature. 3.16 Earnings per Share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, such as convertible notes and share options granted to employees. The Group has no dilutive potential ordinary shares. The diluted earnings per share are the same as the basic earnings per share. 3.17 Segment Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses. An operating segment’s operating results are reviewed regularly by the chief operating decision maker of the Group to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 3.18 Determination of Fair Values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. 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 in the principal, or in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk. Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models as appropriate. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 30 3. Summary of Significant Accounting Policies (continued) 3.18 Determination of Fair Value (continued) If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Fair values have been determined for measurement and/or disclosure purposes based on the methods and assumptions described Note 14, 16 and 29. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. 3.19 Off-setting When preparing the financial statements, assets and liabilities as well as revenues and expenses are not set off except for the cases where the International Financial Reporting Standards specifically require such off-setting. 4. Financial Risk Management Overview The Group has exposure to the following financial risks: credit risk, liquidity risk and market risk. This note presents information about the Group’s exposure to each of these risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contract liabilities. This risk arises principally from the Group’s trade receivables, contract assets and the balance of cash and cash equivalents. The Group controls credit risk by credit policies and procedures. The Group has established a credit policy under which each new customer is analysed for creditworthiness before the standard payment terms and conditions are offered. Customers that fail to meet the benchmark creditworthiness may transact with the Group only on a prepayment basis. The measure of credit risk is the maximum credit risk for each class of financial instruments, which is equal to their carrying amount. The maximum amount of exposure to credit risk in relation to particular classes corresponds to their carrying amount. The maximum exposure to credit risk is set out below: (EUR thousand) 2023 2022 Trade Receivables and Contract Assets 19,528 21,158 Loans granted 0 1 Cash and cash equivalents 10,047 8,955 Total 29,575 30,114 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 31 4. Financial Risk Management (continued) Trade receivables and contract assets: (EUR thousand) 2023 2022 Municipalities and state institutions 1,354 6,266 Legal persons 18,174 14,892 Total trade receivables and contract assets 19,528 21,158 In the statement of financial position, trade receivables and contract assets (i.e. accrued income on the stage of completion) are accounted for under the caption “Non-current and current trade receivables and contract assets”, as disclosed in Note 18. Trade receivables from major customers: (EUR thousand) 2023 % 2022 % Client 1 4,212 25.9 3,635 17.2 Customer No 2 3,122 19.2 2,028 9.6 Customer No 3 1,142 7.0 1,848 8.7 Customer No 4 1,116 6.8 1,685 8.0 Customer No 5 747 4.6 644 3.0 Customer No 6 718 4.4 620 2.9 Customer No 7 441 2.7 534 2.5 Other customers 8,302 29.7 10,531 49.8 Impairment (272) (0.3) (367) (1.7) Total 19,528 100 21,158 100 Trade receivables by geographic regions: (EUR thousand) 2023 2022 Local market (Lithuania) 18,432 20,046 Euro zone countries 772 782 Other countries 324 330 Total 19,528 21,158 Ageing of gross trade receivables as at the reporting date can be specified as follows: (EUR thousand) 2023 Impairment 2022 Impairment Not overdue 16,238 18,395 Overdue 0-30 days 1,405 1,262 Overdue 30-90 days 1,126 1,338 More than 90 days 1,031 272 531 368 Total 19,800 272 21,526 368 The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables. The main components of this allowance are specific losses that relate to individually significant accounts receivable and expected credit losses recognised using ELCs method. Methodology used for establishing the allowance is reviewed regularly to reduce any differences between loss estimate and actual loss experienced. Cash and cash equivalents comprise cash on hand and at bank (only reliable banks are selected); therefore, the related credit risk is relatively low. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 32 4. Financial Risk Management (continued) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Company ensures that it has sufficient cash on demand to meet expected operating expenses, including the servicing of borrowings. Payment maturities of financial liabilities as at 31 December 2023 (undiscounted) as to the agreements, are presented below: Contractual undiscounted Up to 6 More than 6 (EUR thousand) Carrying amount cash flows months months Liabilities Loans and lease liabilities 22,982 25,939 5,082 20,857 Trade payables 17,859 17,859 17,859 Liabilities related to the fine imposed by the Competition Council 4,409 4,671 772 3,899 Total Payment maturities of financial liabilities as at 31 December 2022 (undiscounted) as to the agreements, are presented below: Contractual undiscounted Up to 6 More than 6 (EUR thousand) Carrying amount cash flows months months Liabilities Loans and lease liabilities 19,559 22,103 793 21,310 Trade payables 17,083 17,083 17,083 Liabilities related to the fine imposed by the Competition Council 5,775 5,775 5,775 Total 42,417 44,961 23,651 21,310 * The full amount of the fine is presented as payable within six months because, as described above, when preparing these financial statements, the management was guided by the judgement that the Company does not yet have a court settlement with the Tax Authority, but the Company currently paying the said fine in equal parts for a period of four years (with additional interest). Interest rate applied for calculation of contractual net cash flows: 2023 2022 Loans and lease liabilities 6,349-6,561 3.135-3.625% On 14 December 2017, an overdraft agreement was signed with bank with the limit of EUR 15 million. Overdraft with the repayment term as of 14 June 2021 was used for the development of real estate project of Šeškinės Projektai UAB on 31 December 2020. To refinance the loan, Šeškinės Projektai UAB signed a credit agreement with OP Corporate Bank PLC and Citadele AB for EUR 20,000 thousand in 2021. The contractual maturity date is 1 July 2026. On 17 June 2021, an overdraft agreement was signed with bank with the limit of EUR 5 million. . The agreement was extended until 31 July 2024. As at 31 December 2023, the balance of overdraft limit utilised amounted to EUR 4,120 thousand (Note 23). AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 33 4. Financial Risk Management (continued) Market risk Market risk is the risk that changes in market prices, such as changes in foreign currency rates and interest rates will affect the results of the Group. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. As at 31 December 2023 and 2022, the Group did not use any derivatives. Currency risk. The Group is exposed to the risk of changes in foreign currency rates on sales and receivables, purchases payables and borrowings that are denominated in a currency other than the functional currency. During the year, currency exchange rates in respect of the euro were as follows: As at 31 2023 Average 2022 Average December 2023 As at 31 December 2022 1 SEK = 0.0901 0.0871 0.0899 0.0841 1 RUB = 0.0087 0.0114 0.0087 0.0114 1 NOK = 0.0817 0.0876 0.0951 0.0990 The Group’s analysis of monetary balance sheet items by currency can be specified as follows: As at 31 December 2023 (EUR thousand) EUR NOK PLN Deferred tax assets 273 Trade Receivables and Contract Assets 21,089 69 Excess VAT, prepaid income tax 827 40 Cash and cash equivalents 8,898 30 27 Deferred tax liability (1,088) Loans and borrowings (19,558) Trade payables (16,998) (2) (83) Provisions (973) Income tax (24) (98) (10) Other liabilities (71) Total exposure (7,625) (70) 43 As at 31 December 2022 (EUR thousand) EUR NOK PLN Deferred tax assets 273 69 Trade Receivables and Contract Assets 21,089 40 Excess VAT 827 27 Cash and cash equivalents 8,898 30 Deferred tax liability (1,088) Loans and borrowings (19,558) (83) Trade payables (16,998) (2) Provisions (973) (10) Income tax (24) (98) Other liabilities (71) 43 Total exposure (7,625) (70) 43 The following table presents the Group’s income before tax sensitivity to expected currency rate fluctuations, considering all other variables as constants (in accordance with changes in fair value of financial assets and liabilities). AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 4. Financial Risk Management (continued) The effect of Euro on Russian subsidiary: Increase/(decrease) in 2023 currency rate Impact on profit before tax EUR +15.00 % 0 EUR -15.00 % 0 Increase/(decrease) in 2022 currency rate Impact on profit before tax EUR +15.00 % (6) EUR -15.00 % 6 Interest rate risk. All the Group’s loans received and granted, and other borrowings are subject to variable interest rates linked to EURIBOR. No financial instruments are used to manage the risk. With an increase in the interest rate by 0.5% as at 31 December 2023, the Group’s net profit would decrease by approximately EUR 115 thousand due to loans received (as at 31 December 2022, net profit would decrease by EUR 98 thousand). Capital management The Boards policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the return on capital and proposes the level of dividends based on the Group’s financial results and strategic plans. The Board also aims to keep balance between higher return, which could be available if there was higher level of borrowed “funds” and security, which is provided by higher level of equity. The Group adheres to the requirement set in the Law on Companies of the Republic of Lithuania under which the equity of the entity must not be less than ½ of the issued capital. As at 31 December 2023 and 2022, the Group was in line with this requirement. The Group’s capital management policy did not change during the year. For capital management purpose, capital consists of share capital, retained earnings, revaluation reserve and legal reserve. 5. Segments For management purposes, the Group is organized into business units based on type of activities and has four reportable segments: • Construction; • Steel structures; • Wooden panel houses; • Other activity. The segment of construction includes operations of Panevėžio Statybos Trestas AB, Vekada UAB, Alinita UAB and PS Trests SIA. The main field of activity is the construction, design and installation of various buildings, constructions, facilities and communications or construction of other objects (electrical installation works, renovation of buildings, installation of plumbing, sewage and fire protection systems, video surveillance systems, security and fire alarm systems) in Lithuania and outside the country. The segment of Steel Structures includes operations of Hustal UAB. The main field of activity is designing and fabrication of steel structures for construction purposes. This company also supplies steel structures for other companies where steel items are required. 34 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 35 5. Segments (continued) The segment of wooden panel houses includes operation of Skydmedis UAB. The main field of activity is production, construction and outfit of wooden panel houses. Wooden panel houses are the main product of the Group with approximately 97 % of products successfully exported to Norway, Sweden, the Netherlands, Iceland and other countries. Other activity includes operations of Šeškinės Projektai UAB, Ateities Projektai UAB, PST Investicijos UAB, whose main activity is real estate development, and Kingsbud Sp.z.o.o., which the main activity is the wholesale trading of building materials, as well as other activities of Panevėžio Statybos Trestas AB (production of aluminium constructions, concrete floor installation, and the like). Operating segments related to construction activity have been aggregated in order to form one construction segment as these separate segments are to various operations performed at different phases of construction. No other operating segments have been aggregated to form the above reportable segments. Segment performance is evaluated based on operating profit or loss and is measured consistently with profit from operations in the consolidated financial statements. Transfer prices between operating segments are based on the prices set by the management, which management considers being similar to transactions with third parties. Operating Segments The following tables present revenue, expenses, profit and certain asset and liability information regarding the accountable operating segments: AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 36 5. Segments (continued) Segment assets and liabilities are presented after elimination of intercompany assets and liabilities within the segment, which are eliminated on consolidation. Other disclosures Capital expenditure 673 191 159 80 1,103 0 1,103 Capital expenditure consists of additions of property, plant and equipment, intangible assets and investment properties. Wooden (EUR thousand) Steel panel Other Total Intersegment Total As at 31 December 2023 or during 2023 Construction structures houses activity segments eliminations Group Revenue Third parties 87,662 10,009 11,163 10,994 119,828 0 119,828 Intersegment 4,033 1 0 1,845 5,879 5,879 0 Total revenue 91,695 10,010 11,163 12,839 125,707 5,879 119,828 Other revenue 964 3 120 704 1,791 0 1,791 Expenses Depreciation and amortisation (964) (85) (135) (14) (1,198) 0 (1,198) Other administrative and selling expenses (88,020) (8,513) (10,088) (11,569) (118,190) 0 (118,190) Interest expenses (376) (3) 0 (1,088) (1,467) 0 (1,467) Interest income 0 0 0 0 0 0 0 Financial activity (other than interest), net (1) 0 1 3,983 3983 0 3983 Other expenses (894) (9) (55) (627) (1,585) 0 (1,585) Income tax expense 455 (2) (126) (167) 160 0 160 Segment result 2,859 1,401 880 4,061 9,201 5,879 3,322 Segment assets 57,636 4,589 4,492 41,286 108,003 (21,632) 86,371 Segment liabilities 32,588 1,551 2,601 31,520 68,260 (12,136) 56,124 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 37 5. Segments (continued) Segment assets and liabilities are presented after elimination of intercompany assets and liabilities within the segment, which are eliminated on consolidation. Other disclosures Capital expenditure 294 33 122 36 485 0 485 Capital expenditure consists of additions of property, plant and equipment, intangible assets and investment properties. Wooden (EUR thousand) Steel panel Other Total Intersegment Total As at 31 December 2022 or during 2022 Construction structures houses activity segments eliminations Group Revenue Third parties 83,793 10,332 9,133 12,582 115,840 0 115,840 Intersegment 5,679 1 0 1,525 7,205 7,205 0 Total revenue 89,472 10,333 9,133 14,107 123,045 7,205 115,840 Other revenue 855 3 105 1,493 2,456 0 2,456 Expenses Depreciation and amortisation (940) (89) (137) (167) (1,333) 0 (1,333) Other administrative and selling expenses (87,887) (9,133) (8,107) (10,447) (115,574) 0 (115,574) Interest expenses 1,031 (2) 0 (585) 444 0 444 Interest income 0 0 0 0 0 0 0 Financial activity (other than interest), net 298 1 (22) 99 376 0 376 Other expenses (591) (7) (33) (1,169) (1,800) 0 (1,800) Income tax expense 78 3 (41) (259) (219) 0 (219) Segment result 2,316 1,109 898 3,072 7,395 7,205 190 Segment assets 62,015 3,540 2,940 45,157 113,652 (25,311) 88,341 Segment liabilities 34,857 1,445 2,233 31,010 69,545 (12,954) 56,591 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 5. Segments (continued) Reconciliation of assets 2023 2022 Segment operating assets 108,003 113,652 Intersegment assets (21,632) (25,311) Total assets 86,371 88,341 Reconciliation of liabilities 2023 2022 Segment operating liabilities 68,260 69,545 Intersegment liabilities (12,136) (12,954) Total liabilities 56,124 56,591 Geographical information The following table presents the Group’s geographical information on revenue based on the location of the customers: 2023 2022 Lithuania 97,131 96,842 Scandinavian countries 20,521 17,665 Other countries 2,176 1,333 119,828 115,840 The major part of the Group’s non-current assets is located in Lithuania. Non-current assets consist of property, plant and equipment, investment property, intangible assets, non-current financial and other assets. 6. Revenue from contracts with customers (EUR thousand) 2023 2022 Construction 88,989 83,793 Other customers revenue from contracts with 30,839 32,047 Total sales income 119,828 115,840 In 2023, the Group recognised EUR 3,210 thousand of revenue from contracts with customers that were included in the balance of contract liabilities at the beginning of the period (2022: EUR 674 thousand). Information on contracts outstanding at the end of the financial year is disclosed in Note 18. 7. Cost of sales (EUR thousand) 2023 2022 Construction sub-contractors 43,867 40,888 Raw materials and consumables 40,324 37,767 Wages and salaries (Note 10) 16,276 14,104 Depreciation and amortisation 418 566 Other 6,703 12,985 Total cost of sales 107,588 106,310 8. Selling expenses (EUR thousand) 2023 2022 Advertising and similar expenses 58 58 Wages and salaries (Note 10) 475 420 Other expenses 46 18 Total selling expenses 579 496 38 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 39 9. Administrative expenses (EUR thousand) 2023 2022 Wages and salaries (Note 10) 7,870 7,127 Purchased services for administrative use 1,793 2,322 Operating taxes other than income tax 298 262 Depreciation charge 492 454 Total impairment loss of trade debts, contract assets and other receivables: (96) (4) Impairment (reversal of impairment) of receivables (Note 18) (96) (4) Amortisation charge 38 33 Write-down (reversal) of inventories to net realizable value (Note 17) 17 17 Rent expenses 310 323 Subsidiary liquidation-related adjustments 0 (976) Other expenses 499 543 Total administrative expenses 11,221 10,101 10. Payroll expenses (EUR thousand) 2023 2022 Wages and salaries 22,011 18,475 Social security contributions 435 402 Daily allowances and incapacity benefits 1,218 1,605 Change in accrued vacation reserve and bonuses 1,016 1326 Total salary related expenses 24,680 21,808 Recognised in: Cost of sales 16,276 14,104 Administrative expenses 7,870 7,127 Selling expenses 475 420 Other operating expenses 59 157 Total salary related expenses 24,680 21,808 11. Other Income and Expenses (EUR thousand) 2023 2022 Change in fair value of investment property 178 573 Rental and other income 1,428 324 Gain from sale of property, plant and equipment and other 147 1,559 Total other income 1,753 2,456 Depreciation of rented premises (251) (277) Other expenses (1,334) (1,523) Total other expenses (1,585) (1,800) Total other income and expenses, net 168 656 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 40 12. Finance Income and Expense (EUR thousand) 2023 2022 Interest expenses, related to penalty imposed by the Competition Council (Note 27) 0 1,133 Foreign currency exchange gain 1 65 Liquidation of subsidiary 3,780 421 Other finance income 7 3 Total finance income 3,788 1,622 Loan interest expenses (1,467) (689) Reversal of impairment of contracts in progress 341 0 Foreign currency exchange loss (5) (90) Other expenses (141) (23) Total finance expense (1,272) (802) Total finance income and expense, net 2,516 820 13. Income tax Income tax expense: (EUR thousand) 2023 2022 Current income tax expense 162 98 Change in deferred tax (322) (214) Total income tax expense (160) (116) In 2023 and 2022, the Group applied a standard rate of 15% in Lithuania, a 22% rate in Norway, a 22% rate in the Kingdom of Sweden, a 20% rate in Russia and 0% in Latvia. Reconciliation of effective tax rate: (EUR thousand) 2023 2022 Profit (loss) before tax 3,162 409 Income tax expense (benefit) applying the Group’s tax rate in Lithuania 15.0 % 474 15.0 % 61 Impact of different tax rates in other countries 38 31 Non-deductible expenses (175) 130 Non-taxable income (118) (422) Utilized tax losses (57) (38) Change in deferred tax asset’s realisation allowance (322) 122 (5.06)% (160) (28.4)% (116) AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 41 13. Income Tax (continued) Deferred tax: (EUR thousand) 2023 2022 Temporary Temporary differences Deferred tax differences Deferred tax Impairment of receivables 257 39 333 50 Write-down of inventories to net realisable value 91 13 76 11 Accrued vacation reserve 610 91 525 79 Accrued bonuses 295 44 244 37 Warranty provisions and other 787 118 964 145 Tax losses carry forward 12,189 1,828 8,333 1,250 Onerous contracts 102 15 515 77 Total deferred tax assets 2,148 1,649 Unrecognised deferred tax asset (10) (9) Deferred tax asset recognised 2,138 1,640 Revaluation of land and buildings (2,362) (354) (2,633) (395) Difference in investment property value (12,937) (1,941) (11,496) (1,724) Deferred tax liabilities (2,295) (2,119) Total deferred tax, net (157) (479) Reported in the statement of financial position as: Deferred tax assets 1,079 609 Deferred tax liability (1,236) (1,088) A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the tax benefit can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax asset of impairment of a part of accounts receivable and tax differences in foreign jurisdictions has not been recognized due to uncertainty of realisation. Unused tax loss carry forward as at 31 December 2023 amounted to EUR 12,189 thousand (as at 31 December 2022, EUR 8,333 thousand). Tax loss carry forward can be utilised indefinitely. Group’s deferred income tax assets and liabilities have been netted-off to the extent to which they are related to the same tax authority and the same taxable entity. Change of deferred tax: (EUR thousand) 2023 2022 Net deferred tax as at 1 January (479) (485) Amounts recognised in other comprehensive income 0 (262) Recognised in profit or loss 322 268 Net deferred tax as at 31 December (157) (479) AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 42 13. Income Tax (continued) Change of income tax payable: (EUR thousand) 2023 2022 Prepaid income tax as at 1 January 24 60 Income tax payable as at 1 January (132) (120) Prepaid (payable) income tax as at 1 January (108) (60) Income tax calculated over the reporting period (162) (158) Paid/set off with overpayment of other taxes 151 242 Prepaid income tax as at 31 December 28 24 Income tax payable as at 31 December (147) (132) Prepaid (payable) income tax as at 31 December (119) (108) AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 43 14. Property, Plant and Equipment Machinery Construction- Land and and Fixtures and in-progress (EUR thousand) buildings equipment Vehicles fittings Total Cost (revalued carrying amount of land and buildings) Balance as at 1 January 2023 9,849 4,320 2,650 1,249 0 18,068 Additions 75 382 286 210 134 1,087 Reclassification (931) (931) Disposals and asset written off (468) (173) (261) (902) Balance as at 31 December 2023 8,993 4,234 2,763 1,198 134 17,322 Balance as at 1 January 2022 8,081 4,287 2,611 1,262 0 16,241 Additions 108 98 74 194 474 Revaluation 1,822 1,822 Reclassification (162) (162) Disposals and asset written off (65) (35) (207) (307) Balance as at 31 December 2022 9,849 4,320 2,650 1,249 0 18,068 Depreciation and impairment Balance as at 1 January 2023 995 3,407 2,193 805 7,400 Depreciation for the year 477 318 174 188 1,157 Disposals and asset written off (453) (168) (245) (866) Balance as at 31 December 2023 1,472 3,272 2,199 748 7,691 Balance as at 1 January 2022 583 3,042 1,977 793 0 6,395 Depreciation for the year 412 426 249 205 1,292 Disposals and asset written off (61) (33) (193) (287) Balance as at 31 December 2022 995 3,407 2,193 805 7,400 Residual value As at 1 January 2022 7,498 1,245 634 469 0 9,846 As at 1 January 2023 8,854 913 457 444 0 10,668 As at 31 December 2023 7521 962 564 450 134 9,631 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 44 14. Property, Plant and Equipment (continued) (EUR thousand) 2023 2022 Depreciation recognised in: Cost of sales 414 558 Administrative expenses 492 454 Other expenses 251 280 Total depreciation 1,157 1,292 Land and buildings are stated at revalued amount. The last external revaluation was performed as at 31 December 2022 based on the consultations on possible market prices of the Group’s land and buildings provided by independent appraisers, having appropriate recognized professional qualifications and necessary experience in valuation of property at certain location and of certain category. The valuation was performed using the comparable value approach. Significant unobservable data was used in fair value measurement, i.e. price per square meter/are. The fair value would increase with an increase in price per square meter/are and decrease with a decrease in price per square meter/are. If the buildings and land were stated at cost model, their net book value as at 31 December 2023 would be equal to EUR 1,555 thousand (as at 31 December 2022, EUR 1,767 thousand). As at 31 December 2023, the acquisition cost of fully depreciated but still in use property, plant and equipment amounted to EUR 4,167 thousand, (as at 31 December 2022, EUR 3,479 thousand). As at 31 December 2023, land and buildings, including investment property, with the carrying amount of EUR 42,724 thousand were pledged to the banks (as at 31 December 2022, EUR 37,772 thousand). At 31 December 2023, the net book value of right-of-use assets (machinery, equipment and vehicles) was EUR 100 thousand (2022: EUR 123 thousand). 15. Intangible Assets (EUR thousand) Goodwill Software Other assets Total Cost Balance as at 1 January 2023 323 354 56 733 Additions 16 16 Asset written-off (1) (1) Balance as at 31 December 2023 323 369 56 748 Balance as at 1 January 2022 323 367 58 748 Additions 11 11 Asset written-off (24) (2) (26) Balance as at 31 December 2022 323 354 56 733 Amortisation/impairment loss Balance as at 1 January 2023 292 153 53 498 Calculated during the year 40 1 41 Amortisation of asset written-off (1) (1) Balance as at 31 December 2023 292 192 54 538 Balance as at 1 January 2022 292 137 52 481 Calculated during the year 40 1 41 Amortisation of assets written-off (24) (24) Balance as at 31 December 2022 292 153 53 498 Residual value As at 1 January 2023 31 201 3 235 31 252 7 290 As at 31 December 2023 31 177 2 210 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 45 15. Intangible Assets (continued) Amortisation is accounted for in the following way: EUR 4 thousand is included under cost of sales, EUR 38 thousand – administrative expenses (2022: EUR 8 thousand – under cost of sales, EUR 33 thousand – administrative expenses). The goodwill is related to the subsidiary Alinita UAB (construction: conditioning work CGU). The management has estimated that value in use is higher than the carrying amount; therefore; no impairment was recognized for the goodwill. As at 31 December 2023, acquisition cost of fully amortised intangible assets still in use amounted to EUR 28 thousand, (as at 31 December 2022, EUR 108 thousand). 16. Investment Property (EUR thousand) 2023 2022 Balance as at 1 January 32,565 31,400 Reclassification from (to) property, plant and equipment 886 165 Reclassified of project in progress from inventories 212 427 Change in fair value (38+140) 178 573 Balance as at 31 December 33,841 32,565 In 2015, the Company acquired a 14-floor hotel Panevėžys located in Panevėžys, 16.74% of which is rented out to third parties, and the rest of the hotel is not used. The Company has no detailed plans regarding the use of the remaining part of the building yet; however, the building is not planned to be further used in the Company’s activities; therefore, the whole building is classified as an investment property. The fair value measurement has been determined by valuation of the building carried out by the independent property appraisers Ober-Haus UAB, having appropriate professional qualification and relevant valuation experience. The discounted cash flow method was used in the valuation (discount rate – 9%, exit yield – 7%, occupation rate 80–90%; the same assumptions were used in 2023 and 2022). The identified fair value of the above investment property of EUR 1,690 thousand (2022: EUR 1,550 thousand) was attributed to Level 3 in the fair value hierarchy. At the end of the financial year, future minimum lease payments receivable under non-cancellable lease agreements were the following: EUR 155 thousand in less than one year, EUR 70 thousand between one and five years (as at 31 December 2022: EUR 171 thousand in less than one year, EUR 112 thousand between one and five years). Revenue from the hotel premises rent in 2023 amounted to EUR 132 thousand (2022: EUR 123 thousand) and was accounted for under other income (see Note 10). The Group reclassified the operational buildings, storages and other premises to investment property that are rented for third parties. Estimated fair value of these buildings as at 31 December 2023 amounted to EUR 351 thousand, which was evaluated in accordance with the reports of independent real estate appraisers and a percentage of rented space. The assessment of assets was carried out by UAB corporation Matininkai. Assets were evaluated using comparable and income methods, with regard to the larger value. An average discount rate of 11.91% was applied to income method in accordance with weighted average cost of capital. Expected rental receivables of this investment property under non-cancellable contracts as at 31 December 2023 amounted to: EUR 62 thousand in less than one year, EUR 13 thousand – between one and five years (as at 31 December 2022, EUR 88 thousand in less than one year, EUR 114 thousand – between one and five years). AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 16. Investment Property (continued) Revenue from lease in 2023 amounted to EUR 68 thousand (in 2022: EUR 69 thousand) and was accounted under other income. During 2021 and 2020, the Company reclassified the real estate project under development (office building) Šeškinės Projektai UAB from inventories to investment property to achieve the management’s current objectives to earn rentals. Following reclassification of certain assets, accounted for as assets used in Group of companies, the fair value of remaining investment property as at 31 December 2023 was estimated at EUR 31,800 thousand (as at 31 December 2022, EUR 30,664 thousand). In 2023, these assets were measured at fair value in accordance with the Group’s accounting policy on investment property, and an increase in value of EUR 178 thousand (2022: EUR 573 thousand) was accounted for under other income (Note 11). The management considered the consultation of the independent appraiser (Ober-Haus Nekilnojamas Turtas) on the fair value of the project as of 31 December 2023. Key assumptions used by the management in the estimation of the recoverable value of investment as of 31 December 2023 were as follows: discount rate – 8.75% (pre-tax), leased area – 89%, with the cost of 12.36–29.02 EUR/sq. m. per month for lease of premises. At the end of the financial year, future minimum lease payments receivable under non-cancellable lease agreements for office premises were as follows: EUR 2,512 thousand in less than one year, EUR 4,370 thousand between one and five years (2022: EUR 3,038 thousand in less than one year, EUR 6,128 thousand between one and five years). In 2023, lease income comprised EUR 2,386 thousand and was accounted under sales revenue (2022: EUR 2,195 thousand). As at 31 December 2023, the total fair value of the investment property was estimated at EUR 33,841 thousand (2022: EUR 32,565 thousand) and was attributed to Level 3 in fair value hierarchy. 17. Inventories (EUR thousand) 2023 2022 Capitalized costs related to real estate development 3,242 3,882 Other inventories 5,727 5,792 Total inventories 8,969 9,674 Capitalised costs related to real estate development are as follows: (EUR thousand) 2023 2022 Cost: Costs of acquired land and real estate 2,700 2,816 Real estate development project costs 542 1,547 Total cost 3,242 4,363 Write-down: Write-down to net realisable value of projects in progress 0 (481) Total write-down 0 (481) Total capitalised costs 3,242 3,882 Change in write-down of capitalised costs: 2023 2022 Write-down to net realisable value of capitalised costs at the beginning of the period 481 503 Additional write-down (reversal) recognized under administrative expenses (481) (22) Write-down to net realizable value of capitalized costs at the end of the period 0 481 46 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 47 17. Inventories (continued) Write-down of capitalised costs in relation to real estate development projects is measured taking into consideration the expected realisation amounts of these projects, which are based on the assessment of market prices of real estate projects performed by independent appraisers. For each construction project under development a special purpose entity has been established. As at 31 December 2023 and 2022, the Group had the following special purpose entities: Total capitalized costs as of Total capitalized costs as of 31 December 2023, 31 December 2022, carrying amount carrying amount Panevėžio Statybos Trestas AB 2,723 2,477 PST Investicijos UAB 0 194 Ateities Projektai UAB 519 1,211 Total 3,242 3,882 The net realisable value of project developed by Ateities Projektai UAB was assessed based on independent real estate appraiser’s Ober-Haus Nekilnojamas Turtas consultation on possible market price as of 31 December 2023. Income and comparable value approach was applied. In 2022, following the completion of the project implementation stage I, the construction of cottages commenced. The net realisable value of project developed by Panevėžio Statybos Trestas AB in Vilnius (Kudirkos st.) was assessed based on independent real estate appraiser’s Ober-Haus Nekilnojamas Turtas consultation on possible market price as of 31 December 2023. Residual value approach was applied. The decision on the start of the project construction is expected in 2024. Other inventories can be specified as follows: (EUR thousand) 2023 2022 Raw materials and consumables 3,124 4,551 Work in progress and finished goods 2,434 1,035 Goods for resale 261 281 Write-down to net realizable value at the beginning of the year (75) (58) Write-off 8 21 Additional write-down to net realisable value during the period (25) (38) Write-down to net realisable value (92) (75) Total other inventories 5,727 5,792 Change in write-down of other inventory to the net realisable value was included under administrative expenses. 18. Trade Receivables and Contract Assets (EUR thousand) 2023 2022 Trade receivables 16,624 17,327 Contract assets (accrued income based on the stage of completion) 3,176 4199 Receivables from related parties 0 0 Impairment at the beginning of the year (368) (372) Write-off of doubtful trade receivables 12 (10) Repayment of doubtful trade receivables 49 1 Additional impairment/(reversal) during the period 35 13 Impairment at the end of the year (272) (368) Total trade receivables and contract assets 19,528 21,158 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 48 18. Trade Receivables and Contract Assets (continued) The part of trade receivables due from customers is accounted for as non-current trade receivables: EUR 66 thousand as at 31 December 2023, EUR 114 thousand as at 31 December 2022. These amounts are related with non-current retentions as described below. As at 31 December 2023, trade receivables include retentions (retention – a fixed percentage of the total contract price which is paid by the customer when the construction is completed and the bank guarantee in the amount of the retained payment is provided or warranty document of the insurance is provided by the Group) of EUR 2,200 thousand (2022: EUR 4,059 thousand) relating to construction contracts in progress. For impairment of trade receivables refer to Note 4. As at 31 December 2023, the total contract amount attributed to performance obligations under the construction contracts with customers that were outstanding (or partly outstanding) amounted to EUR 103,298 thousand (as at 31 December 2022, EUR 84,906 thousand). Most of these construction projects are expected to be completed and revenue recognised within one year. Information about customer specific contracts in progress as of 31 December 2023 and 2022: (EUR thousand) 2023 2022 Sales by specific customers’ projects in progress, recognised in the statement of comprehensive income during the year 55,180 70,225 Sales by specific customers’ projects in progress, recognised over the contract period 73,625 106,675 Expenses incurred for completing specific customers’ projects in progress, recognised in the statement comprehensive income during the year 52,287 66,197 Expenses incurred for completing specific customers’ projects in progress, recognised in the statement comprehensive income over the contract period 73,699 102,528 Contract assets (accrued income) 3,143 4,199 Contract liability (deferred income) under outstanding contracts at the year-end (Note 25) 772 2,718 Contract liability (payments from customers for purchase of inventories and etc.) 2,250 2,692 Provisions for onerous contracts (Note 25) 108 518 Trade receivables (under the caption of trade receivables and receivables from related parties) 14,812 14,999 19. Other Current Assets (EUR thousand) 2023 2022 Non-financial assets Excess VAT 540 843 Receivable from related parties 0 1,266 Other current assets 564 449 Other current assets, total 1,104 2,558 The Group did not have any term deposits. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 49 20. Cash and cash equivalents (EUR thousand) 2023 2022 Cash at bank 10,047 8,955 Cash on hand 0 0 Cash and cash equivalents, total 10,047 8,955 21. Capital and Reserves The Group’s issued capital consists of 16,350,000 ordinary shares with a nominal value of EUR 0.29 each. The Group’s share capital is fully paid. The holders of the ordinary shares are entitled to one vote per share in shareholder meetings of the Group and are entitled to receive dividends as declared from time to time and to capital repayment in case of decrease of the capital. There were no changes in the issued capital in 2023. The Group did not hold its own shares in 2023 and 2022. The reserves were as follows: (EUR thousand) 2023 2022 Revaluation reserve 3,071 3,355 Legal reserve 734 734 Foreign currency translation reserve (17) 3,682 Total reserves 3,788 7,771 The revaluation reserve relates to the revaluation of land and buildings and is equal to the residual value of revaluation less the related deferred tax liability. Dynamics in revaluation reserve: 2023 2022 Revaluation reserve as at 1 January 3,355 2,008 Revaluation (Note 14) 0 1,479 Depreciation of revaluation (284) (132) Deferred tax on depreciation of revaluation 0 0 Revaluation reserve as at 31 December 3,071 3,355 Legal reserve is a compulsory reserve allocated in accordance with Lithuanian legislation. An annual allocation of at least 5% of the net profit is required until the reserve is not less than 10% of the authorized share capital. The reserve cannot be paid out in dividends. Legal reserve at 31 December 2023 and 2022 was estimated at 10% of the issued capital and was fully formed. The foreign currency translation reserve results from translation differences arising on consolidation of subsidiaries with functional currency which differs from Group’s functional currency. 22. Trade payables (EUR thousand) 2023 2022 Lithuania 15,496 16,327 Latvia 510 445 Poland 1,598 130 Other 255 181 Total trade payables 17,859 17,083 Trade payables are non-interest bearing and normally settled on 30–90 day term. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 50 23. Loans and borrowings (EUR thousand) 2023 2022 Loans 22,943 19,496 Lease liabilities 39 63 Total loans and borrowings 22,982 19,559 Non-current liabilities 18,165 18,863 Current liabilities 4,817 696 Total loans and borrowings 22,982 19,559 Loans can be specified as follows: (EUR thousand) Interest rate Maturity 2023 2022 OP Corporate Bank plc. 3-month Lithuanian branch (loan) EURIBOR+2.44% 07/2026 9,407 9,746 6-month AS Citadele Banka (loan) EURIBOR+2.7% 07/2026 9,416 9,750 OP Corporate Bank plc. 3-month Lithuania (overdraft) EURIBOR+2.54% 01/2024 4,120 0 Total loans 22,943 19,496 Under the contract with bank for using the loan on 31 December 2023 the Group has pledged a right to rent a land plot together with a non-residential building at Ukmergės st. 219, Vilnius owned by its subsidiary Šeškinės Projektai UAB, as a collateral. Other financial liabilities include lease liabilities with the residual value of EUR 39 thousand as at 31 December 2023 (as at 31 December 2022, EUR 63 thousand). AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 51 24. Non-Current and Current Provisions (EUR thousand) 2023 2022 Warranty provisions 436 580 Other 453 393 Total provisions 889 973 Change in provisions: 2023 2023 2023 2022 2022 2022 Warranty Pensions Other Warranty Pensions Other Warranty provision at the beginning of the period 580 384 9 816 288 9 Used during the period (584) (113) (555) (110) Accrued during the year 440 64 109 319 206 Warranty provision at the end of the period 436 335 118 580 384 9 * Represents current and non-current part of provision. Warranty provisions are related to constructions. Based on the legislation of the Republic of Lithuania, the Company has a warranty liability for construction works, the term of which varies from 5 to 10 years after delivery of construction works. Provision for warranties is based on estimates made from historical data of actually incurred costs of warranty repairs. 25. Contract and Other Liabilities (EUR thousand) 2023 2022 Non-financial liabilities: Contract liability (deferred income) under contracts in progress (Note 18) 772 2,718 Contract liability (payments from customers for purchase of inventories and etc.) (Note 18) 2,250 2,692 Accrued vacation reserve 2,305 2166 Salaries and related taxes payable 1,852 1,835 Bonus accrual for employees 313 244 Payable VAT 341 443 Accrued expenses 253 360 Provisions for onerous contracts (Note 18) 108 518 Financial liabilities: Liabilities related to the fine imposed by the Competition Council (Note 27) 4,409 5,775 Operating lease liabilities 110 122 Other liabilities 298 364 Total contract and other liabilities 13,011 17,237 Whereof: Non-current portion 3,739 296 Current portion 9,272 16,941 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 52 26. Earnings and Dividends per Share (EUR) 2023 2022 Net result for the year attributable to equity holders of the Group 3,322,234 525,437 Dividends declared 0 0 Average number of shares 16,350,000 16,350,000 Basic and diluted earnings per share 0.20 0.03 Dividends declared per share 0 0 The Group has no potential shares. Hence the diluted earnings (loss) per share are the same as the basic earnings per share. 27. Contingent Liabilities Guarantees As at 31 December 2023, the bank guarantees of EUR 9,529 thousand issued to third parties on behalf of the Group in connection with the liabilities under the construction contracts performed by the Group (in 2022, EUR 10,603 thousand). The guarantees expire in the period from 4 January 2024 to 30 August 2029. In addition, the Group has guarantees issued by insurance companies for the amount of EUR 14,673 thousand, which are also related to liabilities in the construction contracts (2022: EUR 15,840). The guarantees expire in the period from 30 January 2024 to 21 December 2026. No additional liabilities are recorded in respect of these guarantees in the financial statements other than estimated warranty reserve (Note 24). The property with a carrying amount of EUR 42,724 thousand as at 31 December 2023 (EUR 37,772 thousand as at 31 December 2022) has been pledged to banks, insurance company and the state authority for the guarantee limit, bank guarantees issued and deferral of payables. As at 31 December 2023, the guarantee limit amounted to EUR 15,000 thousand, the balance withdrawn was EUR 9,098 thousand. The guarantee limit agreement is effective until 31 March 2024 with the possibility to issue guarantees until 31 March 2024 that would be valid for 3 years following their date of issue. Guarantees are valid for 5 years following their date of issue if the amount does not exceed EUR 1,500 thousand. As at 31 December 2022, the guarantee limit amounted to EUR 15,000 thousand, the balance withdrawn was EUR 10,456 thousand. Legal contingencies The Group is involved in below described material legal cases: The Competition Council has made a decision as of 20 December 2017 “Regarding Irdaiva UAB and PST AB actions in joint participation in public tenders of buildings renovation and modernization works meeting the requirements of Article 5 of the Competition law of the Republic of Lithuania”. Based on the Competition Council decision, joint activity agreement signed between the Company and Irdaiva UAB for providing joint offers in 24 public tenders organized by Vilniaus Vystymo Kompanija UAB intended to limit competition and violated the requirements of Article 5(1) of the Competition Law of Republic of Lithuania. A fine was set to the Company in total amount of EUR 8,514 thousand. On 3 June 2020, the Supreme Administrative Court of Lithuania announced a non-appealable ruling on the dispute of the Group against the decision of the Competition Council. As a consequence, the Group recognised in the financial statements for the year ended 31 December 2020 the fine amounting to EUR 8,514 thousand and related interest charge amounting to EUR 1,385 thousand, and the bailiff enforcement fee amounting to EUR 396 thousand. The Group recognised the full amounts of fine, interest and enforcement fees in its financial statements for the year ended 31 December 2020, however the management took additional legal actions to reduce the interest and the enforcement fee amounts, as further described below. The Tax Authority informed the participants involved in the enforcement process by the letter No 21915 (individual administrative act) of 12 August 2020 on the decision to set the payment of fine and interest imposed on the Group in equal parts for a period of eight years. The Tax Authority also stated that the bailiff's enforcement fees should not be included in the payment schedule. On 17 AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 53 27. Contingent liabilities (continued) February 2023, the settlement agreement was signed with the Tax Authority, with the fine payable by equal instalments over four years period. On 20 July 2023, the Chamber of Panevėžys of the Panevėžys District approved the settlement agreement between the Group and the Tax Authority of 17 February 2023 regarding the collection of the fine imposed by the Competition Council in enforcement proceedings. The outstanding debt as at the date of conclusion of the settlement agreement, amounting to EUR 5,568,841.30, is divided over a period until 1 February 2027, and is paid in equal installments every month. The Group’s non-current assets with the carrying amount of EUR 4,104,022 were pledged to secure payments. The Chamber of Panevėžys of the Panevėžys District Court investigated the appeal of PANEVĖŽIO STATYBOS TRESTAS AB in a civil case No 2YT-238-1105/2021 regarding the bailiff’s orders by which the enforcement fees were calculated. By the ruling of 8 February 2022, the Court overturned the order No S-20-102-25277 of S. Ramanauskas, a bailiff, dated 7 September 2020, regarding the recovery of enforcement fees in the enforcement proceedings No 0102/20/00638. The parties to the proceedings did not appeal, and thus bailiff's enforcement fees decreased from EUR 396 thousand to EUR 45 thousand. The Chamber of Panevėžys of the Panevėžys District Court investigated the appeal of PANEVĖŽIO STATYBOS TRESTAS AB in a civil case No 2YT-8648-452/2020 [2YT-230-452/2021] regarding the bailiff’s orders by which the interest payable and the enforcement fees were calculated under the Decision No 2S-11(2017) of 20 December 2017 of the Competition Council of the Republic of Lithuania. The Chamber of Panevėžys of the Panevėžys District Court dismissed the appeal by an order of 13 January 2021. This order was appealed by bringing a separate appeal on 20 January 2021. By order of 20 April 2021, the Panevėžys Regional Court upheld the decision of the Chamber of Panevėžys of the Panevėžys District Court unchanged. This decision was appealed in cassation. On 14 April 2022, the Supreme Court of Lithuania overturned the ruling of the Panevėžys Regional Court dated 20 April 2021 and remitted the case to the appeal court for reconsideration. On 14 June 2022, the Panevėžys Regional Court overturned the ruling of the Chamber of Panevėžys of the Panevėžys District Court dated 13 January 2021, and decided this question on the merits: upheld the appeal against the actions of bailiff Saulius Ramanauskas in enforcement proceedings No OI 02/20/00638; repealed the bailiff's order No S-20- 17054 dated 11 June 2020, order No S-20-102- 17225 dated 12 June 2020, order No 20-102-17214 dated 12 June 2020, order No S-20-102-17969 dated 18 June 2020 and order No S-20-102-18809 dated 30 June 2020 concerning the calculation of interest and enforcement fees (bailiff fees), and ordered the bailiff Saulius Ramanauskas to carry out a recalculation of the interest and enforcement fees specified in these orders. On this basis, the interest charged decreased from EUR 1,385 thousand to EUR 252 thousand. There is a civil case in Vilnius District Court based on DG Paupio Verslo Namai UAB (Plaintiff) action against Panevėžio Statybos Trestas AB (civil case No e2-739-863/2024), under which the Plaintiff seeks that the Group and ERGO Insurance SE acting through ERGO Insurance SE Lithuanian branch be ordered jointly and severally to pay EUR 827,917.61; the Group be ordered to pay EUR 397,983.79; and the Group be ordered to pay 6% annual interest from the adjudged amount calculated from the day when the civil case was lodged in the court until complete execution of the judgement and the costs incurred. The dispute arose out of the plaintiff’s allegation that the Group did not properly carry out the exterior facade tile installation works of the apartment building at Aukštaičių g. 10, Vilnius, resulting in several tiles falling off external facade. By judgment delivered by the Court of First Instance on 3 April 2024, the compensation for damages was reduced to EUR 208,141. The judgment can be appealed to the Lithuanian Court of Appeal within 30 days. The management intends to appeal the judgment and is confident that the case will be successfully resolved, therefore no provision has been made for the amount of the claim. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 54 27. Contingent liabilities (continued) The property of EUR 854,736 is pledged to the insurance company to secure fulfilment of the obligations. 28. Related-Party Transactions Related parties are defined as shareholders, employees, members of the Management Board, their close relatives and companies that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with the Group, provided the listed relationship empowers one of the parties to exercise the control or significant influence over the other party in making financial and operating decisions. The Group had sales and purchase transactions in 2023–2022 with the parent of the Hisk AB and with subsidiaries of Hisk AB. Transactions with related parties during 2023 and 2022 were as follows: (EUR thousand) Type of transaction 2023 2022 Sales: Shareholder Hisk AB Goods and services 106 185 Shareholder’s subsidiaries Panevėžio Ryšių Statyba UAB Goods and services 1 Purchases: Shareholder Hisk AB Goods and services 966 593 Shareholder’s subsidiaries (none) Other companies related to the shareholder Scard UAB Services 110 120 Other (EUR thousand) Goods and services 2023 42 2022 38 Receivables: Shareholder Hisk AB (trade receivable) 0 0 Payables: Shareholder Hisk AB 369 269 Shareholder’s subsidiaries Other Other companies related to the shareholder 0 0 Other 4 13 Receivables and payables payment terms between the related parties are up to 30–90 days. Balances at the year-end have no collaterals and all transactions are carried out in cash unless otherwise agreed. There have been no guarantees provided or received for any related party receivable or payable and no allowance has been made for the receivables from related parties by the Group. The balances outstanding with related parties of the Group were not overdue as at 31 December 2023 and 2022. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 55 28. Related Party Transactions (continued) Management remuneration In 2023, wages, salaries and social insurance contributions, payable to the Group`s management and the Board members amounted to EUR 1,598 thousand (2022: EUR 1,518 thousand). For the Group’s management and the Board members, there were no guarantees issued, any other paid or accrued amounts or assets transferred. 29. Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction under current market conditions in the main (or the most favourable) market independent on whether this price is directly observable or established using valuation techniques. As at 31 December 2022 Carrying Fair value amount Financial assets Total Level 1 Level 2 Level 3 Trade receivables 19,528 19,528 Cash and cash equivalents 10,047 10,047 Financial assets, total 29,575 10,047 19,528 Financial liabilities Interest bearing loans and borrowings (27,391) (27,391) (Finance) lease payments (39) (39) Trade payables (17,859) (17,859) Total financial liabilities (45,289) (45,289) As at 31 December 2022 Carrying Fair value amount Financial assets Total Level 1 Level 2 Level 3 Trade receivables 21,158 21,158 Cash and cash equivalents 8,955 8,955 Financial assets, total 30113 8,955 21,158 Financial liabilities Interest bearing loans and borrowings (19,496) (19,496) (Finance) lease payments (63) (63) Trade payables (17,083) (17,083) Fine payable under the decision of the Competition Council (Note 27) (5,775) (5,775) Total financial liabilities (42,417) (42,417) There were no transfers between levels of the fair value hierarchy in 2023 and 2022 at the Group. The following methods and assumptions are used by the Group to estimate the fair value of the financial instruments not carried at fair value: Cash Cash represents cash at banks and on hand stated at value equal to the fair value. AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 56 29. Fair Value of Financial Instruments (continued) Receivables The fair value of trade and other receivables and loans granted is estimated at the present value of future cash flows, discounted at the market rate of interest at the reporting date. Fair value of short- term trade and other receivables with no stated interest rate is deemed to approximate their face value on initial recognition and carrying value on any subsequent date as the effect of discounting is immaterial. The fair value of non-current trade receivables was estimated to approximate carrying value as discounting effect was determined to be not material. The fair value of loans granted was estimated to approximate carrying value as majority of the loans are subject of market level variable interest. Payables, loans and borrowings, and lease liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Fair value of current trade payables with no stated interest rate is deemed to approximate their face value on initial recognition and carrying value on any subsequent date as the effect of discounting is immaterial. The fair value of other liabilities is considered to approximate to their carrying amount due to short maturities. The fair value of borrowings (overdraft) was estimated to approximate carrying value as it is subject to variable market interest rates. 30. Non-Controlling Interests As at 31 December 2023 and 2022, Panevėžio Statybos Trestas AB held 95.6% and 69.0% of ordinary registered shares in subsidiaries Vekada UAB and PST Investicijos UAB, respectively, and is considered a controlling shareholder of the subsidiaries. The main financial indicators of the subsidiary that has non-controlling interests (thousand EUR): PST Investicijos UAB 2023 2022 Non-controlling interest,% 31.0 % 31.7 % Non-current assets 75 1 Current assets 185 4,926 Total assets 260 4,927 Non-current liabilities 9 9 Current liabilities 1 40 Total liabilities 10 49 Net assets 250 4,878 Net assets attributable to non-controlling interest 78 1,546 Revenue 4,075 372 Expenses (273) (339) Net profit (loss) 3,802 33 Other comprehensive income 0 0 Net profit/(loss) attributable to non-controlling interest 7 10 Other comprehensive income attributable to non-controlling interest 0 0 Cash flows from operating activities (548) (3,767) Cash flows used in investing activities 0 0 Cash flows from/used in financing activities 0 0 Net increase/(decrease) in cash and cash equivalents (548) (3,767) AB „Panevėžio statybos trestas“AB Consolidated Financial Statements 57 30. Non-controlling interests (continued) Vekada UAB 2023 2022 Non-controlling interest,% 4.4 % 4.4 % Non-current assets 273 310 Current assets 1,053 1,280 Total assets 1326 1,590 Non-current liabilities 0 0 Current liabilities 434 491 Total liabilities 434 491 Net assets 892 1,099 Net assets attributable to non-controlling interest 39 48 Revenue 2,568 3,085 Expenses (2,750) (3,148) Net profit (loss) (182) (63) Other comprehensive income Net profit/(loss) attributable to non-controlling interest (8) (3) Other comprehensive income attributable to non-controlling interest 0 0 Cash flows from operating activities 21 60 Cash flows used in investing activities 0 (4) Cash flows from/used in financing activities 0 0 Net increase/(decrease) in cash and cash equivalents 21 (56) 31. Change in Liabilities Arising from Financing Activities As at 31 Accrued As at 31 December Dividends Cash Currency December (EUR thousand) 2022 declared outflows exchange 2023 Dividends payable 27 27 Loans received and interests payable 19,496 4,120 (673) 22,943 (Finance) lease liabilities 63 (24) 39 Total 19,586 4,120 (697) 23,009 32. Events after the End of the Reporting Period On 23 January 2024, Panevėžio Statybos Trestas AB, former managing director and insurers R&Q Syndicate Management Limited and Marco International Insurance Company Limited signed a settlement agreements, whereby amicably discontinuing all court and arbitration disputes regarding the civil liability of the former managing director of PST (regarding the fine imposed by the Competition Council of the Republic of Lithuania under the resolution No 2S-11 (2017) of 20 December 2017) and the payment of the related insurance benefit. In line with the settlement agreements, the insurers paid EUR 1,200,000 in favour of PST, and PST waived all its claims against the insurers and the former managing director. Managing director Tomas Stukas 09/04/2024 Chief Accountant Danguolė Širvinskienė 09/04/2024 58 Company’s and Consolidated Annual Report, Governance Report, Consolidated Report of Social Responsibility, and Remuneration Report of Panevezio statybos trestas AB for 2023 59 I. Consolidated Annual Report 1. Accounting period covered by the Annual Report This Company’s and Consolidated Annual Report for the year 2023 covers the period from 1 January 2023 until 31 December 2023. 2. References and additional clarifications on the data included in the Annual Report The auditor of the company is Grant Thornton Baltic UAB. In this report, Panevezio statybos trestas AB can also be referred to as ‘the Company’, and the Company together with its subsidiary companies can be referred to as ‘the Group’. 3. The main data about the Company (the issuer) Name of issuer Public limited liability company Panevezio statybos trestas Authorised capital 4,741,500 Euros Address of registered office P. Puzino Str. 1, LT-35173 Panevezys, Lithuania Telephone (+370 45) 505 503 Fax (+370 45) 505 520 Legal-organisational form Public limited liability company Date and place of registration 30 October 1993, Panevezys City Board Registration No. AB 9376 Register code 147732969 VAT code LT477329610 LEI code 529900O0VPCGEWIDCX35 Administrator of Legal Entity Register State Enterprise Centre of Registers E-mail pst@pst.lt Website www.pst.lt 4. Nature of the main activities of the issuer The main area of activities of the Company and its subsidiaries (the Group) is design and construction of buildings, structures, equipment and communications and other objects for various applications in and outside Lithuania, sale of building materials, production and real estate development. In addition to the listed activities, the Company is engaged in rent of premises and machinery. 60 5. The companies included in the Group of Panevezio statybos trestas AB As of 31 December 2023, the Group of Panevezio statybos trestas AB included the following companies: Subsidiary company Registration date, register administrator Company code Registered address Telephone, fax, e-mail, website Portion of shares held (per cents) Skydmedis UAB 17 June 1999 State Enterprise Centre of Registers 148284718 Pramones Str. 5, Panevezys Tel. (+370 45) 467626 Fax (+370 45) 460259 info@skydmedis.lt www.skydmedis.lt 100 Vekada UAB 16 May 1994 State Enterprise Centre of Registers 147815824 Tinklu Str. 7, Panevezys Tel. (+370 45) 461311 Fax (+370 45) 461311 info@vekada.lt www.vekada.lt 95.6 Alinita UAB 8 December 1997 State Enterprise Centre of Registers 141619046 Tinklu Str. 7, Panevezys Tel. (+370 45) 467630 Fax (+370 45) 467630 info@alinita.lt www.alinita.lt 100 Kingsbud Sp.z o.o. 11 August 2010 District Court in Bialystok, XII Economic Department of National Court 200380717 A. Patli Str. 12, 16-400 Suwalki, Poland Tel. (+48 875) 655 021 Fax (+48 875) 655 021 biuro@kingsbud.pl www.kingsbud.lt 100 PS Trests SIA 22 May 2000 Centre of Registers, Republic of Latvia 40003495365 Skultes Str. 28, Skulte, Marupes Parish, Riga Region, Latvia Tel. +371 29525066 100 Seskines projektai UAB 9 November 2010 State Enterprise Centre of Registers 302561768 Ukmerges Str. 219, Vilnius Tel. (+370 615) 54090 info@psti.lt gbujokas@psti.lt 100 Ateities projektai UAB 25 April 2006 State Enterprise Centre of Registers 300560621 Ukmerges Str. 219, Vilnius Tel. (+370 5) 2102130 Fax (+370 5) 2102131 info@psti.lt gdieckuviene@psti.lt 100 PST investicijos UAB 23 December 1998 State Enterprise Centre of Registers 124665689 Ukmerges Str. 219, Vilnius Tel. (+370 5) 2102130 info@psti.lt gbujokas@psti.lt 68 Tauro apartamentai UAB 23 October 2018 State Enterprise Centre of Registers 304937621 Ukmerges Str. 219, Vilnius Tel. (+370 610) 09222 gbujokas@psti.lt 100 Hustal UAB 16 June 1999 State Enterprise Centre of Registers 148284860 Tinklu Str. 7, Panevezys Tel. (+370 45) 585087 www.hustal.eu 100 Aliuminio fasadai UAB 2 January 2020 State Enterprise Centre of Registers 305412441 Pramones Str. 5, Panevezys Tel. (+370 686) 32727 info@alfasadai.lt www.alfasadai.lt 100 61 6. Nature of operating activities of the companies included in the Group Skydmedis UAB – production, construction and outfit of pre-fabricated timber panel houses. Panel houses are the main product of the company. Products are successfully exported to Norway, Sweden, Switzerland, Iceland and other countries. Hustal UAB – design, fabrication and erection of steel structures. The company also supplies steel structures for other industries where steel items are required. Activity and sale of the company are focused on the Scandinavian market. Vekada UAB – installation of electrical systems. Alongside with the usual electrical engineering activities, works in the low current fields are carried out: video surveillance systems, security and fire alarm systems, utility system control. Alinita UAB – installation of heating, ventilation and air-conditioning systems in buildings, indoor water supply, waste water and fire-fighting systems, design, start-up and commissioning of indoor utility systems. Kingsbud Sp. z o.o. – wholesale of construction materials. Kingsbud Sp. z o.o. has a branch established in Lithuania, which focuses on wholesale of stoneware and glazed tiles for indoor and outdoor application. PS Trests SIA – construction activities. The company was established for searching of new markets and carrying out construction activities in Latvia. Seskines projektai UAB – real estate development and rent. Ateities projektai UAB – real estate preparation and sale. PST investicijos UAB – real estate preparation and sale. Tauro apartamentai UAB – development of real estate projects. Aliuminio fasadai UAB – production of aluminium profile systems, aluminium framed windows and doors. 7. Contracts with the intermediary of public trading in securities The Company has the contract for securities accounting signed with Siauliu bankas AB. 8. Data on trading in securities of the issuer in regulated markets The ordinary registered shares of Panevezio statybos trestas AB have been on the Official Trading List of Nasdaq Vilnius AB since 13 July 2006 (company symbol PTR1L). Share type Number of shares, pcs. Par value, Euros Total par value, Euros Emission code ISIN Ordinary registered shares (ORS) 16,350,000 0.29 4,741,500 LT0000101446 62 Comparison of PTR1L Panevezio statybos trestas and OMX Vilnius Benchmark GI indexes in 2023 Company share price variation at Stock Exchange Market Nasdaq Vilnius for the period 2019 through 2023 (Euros) Company share price variation at Stock Exchange Market Nasdaq Vilnius in 2023 (Euros) 63 Table 1. Information on the Company share price at Stock Exchange Market Nasdaq Vilnius for the period 2019 through 2023: Indicator 2023 2022 2021 2020 2019 Highest price, Euros 0.582 0.694 0.838 0.85 0.878 Lowest price, Euros 0.45 0.50 0.53 0.52 0.71 Average price, Euros 0.514 0.564 0.677 0.629 0,78 Share price as of the end of reporting period, Euros 0.475 0.518 0.66 0.57 0.75 Traded volume 772,677 991,215 2,935,832 1,980,134 986,685 Turnover, mln. Euros 0.40 0.56 1.99 1.25 0.77 Capitalisation, mln. Euros 7.78 8.47 10.79 9.32 12.26 9. Fair review of position, performance and development of the Company and the Group, description of the principal risks and uncertainties the company faces Key events of the reporting period The key events that occurred during 2023 and were published through the GlobeNewswire information system are listed below. 1 February 2023. The General Extraordinary Meeting of Shareholders was reconvened to take the resolution on approval of the agreed material conditions for the settlement agreement with the State Tax Inspectorate. 27 April 2023. The Ordinary General Meeting of Shareholders of Panevezio statybos trestas AB took place. The Ordinary General Meeting of Shareholders did not come to the decision to pay dividends. 27 July 2023. The Extraordinary General Meeting of Panevezio statybos trestas AB took place. The Extraordinary General Meeting of Shareholders selected the audit company Grant Thornton Baltic UAB to carry out the audit of the financial statement sets of Panevezio statybos trestas AB and the companies of Panevezio statybos trestas AB Group for the years 2023 and 2024, and approved the terms and conditions of payment for the audit services. 31 July 2023. The Board of Panevezio statybos trestas AB (PST) has appointed Tomas Stukas as the company's CEO. Egidijus Urbonas, who has held this position for the last three years, will remain in the Group's management team and continue his career as PST Director of Construction. 1 August 2023. By the court judgement dated 20 July 2023, the Panevezys Chamber of the Panevezys District Court approved the settlement agreement dated 17 February 2023 between the company and the State Tax Inspectorate at the Ministry of Finance of the Republic of Lithuania on recovery of the fine imposed by the Competition Council in the enforcement case. 5 October 2023. Panevezio statybos trestas AB (PST) has signed a civil contract with Juodeliai UAB for construction of the second production building and reconstruction of utility networks. This extension is planned in the subdivision of the company operating in the Marijampole Municipality. The contract value totals 13.5 mln. Euros, VAT inclusive. The total area of facilities amounts to approximately 14,700 square meters. Completion of the works is scheduled for the end of June 2024. 26 October 2023. Panevezio statybos trestas AB has signed a 17 mln. Euros (VAT inclusive) order with one of the largest food production companies in Lithuania, Kauno grudai AB, for construction of production and industrial building at Fortu Str. 9, Alytus. The total area of the building will be 7.4 thousand square meters, completion of the works is scheduled 11 months after the date of the signed contract. 30 October 2023. The Extraordinary General Meeting of Shareholders of Panevezio statybos trestas AB took place. The Ordinary General Meeting of Shareholders approved the new wording of the Articles of Association of Panevezio statybos trestas AB. The member of the Board of Panevezio statybos trestas AB Vaidas Grincevicius was removed from office from 30 October 2023. Darijus Vilcinskas was elected as an independent member to the Board. 64 6 November 2023. Panevezio statybos trestas AB has signed a 13 mln. Euros (VAT inclusive) order with Sausiu logistikos parkas UAB for construction of a storage building at Logistikos Str. 30, Sausiai Village, Lentvaris Subdistrict, Trakai District. The total area of the building will be nearly 10 thousand square meters, completion of the works is scheduled 12 months after the date of the signed contract. The services of construction management and technical supervision will be provided by Viconus UAB. In 2023 the Company has successfully completed several major construction projects, such as Construction of Vilnius Lazdynai Swimming Pool opened to public, Construction of Laboratory and Education Blocks for Faculties of Mechanics, Electronics and Transport Engineering at VILNIUS TECH. The modernization projects of apartment buildings have been completed in Klaipeda. In 2023 the works on several wind farm projects were completed, where the Konstrukcija branch carried out the installation of foundations for the wind turbines. In addition to that, activities are continued in such projects as Modernisation of Oil Refining Plant of ORLEN Lietuva AB in Mazeikiai, Reconstruction of Panevezys City Sports Centre Aukstaitija – Construction of Swimming Pool, Reconstruction of Wroblewski Library of Lithuanian Academy of Sciences. Over the year 2023, the Company signed the contracts and started the projects of apartment building renovation. More than once the Company has been awarded for successfully implemented projects, their complexity, high quality and organization of complicated activities. In December 2023, the awards of the Lithuanian Product of the Year were arranged by Lithuanian Confederation of Industrialists for the 27th time where Panevezio statybos trestas AB has been awarded the gold medal for the Lazdynai Swimming Pool project in the category of construction and construction material industry. In 2023, the following branches continued their operation in the structure of the Company: Gerbusta, focusing on construction of utility networks and landscaping, Pastatu apdaila, carrying out indoor and outdoor finishing works, Konstrukcija, where production capacities are concentrated, this branch carries out civil and special construction works, Vilnius branch Genranga, performing general contracting activities and project management in the Vilnius Region, and Klaipstata, performing general contracting activities and project management in the Klaipeda Region. The Company has permanent establishments in the Republic of Latvia and Kingdom of Sweden. In 2023, the companies of the Group successfully continued their activity inside and outside Lithuania. 97 per cents of all orders of Hustal UAB engaged in fabrication of steel structures were directed to Scandinavian countries in 2023. Skydmedis UAB, which is producing pre-fabricated timber panel houses, sells nearly all of their products in the foreign market. 94 per cents of the company’s revenue were for the products sold in the Scandinavian countries. Vekada UAB and Alinita UAB‚ which specialize in installation of indoor heating, ventilation and conditioning, water supply and waste water systems, and in installation of electric systems, renewable energy and low current fields, implemented the projects in Lithuania. The most advanced aluminium profile systems, aluminium windows and doors, façades are produced at Aliuminio fasadai UAB. PST investicijos UAB, Ateities projektai UAB and Seskines projektai UAB are the real estate development companies. Ateities projektai UAB develops the project of residential houses in Kunigiskes. PS Trests SIA operating in Latvia, in 2023 continued to carry out the construction works it had started. In 2023, the wholesale of building materials is further developed. Kingsbud Sp. z o.o, the company operating in Poland, is engaged in this. Key events after the reporting period (in the year 2024) 23 January 2024. Panevezio statybos trestas AB, the former CEO of the Company, D. Gesevicius, and the insurers R&Q Syndicate Management Limited and Marco International Insurance Company Limited signed the settlement agreements, on the basis of which all legal and arbitration disputes regarding the civil liability of the former CEO of the Company, D. Gesevicius, (for the fine imposed by the decision No. 2S-11(2017) of the Competition Council dated 20 December 2017) and payment of the insurance benefit related to it will be amicably ended. Referring to the concluded settlement agreements, the insurers will pay the sum amounting to 1 200 00 Euros in favour of Panevezio statybos trestas AB, and Panevezio statybos trestas AB will waive all its claims against the insurers and the former CEO, D. Gesevicius. 65 Risk factors related to the Company’s activities: In their operation, both the Company and the Group face various types of risks, such as legal regulation, severe competition, shortage of qualified labour, cyclical nature of economy, consistency of orders, volatile material prices in the global market, macroeconomic factors, damping. However, only a few of them may have significant impact on the performance results of the Group and the Company. The main factors that create business risk for the Company and the Group are competition in the construction market and changes in the demand for construction services. The demand for construction services also depends heavily on the volume of investments and financing received from the EU structural funds. Increase and variation of material and service prices make the process of the project budgeting and possibility to complete the already started projects based on the planned costs more difficult. This results in extra risk for performance of fixed price construction contracts and reduces profitability of projects. Furthermore, activity of the Company and the Group is influenced by the economic situation (economic cycles), geopolitical changes in Lithuania and the countries where the Group companies operate, Russia's military invasion of Ukraine, and remaining risks related to COVID-19. Although there is still some uncertainty about the trends in global economic development as well as regional and global crisis in future. Information on the types of financial risks and risk management is provided in the Notes to the Separate Financial Statements (Note 4) and Consolidated Financial Statements (Note 4). Legal uncertainties are provided in the Notes to the Separate Financial Statements (Note 28) and Consolidated Financial Statements (Note 27). 10. Analysis of financial and non-financial performance, information related to environmental and employee matters In 2023, the consolidated revenue of the Group of Panevezio statybos trestas AB amounted to 119.828 mln. Euros, whereas in 2022 the consolidated revenue was 115.84 mln. Euros. Over the reporting period, the net profit of the Group amounted to 3.322 mln. Euros and in 2022 the Group had the net profit in the amount of 0.525 mln. Euros. In May 2023, Baltevromarket OOO (Russia, Kaliningrad), the subsidiary company of PST investicijos UAB was liquidated. Liquidation of this company have had a significant impact on the results of the Group. Elimination of the company resulted in additional income from financial activities for the Group amounting to 3.8 mln. Euros. Baltevromarket OOO is the last liquidated Russian company in the balance of the Group. Over the year of 2023, the turnover of Panevezio statybos trestas AB amounted to 80.751 mln. Euros, and in 2022 the turnover of Panevezio statybos trestas AB was 79.222 mln. Euros. In 2023, Panevezio statybos trestas AB has suffered the net loss in the amount of 2.279 mln. Euros, the net loss in 2022 was 1.720 mln. Euros. 66 Table 2. Performance (thousands Euros) of the Company and the Group of Panevezio statybos trestas AB for the period 2021 through 2023: Group Items Company 2021 2022 2023 2021 2022 2023 98,451 115,840 119,828 Revenue 65,721 79,22 80,751 68,283 106,310 107,588 Cost of sales 59,888 77,066 76,909 12,168 9,530 12,240 Gross profit 5,833 2,156 3,842 12.36 8.23 10.21 Gross profit margin (per cents) (API) 8.88 2.72 4.76 2,414 -1,067 440 Typical operating result -589 -4,978 -4,221 2.45 -0.92 0.37 Typical operating result from turnover (per cents) -0.90 -6.28 -5.23 3,477 266 1,638 EBITDA 1 (API) 259 -4,192 -3,551 3.53 0.23 1.37 EBITDA margin (per cents) (API) 0.39 -5.29 -4.40 3.499 525 3,322 Net profit (API) 304 -1,720 -2,279 3.55 0.45 2.77 Nets profit (loss) margin (per cents) 0.46 -2.17 -2.82 0.214 0.032 0.203 Earnings per share (Euros) (EPS) 2 (API) 0.019 -0.105 -0.139 12.58 1.75 10.89 Return on equity (per cents) (ROE) 3 (API) 1.38 -7.89 -11.22 4.41 0.60 3.81 Return on assets or asset profitability (ROA) 4 (API) 0.55 -3.40 -4.54 6.65 0.99 6.16 Return on investments (ROI) 5 (API) 1.29 -7.67 -10.01 1.30 1.23 1.26 Current liquidity ratio 6 (API) 1.12 1.02 1.14 1.00 0.95 0.98 Critical liquidity ratio 7 (API) 0.94 0.85 0.96 0.34 0.35 0.35 Equity ratio 8 (API) 0.46 0.41 0.40 0.65 0.64 0.65 Debt ratio 9 (API) 0.54 0.59 0.60 1.90 1.82 1.85 Debt to equity ratio 10 (API) 1.19 1.46 1.49 1.79 1.88 1,85 Book value per share 11 (API) 1.35 1.31 1.17 0.37 0.28 0.26 Price-to-book ratio (P/B ratio) 12 (API) 0.49 0.39 0.41 3.08 16.13 2.34 Price-to-earnings ratio (P/E) 13 (API) 35.50 -4.92 -3.41 1 EBITDA = profit before taxes, interest, depreciation and amortization. The essence of EBITDA indicator is to determine the most objective profit (loss) of the company, which is least dependable on circumstances (least variable). 2 Earnings per share (Euros) = net profit (loss) / number of issued shares. 3 Return on equity (per cents) (ROE) = net profit / equity capital (a portion equity capital belonging to the shareholders). 4 Return on assets (ROA) or asset profitability = net profit / assets. 5 Return on investments (ROI) = net profit / (assets-current debt). 67 7 Critical liquidity ratio = (current assets – inventories) / current liabilities. 8 Equity ratio = equity capital / assets. 9 Debt ratio = liabilities / assets. 10 Debt to equity ratio = liabilities / equity. 11 Book value per share = equity capital / number of shares. 12 Price-to-book ratio (P/B ratio) = share price as of the end of reporting period / share book value. 13 Price-to-earnings ratio (P/E) = share price as of the end of reporting period / net profit allocated for one share. Panevezio statybos trestas AB uses Alternative Performance Indicators to better disclose the financial performance of the Group and the Company. The description of these indicators and methodology for their calculation are available on the Company's website https://www.pst.lt/en/finansines-ataskaitos The main revenue of the Company by activity types is from construction and erection activities. In 2023, the revenue of the Group from construction and erection activities totalled 74.3 per cents, the revenue from real estate development and rent was 2.4 per cents, the revenue from finished products and other revenue amounted to 23.3 per cents, whereas in 2022, the revenue of the Group from construction and erection activities totalled 75.5 per cents, the revenue from real estate development and rent was 1.6 per cents, the revenue from finished products and other revenue amounted to 22.9 per cents. Revenue distribution by activity types for the Group: The main activities of the Company were performed in Lithuania and made 98.01 per cents of all works carried out by the Company in 2023 compared to 99.02 per cents in 2022. The revenue of the Group from the works performed inside the country made 81.1 per cents of the revenue, whereas in 2022 it was 83.6 per cents. In 2023 and 2022, the revenue of the Group in the Scandinavian countries was respectively 17.1 and 15.25 per cents of total revenue. Operating revenue distribution by countries for the Company: 68 Operating revenue distribution by countries for the Group: Environment protection Work quality, sustainability, environment protection, occupational health and safety play a very important role in activities of Panevezio statybos trestas AB. Quality Management (ISO 9001), Environmental Management (ISO 14001) and Occupational Health and Safety Management (OHSAS 18001) Systems introduced and available at the Company allow taking proper care of these significant factors. Assessment of occupational risk is carried out, analyses are performed and measures for risk reduction or elimination are taken on each site. For the purposes of environment and resource protection and sustainability, ensuring pollution prevention, in the beginning of each project the environmental plan including specific measures for control of significant aspects of environment protection and activities performed is prepared. The companies of the Group also have Quality, Environmental and Occupational Health and Safety Management Systems in accordance with the requirements of LST EN ISO 9001:2015, LST EN ISO 14001:2015 and LST ISO 45001:2018 introduced and successfully functioning. In 2023, the Lithuanian National Accreditation Bureau accredited the Construction Laboratory of the Company according to LST EN ISO/IEC 17025:20185 thus granting it the right to perform tests of building materials for the period of 5 years. Employees Professional, competent and responsible employees are the biggest asset of the Company. Therefore, much attention is paid to motivation of employees: environment favourable for generation and implementation of new ideas is being created and sharing of information is being promoted. In modern environment, competence of employees is one of the key factors describing competitiveness of the company. Taking this factor into account, the company encourages employees in all organizational levels to learn and improve their skills. The employees are motivated not only by material incentives – competitive salaries, progressive bonus system but also by exceptional quality of working environment. As of 31 December 2023, the number of employees in the Group was 762, in the Company – 491. As of 31 December 2022, the number of employees in the Group was 805, in the Company – 536. 69 Table 3. Average number of employees in 2022 and 2023: Average number of employees 2022 2023 Group Company Group Company Managers 22 11 22 11 Specialists 304 224 309 229 Workers 486 310 519 336 Total 813 544 850 576 Table 4. Education level of the Group employees as of the end of the period: PST Group employees Payroll number Higher university level education Higher non- university education Junior college education Secondary education Incomplete secondary education Managers 22 21 0 1 0 0 Specialists 288 214 37 22 15 0 Workers 452 19 8 64 324 37 Total 762 254 45 87 339 37 Employment contracts do not include any special rights and obligations of employees or some part of them. In 2023, the Company also paid much attention to qualification improvement, safety (zero fatalities), welfare, diversity, equality and involvement of employees. Training in the Company is done in two directions using: 1. Services of training institutions (external training); 2. Services of higher education institutions (employee studies). 11. Important events having occurred since the end of the preceding financial year Information on key events having occurred after the end of the financial year is provided in the Notes to the Separate Financial Statements (Note 32) and Consolidated Financial Statements (Note 32), also refer to Section 13 of this Annual Report. 12. Information on research and development activities performed by the Company and the Group The Company and companies of the Group continually pay much attention to increase of operational management efficiency, improvement of construction work quality and introduction of modern technologies. We are looking for the ways to make activities more efficient, apply innovative and resource-saving process management methods, improve working conditions of employees, improve quality of services. Realizing that construction activities leave a fairly significant footprint for nature and people, we make emphasis on the sustainability issue in our operation. We strive to analyse the impact of our operation on the environment and implement the solutions to consistently reduce the emissions of CO 2 , negative influence on the health of our employees, surrounding communities and nature. By optimizing production processes, we aim to reduce the amount of energy used in our activities. We invest in more effective work equipment, technologies allowing to generate and use green energy. To maintain the highest competence in the construction sector, the Company in cooperation with our partners strives for a wider application of the digital model (BIM) principles in development project management. 70 13. Operation plans and forecasts of the Company and the Group In 2023, the Lithuanian construction market was significantly influenced by the overall macroeconomic situation of the country and the whole Europe. Economic activity was reduced throughout the EU, and many countries, including Lithuania, were in fixed recession. The change in real GDP in Lithuania was negative by about -0.2%. This had a direct impact on the slowdown of investments, including in the real estate sector. Panevezio statybos trestas AB always diversifies projects in progress according to different sectors, i.e. implements construction projects in the residential, industrial, logistics, green energy, and public sectors. This guarantees a stable portfolio of the Company. Despite the difficult geopolitical situation, in 2024 economic forecasts show a positive trend, growth of about 1.5% of GDP in Lithuania is expected. The existing portfolio of signed contracts- construction projects allows Panevezio statybos trestas AB to forecast growth. The companies of Panevezio statybos trestas AB forecast maintaining stable activity volumes. In 2024, the Company and the Group will continue to investing in making processes more efficient through digitization, implement innovations, and sustainably develop activities taking into account the benefits for clients, employees, business partners and shareholders. 14. Authorised capital of the issuer and its structure As of 31 December 2023, the authorised capital of the Company amounted to 4,741,500 Euros divided into 16,350,000 ordinary registered shares (ORS), the nominal value of each share being 0.29 Euros. All shares are fully paid. The proof of ownership is the record in the securities accounts. The Company has not acquired any shares of the Company. On 31 December 2023, the total number of the shareholders was 1,759. Table 5. Distribution of shareholders by residence country and legal form: Investors Number of shares, pcs. Portion of authorized capital, per cents Foreign investors Legal entities 1,351,015 8.3% Natural persons 1,401,132 8.6% Local investors Legal entities 9,850,635 60.2% Natural persons 3,747,218 22.9% Table 6. Shareholders holding or controlling more than 5 per cents of the authorised capital of the Company: Full name of a shareholder (company name, type, headquarter address, company code) Number of ordinary registered shares held by a shareholder under ownership right (pcs.) Portion of the authorized capital held (%) Portion of votes granted by the shares held under ownership right (%) HISK AB S. Kerbedzio Str. 7, Panevezys Company code: 147710353 8,138,932 49.78 49.78 Freely floating shares (shareholders holding or controlling less than 5 percents of authorized capital) 8,211,068 50.22 50.22 None of the shareholders of the issuer has any special control rights. All shareholders have equal rights prescribed by Section 4 of the Law on Companies of the Republic of Lithuania. The number of shares carrying votes at the General Meeting of Shareholders of Panevezio statybos trestas AB is 16,350,000, one ordinary registered share of the Company carries one vote at the General Meeting of Shareholders. 71 15. Dividends The decision to pay dividends is taken and the amount to be paid as dividends is set by the General Meeting of Shareholders. The Company pays the allocated dividends within 1 month from the date when decision on profit appropriation has been taken. The persons who were the shareholders of the Company at the end of the tenth business day from the General Meeting of Shareholders that adopted the relevant decision are entitled to the dividends. Dividends are taxable in accordance with the Law on Income Tax of Individuals and the Law on Corporate Income Tax of the Republic of Lithuania. The Ordinary General Meeting of Shareholders of Panevezio statybos trestas AB that took place on 27 April 2023 did not come to the decision to pay dividends. 16. Information on significant transactions between the related parties All transactions with related parties are provided in the Notes to the Separate Financial Statements (Note 29) and Consolidated Financial Statements (Note 28). 17. Published information In accordance with the procedure established by the laws of the Republic of Lithuania, all material events related to operation of the Company and information on the time and place of the General Meeting of Shareholders are published on the website of the Company https://www.pst.lt/investuotojams and on the stock exchange NASDAQ Vilnius AB (www.nasdaqomxbaltic.com). 72 Governance Report Information on compliance with the Corporate Governance Code The information on compliance with the Corporate Governance Code is provided in Appendix 1 to the Annual Report. Panevezio statybos trestas AB in principle complies with the recommendatory Governance Code for the companies listed at NASDAQ OMX Vilnius. Referring to the Articles of Association of the Company, the governance bodies of the Company include the General Meeting of Shareholders, the Board and the Managing Director. According to the Law on Companies of the Republic of Lithuania, either two (supervisory and management) or one collegial management body may be set up in the Company at the discretion of the Company. As no Supervisory Board is set up in the Company, the Board is elected, which performs the supervision functions pursuant to the Law on Companies of the Republic of Lithuania. Following the Articles of Association of the Company, the Board is set up of 5 members, which are elected for the period of four years. The members of the Board represent the shareholders and perform the supervisory and control functions. Only the Audit Committee, which is elected for the period of one year, is formed in the Company. The functions of the Nomination and Remuneration Committees are performed by the Board. The system of the corporate governance ensures fair treatment of all shareholders, including minority and foreign shareholders, and protects the rights of the shareholders. The management system of the Company ensures that any information on all essential issues, including financial situation, operation and Company management, is disclosed in a timely and accurate manner. The Audit Committee of the Company gives recommendations to the Board on nomination of an auditing company/auditor. The Board selects the candidate for the auditing company/auditor and submits it to the General Meeting of Shareholders for approval. This ensures independence of the conclusions and opinion provided by the auditing company. Information on extent of risk and risk management Risk management is a part of strategic management and integral to the day-to-day operations of the Group. In managing risks, the main objective of the Group is to identify higher and significant risks and manage them in the optimal way. The following financial risks are faced within the Group: credit, liquidity, market, business and operational. The Board is responsible for setting up and maintaining the risk management structure. The risk management policy of the Group is aimed at identifying and analysing the risks faced by the Group, introduction and maintenance of appropriate limits and controls. The risk management policy and risk management systems are reviewed at regular intervals to reflect changes in market conditions and operation of the Group. The Group seeks to create a disciplined and constructive environment for risk management where all employees know their roles and responsibilities. Based on the credit risk policy established by the Group, standard payments and terms are only offered after credit standing of each new client has been assessed. The potential credit risk for the clients of the Group and the Company is managed through continuous monitoring of outstanding balances. The aim to ensure that the services are provided to reliable clients and do not exceed the permissible credit risk limit is continuously maintained. The clients failing to meet the established limit may only make purchases with the Group after paying prepayments. The Group manages the liquidity risk to ensure, as far as possible, sufficient liquidity, which allows fulfilling its obligations under both normal and complex conditions without incurring unacceptable losses and without facing the risk to lose reputation of the Group. The Company and the Group strives to maintain sufficient amount of cash and cash equivalents or secure of appropriate credit instruments so as to fulfil their obligations. The market risk is the risk that changes in market prices, for example, changes in exchange rates and interest rates will affect the result of the Group or the value of available financial instruments. The purpose of the market risk management is to manage open positions of risk in order to optimize returns. 73 The business risk is related to the Group's entry into new markets, segments, management of available inventories and investments, and execution of construction contracts. One of the peculiarities related to construction activities is that the fulfilment of concluded construction contracts is a long-term process, which makes the sector inert to changes in the economic environment. For this reason, both positive and negative changes reach the economic environment in the construction sector with considerable delay. In order to manage business risk, the Company and the Group seek to diversify their sources of revenue. To this end, orders are being sought and contracts are being concluded in both private and public sectors, and markets are being searched not only in Lithuania but in other countries as well. The companies of the Group operate in different sectors, such as construction, real estate development, production and engineering network installation. The construction sector is not limited to the construction of single-purpose buildings. The Company implements construction projects for industrial, engineering, environmental and residential buildings. Before starting new projects, the Company and the companies of the Group make a thorough analysis of the project specifics and only after are confident that the environment is sufficiently stable and a competent team is collected, final decisions are made. The accounts of the Company are kept and financial statements are prepared in accordance with International Financial Reporting Standards adopted for application in the EU. The annual financial statements are audited by the independent auditors selected by the General Meeting of Shareholders. This procedure ensures relevance and transparency of the data provided in the financial statements. The operational risk constitutes the risk of probability to incur losses due to people, systems, inadequate internal processes or their failure, effects of external events, including legal risks. For the purposes of operational risk management, the Group implements appropriate measures to ensure functioning of the internal control system and appropriate co-operation with relevant third parties. The main elements of internal control applied in the Group are control of operations and accounting, limits of decision-making powers and their control, separation of business decision-making and control functions, etc. The aim is to minimize the risk of legal compliance and ensure that the activities carried out comply with the applicable legislation. To this end, the advice of professional lawyers and their participation are used in the processes of drafting internal instruments and contracts. Information on significant directly or indirectly held share portfolios The Company has no information available on directly or indirectly held share portfolios. Information on any transactions with related parties as prescribed by Paragraph 2, Article 37 of the Law on Companies There were no such transactions concluded. Information on shareholders with special control rights There are no shareholders with special control rights in the Company. The ordinary dematerialised shares of the Company grant equal voting rights to all shareholders of the Company. Information on all existing limitations on voting rights The Company has no information available on limitations on voting rights. Information on rules regulating election and replacement of the Board members, and amendment of Articles of Association The Board of the Company consisting of five members is elected by the General Meeting of Shareholders for a period not longer than 4 years. At present there are five members in the Board. The procedure of electing and dismissing the members of the Board is not different from that prescribed by the Law on Companies. 74 The Articles of Association may be amended only by the General Meeting of Shareholders by the qualified majority of at least 2/3 of the total votes of the shareholders attending the meeting. The resolution amending the Articles of Association is adopted following the procedure set forth in the Law on Companies of the Republic of Lithuania. Information on powers of members of the Board The powers of the members of the Board are set forth in the Law on Companies of the Republic of Lithuania and the Articles of Association. The Articles of Association of Panevezio statybos trestas AB are published on the website at https://www.pst.lt/en/pst-istatai-ir-audito-nuostatai. Information on powers of General Meeting of Shareholders, rights of shareholders and their exercising The powers of the General Meeting of Shareholders and the rights of shareholders are set forth in the Articles of Association and are not different from that prescribed by the Law on Companies. Information on composition of management, supervisory bodies and their committees, their activities and field of activities of the Chief Executive Officer Referring to the Articles of Association of Panevezio statybos trestas AB, the management bodies of the Company are the General Meeting of Shareholders, the Board and the Managing Director. The Supervisory Council is not formed in the Company. The General Meeting of Shareholders is the highest governing body of the Company, resolving the issues assigned to its competence by the Law on Companies and the Articles of Association of the Company. The competence of the General Meeting of Shareholders does not differ from that of the competence prescribed by the Law on Companies. According to the Law on Companies of the Republic of Lithuania, one collegial management body may be formed in the Company. The Board consists of 5 (five) members, who are elected by the General Meeting of Shareholders for the period of 4 (four) years. They represent the shareholders and perform supervisory and control functions. The activities of the Board are managed by the Chairman. The Board elects the Chairman from the members of the Board. The Chief Executive officer of the Company is the Managing Director. The Managing Director is the sole governing body of the Company. The Managing Director is the main person managing and representing the Company. The Board elects and dismisses the Chief Executive Officer of the Company – the Managing Director, fixes his salary, sets other terms and conditions in the employment contract with him, approves his job description, gives incentives and imposes penalties. The Managing Director shall organize the activities of the Company. The Board: The Board members of Panevezio statybos trestas AB were elected for a new 4 (four) year term at the General Meeting of Shareholders on 9 April 2021, 2 (two) members of the Board are independent. The term of office of all members of the Board will end on 9 April 2025. On 30 October 2023 at the Extraordinary General Meeting of Shareholders the independent member of the Board Vaidas Grincevicius was removed from office and Darijus Vilcinskas was elected as an independent member to the Board. JUSTAS JASIUNAS, Chairman Educational background: Mykolas Romeris University, Master in Law. Place and position of employment: Consultant at Panevezio statybos trestas AB (company code 147732969, P. Puzino Str. 1, Panevezys). Participation in activities of other companies: Board Member at HISK AB (company code 147710353, S. Kerbedzio Str. 7, Panevezys); Chairman at Aliuminio fasadai UAB (company code 305412441, Pramones Str. 7, Panevezys); Chairman at Vekada UAB (company code 147815824, Marijonu Str. 36, Panevezys); Board Member at Skydmedis UAB (company code 148284718, Pramones Str. 5, Panevezys); 75 Board Member at PST investicijos UAB (company code 124665689, Ukmerges Str. 219, Vilnius); Board Member at Lauktuves Jums UAB (company code 147797155, Laisves Sq. 26, Panevezys). Board Member at Gustoniu zemes ukio technika UAB (company code 168581940, S. Kerbedzio Str. 7F, Panevezys) As of 31 December 2023, held no shares of the Company. GVIDAS DROBUŽAS, Board Member Educational background: Panevezys Polytechnic School, higher non-university. Place and position of employment: General Director, Board Member at IOCO Packaging UAB (company code 110564826, Pusaloto Str. 212, Panevezys). Participation in activities of other companies: Chairman at HISK AB (company code 147710353, S. Kerbedzio Str. 7, Panevezys); Consultant at Panevezio statybos trestas AB (company code 147732969, P. Puzino Str. 1, Panevezys); Board Member at PST investicijos UAB (company code 124665689, Ukmerges Str. 219, Vilnius); Director at Pokstas UAB (company code 168424572, Gustonys Vlg., Naujamiestis Eldership, Panevezys District Municipality); Director at IOCO UAB (company code 302547850, Verkiu Str. 25C-1, Vilnius); Director at Stenrosus UAB (company code 300007108, B. Sruogos Str. 6-14, Vilnius). As of 31 December 2023, held 5 (five) shares of the Company, a shareholder of HISK AB. KRISTINA MACIULIENE, Board Member Educational background: Kaunas University of Technology, Bachelor in Business Administration, Lithuanian University of Law, Master in Law. Place and position of employment: Expert-Consultant at HISK AB (company code 147710353, S. Kerbedzio Str. 7, Panevezys). Participation in activities of other companies: Board Member at HISK AB (company code 147710353, S. Kerbedzio Str. 7, Panevezys); Chairman at Skydmedis UAB (company code 148284718, Pramones Str. 5, Panevezys); Chairman at Hustal UAB (company code 148284860, Tinklu Str. 7, Panevezys); Board Member at Vekada UAB (company code 147815824, Marijonu Str. 36, Panevezys); Board Member at Aliuminio fasadai UAB (company code 305412441 Pramones Str. 5, Panevezys); Chairman at Lauktuves Jums UAB (company code 147797155, Laisves Sq. 26, Panevezys); Chairman at Gustoniu zemes ukio technika UAB (company code 168581940, S. Kerbedzio Str. 7F, Panevezys). As of 31 December 2023, held 10 (ten) shares of the Company. LINA SIMASKIENE, independent Board Member Educational background: Kaunas University of Technology, Engineer-Economist. Place and position of employment: Chief Financial Officer at IOCO Packaging UAB (company code 110564826, Pusaloto Str. 212, Panevezys), Board Member. Participation in activities of other companies: Chief Accountant at IOCO UAB (company code 302547850, Verkiu Str. 25C-1, Vilnius); Chief Accountant at Pokstas UAB (company code 168424572, Gustonys Vlg., Naujamiestis Eldership, Panevezys District Municipality); Chief Accountant at Stenrosus UAB (company code 300007108, B. Sruogos Str. 6-14, Vilnius); As of 31 December 2023, held no shares of the Company. DARIJUS VILCINSKAS, independent Board Member Educational background: Vilnius Gediminas Technical University (VILNIUS TECH), Master Degree. Place and position of employment: Director at VIP Centras UAB, Director at VK Invest UAB; Director at Restoda UAB. Participation in activities of other companies: 76 Board Member at Hunting Club Truskava. As of 31 December 2023, held no shares of the Company. Administration: TOMAS STUKAS – Head of Administration, Managing Director of the Company. Education – Vilnius Gediminas Technical University, Bachelor in Industrial Engineering, Vilnius Gediminas Technical University, Master in Industrial Engineering. As of 31 December 2023, held no shares of the Company DANGUOLE SIRVINSKIENE – Chief Accountant of the Company. Holds no shares of the Company. University education (LZUA), Accounting - Economics. As of 31 December 2023, held no shares of the Company. In 2023, no loans, guarantees, sureties were granted and no property was transferred to any Board Members or top managers of Panevezio statybos trestas AB. Audit Committee Following Article 52 of the Law on Audit of the Republic of Lithuania, the General Meeting of Shareholders of Panevezio statybos trestas AB elects the Audit Committee. The Audit Committee consists of three members, two of them being independent. The term of office of the Audit Committee is one year. The continuous term of office of a committee member cannot exceed 12 years. The functions of the Audit Committee are as follows: 1) to monitor the financial reporting process; 2) to monitor effectiveness of the company's internal control, risk management and internal audit, if applicable, systems; 3) to monitor the process of the audit; 4) to monitor independence and objectivity of the auditor or audit company. The following members were elected to the Audit Committee at the Annual General Meeting of Shareholders of Panevezio statybos trestas AB on 27 April 2023: Drasutis Liatukas – an independent auditor, CEO of Finansu auditorius UAB, auditor. Holds no shares of the Company; Irena Kriauciuniene – an independent auditor. Holds no shares of the Company; Lina Rageliene –Accountant at Panevezio statybos trestas AB. Holds no shares of the Company. Diversity policies applied to election of the CEO and members of the supervisory bodies of the company The Company has no diversity policy for election of the CEO and members of the supervisory bodies of the Company. The main criterion for election of a candidate to CEO and members of the supervisory or management bodies is competence of the candidate. Information on all agreements between the shareholders The Company has no information on any agreements between the shareholders available. Consolidated Report of Social Responsibility The Consolidated Report of Social Responsibility for the Group has been prepared in accordance with the standards of the Global Reporting Initiative and is provided in the Appendix of the Annual Report Social Responsibility and Sustainability Report for 2023. 77 Consolidated Remuneration Report The Remuneration Report of Panevezio statybos trestas AB has been prepared for the reporting financial period of the year 2023. The report has been prepared in accordance with the Law on Financial Reporting of Enterprises of the Republic of Lithuania, the Ordinary General Meeting of Shareholders held on 29 April 2020 approved the Remuneration Policy for Top and Middle Management Staff of Panevezio statybos trestas AB and the Extraordinary General Meeting of Shareholders held on 9 April 2021 approved the Procedure for Awarding and Paying Remuneration of Independent Board Members of Panevezio statybos trestas AB. The Consolidated Remuneration Report for 2022 was approved at the General Meeting of Shareholders on 27 April 2027 together with the Set of Financial Statements for 2022. Remuneration of Board Members As the Law on Companies of the Republic of Lithuania provides for the possibility to elect only one either collegial supervision or management body, the collegial management body, the Board performing the supervision function, and one-person management body, the Managing Director, are set up at the Company. Following the Law on Companies and Articles of Association of the parent Company, the Board Members are appointed for the four-year term of office. On 9 April 2021 the Extraordinary General Meeting of Shareholders approved the procedure for awarding and paying remuneration of the independent members of the Board for their activities in the Board. Remuneration (bonuses) is paid to the members of the Board, except for the independent members of the Board, for their work by the decision of the General Meeting of Shareholders in accordance with the Law on Companies of the Republic of Lithuania. Remuneration Paid to Board Members On 9 April 2021 the Extraordinary General Meeting of Shareholders elected the new Board of Panevezio statybos trestas AB. The information on payments made to the members of the newly elected Board over the year 2023 is provided below. The Extraordinary General Meeting of Shareholders held on 27 April 2023 did not come to the decision to pay bonuses to the members of the Board. The amounts in the table are in Euros, before taxes. Table 7. Information on remuneration of supervisory body members of the issuer in 2023: Full name Position Remuneration of independent member of the Board, total for 2023 (Euros) Total income from the company for 2023 (Euros) Justas Jasiunas Chairman - 75,600 Gvidas Drobuzas Board Member - 148,645 Kristina Maciuliene Board Member - - Vaidas Grincevicius (Jan. through Oct.) Board Member 32,850 - Lina Simaskiene Board Member 39,600 - Darijus Vilčinskas (Oct. through Dec.) Board Member 6,750 Total 79,200 224,245 * an independent member of the Board The Company is not aware that the Board Members of the Board have received any remuneration from other companies of Panevezio statybos trestas AB Group. After the term of office for the Board expires, the Board Members are not entitled to any severance pays. 78 Remuneration of Company’s Employees The purpose of the remuneration policy is to increase the operation efficiency at the Company and promote achievement of strategic objectives. The objective of the Company goal is to maximize the efficiency of the reward programs in order to attract and motivate highly skilled employees who are necessary for success in business. Over the year 2023 the salary fund attributed to the Company's employees amounted to 16.324 mln. Euros compared to 14.520 mln. Euros in 2022. To attract high-level professionals to management positions, we aim to keep the remuneration close to the market median of the country in which any company of the Group operates. In general, the remuneration structure at the Company consists of two parts: Fixed Remuneration Component (FRC) and Variable Remuneration Component (VRC). The FRC range limits are set taking into account the remuneration trends in the market, research data and comparative market, i.e. the market of the companies operating in Lithuania. The VRC is a tool for getting the Top and Middle Management Staff directly interested in seeking for high performance of the Company, an instrument to for creating policy and culture of the Company, clearly and accurately indicating what achievements and contributions are valued/rewarded. The Variable Remuneration Component to the Top and Middle Management Staff is paid once a year at the end of the financial year and is linked to performance of the employee, team and/or company. The full text of Renumeration Policy is provided at https://www.pst.lt/en/pst-istatai-ir-audito-nuostatai. The Company does not provide for the possibility to restore variable remuneration. The average monthly salary of employees (FRC and VRC) for the period 2019 through 2023 is provided in the tables below. Table 8. Average monthly salary for employees of the Group, Euros (before taxes) Position category 2023 2022 2021 2020 2019 Average salary Average salary Average salary Average salary Average salary Managing Director 9993 9281 8863 7626 Top Management Staff 6049 5528 5107 5323 4524 Middle Management Staff 4713 4428 4297 3478 3216 Specialists 2754 2380 2192 1806 1753 Workers 2097 1646 1380 1319 1322 Total 2458 2020 1800 1583 1569 Table 9. Average monthly salary for employees of the Group, Euros (before taxes) Position category 2023 2022 2021 2020 2019 Average salary Average salary Average salary Average salary Average salary Top Management Staff 5569 5019 4482 3957 4083 Specialists 2788 2436 2167 1871 1752 Workers 2122 1649 1407 1363 1322 Total 2471 2048 1787 1622 1569 Remuneration Structure for Managing Director and Top Management Staff The Fixed Remuneration Component is determined considering the impact on general operation of the Company, management scope, decision making, complexity of activities, knowledge and experience. Remuneration determined in the Employment Contract, taking into account the level of position and competence of the employee (conformity with the requirements for the position). The 79 Fixed Remuneration Component is paid on a monthly basis. The Fixed Remuneration Component of the Top and Middle Management Staff is reviewed minimum every 12 months. The new size of the FRC is determined/revised based on performance assessment of the Top and Middle Management Staff. The PAD of the Top and Middle Management Staff may be changed by the decision of the Board. The Variable Remuneration Component is designed to promote achievement of the annual objectives. The size of the VRC amounts to a fixed percentage of the annual result, which is determined and approved by the Board. The Chief Executive Officer and directors of the Company are assigned the percentage of the profit accepted for calculating motivation. For the Directors of the branches the percentage is determined from the profit accepted for calculating motivation for the branch managed by him. Annual Changes in Remuneration Changes in performance of the Company and average salary of the employees of the Company who are not members of the management and supervisory bodies during the last five years. Table 10. Company performance and average monthly gloss salary for the period 2019 through 2023 Company performance 2023 2022 2021 2020 2019 Net profit (loss) (thousands Euros) -2,279 -1,720 304 -12,418 590 Profit (loss) per share (Euros) -0.139 -0.105 0,019 -0.76 0.036 Assets (thousands Euros) 47,727 52,762 48,478 62,290 71,337 Average monthly salary 2,458 2,040 1,800 1,583 1,569 Long-Term Motivation by Shares The Company applies neither schemes under which the members of management bodies, managers and employees receive remuneration in shares, share options or other rights to share acquisition, nor supplementary pension or early retirement schemes. 80 Annex 1 Corporate Governance Reporting Form Panevezio statybos trestas AB (hereinafter referred to as “the Company”), acting in compliance with Article 22 (3) of the Law on Securities of the Republic of Lithuania and paragraph 24.5 of the Listing Rules of Nasdaq Vilnius AB, 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. 1. Summary of the Corporate Governance Report: Panevezio statybos trestas AB in principle complies with the recommendatory Governance Code for the companies listed at NASDAQ Vilnius. Referring to the Articles of Association of the Company, the governance bodies of the Company include the General Shareholders’ Meeting, the Management Board and the Managing Director. According to the Law on Companies of the Republic of Lithuania, either two (supervisory and management) or one collegial management body may be set up in the Company at the discretion of the Company. No Supervisory Board is set up in the Company. Following the Articles of Association of the Company, the Management Board is set up of 5 members, which are elected for the period of for years. The members of the Management Board represent the shareholders and perform the supervisory and control functions. Only the Audit Committee, which is elected for the period of one year, is formed in the Company. The functions of the Nomination and Remuneration Committees are performed by the Management Board. The system of the corporate governance ensures fair treatment of all shareholders, including minority and foreign shareholders, and protects the rights of the shareholders. In its Annual Report, in accordance with the requirements of the legal acts, the Company provides information on the total amounts of money calculated during the reporting period to the members of the Management Board of the Company, the Chief Executive Officer. The management system of the Company ensures that any information on all essential issues, including financial situation, operation and company management, is disclosed in a timely and accurate manner. The audit company is proposed by the Management Board and elected by the Meeting of Shareholders, thus ensuring independence of the conclusions and opinion provided by the audit company. 2. 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. 81 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 All information that shall be made public in accordance with legal acts is published in Lithuanian and English via informational system of stock-exchange Nasdaq Vilnius and on the website of the Company. The venue, date and time of the Meeting of Shareholders convened by the Company are chosen in such a way as to ensure participation of all shareholders in the decision-making process of the Company. 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 authorized share capital consists of 16,350,000 ordinary shares, the nominal value of 0.29 EUR each, which provide their holders equal voting, property, dividend and other rights. 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 rights attached to the shares are indicated in the Articles of Association of the Company, which are published on the website of the Company. 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 The Articles of Association of the Company do not provide that the mentioned transactions are subject to approval of the General Meeting of Shareholders. The shareholders of the Company approve the transactions for approval of which they have the right prescribed by the Law on Companies of the Republic of Lithuania and the Articles of Association of the Company. 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 The Company convenes a General Meeting of Shareholders in accordance with the procedure established by the Law on Companies of the Republic of Lithuania. 82 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 All information for shareholders, notices on convocation of General Meetings of Shareholders, drafts of resolutions and documents proposed for the Meeting of shareholders by the Management Board and adopted resolutions and approved documents are made public in Lithuanian and English languages through the information system of NASDAQ Vilnius Stock Exchange and published on the website of the Company. 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 Each shareholder can participate at the meeting in person or delegate the participation to some other person. The Company allows the shareholders voting by filling the general voting ballot in as prescribed by the law. 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 The Company does not comply with the provisions of this recommendation, as it is not possible to ensure text protection and identify the signature of a voting person. Furthermore, in the opinion of the Company, so far there was no need for any modern technologies at the General Meeting of Shareholders for the purposes of participation and voting via electronic means of communication. 83 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 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. Yes Information on the candidates to the members of the Management Board of the Company is provided to the shareholders at the General Meeting of Shareholders with the item related to the election of the members of the Management Board on the agenda in accordance with the procedure established by the Law on Companies of the Republic of Lithuania. Information on the audit company to be elected is made public together with the notice on the draft resolutions of the General Meeting of Shareholders to be convened in accordance with the procedure prescribed by the legal acts. 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 The Managing Director, Chief Accountant, Chairman and other competent persons who can provide information on the agenda of the General Meeting of Shareholders always participate at the General Meeting of Shareholders. The proposed candidates to the members of the Management Board, however not all, participated at the General Meeting of Shareholders. 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 As the Law on Companies of the Republic of Lithuania provides for the possibility to elect only one either collegial supervision or management body, the collegial management body, the Management Board performing the supervision function, and one-person management body, the Managing Director, are set up in the Company. The collegial supervising – the Supervisory Board is not formed. 1 For the purposes of this Code, heads of the administration are the employees of the company who hold top level management positions. 84 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 See item 2.1.1. 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 See item 2.1.1. 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 decision-making; b) not seek or accept any unjustified privileges that might compromise their independence. Not applicable See item 2.1.1. 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 See item 2.1.1. 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 See item 2.1.1. 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. 85 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 See item 2.1.1. 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 See item 2.1.1. 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 See item 2.1.1. 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 See item 2.1.1. 86 2.2.5. When t 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 See item 2.1.1. 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 See item 2.1.1. 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 See item 2.1.1. 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 As there is no Supervisory Board formed at the Company, the Management Board performs supervisory functions, discusses and approves the strategy of the Company, analyses and evaluates information on implementation of the strategy of the Company. 87 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 The Company follows the strategic plan of the Company based on which the mission of the management bodies of the Company is to create and maintain a strong, competitive, financially capable and technically advanced Company that creates and maximizes the value for the shareholders. 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 The Management Board ensures compliance with the laws and internal policy of the Company applicable to the Company or the Group. 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 The Management Board complies with this guidance. 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 Chief Executive Officer, the Board takes into account 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 The members of the Management Board of the Company are elected by the General Meeting of Shareholders. The members of the Management Board of the Company are qualified and competent to perform their functions, have a long experience in management. At present the Management Board fails to maintain gender equality. All members of the Management Board are male. At present females make 40 per cents of the members of the Management Board, i. e. two females and three males. 3 Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti- bribery/44884389.pdf 88 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 Information on the positions taken by the members of the Management Board or their participation in operation of other companies is continuously collected and compiled, and at the end of every year it is revised and presented in the reports prepared by the Company. 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 The new members of the Management Board have been familiarised with their duties, the structure, operations and strategy of the Company. 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 order to ensure necessary development of professional experience and sufficiently frequent reconfirmation of their status. Yes The Management Board of the Company is elected by the General Meeting of Shareholders for the maximal four-year term in office prescribed by the Law on Companies of the Republic of Lithuania. Individual members of the Management Board or the entire Management Board may be recalled by the General Meeting of Shareholders before the end of their term of office. 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 Chairman of the Management Board represents the main shareholder and has never been the Chief Executive Officer of the Company. 89 3.2.6. Each member should devote sufficient time and attention to perform his duties as a member of the Management Board. Should a member of the Management Board attend less than a half of the meetings of the Management Board throughout the financial year of the company, the Supervisory Board of the company or, if the Supervisory Board is not formed at the company, the General Meeting of Shareholders should be notified thereof. Yes The members of the Management Board fulfil their functions properly: actively participate at the meetings of collegial body and devote sufficient time to perform their duties as a member of the collegial body. In 2023 there were 19 (nineteen) meetings of the Management Board where four members participated in all the meetings and one member participated in fifteen meetings. 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 independent4, 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. No Two independent Board Members are Vaidas Grincevicius and Lina Simaskiene. Prior to the Meeting of Shareholders, it was published that these two candidates for Board Membership would be considered as independent Board Members. 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 On 9 April 2021 the Extraordinary General Meeting of Shareholders approved the Procedure for Awarding and Paying Remuneration to Independent Board Members of Panevezio statybos trestas AB for their Activities in the Board. The members of the Management Board, except for the independent members of the Management Board, are paid remuneration (bonuses) by the decision of the General Meeting of Shareholders in accordance with the Law on Companies of the Republic of Lithuania. 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 Based on the data available to the Company, all members of the Management Board act in good will for the interests of the Company and its shareholders, they are guided by the interests of the Company and not those of their own or any third parties, seek to maintain their independence in decision-making. 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. 90 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. Yes/No The internal documents of the Company do not directly provide for an activity assessment of the collegial bodies exercising individual supervisory functions. However, the collegial body ensures that its members are competent and have a variety of knowledge, opinions and experience to perform their tasks properly. 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 There is no Supervisory Board 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 The meetings of the Management Board of the Company are held at least once a month in accordance with the Rules of Procedures of the Management Board. The date of the next meeting of the Management Board is agreed at each meeting of the Management Board. If required, the meetings of the Management Board are held at shorter intervals. 91 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 certain issues that are important to the company require immediate resolution. Yes The members of the Management Board are notified of the meeting being convened and its agenda in advance. All members of the Management Board get all materials relevant to the issues on the agenda in advance and have an opportunity to get familiarised with them and ask questions before and during the meeting, have the right to request to supplement or clarify the materials relevant to the issue to be discussed. 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 The Company does not have a Supervisory Board. 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. 92 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 . No The collegial body of the Company’s management is the Management Board performing the functions of Nomination Committee and the Remuneration Committees. The Management Board selects and approves the candidacy of the Chief Executive Officer of the Company – Managing Director and agrees with the candidacies of Directors of the Company proposed by the Managing Director. The Management Board continuously evaluates their experience, professional capabilities and implementation of the Company’s strategic goals, hears out their reports. The Board selects the candidate for the external auditor and provides proposals to the General Meeting of Shareholders for approval. On 27 April 2023, the Audit Committee was elected at the Annual 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 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. No See the commentary on the recommendation provided in item 5.1.1. The recommendation is implemented to the extent it is related to the activities of the Audit Committee in the Company. 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 See the commentary on the recommendation provided in 5.1.1. The recommendation is implemented to the extent it is related to the activities of the Audit Committee in the Company. The Audit Committee is composed of three members. Two members conform to the requirements for independence. The Audit Committee is elected for the period of one year. 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). 93 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 See the commentary on the recommendation provided in item 5.1.1. The Audit Committee follows the Rules of the Audit Committee prepared by the committee and approved by the General Meeting of Shareholders. These rules define the regulations specifying the rights and duties of the Audit Committee, size of the Audit Committee, term of office in the Audit Committee, requirements for education, professional experience and principles iof independence. The approved Rules of the Audit Committee are published on the website of the Company. In 2023, there were 2 meetings of the Audit Committee held where all members of the Audit Committee were present. 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/No See the commentary on the recommendation provided in item 5.1.1. The recommendation is implemented to the extent it is related to the activities of the Audit Committee in the Company. 94 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 There is no Nomination Committee formed at the Company. The functions of the collegial body – the Management Bord performs the functions of the Nomination Committee. (See the commentary on the recommendation provided in item 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 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; Not applicable There is no Remuneration Committee formed at the Company. (See the commentary on the recommendation provided in 5.1.1). 95 3) review, on a regular basis, the remuneration policy and its implementation. 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 The Company implements this recommendation. On 27 April 2023, the Audit Committee was elected at the Annual General Meeting of Shareholders. The Audit Committee is composed of three members, two of which conform to the requirements for independence. The Audit Committee organizes its activities in accordance with the Rules of the Audit Committee approved at the Meeting of Shareholders. 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 Audit Committee organizes its activities in accordance with the Rules of the Audit Committee approved at the Meeting of Shareholders. All members of the Committee are provided with detailed information on specific issues of the accounting system, finances and operations of the Company. 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 organizes its activities in accordance with the Rules of the Audit Committee approved at the Meeting of Shareholders. 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. Yes The Audit Committee organizes its activities in accordance with the Rules of the Audit Committee approved at the Meeting of Shareholders. The Audit Committee is provided with the information mentioned listed herein from independent audit firm. No internal audit function exists at the Company/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. 96 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. Yes The Audit Committee organizes its activities in accordance with the Rules of the Audit Committee approved at the Meeting of Shareholders. 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. Yes The Audit Committee makes analysis of ang gives evaluation to the financial statements of the Company, gives recommendations on their approval to the Management Board together with the reports on their activity over the period. 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. The Corporate Governance Framework should recognize the rights of stakeholders as established by law and encourage active co-operation 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. 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 Members of the management bodies of the Company behave in such a way that there is no conflict of interest with the Company. During the reporting period, there have been no known conflict of interest between the Company and the member of its management body. 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 The Company has prepared the draft of revised Remuneration Policy, which is subject to the approval at the coming General Meeting of Shareholders. 97 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 The Remuneration Policy of the Company defines the renumeration components and established the principles of its award and payment. 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 Remuneration policy is intended to establish only the principles of remuneration of top and middle management staff. See item 3.2.8. 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. Yes The Company complies with this recommendation in accordance with the provisions of the Labour Code of the Republic of Lithuania within the limits established therein. 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. Not applicable There is no scheme anticipating remuneration of the directors in shares, share options or any other right to purchase shares. 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 Company publishes information about the implementation of the remuneration policy in the Annual Report. 98 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. No The Company does not apply any schemes under which members and employees of a collegial body receive remuneration in shares or share options. 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 protects all rights of the stakeholders, allows the stakeholders to participate in corporate governance in the manner prescribed by law. 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 complies with this recommendation. For example, the Company has a Co-operation Agreement signed with the Works Council. According to the signed agreement, the Company informs the representatives of the Council about the financial position of the Company, employer’s status, expected changes, etc. 8.3. Where stakeholders participate in the corporate governance process, they should have access to relevant information. Yes Detailed information on scheduled events of the shareholders is made public following the procedure prescribed by law, the investors (shareholders) have sufficient opportunities to familiarize themselves with the relevant information and vote in adopting decisions. 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. Yes The stakeholders may submit anonymous reports to the collegial body. 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. 99 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: - operating and financial results of the company; Yes The operating and financial results of the Company are made public in the Intermediate Semi-annual and Annual Reports of the Company on the website of the Company and on the website of stock-exchange Nasdaq Vilnius. - objectives and non-financial information of the company; Yes Information is published in the Intermediate Semi-annual and Annual Reports of the Company. - 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 All information available to the Company is published in the Intermediate Semi-annual and Annual Reports of the Company. - 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 Information is published in the Intermediate Semi-annual and Annual Reports of the Company. - 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 Information on composition, number of meeting and attendance of members of the existing committees is published in the Intermediate Semi-annual and Annual Reports of the Company. - potential key risk factors, the company’s risk management and supervision policy; Yes Information is published in the Intermediate Semi-annual and Annual Reports of the Company. - the company’s transactions with related parties; Yes Information is published in the Intermediate Semi-annual and Annual Reports of the Company. - 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 No The Company does not apply any schemes under which employees receive remuneration in shares, share options or other rights to share acquisition. 100 share options as incentives, relationships with creditors, suppliers, local community, etc.); - structure and strategy of corporate governance; Yes/No Information is published in the Intermediate Semi-annual and Annual Reports of the Company. - 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 Information is published in the Intermediate Semi-annual and Annual Reports of the Company. 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 The Company complies with the recommendation and discloses information about the results of the Company and the Group of its subsidiaries. The information is published in the Intermediate Semi-annual and Annual Reports of the Company. 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 The information specified in the recommendation in provided in the Annual and Semi-annual Reports of the Company. 101 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 The Company discloses the information via the information disclosure system used by the Vilnius Stock Exchange in the Lithuanian and English languages simultaneously. The Company does not disclose the information likely to impact the price of the issued by it securities in its comments, interviews or otherwise by the time such information is announced via the information system of the Stock Exchange. 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 The independent audit company performs auditing of the individual and consolidated (the Group) annual financial statements of the Company and its subsidiaries in accordance with the International Accounting Standards applicable in the European Union. The independent audit company evaluates conformity of the Annual Report to the audited Financial Statements. 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 Management Board proposes an audit firm to the General Meeting of Shareholders. 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. Yes In 2023, the firm of auditors provided no services other than auditing. SOCIAL RESPONSIBILITY AND SUSTAINABILITY REPORT 2023 CONTENT Social Responsibility and Sustainability Report 2023 2 CEO LETTER 3 SUSTAINABILITY IN THE GROUP 6 ENVIRONMENTAL AREA 17 SOCIAL AREA 23 GOVERNANCE AREA 35 INDEX 42 ABOUT THE SUSTAINABILITY REPORT 4 BRIEFLY ABOUT THE GROUP 5 Main sustainability principles 7 Sustainability management 8 Stakeholder involvement 9 Materiality matrix 9 Key sustainability topics 11 EU Taxonomy alignment overview 12 CO2 emissions reduction and energy efficiency 18 Waste reduction and resource management 20 Water conservation and pollution reduction 21 Environmental impact of buildings and services 22 Employees and their diversity 24 Diversity, equality and inclusion 26 Employee safety and wellbeing 28 Employee training and education 30 Building an internal culture of sustainability 32 Positive impact on local communities 33 Human rights 34 Business ethics 36 Sustainability in the supply chain 38 Innovation and operational efficiency 39 Quality of services and buildings 40 Risk management 41 GRI index 42 UN Global Compact Principles 45 CEO LETTER As one of the largest construction groups in Lithuania, we consider sustainability an integral part of our business. I am pleased to present our latest Sustainability Report, which reflects our environmental, social, and governance achievements and ambitions. In this report, we have included the issues that matter most to our customers, employees, shareholders, suppliers and partners, considering their sustainability expectations. Our sustainability and responsibility principles are based on global agreements and recommendations. We commit to adhering to the guidelines set out by the United Nations Global Compact, contributing to the Sustainable Development Goals, and following other generally accepted principles of social responsibility. In the environmental area, reducing the environmental impact of buildings and services, waste management and resource efficiency, and reducing CO2 emissions remain our priorities. By investing in solar energy projects and sourcing 100% of our electricity from renewable sources, we are committed to reducing CO2 emissions and contributing to climate change mitigation. We strive not only to improve our environmental impact but also to set an example for other organisations. Last year, the Lithuanian Confederation of Industrialists (LCI) also noticed our efforts, recognising the Lazdynai swimming pool construction project as the Product of the Year and awarding it with the gold medal of the "Lithuanian Product of the Year 2023". On the social area, our efforts are focused on the safety and well-being of our employees. Vision Zero for Accidents at Work continues to be our primary objective. In 2023, we introduced an e-learning platform to enhance occupational health and safety knowledge, improving the safety and efficiency of the working environment. Through various projects and events, we have worked to create and foster an internal culture of sustainability. In governance (economic) area, we do our best to foster a culture of ethical business, ensure the high quality of the projects we carry out, manage risks, and strengthen our cooperation with partners to provide the necessary innovations and the smooth introduction of technology. Chief Executive Officer Tomas Stukas 3 This Sustainability Report provides a comprehensive overview of our performance and commitment to sustainability in each business area. We will continue to pursue sustainability initiatives, considering stakeholders' expectations and suggestions. For us, sustainability means not only responsibility but also an opportunity to grow and develop together with our community and society. I am grateful to all our employees, partners and stakeholders for their commitment, contribution and continued support on our sustainability journey. GRI 2-22 Social Responsibility and Sustainability Report 2023 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP ABOUT THE SUSTAINABILITY REPORT 4 This Social Responsibility and Sustainability Report (hereinafter the Sustainability Report) of the public limited liability company Panevezio statybos trestas (hereinafter the Company; PST), registered in Lithuania at P. Puzino g. 1, LT-35173 Panevezys, and its subsidiaries (hereinafter jointly called the Group), is published in April 2024 for the period from 1 January 2023 to 31 December 2023. The information presented in this report includes consolidated information of all Group companies, in some cases highlighting the data of Panevezio statybos trestas AB. Subsidiaries have no separate sustainability reports produced. The Group's sustainability report is compiled by the Global Reporting Initiative (GRI) standards 2021 updated version. The Sustainability Report is presented for the same period as the annual financial statements. This report is integrated into the Company’s and Consolidated Annual Report, which is audited by an independent external auditor; having read the sustainability section of the report, the auditor confirmed its conformity to the Law of the Republic of Lithuania on Financial Reporting by Undertakings. The Company’s and Consolidated Annual Report (together with the Sustainability Report) is approved by the Board and then presented to the General Meeting of Shareholders. The Sustainability Report presents the Company's and its subsidiaries' achievements and aspirations in the environmental, social and governance (ESG) areas. This report reveals how the Group contributes to the United Nations Sustainable Development Goals (SDGs) and adheres to the principles of the Global Compact. The report is prepared in consultation with external sustainability experts but is not audited. The information contained in the Sustainability Report complies with the requirements for the Social Responsibility Report of the Republic of Lithuania and the guidelines for non-financial reporting of the European Commission. In 2023, when applying the GRI Standards, the Group focused on conducting materiality analysis, interviewing stakeholders and developing a materiality matrix to identify the information most relevant to stakeholders. This Sustainability Report represents the best available data at the time of publication. Still, in the future the Group will strive to improve further the quality of the information provided in the Sustainability Reports and to fully and accurately disclose all relevant performance indicators. Questions or feedback on this report and the Group's sustainability activities can be sent to the following contacts: Economist R. Kairienė: rkairiene@pst.lt GRI 2-1 GRI 2-2 GRI 2-3 GRI 2-4 GRI 2-5 GRI 2-14 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 BRIEFLY ABOUT THE GROUP 5 Panevezio statybos trestas AB, together with its Group companies, is one of the largest construction companies in Lithuania. Operating in the construction sector for over 70 years, the Group has delivered major and complex projects contributing to the country's economic growth, infrastructure development, and environmental objectives. The Group operates in the following countries: Lithuania, Sweden, Norway, Latvia and Poland. The Group's activities include the construction and design of buildings, structures, facilities and communications, and other objects for various purposes in Lithuania and beyond, the production and design of metal structures for construction, the sale of building materials, and real estate development. The group consists of the following companies: GRI 2-1 GRI 2-2 GRI 2-6 Panevezio statybos trestas AB Skydmedis UAB Hustal UAB Vekada UAB Alinita UAB Aliuminio fasadai UAB Seskines projektai UAB Ateities projektai UAB PST investicijos UAB Tauro apartamentai UAB PS Trests SIA Kingsbud Sp.z.o.o. The Group's principal activities are: Construction and design of buildings, structures, facilities, communications, and other objects for various purposes in Lithuania and abroad. Sales of building materials. Production of some building materials. Real estate development and management. Subcontractors are among the Group's most important partners. As part of the subcontractor selection process, the Company assesses the subcontractors' qualifications. The most important requirements for subcontractors are environmental protection, compliance with occupational safety and health legislation, and integrity. Further information on the nature of the Group's activities is provided in the Company's and Consolidated Annual Report. SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 SUSTAINABILITY IN THE GROUP MAIN SUSTAINABILITY PRINCIPLES 7 The Group aims to integrate sustainability topics into its overall business strategy and key performance indicators. Sustainability is understood as an integral part of the Group's activities, closely linked to its commitments to its stakeholders and key strategic directions. The Group's principles of sustainable, responsible, and fair business conduct are described in the Code of Conduct for Employees, Suppliers, and Company Representatives and other applicable policies. Key sustainability principles applied in the Group: Embedding sustainability in three areas – environmental, social and governance – to create balanced long-term value. Taking into account stakeholders' expectations, honoring our commitments to them, and engaging with them transparently and fairly when making decisions on the Group's sustainable development. Sticking to the common objectives set out in the European Green Deal and the Paris Agreement on climate change. Implementing the globally recognised good governance recommendations by OECD. Contributing to the United Nations Sustainable Development Goals (SDGs). Supporting and being guided by the United Nations Global Compact principles on human rights, employees' rights, the environment, and the prevention of corruption. Carrying out due diligence on environmental, social and economic impact management. Setting sustainability targets based on the precautionary principle, i.e., using the most up-to-date scientific advice on the environmental protection. GRI 2-23 GRI 2-24 The Group understands the importance of sustainable development and will seek to further clarify the directions of its sustainability strategy, develop a framework for embedding responsible business principles at all organisational levels, and integrate them into operational strategy, policies, and procedures in the future. SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 SUSTAINABILITY MANAGEMENT 8 he management of the Group's environmental, social and economic impacts is overseen by the Board and the Management Team (top management). The Board reviews the results of impact management once a year and considers and approves the Group's strategy. The Board puts executive managers and employees in charge for sustainability in Company’s day-to-day operations. The persons in charge shall report to the Board on the results of environmental, social and economic impact management on a regular basis – at weekly, monthly and annual meetings and as required. The CEO immediately informs the Board of critical sustainability issues. In 2023, there were no essential sustainability issues of particular concern in Group companies. Governance structure and composition According to the Articles of Association of Panevezio statybos trestas AB, the company's governing bodies are the General Meeting of Shareholders, the Board (which performs a supervisory function), and the CEO — general director. The members of the Board have supervisory and control functions. The Company has an Audit Committee only, elected for one year. The Board exercises the functions of the Appointment and Remuneration Committee. The Board is composed of 5 members elected by the General Meeting of Shareholders for four years to represent the interests of shareholders. In 2023, the Board consisted of 3 men and two women. 2 Board members were independent. The Chairman of the Board has not held any other significant position (as a top manager) in the Company. In 2023, the Audit Committee comprised one man and two women, with two independent Audit Committee members. For more information on the members of the Board and the Audit Committee, including their other significant responsibilities, please refer to the section Governance Report of the Company's and the Consolidated Annual Report. GRI 2-13 GRI 2-15 Nomination and selection of board members The Company's Board is elected and dismissed by the General Meeting of Shareholders under the procedure established by the Republic of Lithuania Law on Companies. The company's shareholders propose candidates for the Board. Board members must be qualified and competent to perform their functions and have years of experience in management. At least two members must be independent, and at least two-fifths of the Board members must be women. To date, Board members have been selected disregarding their competencies in sustainable development, and no specific measures were taken to improve their knowledge of sustainability; the measures would be applied if needed. Conflicts of Interest Board members, employees, suppliers, and representatives of the Company are required to disclose any situation that may give rise to a conflict of interest that may compromise the interests of the Company in favour of their own private interests or those of persons close to them. Situations where the personal, family, or financial interests of employees could conflict with the interests of the Company must be avoided. The potential risk of conflicts of interest is assessed during the annual audit, and the auditor issues their opinion. No conflicts of interest were identified in 2023. Whistleblowing channels and processes to remediate negative impacts Stakeholders can report various infringements and concerns, such as possible ongoing or committed criminal activities, breach of administrative duty or job responsibilities, or other offences that threaten or undermine the public interest, by emailing skundai@pst.lt and through other channels indicated on the PST website. Infringement information is dealt with by the description of the procedure for submitting and handling infringement information by PST. Depending on the nature of the breach, PST shall, following the Company's procedures, investigate the breach, report to management and the responsible authorities and undertake to remedy and/or repair the damage. In the absence of a prescribed process, the Company shall act by the law. GRI 2-16 GRI 2-17 GRI 2-25 GRI 2-26 GRI 2-9 GRI 2-10 GRI 2-11 GRI 2-12 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 STAKEHOLDER INVOLVEMENT 9 Continuous engagement with stakeholders and assessing and responding to their expectations is crucial for the Group's success in ensuring sustainable operations. The Group's strategy defines five main stakeholder groups: customers, employees, shareholders, suppliers and partners. Stakeholders are defined as groups that find our activities highly relevant and/or are significantly affected by our actions, as well as individuals and organisations that significantly influence the Group. The Sustainability Report's content is based on key stakeholders' views, needs and expectations. Social Responsibility and Sustainability Report 2023 GRI 2-29 GRI 3-1 MATERIALITY MATRIX At the beginning of 2023, the Group conducted its first materiality analysis of sustainability topics following GRI standards. The purpose of this assessment is to identify the Group's key environmental, social, and governance topics, start developing the Group's sustainability strategy based on these topics, and provide detailed information on their management in sustainability reports. The results of the materiality analysis are summarised later in this report. Critical steps in assessing materiality: Identification of relevant topics for sector peers. Topics of interest to companies in the construction and other sectors in which the Group operates were reviewed, and a list of potential sustainability topics was compiled. Topics recommended by other widely used sustainability standards were also assessed. An assessment of the topics that are most important to stakeholders. An anonymous survey was conducted to compile information on the most critical sustainability topics for stakeholders. The survey was carried out in March 2023 by sending a questionnaire to targeted contacts from each stakeholder group. A total of 204 responses were received. Impact and risk assessment. Each sustainability topic has been assessed in terms of its potential impact on the environment and society and its impact on the Group's performance. At this stage, the Group also discussed the principal risks and opportunities related to sustainability and the potential financial impact on Group companies. The final result is a materiality matrix, which is presented further. Risks related to each sustainability topic is described throughout the report in topic-specific sections. 1 2 3 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA MATERIALITY MATRIX 10 GRI 3-2 GRI 3-3 Water conservation and pollution reduction Moderately important Very important Moderately significant Very significant IMPORTANCE FOR STAKEHOLDERS IMPACT ON SOCIETY, ENVIRONMENT AND THE GROUP'S PERFORMANCE Positive impact on local communities Sustainability in the supply chain Employee training and education Waste reduction and resource management Environmental impact of buildings and services Innovation CO2 emissions reduction and energy efficiency Building an internal culture of sustainability Employee safety and wellbeing Business ethics Quality of services and buildings Human rights Diversity, equality and inclusion Operational efficiency Risk management The materiality matrix outlines the social, environmental and governance topics (impacts and risks) most relevant to the Group's sustainability. These topics are all important, but to set sustainability priorities, they are ranked according to their importance to stakeholders and their impact on society, the environment and the Group's performance. Material topics are the issues of utmost importance to the stakeholders that significantly impact society, the environment, and the Group's results, highlighted in the matrix's darkest colour. The management principles for all material topics are described by GRI requirements in this report, in chapters arranged by topic. – Environmental; – Social; – Governance SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Priority sustainability topic Long-term direction Sustainable Development Goals Environmental area Environmental impact of buildings and services To apply and develop new solutions and services to help reduce the environmental impact of buildings throughout their life cycle. Waste reduction and resource management To optimise production processes to decrease the amount of raw materials used and reduce and recycle waste. CO2 emissions reduction and energy efficiency To reduce the energy needed for our operations and the greenhouse gases (CO2) emitted. Social area Employee safety and wellbeing To create a safe and healthy working environment and improve working conditions. Priority sustainability topic Long-term direction Sustainable Development Goals Social area Human rights To support and promote the protection of fundamental human rights in the Group's activities. - Employee training and education To ensure all employees are given opportunities to improve and develop their skills. Diversity, equality and inclusion To ensure equal opportunities, prevent discrimination at work and promote equality in recruitment. Governance area Business ethics To create and foster an ethical business culture, prevent corruption and bribery, and compete fairly. Quality of services and buildings To ensure that the projects we deliver are of high quality, meet our clients' needs and comply with industry standards. Innovation To develop and apply innovative solutions and introduce modern technologies into crucial business processes. Operational efficiency To apply efficient, innovative and resource-saving process management methods. Risk management To continuously assess operational risks and implement measures to address and mitigate them. - KEY SUSTAINABILITY TOPICS 11 The materiality analysis identified 12 key (priority) sustainability topics that are closely interlinked and most relevant to the Group's environmental, social, and governance activities. The Group will continue developing its sustainability strategy and reporting on these topics. The United Nations Sustainable Development Goals the Group can contribute to the most are identified and listed for each topic (if applicable). The Sustainable Development Goals (SDGs) are a universal set of aspirations that set the direction for global economic, social and environmental development up to 2030. This report details the principles behind managing the sustainability topics and the Group's performance and targets in each area. SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 EU TAXONOMY ALIGNMENT OVERVIEW 12 The European Union (EU) Taxonomy (Taxonomy Regulation 2020/852 and the delegated acts adopted under it) is a classification system for sustainable economic activities designed to channel private investment into environmentally sustainable activities that contribute to the environmental objectives of the European Green Deal. The Taxonomy regulation sets out scientific evidence- based criteria for assessing the sustainability of an activity. The activities of those enterprises that fall under the Taxonomy list and meet the criteria provided can be classified as sustainable and attract green investments. Taxonomy-eligible economic activities are defined as activities described in the relevant delegated acts of the Taxonomy Regulation, i.e. included in the Taxonomy. Companies that have identified that their Turnover, CapEx and/or OpEx are related to the activities described in the Delegated Acts are required to carry out an analysis and disclose the extent to which their activities comply with the Taxonomy criteria with respect to these indicators. Taxonomy-aligned activity is defined as an activity meeting the Taxonomy technical analysis criteria, 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. The methodology for calculating the indicators has been updated compared to our last year's disclosure (described further). TAXONOMY-ELIGIBILITY ASSESSMENT AND CALCULATION OF INDICATORS Turnover. The Group derives part of its revenue from taxonomy-eligible activities. The primary economic activity of PST, construction, accounts for the majority of the Company's revenue and corresponds in the Taxonomy to the activity labeled Construction of new buildings. Other activities of the Company (real estate activities, building renovation activities) that are considered taxonomy-eligible are the Acquisition and ownership of buildings and Renovation of existing buildings. The revenue generated by these activities is calculated accordingly, as shown in the table provided further. Capital expenditure (CapEx). In terms of specific acquisitions that can be attributed to taxonomy-eligible activities in 2023, the Group acquired passenger vehicles (Transport by motorbikes, passenger cars and light commercial vehicles) and freight vehicles (Freight transport services by road) and a solar power plant (Installation, maintenance and repair of renewable energy technologies). The remaining long-term asset acquisitions have been distributed among taxonomy- eligible activities based on revenue proportions. This allocation is necessary because the equipment is utilized across various projects and cannot be directly linked to a specific activity. This approach was selected as the most suitable given the prevailing trends in Taxonomy disclosure within the construction sector. Operating costs (OpEx). Operating costs (OpEx) are defined in the Taxonomy Regulation as direct non-capitalised costs related to research and development, building renovation measures, short-term leases, maintenance and repairs, etc. According to the definition of the Taxonomy OpEx, we have calculated the total amount of operating costs (denominator) by including only maintenance and repair costs and short-term rentals. Similar to CapEx, the total operating costs have been divided among taxonomy-eligible activities based on revenue proportions. TECHNICAL SCREENING OF ACTIVITIES So far, the Taxonomy has encompassed and implemented criteria for activities aiding climate change mitigation and adaptation objectives (that also applies to our taxonomy-eligible activities). By the end of 2023, the list was broadened to incorporate criteria for activities addressing the remaining four environmental objectives. According to the expanded list, the activities Construction of new buildings and Renovation of existing buildings can also contribute to the transition to circular economy objective. We have also assessed other activities identified under the transition to circular economy objective, but have not identified any taxonomy-eligible activities tied to this objective for projects executed in 2023. In the future, our taxonomy-eligible activities and the methodology for calculating indicators may change in the light of possible new official interpretations of the EU Taxonomy. SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Our technical analysis has shown that the Group's current activities only partially meet the Taxonomy criteria and are therefore assessed as not taxonomy-aligned. The Group executes projects based on designs and cost estimates approved by clients, thus it cannot guarantee alignment with Taxonomy criteria. For example, the main activity of the Group Construction of new buildings is subject to quite challenging climate change mitigation criteria: new buildings must meet even higher requirements than are currently applied to buildings of the highest energy performance class A++, which are almost energy-free. Climate risk and vulnerability assessments have not been conducted for individual projects or at the Group level. Consequently, the activities fail to meet one of the 'do no significant harm criteria' for climate change adaptation, which applies to all taxonomy-eligible activities. In line with our support for the EU Green Deal, we intend to consider the Taxonomy Regulation in our future investment planning, so that our activities align with the Taxonomy criteria to the extent possible. The results of the screening are presented further using the template tables set out in the Taxonomy. MINIMUM SAFEGUARDS In its activities, Panevezio statybos trestas AB ensures compliance with the Guidelines for Multinational Enterprises of the Organization for Economic Co- operation and Development (OECD) and the United Nations' Guiding Principles on Business and Human Rights. The company protects and respects human rights and has a Code of conduct for employees, suppliers and company's representatives. Being one of the largest construction companies in Lithuania, Panevezio statybos trestas AB recognizes, understands and assumes responsibility for the impact of the corporate activities on the social, economic and natural environment. The Company is committed to complying with the legislation, regulations and agreements applicable to its operation. 13 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 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 Taxonomy- aligned proportion of revenue, 2022 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 activity: A.1. Environmentally sustainable activities (Taxonomy-aligned) Revenue of environmentally sustainable activities(Taxonom y-aligned) (A.1) 0 0% 0% 0% A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Construction of new buildings F41.1, F41.2, F43 81649 68.14% Acquisition and ownership of buildings L68 2883 2.41% Renovation of existing buildings F41, F43 7340 6.13% Revenue of Taxonomy- eligiblebut not environmentally sustainable activities (not Taxonomy-aligned activities)(A.2) 91872 76.67% Total: A.1 + A.2 91872 76.67% B. Taxonomy-non-eligible activities Revenue of Taxonomy-non- eligible activities (B) 27956 23.33% TOTAL: A + B 119828 100.00% REVENUE ACCORDING TO TAXONOMY IN 2023 14 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Substantial contribution criteria Do no significant harm criteria Economic activity NACE code(s) Absolute Taxonomy CapEx in 2023 Proportion of CapEx, 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 CapEx, 2023 Taxonomy- aligned proportion of CapEx, 2022 Category (enabling) Category (transitional) Eur % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % % E T A. Taxonomy-eligible activity: A.1. Environmentally sustainable activities (Taxonomy-aligned) CapEx of environmentally sustainable activities(Taxonomy- aligned) (A.1) 0 0% 0% 0% A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Transport by motorbikes, passenger cars and light commercial vehicles H49.32, H49.39, N77.11 100554 9.11% Freight transport services by road H49, H53 N77 172065 15.59% Installation, maintenance and repair of renewable energy technologies F42, F43, M71, C16, C17, C22, C23, C25, C27, C28 113915 10.32% Construction of new buildings F41.1, F41.2, F43 582003 52.75% Acquisition and ownership of buildings L68 10143 0.92% Renovation of existing buildings F41, F43 25780 2.34% CapEx of Taxonomy- eligiblebut not environmentally sustainable activities (not Taxonomy-aligned activities)(A.2) 1004459 91.04% Total: A.1 + A.2 1004459 91.04% B. Taxonomy-non-eligible activities Taxonomy CapEx of Taxonomy-non-eligible activities (B) 98892 8.96% TOTAL: A + B 1103352 100 % CAPITAL EXPENDITURE (CAPEX) ACCORDING TO TAXONOMY IN 2023 15 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Substantial contribution criteria Do no significant harm criteria Economic activity NACE code(s) Absolute operating expenditure in 2023 Percentage of operating 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 percentage of operating expenditure, 2023 Taxonomy- aligned percentage of operating expenditure, 2022 Category (enabling) Category (transitional) Eur % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % % E T A. Taxonomy-eligible activity: A.1. Environmentally sustainable activities (Taxonomy-aligned) Operating expenditure of environmentally sustainable activities(taxonomy- eligned) (A.1) 0 0% 0% 0% A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Construction of new buildings F41.1, F41.2, F43 547169 68.10% Acquisition and ownership of buildings L68 19284 2.40% Renovation of existing buildings F41, F43 49012 6.10% Operating expenditure of Taxonomy-eligiblebut not environmentally sustainable activities (not Taxonomy-aligned activities)(A.2) 615465 76.60% Total: A.1 + A.2 615465 76.60% B. Taxonomy-non-eligible activities Operating expenses of non-taxonomy-eligible activities (B) 188014 23.40% TOTAL: A + B 803479 100.00% 2023 OPERATING EXPENDITURE (OPEX) ACCORDING TO TAXONOMY 16 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 ENVIRONMENTAL AREA To provide a better picture and set specific and measurable targets, PST also foresees to assess the indirect emissions of Scope 3 for 2024. CO2 EMISSIONS REDUCTION AND ENERGY EFFICIENCY The Group is responsible for a significant amount of greenhouse gases (GHGs) emitted into the atmosphere during its activities. Therefore, this topic is identified as one of the key impact areas to manage. Reducing emissions and increasing energy efficiency are integral parts of the Group's strategy and will be the focus of future annual targets and impact reduction. The Group puts great effort into contributing to climate change mitigation and environmental protection. This is crucial for the sustainable and long-term preservation of the environment. The Group keeps investing in developing solar power plants and purchasing energy from 100% renewable sources. Some Group's companies already generate electricity to cover 100% of their needs. The Group keeps investing in developing solar power plants and purchasing energy from renewable sources. Some Group companies already generate electricity to cover of their needs. 100% In this report, the PST publishes its estimated (GHG) emissions from its activities in CO2 equivalent. The sources of emissions and the methodologies used to calculate them are identified, including the Scope to which the emission source belongs. The know-how and methodologies of market-based financial institutions and energy suppliers were used to calculate GHG emissions. The emissions calculation was based on the Greenhouse Gas Protocol (GHG) and Global Reporting Initiative (GRI) standards and recommendations. The calculation of emissions includes not only CO2 but also all other greenhouse gases (CO2, NH4, CH4, HFCs) emitted in the activity, converting them to CO2 equivalents using standard factors and naming the final total figure as CO2-eq. Emission consolidation method: operational control. The baseline year for calculating GHG emissions is 2022, the first year PST has chosen to estimate its emissions. Plans for 2024 Measurement units 2022 2023 Change 2022/ 2023 Change 2022/ 2023, t CO2 eq. Direct (Scope 1) t CO2-eq 1 803.5 1 916.5 + 6.27% + 113.1 Indirect (Scope 2) t CO2-eq 243.0 462.8 + 90.41% + 219.7 Indirect (Scope 3) t CO2-eq - - - - GHG emissions Note: Calculated using the market-based method, based on actual electricity purchases. Calculated using the location-based method, i.e. based on a country's specific energy production pattern, 2023. The company's indirect Scope 2 GHG emissions would be 702,1 t CO2 eq., 850.1 t CO2 eq. in 2022. * Compared to 2022, direct (Scope 1) emissions have increased due to higher fuel consumption in the transport fleet. ** Compared to 2022, indirect (Scope 2) emissions have increased because part of the electricity in Hustal UAB was purchased without guarantees of origin (it cannot be classified as green energy), and heating costs in PST construction sites have increased ~53%. The GHG emission intensity is calculated by dividing annual emissions by the number of units of economic activity. PST calculates how much CO2 is emitted per employee and per million Eur in this case. As with the total emissions calculation, the intensity ratios include all GHG emissions, converting them into CO2-eq. 2022 2023 Change 2022/2023 t CO2-eq / 1 employee 2.9 3.7 + 28% t CO2-eq / €1 million turnover 20.9 23.0 + 10% GHG emissions intensity Note: The emission intensity ratio has been calculated for the total Scope 1 and Scope 2 GHG emissions. 18 100% SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Energy consumption Direct & indirect energy consumption Measureme nt units 2022 2023 Direct fuel consumption from renewable sources TJ 0.42 0.84 Biofuels TJ 0.42 0.84 Direct fuel consumption from non- renewable sources TJ 24.05 25.67 Diesel TJ 22.58 23.48 Petrol TJ 1.47 2.19 Energy purchased and consumed TJ 21.21 17.78 Electricity TJ 12.45 7.18 Heat TJ 9.06 10.60 Total energy consumption in the organisation: TJ 45.98 44.29 Energy intensity 2022 2023 TJ / 1 million Eur revenue 0.47 0.43 TJ / 1 employee 0.066 0.068 Note: Total energy consumption is calculated using the GRI 302-1 formula. Conversion factors from convert-measurement-units.com convert energy quantities to TJ. Energy intensity The energy intensity index is calculated using the GRI 302 Energy methodology. GRI 302-3 PST purchased a new Komatsu bulldozer to replace the previous one manufactured in 2007. The new bulldozer has a new generation Euro 6 engine (the old bulldozer had Euro 3 one). In terms of hours actually worked in 2023 and the average fuel consumption per hour for this model, the new bulldozer consumes half as much fuel per working hour. During 2023, It emitted approximately 17.5 tonnes less CO2 than the old bulldozer would. Work and Achievements in 2023 PST has increased the capacity of its solar power plant (Puzino g. 1, Panevezys) from 30 kW to 60 kW. Hustal UAB has increased the capacity of its solar power plant from 200 kW to 320 kW. Development of solar energy projects: investments in new solar power plants or the expansion of existing ones to increase renewable energy production and reduce dependence on non-renewable sources. Plans for 2024 Initiation of projects to reduce electricity consumption by applying energy efficiency improvement measures and promoting responsible energy use. GRI 305-1 GRI 305-2 GRI 305-3 GRI 305-4GRI 302-1 19 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Measurement units 2021 2022 2023 General waste t 12,531.279 3684.020 2772.483 Hazardous waste t 2.923 4.759 11.107 Total t 12534.203 3688.779 2783.59 Measurement units 2021 2022 2023 Wood t 68.890 98.670 72.86 Metals t 20.010 5.118 277.585 Paper t 7.770 7.365 19.755 Glass t 13.940 2.040 0.14 Plastics t 0.040 0.065 8.807 Concrete brick mixes t 3099.940 1042.500 1088.1 Bituminous mixtures t 1200.000 416.400 0.65 Total t 4410.59 3590.109 1467.897 WASTE REDUCTION AND RESOURCE MANAGEMENT The Group aims to ensure the responsible management of all waste associated with its operations, continuously increase recycling and ensure responsible resource management. To conserve the environment and natural resources and to provide comprehensive pollution prevention, the Company has a practice of preparing an environmental plan at the beginning of each project. The plan foresees specific measures to manage significant environmental aspects and the Company’s activities. This is to minimise the Group's footprint in this area. The Company's approach to waste reduction is defined explicitly in the PST Environmental Policy. To successfully manage this topic, the Company has implemented an Environmental Management System according to the standard LST EN ISO 14001:2015. Waste reduction targets, describing the proportion of waste sorted to be achieved, are set each year. Objectives for 2024: GRI 306-3 GRI 306-4 Ensure the following minimal proportion of waste sorting on sites: To keep construction machinery, equipment and vehicles up-to-date, subject to financial constraints. PST sorts the generated construction waste on-site. Building materials suitable for reuse are separated. Waste that is not suitable for reuse is sent to waste handlers. Waste generated on construction sites is also sorted according to all applicable requirements. Internal audits monitor and control the waste sorting process. Records of generated waste are kept in the electronic Unified Product, Packaging, and Waste Record Keeping Information System (GPAIS). At the end of the calendar year, the proportion of waste sorted is calculated. Waste from operations PST strives to reduce the Group's negative environmental impact by adequately managing all waste generated from its operations. The Company supports and endorses the European Union's (EU) waste policy, which is based on the waste hierarchy principle of waste management—waste prevention in the first line, followed by preparation for reuse and only afterwards recycling and recovering. Waste sent for recycling Note: All hazardous waste generated by the activity has been passed on to waste handlers. Note: All of this waste has been sent for recycling; however, PST cannot guarantee that it has actually been recycled. new construction – 60 %; reconstruction, modernisation and renovation of buildings – 30 %; environmental management, road construction, site development and waste sites – 85%; otherwise unspecified waste sites – 45 %. 20 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Measurement units 2021 2022 2023 Water consumption of PST fixed facilities ML (megaliters) 3.211 4.312 5.233 Water consumption of PST construction sites ML (megaliters) 1.365 12.102 8.822 TOTAL: ML (megaliters) 4.576 16.414 14.055 WATER CONSERVATION AND POLLUTION REDUCTION The company considers water conservation and reducing water pollution as one of its key objectives and aims to reduce its impact on this topic in every possible way. The approach to this topic is further described in the Company's (Environmental Policy.) Amount of water consumed GRI 303-5 PST does not use water from areas experiencing water stress, while all calculations are based on metering devices installed within the Company. 21 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 ENVIRONMENTAL IMPACT OF BUILDINGS AND SERVICES The Company sees this topic as one of the most important for managing its impact on the environment, employees, and society. Therefore, the aim is to apply and develop new solutions and services to help reduce the environmental impact of buildings throughout their life cycle. The circular economy is about preserving the value of products and materials for as long as possible, with as little waste as possible and as few resources used as possible; the Company aims to do the same by trying to minimise its impact in this area. It is important to note that in terms of volume, construction and demolition are among the largest sources of waste. The construction industry significantly impacts the overall environmental performance of the life cycle of buildings and infrastructure. Given the long lifespan of buildings, the Company strives to promote better design in every possible way to reduce the impact on the environment and to increase the resilience and recyclability of their components. At the same time, the use of hazardous chemicals in construction sites is being steadily reduced by replacing them with less hazardous ones. The Company's new buildings currently under construction are of energy efficiency class A++. These buildings use almost no thermal energy, contributing to climate change mitigation. As the market tightens its requirements for the energy class of new projects, PST is developing its competencies and technological base to implement this type of project. In 2023, the Lazdynai swimming pool was recognised as the Product of the Year at the Lithuanian Confederation of Industrialists (LPK) awards, receiving the "Lithuanian Product of the Year 2023" gold medal. In 2024, priority will be given to acquiring and installing equipment and machinery, allowing to reduce the environmental impact of operations and fuel consumption. Work and Achievements in 2023 Plans for 2024 22 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 SOCIAL AREA Number of employees Permanent employees by gender (indefinite contract) Temporary employees by gender (fixed-term contract) Full-time employees by gender Part-time employees gender PST Group PST Group PST Group PST Group PST Group Total 491 762 451 721 40 41 471 735 20 28 Women 80 108 76 103 2 3 79 156 6 12 Men 411 618 375 38 38 578 392 578 14 16 Lithuania 490 756 450 716 40 41 470 729 20 27 Latvia 1 3 1 3 0 0 1 3 0 1 Poland 0 3 0 2 0 0 0 2 0 0 EMPLOYEES AND THEIR DIVERSITY Professional, competent and responsible employees are the Group's greatest asset and essential to achieving its goals. The Group aims to ensure a respectful and caring relationship with its employees, increase diversity, and foster employees’ well-being and internal corporate culture. On 6 August 2021, a Labour Council of nine members was elected to represent employees in the Group. The Labour Council makes proposals to employer on economic, social, and labour issues of concern to employees, as well as employer decisions and laws and regulations governing labour relations. The Council is set up for a term of office of 3 years, starting from the beginning of its mandate. As of 31 December 2023, the Group had a total of 762 employees, and PST had 491 employees. As of 31 December 2022, the Group had a total of 805 employees, and PST had 536 employees. Breakdown of employees by gender and location Note: The tables present the Group's data at the end of the reporting period (2023). Data for 2022 is available for comparison in the PST Social Responsibility and Sustainability Report for 2022. There has been a natural turnover of employees in the Group's companies during 2023. The Group does not have information on the total number of employees (e.g., subcontractors' employees) who are not employees of the Group and whose work and/or workplace is not controlled by the Group. GRI 2-7 GRI 2-8 24 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 New hires Turnover Total number in each category Number of new hires Rate per category (%) Number of redundancies Rate per category (%) By gender: Women 108 10 9.3% 4 3.7% Men 654 225 34.4% 71 10.9% By age: Up to 30 years 67 61 91.0% 20 29.9% 30–50 years 389 131 33.7% 38 9.8% Over 50 years 306 43 14.1% 17 5.6% By location: Lithuania 756 212 28.00% 43 5.7% Latvia 3 0 0.00% 0 0.00% Poland 3 1 33.3% 0 0.00% Employees and their diversity Breakdown by gender Total number of employees entitled to parental leave (by gender). Men – 7 Women – 1 Total number of employees on parental leave (by gender). Men – 0 Women – 1 Total number of employees who returned to work after parental leave during the reporting period (by gender). Men – 0 Women – 3 The total number of employees who returned to work after parental leave and are still working 12 months after their return (by gender). Men – 0 Women – 1 The rate is calculated as follows: the number of new hires in a given category divided by the total number of employees in that category. For example, the number of new female hires among all female employees. Parental leave Note: The relative rate of return to work of workers on parental leave by the GRI formula is not reported, as this is the first time the indicator has been reported, and the data are only disclosed for 2023. GRI 401-1 GRI 401-3 New hires and turnover 25 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Gender and age group 2022 2023 Share (%) The board Women 40 40 Men 60 60 Up to 30 years 0 0 30–50 years 60 40 Over 50 years 40 60 Gender and age group Share (%) 2021 2022 2023 PST Women 15 17 16 Men 85 83 84 Up to 30 years 7 8 8 30–50 years 42 43 48 Over 50 years 51 49 44 Group Women 19 15 14 Men 81 85 86 Up to 30 years 8 9 9 30–50 years 47 47 51 Over 50 years 45 44 40 Percentage of employees in each of these diversity categories DIVERSITY, EQUALITY AND INCLUSION The Group has placed a strong emphasis on diversity, equality and inclusion in 2023. By creating a work environment based on diversity, equality and inclusion, the Group ensures that the views of different stakeholders are taken into account and that the expectations of these stakeholders towards the Group are better reflected. In 2023, as in the past, the majority of the Group's employees, 86% (PST – 84%), were men, which is typical for the construction sector. This is strongly influenced by the specific nature of the activities carried out, i.e. women are less likely to opt for technological work in construction and directly related construction-technical- engineering occupations and outdoor work. The Group does not discriminate based on gender, assesses employees based on their qualifications, and provides equal employment and career opportunities. Every employee's opinions and ideas are accepted. There were no cases of discrimination in 2023. Social Responsibility and Sustainability Report 2023 GRI 406-1 GRI 405-1 The group is against forced, involuntary labour and child exploitation. Only persons of the legal age by the law of the Republic of Lithuania may be recruited. Percentage of individuals in each of these diversity categories on the Group's board 26 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA  PST Group 2021 2022 2023 2021 2022 2023 The ratio of the annual total compensation for the organisation’s highest-paid individual to the median annual total compensation for all employees 6.33:1 5.5:1 4.7:1 6:1 7.87:1 7.5:1 The ratio of the percentage increase in annual total compensation for the organisation’s highest-paid individual to the median percentage increase in total yearly compensation for all employees - 0.24:1 0.29:1 - 2:1 0.73:1 REMUNERATION POLICY To attract professionals to management positions, the Group aims to maintain remuneration close to the market median of the country where the Group operates. The remuneration system is a set of remuneration packages that Group companies use to attract, motivate and retain the best people to help them achieve their long-term goals and business strategy. Staff remuneration is based on the employee's responsibilities, performance, competencies, knowledge and skills; the pay for equivalent posts is similar. Employees benefit from advanced bonus schemes and an exceptional working environment. The Group also provides social security benefits for employees, such as death benefits for family members or relatives (in the event of an employee's loss) and gifts at the birth of a child and on the occasion of an anniversary. For more information on the remuneration policy, please refer to the "Consolidated Remuneration Report" section of the Annual Report. GRI 2-19 GRI 2-20 DETERMINING THE REMUNERATION FOR THE BOARD MEMBERS The extraordinary general meeting of shareholders of 9 April 2021 approved the procedure for the appointment and payment of remuneration to independent members of the board of Panevezio statybos trestas AB. Under these arrangements, the independent member of the board is paid a fixed monthly remuneration. The board members, other than the independent members of the board, are paid remuneration (bonuses) for their work on the board, as decided by the general meeting of shareholders, by the Law on Companies of the Republic of Lithuania. DETERMINING THE REMUNERATION OF TOP AND MIDDLE MANAGERS The remuneration policy for top and middle managers of Panevezio statybos trestas AB was approved at the ordinary general meeting of shareholders on 29 April 2020. The board approves the remuneration of the Company's chief executive officer (general director) and the remuneration of functional and branch directors on the general director's recommendation. The Company currently has no information on how stakeholders' views (including shareholders) are considered in determining remuneration or the involvement of consultants in the remuneration setting. Remuneration for top and middle managers consists of fixed and variable components. The fixed component is the employee's basic monthly salary, as set out in the employment contract. The variable component is based on the Company's and the employee's performance. The remuneration policy for board members and the management team is not linked to sustainability performance. The consolidated remuneration report for 2022 and the set of financial statements 2022 were approved at the general meeting of shareholders on 27 April 2023. Annual total compensation ratio The annual increase in total remuneration for the highest-paid individual at PST was 8%. The annual percentage increase in the median total compensation of all employees (excluding the highest-paid individual) was 26%. At the group level, the highest-paid individual had an annual compensation increase of 18%. The annual percentage increase in the median total remuneration of all employees (excluding the highest-paid individual) was 24%. GRI 2-21 27 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 EMPLOYEE SAFETY AND WELLBEING The Group is committed to ensuring a safe working environment for its employees, so safety is considered one of the highest priorities. One of the Group's main objectives is to become a leader in the construction market, guaranteeing safe and hazard-free workplaces for Panevėžio statybos trestas AB employees and all the employees working on behalf of the Company. The Group has an Occupational Health and Safety (OHS) Policy and relevant ISO 45001 procedures in place: Implementation of legal and other requirements for environmental protection and occupational safety and health (ADSSVP-02). Emergency preparedness and response (ADSSVP-04). Monitoring and measurement (ADSSVP-06). Occupational safety and health management (OSHMP-09). Identification and risk assessment of occupational hazards (DSSAP-10). Managing objectives, targets and management programs (KADSSVP-002). Design Management (KADSSVP-003). Purchase and sale (KADSSVP-004). Selection of subcontractors (KADSSVP-005). This helps to ensure the ongoing identification and assessment of OHS risks, defining risk management measures, and monitoring their implementation. GRI 403-1 WORK-RELATED RISKS Sound occupational health and safety management contributes significantly to the Group's sustainable and long-term performance. In the construction sector, the risk of injury and occupational diseases is high where there are high physical loads or where hazardous work, chemicals, or other materials are involved. Hazardous and harmful risk factors (hazards) identified: Noise – noise from mobile electrical work equipment on a construction site. Hand vibration – when working with portable electrical equipment on a construction site. Low and high temperatures (working outdoors, indoors (cold and warm seasons)). Inadequate lighting – artificial lighting (when work is carried out outdoors, in open spaces during the dark daytime, or in basements). Contact with hazardous chemicals: petroleum products (fuels, lubricants, etc.), acids, alkalis in mixtures and other hazardous substances, soil, paints, adhesives, and sealants. The physical exertion of lifting and carrying loads by hand involving the arms, legs and back muscles. Falls from height – scaffolding; mobile towers, ladders; mobile work platforms; workplaces at a height not protected by safety fencing. Falling at the same level (horizontal), risk of slipping, tripping, stumbling. Falling objects – lifting loads with cranes; workplaces at heights not protected by safety fencing; hazardous areas near buildings; lifting equipment. Risk of tripping, pinching – erecting and dismantling heavy structures using lifting equipment. There is a risk of being run over, pinched, or crushed by moving vehicles during delivery of building materials, waste removal, or landscaping. Risk of entrapment and crushing of rotating parts of machinery and equipment. Risk of cuts and dents when using sharp tools or materials with sharp edges or corners. Exposure to electrical currents (alternating current over 50 V and direct current over 75 V, high voltages of 10 kV and above). Fragmented, flying particles of work materials – hazardous areas on a construction site when working with portable electrical work equipment. Fire hazards include welding, metal cutting with power tools causing sparks, and the use of electrical household appliances. Potential displacement and collapse of stored building materials and structures – storage of building materials and heavy structures. Hazards in the work and services provided by other organisations and their employees. Dust risk – excavation and construction work during the warm season. 28 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 2022 2023 Injury rate 0 2 Number of minor accidents (injuries) per million hours worked 0 1.31 Work and Achievements in 2023 Plans for 2024 GRI 403-9 Work-related injuries Note: The total recordable injury rate per million hours worked is calculated using the GRI 403-9 formula. The total number of hours worked by all employees in 2023 was 11,269,833. We introduced an e-learning platform for qualification and occupational safety and health training to improve the quality and accessibility of training for every employee. The process for issuing personal protective equipment has been digitised. From 1 March 2023, employees will be issued personal protective equipment via the VIACOREX electronic platform. OCCUPATIONAL HEALTH AND SAFETY TRAINING SYSTEM The company provides occupational health and safety training to ensure every employer is informed and prepared to perform their duties safely. The training program comprises several parts: Theoretical training covering the basics of health and safety at work, legislation, Company policies and procedures. It also focuses on hazard identification and the principles of safe behaviour, including using personal protective equipment and accident prevention. Practical training on specific hazards and activities, such as fire safety, civil protection, use of chemicals and high-risk work. It also includes evacuation plan training and first aid principles. Periodic knowledge checks and practical training to refresh and test workers' knowledge and skills in actual or simulated situations. The Company's managers and safety officers are responsible for ensuring the quality of the training and keeping the programs up-to-date with the latest hazards and legal requirements. This is the Company's way of creating a safe working environment and ensuring every employee is well-prepared for different situations. On 16-03-2023, Technical Director K. Grimalis, OHS Senior Specialist V. Fijalkauskas and Construction Manager K. Kurpis participated in PETROFAC's “2023 Contractors Safety Forum Lithuania”, where Lithuanian and foreign companies shared their experience of creating a safe environment. The digitalisation of compulsory health screening for workers through the electronic platform Esveikata. It has been launched to improve the quality of health screening and the accessibility of information for every employee. The overarching goal of the Vision Zero for Accidents at Work 2024 is 0 accidents at work. The implementation of the e-platform for OSH management, "SAUGA.lt," should be completed in Q1 2024. OSH and competencies/professional training will be delivered using the e-platform. Improve staff and manager awareness of OSH and risk assessment through better training programs and presentation of information. GRI 403-5 29 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 One of the main objectives of the Group's strategy is to promote the training and development of employees at all levels. Employee development and improving specific and general skills ensure the proper and smooth running of the Group's businesses and operational processes. They are among the most critical factors in ensuring competitiveness. Employee development plans are drawn up annually, taking into account the Group's objectives and the competencies required to achieve them. The Group provides opportunities for employees to improve their knowledge and skills through various training courses, seminars and conferences. The Company and its subsidiaries provide regular in-house training for employees based on the nature of the work and the workplace requirements. The Group focuses mainly on Occupational Health and Safety (OHS) training, which is included and described in the Group's Occupational Health and Safety Policy. To ensure a smooth process on this topic, the Group has also implemented the ISO 45001 procedure Personnel Training (KADSSVP-016) and the training procedures are defined in the Group's procedure for training, testing and assessment of the Group's employees' knowledge in the field of occupational safety and health. The Company and its subsidiaries are responsible for developing the qualifications and skills of their employees, which means investing time and money in organising and implementing the necessary training and education programs. The Group's training is delivered in two tracks, using the services of 1. Training providers (external training). 2. Higher education institutions (employee studies). The Group continuously invests in training and development courses to improve its employees' competencies and awareness of occupational safety and health. In 2023, training courses were organised at the Company and training institutions. The training sessions attended by employees are listed in the table below. 4712 The Group dedicated a total of hours to various external and internal trainings”, pagal nutartą dizaino kryptį. EMPLOYEE TRAINING AND EDUCATION 30 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Average hours of training per year per employee  2022 2023 2022 2023 2022 2023 Number of specialists Number of hours Average hours of training per employee Women 6 19 130 170 21.67 8.95 Men 143 272 2791 4542 19.52 16.70 Sales and negotiations 2 3 8 16 4.00 5.33 Workman employed in the construction of high-rises 40 23 916 148 22.90 6.43 Cargo hanger 0 21 0 277  13.19 Fire safety (employee) 48 59 161 176 3.35 2.98 Fire safety (manager) 6 3 41 17 6.83 5.67 Civil protection 9 22 1 40 0.11 1.82 Violence and harassment: risks, prevention measures, employees' rights and obligations 9 22 1 40 0.11 1.82 Lifting platform and equipment operator 0 41 0 1274  31.07 The organisation of crane work 0 1 0 3  3.00 Tower crane operator 0 1 0 32  32.00 Mobile work platforms work manager 0 1 0 16  16.00 Coordinator for construction safety and health at work 0 3 0 96  32.00 First aid training 9 53 1 143 0.11 2.70 OHS professionals 9 14 652 1072 72.44 76.57  2022 2023 2022 2023 2022 2023 Number of specialists Number of hours Average hours of training per employee Improving occupational health and safety 0 3 0 64  21.33 Persons authorised by the employer 5 5 170 170 34.00 34.00 Energy workers (heating) 8 0 234 0 29.25 Training of certified construction professionals for the certificate of competence 4 3 32 48 8.00 16.00 Training for the renewal of the certificate of competence for certified construction professionals 17 29 404 704 23.76 24.28 Training of certified construction professionals to supplement the certificate of qualification for work in the territory of a cultural heritage object, its protection zone, a cultural heritage site 10 13 160 259 16.00 19.92 Certification training for responsible structural welders 4 3 128 96 32.00 32.00 GRI 2-4 GRI 404-1 * Employer's authorised person – the head of the structural unit to which the head of the company has delegated the implementation of OHS prevention measures (head of a department, office, bureau or other units) Note: The table for 2023 has been updated with data for 2022, as the information disclosed in last year's report was incomplete. 243 employees and managers trained 31 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 The Group consistently strives to foster an internal culture of sustainability. There is a strong focus on encouraging employees, creating a supportive environment for developing and implementing new ideas, and constant information sharing. The Group aims to ensure that employees feel comfortable in their workplace, can build their skills and knowledge, and are free to create and implement sustainability-related ideas. The Group's key principles for a sustainable culture: Accountability (for impacts on society, economy, environment). Transparency (decisions and activities affecting society and the environment). Ethical (decent) conduct. Respecting (listening and responding to) stakeholders' interests. Respect for the rule of law. Compliance with international standards of conduct. Respect for human rights. A well-established sustainability culture helps the Company manage its negative environmental impacts, ensure a sustainable construction process and contribute to a sustainable society. To create and foster an internal culture of sustainability, the Group has developed additional related documents to communicate the Group's position on various sustainability issues to its employees. The following documents are available to all employees: Supplier code of conduct Environmental policy BUILDING AN INTERNAL CULTURE OF SUSTAINABILITY Practical first aid training for all employees from Panevėžys and Vilnius who expressed their wish to participate. During the training, they learned or refreshed their knowledge on how to deal with life-threatening situations so that they could help colleagues, relatives, or other close people if needed. Expanding the fleet and capacity of existing solar power plants at Hustal UAB. Hustal UAB colleagues have taken concrete action on the environment by producing two Environmental Product Declarations (EPD). In the main product declaration, one of the key indicators—the product's Global Warming Potential (GWP)—was reduced from 2.83 to 1.47 kgCO2/kg, while the box joist declaration achieved an extremely low GWP of 0.877 kgCO2/kg. This means that Hustal UAB products now have a lower carbon footprint and are greener. 2023 achievements: In May, employees repeatedly participated in the Steps Challenge initiative, which saw more than 22 million steps taken. In 2023, the following initiatives have been implemented within the Group to promote a culture of sustainability: PST's subsidiary Skydmedis produces green energy and fully supplies its needs. Neither electricity nor heating fuel is bought from outside. PST purchases and focuses only on green energy purchases at the company level. ncreasingly, the Company is using Ecocrete, a low-CO2 formula concrete with the same standard and early strength characteristics as conventional concrete but a significant reduction in CO2 emissions, in a wide range of projects (especially wind farms). The company aims to keep using more environmentally friendly concrete and other technologies that help use resources more efficiently and reduce environmental pollution. The company gives a second thought and responsibly gives sustainable gifts to its customers or partners on special occasions. For example, on the occasion of the completion of the Lazdynai swimming pool, an oak tree with a commemorative plaque was planted on the site; partners OP Bank were also presented with a tree near their office on the anniversary of their establishment in Lithuania. 32 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Positive impact on communities is one of the Group's key focus areas. The Group believes that corporate social responsibility - effective only when integrated into daily work and managed like any other business activity - leads to a sustainable and responsible economy. The Group's constant and continuous improvement in business and project management, quality, customer satisfaction, supply and subcontractors' chain management, environmental protection and public relations is not only a matter of being open to the surrounding community but also of acting ethically, honestly and transparently towards the market, the environment, society and employees. The Group's businesses are guided by the highest standards of business ethics and social ethics. Social responsibility activities are based on the Group's values and define the Group's approach to its activities, the incorporation of social, environmental and transparency principles into the Company's and the Group's internal processes, and its relations with its customers. The construction sector has a significant environmental and ecological footprint. It depletes natural resources, uses a wide range of machinery (trucks, tractors, etc.), and pollutes building materials. Without managing the risks associated with such activities, the impact on the environment and communities can be significant. To successfully manage this topic, the Group is implementing local community involvement, impact assessment and the following development programs: A life cycle perspective is considered when determining the environmental aspects of projects. The following key stages of the product/service life cycle are assessed in the process: procurement of raw materials, design, manufacture of construction products, transport, construction of the building, use of the building, demolition at the end of the cycle and final disposal. The Group monitors and measures environmental, social and governance indicators such as waste, hazardous chemicals used, incidents of ground contamination by petroleum products, stormwater pollution, internal combustion engine emissions, particulate air pollution, noise, indoor dust, street dirt/dust, electricity, water and fuel consumption, etc. The Group and its companies report the results of the measurements to the regulatory authorities. POSITIVE IMPACT ON LOCAL COMMUNITIES GRI 413-1 SUPPORTING LOCAL COMMUNITIES In 2023, the Group continued to pursue its goal of being a reliable and socially responsible company by investing its financial and human resources in a wide range of complementary activities and by supporting social, sporting, cultural and health promotion projects. In 2023, the Group has supported over ten various organisations. We aim to support the education community, engage with students and strengthen their interest in the construction sector. Work and Achievements in 2023 We have contributed to supporting and growing the Lithuanian scientific community: We have awarded a scholarship to the author of the best scientific dissertation of 2022 in the framework of the "Best Dissertation of 2022" election initiated by the Lithuanian Society of Young Researchers (LJMS). In cooperation with Kaunas University of Technology (KTU) Panevezys Faculty of Technology and Business, we have established a scholarship for the best study and scientific achievements for the student of the master's degree study program "Integrated Design and Construction Management". 33 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA Social Responsibility and Sustainability Report 2023 Social Responsibility and Sustainability Report 2023 The Group aims to provide a working environment based on respect for fundamental human rights and human values. The importance of ensuring human rights is defined in PST Code of conduct for employees, suppliers and company representatives. PST expects the employees, suppliers and representatives in all branches of the Company to prohibit all forms of discrimination and harassment. During 2023, the Group identified no human rights risks or violations. The Company and the Group respect the principles of human rights protection, do not tolerate any violation of human rights, advocate a fair and transparent remuneration policy, comply with the laws on overtime and working time, respect the right of workers to rest and do not tolerate any form of harassment and violence. The Company opposes discrimination and forced labour of any kind. Employees have equal rights and opportunities regardless of gender, nationality, social or marital status, social or political organisation membership, or personal characteristics. In 2023, the Company and the Group did not record any cases of human rights violations or related complaints. HUMAN RIGHTS 34 SOCIAL AREASUSTAINABILITY IN THE GROUP ENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP GOVERNANCE AREA GOVERNANCE AREA Business ethics is integral to PST and the Group's business activities. The Group aims to create and foster an ethical business culture, prevent corruption and bribery and compete fairly. The PST Code of Conduct, accessible to all stakeholders, describes the Group's position and broader approach to business ethics. The Group has identified and is guided by the following principles: BUSINESS ETHICS GRI 205-3 FIGHTING CORRUPTION AND BRIBERY The Company and its subsidiaries do not tolerate corruption of any kind or its manifestation. They are committed to open competition, ethical business conditions and adequate transparency and openness in their operations. The Group does not tolerate fraud, extortion, the creation of unofficial accounts, the execution of unofficial and improperly documented transactions, the recording of fictitious expenses, the use of false documents and other forms of corruption. The anti-corruption provisions apply to all employees of the Group, members of the management and supervisory bodies and third parties acting on behalf of the Group. Comprehensive internal control mechanisms to identify potential corruption risk factors mitigate the risk. The Company and the Group's companies continuously monitor and improve their business processes. The Company and its subsidiaries refrain from any form of influence with politicians and do not contribute to the election campaigns of political parties, their representatives or candidates. The Group always cooperates with the authorities and is ready to provide all the necessary information. The Company and its subsidiaries shall ensure that all its procurement is carried out in a manner that rationally uses resources based on the principles of equality, non-discrimination, transparency, mutual recognition, proportionality, confidentiality, and impartiality. Suppliers shall be selected based on the most economically advantageous tender or the lowest price, based on equal and non- discriminatory treatment between suppliers. The group assesses subcontractor qualifications as part of the subcontractor selection process. Subcontractors must ensure compliance with environmental and occupational health and safety legislation and their integrity. There were no significant cases of non-compliance during 2023. There were also no fines for non-compliance with laws and regulations. The Group complies with the law as defined by government regulations. No cases of corruption were reported in 2023. GRI 2-27 Accountability (for impacts on society, economy, and environment) Transparency (of decisions and activities that affect society and the environment) Ethical (decent) conduct Respecting (listening and responding to) stakeholders' interests Respect for the rule of law Compliance with international standards of conduct Respect for human rights 36 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 GRI 205-2 COMMUNICATION AND TRAINING ON ANTI-CORRUPTION POLICIES AND PROCEDURES The description of the procedure for reporting and handling irregularities has been uploaded on the PST website and is available to all management bodies. It was also emailed to the board members and the general director. All employees (100%) are informed about the organisation's anti-corruption policies and procedures. A description of the procedure for reporting and handling infringements is available to business partners on the PST website. The awareness percentage is not calculated. In 2023, no anti-corruption training was provided for governing body members or employees. The procedure is explicitly explained in the description mentioned above. It is communicated to employees upon signed acknowledgement. 37 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 Location Share of products and services purchased by country (%) 2022 2023 Lithuania 94.4 88.87 Poland 2.7 3.2 Latvia 1.5 7.64 Germany 1.3 0.28 Sustainability in the supply chain is managed by selecting suppliers based on their practices and their impact on the environment, human rights and communities. By contributing to sustainability initiatives in the supply chain, the Group can provide an impetus for suppliers and building product manufacturers to join together and make their operations more sustainable. A sale/purchase procedure is foreseen to ensure a proper process for this topic. In addition, the management of this topic is defined in the Quality and Environmental policies. Share of the procurement budget by location of operation SUSTAINABILITY IN THE SUPPLY CHAIN GRI 204-1 GRI 308-1 Note: The Group's geographical definition of ‘local’ is Lithuania. Construction sites define the ‘significant locations of operation’. So far, new suppliers have not been evaluated on environmental and social criteria. In the future, it is envisaged that suppliers will be evaluated based on sustainability criteria and that suppliers that meet these criteria will be given preference. 2023 achievements: The procurement management system was digitised in 2022, and procurement was launched on the e-procurement platform Viacorex. In 2023, 90% of purchases were made through this system. Purchase/sales contracts have been transferred to the program Doclogix, which allows a significant reduction in paper and ink consumption. So, in 2023, paper annexes to generic contracts were abandoned in favour of e-orders. Up to 80% of purchases are made this way. GRI 414-1 38 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 The Company and its subsidiaries continuously focus on improving operational management efficiency, improving the quality of construction works, and introducing modern technologies. The Group seeks ways to improve efficiency, innovative and resource-efficient process management, working conditions, construction work and service quality. So, in 2023, the company started optimising its core business – project management processes. The aim will be to purify and digitise the processes. The Company and its subsidiaries aim to reduce the energy used in their operations by optimising production processes. The Group is investing in technologies that produce and use green energy. The Group adopts and uses advanced processes and technologies to maintain excellence in the construction sector. In cooperation with its partners, the Group seeks to expand the use of Building Information Modeling (BIM) principles in project management activities. The Group uses modern design software to prepare building projects. It also actively monitors and continuously adds relevant applications to the software. INNOVATION AND OPERATIONAL EFFICIENCY Plans for 2024 In 2024, the company will focus on digitising processes (project management, HR management, data analysis). It will also aim to acquire and install equipment and machinery to increase productivity, improve accuracy and reduce the environmental impact of the activities and fuel consumption. 39 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 Quality of services and buildings is one of the Group's key strategic topics. The Company and its subsidiaries are committed to ensuring that the projects they deliver are of high quality, meet the needs of their clients and comply with industry standards. To meet its customers' needs and expectations, the Group endeavours to understand not only the customer's current needs but also its forecasted needs by identifying the key characteristics of its products/services, assessing its position in the marketplace, identifying market opportunities and weaknesses, and predicting its future competitive advantage. The Group is guided by a quality management system that has been developed, documented, implemented and continuously monitored to ensure the smooth implementation of this topic. The Group is committed to continuously improving the performance of its quality management system to the requirements of LST EN ISO 9001:2015. Specific processes have been identified, their sequence and interactions defined, and criteria and methods identified for effective process management. The Company and its businesses have established quality objectives and requirements for products or services in their product and service marketing planning. The requirements are detailed in the Group's Quality Policy. Quality objectives and requirements are reviewed yearly. The management systems implemented in the Company and its subsidiaries are certified by an independent surveillance audit carried out by auditors from the certification firm Bureau Veritas. The management team analyses the results of internal and external audits and makes decisions to improve the management system. QUALITY OF SERVICES AND BUILDINGS Work and Achievements in 2023 2023 Einpix was launched to streamline communication and task sharing with collaborators, suppliers, subcontractors, and customers to manage warranty tasks. It has enabled simplified task and defect management, efficient handling of urgent problems, real-time supervision of staff tasks, and monitoring of the client's reaction to the work performed. Plans for 2024 Integrate quality issues into the project management IT system that is being implemented. 40 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 Risk management is part of strategic management and is integral to the Group's operations. The Group's primary objective in managing risks is to identify and optimally manage the higher and more significant risks. The Group aims to continuously assess its operational risks and implement measures to address and mitigate them. PST and the Group companies are exposed to a variety of risks in the course of their business: Legal regulation High levels of competition Shortage of qualified labour force Economic cyclicality Consistency of order intake Volatile material prices on the global market Rising material prices Macroeconomic factors Dumping Only some of them may significantly impact the Group's and the Company's performance. The main factors that create business risks for the Company and the Group are competition in the construction market and changes in demand for construction services. Demand for construction services is also strongly influenced by the volume of investment and the funding available from EU structural funds. Increases and fluctuations in the prices of materials and services complicate the budgeting process for ongoing projects and the ability to complete projects within planned costs. This creates additional risks in fixed-price construction contracts and reduces project profitability. The Company's and the Group's operations are also affected by the economic situation in Lithuania and the countries where the Group's companies operate (economic cyclicality), geopolitical changes, Russia's military invasion of Ukraine, and the remaining risks associated with COVID-19. Uncertainties remain in global economic developments due to the anticipated regional and global crisis. RISK MANAGEMENT The section Governance Report of the Company’s and Consolidated Annual Report provides more information on risks and their management. Note 4 to the Separate Financial Statements and Note 4 to the Consolidated Financial Statements provide information on the types of financial risks and risk management. Legal uncertainties are disclosed in Note 28 to the Separate Financial Statements and Note 27 to the Consolidated Financial Statements. 41 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 INDEX GRI INDEX Statement of use Panevezio statybos trestas AB 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 GRI Standard Page 1. The organisation and its reporting practices 2-1 Organisational details 4, 5 p. 2-2 Entities included in the organisation's sustainability reporting 4, 5 p. 2-3 Reporting period, frequency and contact point 4 p. 2-4 Restatements of information 4, 31 p. 2-5 External assurance 4 p. 2. Activities and workers 2-6 Activities, value chain and otherbusiness relationships 5 p. 2-7 Employees 24 p. 2-8 Workers who are not employees 24 p. GRI Standard Page 3. Governance 2-9 Governance structure and composition 8 p. 2-10 Nomination and selection of the highest governance body 8 p. 2-11 Chair of the highest governance body 8 p. 2-12 Role of the highest governance body in overseeing the management of impacts 8 p. 2-13 Delegation of responsibility for managing impacts 8 p. 2-14 Role of the highest governance body in sustainability reporting 4 p. 2-15 Conflicts of interest 8 p. 2-16 Communication of critical concerns 8 p. 2-17 Collective knowledge of the highest governance body 8 p. 2-18 Evaluation of the performance of the highest governance body To date, there has been no specific process for assessing the board's performance in terms of sustainability. Such a process would be foreseen should the need arise. 2-19 Remuneration policy 27 p. 2-20 Process to determine remuneration 27 p. 2-21 Annual total compensation ratio 27 p. 4. Strategy, policies and practices 2-22 Statement on sustainable development strategy 3 p. 2-23 Policy commitments 7 p. 2-24 Embedding policy commitments 7 p. 2-25 Processes to remediate negative impacts 8 p. 2-26 Mechanisms for seeking advice and raising concerns 8 p. 42 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 GRI Standard Page 2-27 Compliance with laws and regulations 36 p. 2-28 Membership associations Panevezio statybos trestas AB is a member of the Lithuanian Construction Association,Association of construction products testing laboratories anda member of Panevezys Chamber of Commerce, Industry and Crafts.Metalo meistrai UAB is a member of the Lithuanian Welders Association,PST investicijos UAB is a member of the Lithuanian Real Estate Development Association. 5. Stakeholder engagement 2-29 Approach to stakeholder engagement 9 p. 2-30 Collective bargaining agreements The Company does not have a collective agreement with its employees. GRI 3: Material topics 2021 3-1 Process to determine material topics 9 p. 3-2 List of material topics 10 p. 3-3 Management of material topics 10 p. Economic topics GRI 204: Procurement practices 2016 204-1 Proportion of spending on local suppliers 38 p. GRI 205: Anti-corruption 2016 205-2 Communication and training on anti-corruption policies and procedures 37 p. 205-3 Confirmed incidents of corruption and actions taken 36 p. Environmental topics GRI 302: Energy 2016 302-1 Energy consumption in the organisation 19 p. 302-3 Energy intensity 19 p. GRI Standard Page GRI 303: Water and Effluents 2018 303-5 Water consumption 21 p. GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions 19 p. 305-2 Energy indirect (Scope 2) GHG emissions 19 p. 305-3 Direct (Scope 1) GHG emissions 19 p. 305-4 GHG emissions intensity 19 p. GRI 306: Waste 2020 306-3 Waste generated 20 p. 306-4 Waste diverted from disposal 20 p. GRI 308: Supplier Environmental Assessment 2016 308-1 New suppliers that were screened using environmental criteria 38 p. Social topics GRI 401: Employment 2016 401-1 New employee hires and employee turnover 25 p. 401-3 Parental leave 25 p. GRI 402: Labor/Management Relations 2016 402-1 Minimum notice periods regarding operational changes Matches the deadlines set out in the Labour Code GRI 403: Occupational health and safety 2018 403-1 Occupational health and safety management system 28 p. 403-5 Occupational health and safety management system 29 p. 403-9 Work-related injuries 29 p. GRI 404: Training and Education 2016 404-1 Average hours of training per year per employee 31 p. 43 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 GRI Standard Page GRI 405: Diversity and Equal Opportunity 2016 405-1 Diversity of governance bodies and employees 26 p. GRI 406: Non-discrimination 2016 406-1 Incidents of discrimination and corrective actions taken 26 p. GRI 413: Local Communities 2016 413-1 Activities related to local community participation, impact assessment and development programs 33 p. GRI 414: Supplier Social Assessment 2016 414-1 New suppliers that were screened using social criteria 38 p. 44 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023 Global Compact principle Page 1 We support and respect the protection of internationally proclaimed human rights. 34 p. 2 We make sure that we are not complicit in human rights abuses. 34 p. 3 We uphold the freedom of association and the effective recognition of the right to collective bargaining. 34 p. 4 We do not use forced and compulsory labour and work to eliminate all forms of it. 34 p. 5 We do not exploit child labour and work to eliminate all forms of it. 34 p. 6 We do not discriminate and work to eliminate discrimination in respect of employment and occupation. 34 p. 7 We support a precautionary approach to environmental challenges. 7 p. 8 We undertake initiatives to promote greater environmental responsibility. 17 p. 9 We encourage the development and diffusion of environmentally friendly technologies. 17 p. 10 We do not tolerate corruption and work against corruption in all its forms, including extortion and bribery. 36 p. UN GLOBAL COMPACT PRINCIPLES At the beginning of this century, the United Nations compiled and published the 10 universal principles Global Compact), Global Compact), inviting all organisations seeking to operate responsibly and sustainably to adhere to voluntarily. We support these principles in our work and promote their implementation in areas we can impact. Below is a list of all the principles and the pages in this report that describe our activities, ambitions and initiatives in relation to these principles. 45 SOCIAL AREASUSTAINABILITY IN THE GROUP GOVERNANCE AREAENVIRONMENTAL AREA INDEXCONTENT CEO LETTER ABOUT THE SUSTAINABILITY REPORT BRIEFLY ABOUT THE GROUP Social Responsibility and Sustainability Report 2023