Annual Report (ESEF) • Apr 7, 2022
Preview not available for this file type.
Download Source File48510000PW42N5W74S872020-01-012020-12-3148510000PW42N5W74S872021-01-012021-12-31iso4217:EUR48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberiso4217:EURxbrli:shares48510000PW42N5W74S872021-12-3148510000PW42N5W74S872020-12-3148510000PW42N5W74S872021-12-31ifrs-full:SeparateMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMemberifrs-full:IssuedCapitalMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMemberifrs-full:SharePremiumMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMemberifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMemberifrs-full:TreasurySharesMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMemberifrs-full:OtherReservesMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMemberifrs-full:RetainedEarningsMember48510000PW42N5W74S872019-12-31ifrs-full:SeparateMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberifrs-full:IssuedCapitalMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberifrs-full:SharePremiumMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberifrs-full:TreasurySharesMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberifrs-full:OtherReservesMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SeparateMemberifrs-full:RetainedEarningsMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMemberifrs-full:IssuedCapitalMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMemberifrs-full:SharePremiumMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMemberifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMemberifrs-full:TreasurySharesMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMemberifrs-full:OtherReservesMember48510000PW42N5W74S872020-12-31ifrs-full:SeparateMemberifrs-full:RetainedEarningsMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMemberifrs-full:IssuedCapitalMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMemberifrs-full:SharePremiumMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMemberifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMemberifrs-full:TreasurySharesMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMemberifrs-full:OtherReservesMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SeparateMemberifrs-full:RetainedEarningsMember48510000PW42N5W74S872021-12-31ifrs-full:SeparateMemberifrs-full:IssuedCapitalMember48510000PW42N5W74S872021-12-31ifrs-full:SeparateMemberifrs-full:SharePremiumMember48510000PW42N5W74S872021-12-31ifrs-full:SeparateMemberifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872021-12-31ifrs-full:SeparateMemberifrs-full:TreasurySharesMember48510000PW42N5W74S872021-12-31ifrs-full:SeparateMemberifrs-full:OtherReservesMember48510000PW42N5W74S872021-12-31ifrs-full:SeparateMemberifrs-full:RetainedEarningsMember48510000PW42N5W74S872019-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872019-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872019-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872019-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872019-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872019-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872019-12-3148510000PW42N5W74S872020-01-012020-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872020-01-012020-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872020-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872020-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872020-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872020-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872020-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872020-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872021-01-012021-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872021-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872021-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872021-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872021-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872021-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872021-12-31ifrs-full:RetainedEarningsMember ENDORSEMENT BY THE RESPONSIBLE PERSONS 07/04/2022 Pursuing Article 22 of the Law on Securities of the Republic of Lithuania and in accordance with the rules of preparation and submission of periodical and supplementary information, we, the undersigned – the Chief Executive Officer Dalius Trumpa and the Chief Financial Officer Antanas Kavaliauskas – approve that to our knowledge the audited financial statements of the year 2021 as well as annual consolidated financial statements of Rokiskio suris AB for the year 2021, are formed in accordance with the applicable accounting standards, they are true and show fair assets, obligations, financial state, profit and cash flows of the Company and total consolidated group. Also, to our best knowledge both the Company’s annual report and the consolidated annual report make fair overview of the operations and business development, current state of the company Rokiskio suris AB and the overall group of Rokiskio suris AB, including description of the main risks and uncertainties. Chief Executive Officer Dalius Trumpa Chief Financial Officer Antanas Kavaliauskas Dokumentą elektroniniu parašu pasirašė ANTANAS,KAVALIAUSKA S Data: 2022-04-05 08:33:02 Dokumentą elektroniniu parašu pasirašė DALIUS,TRUMPA Data: 2022-04-07 11:01:35 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE COMPANY’S FINANCIAL STATEMENTS, CONSOLIDATED ANNUAL REPORT AND INDEPENDENT AUDITOR’S REPORT 31 December 2021 Translation note: This version of the accompanying documents is a translation from the original, which was prepared in Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the accompanying documents takes precedence over this translation. TABLE OF CONTENTS CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS Income statement 3 Statement of comprehensive income 4 Balance sheet 5 Statement of changes in equity 6-7 Statement of cash flows 8 Notes to the financial statements 9-51 CONSOLIDATED ANNUAL REPORT 52–136 INDEPENDENT AUDITOR'S REPORT 137–146 ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on ___2022 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 3 Income statement Group Company Notes 2021 2020 2021 2020 Sales 5 253,062 210,829 233,658 189,870 Cost of sales 10 (234,435) (189,441) (219,356) (174,799) Gross profit 18,627 21,388 14,302 15,071 Selling and marketing expenses 6,10 (12,483) (10,692) (10,951) (9,528) General and administrative expenses 7,10 (5,609) (6,832) (3,654) (4,989) Other income 8 256 292 2,038 2,900 Other (losses)/gains 9 174 15 174 13 Operating profit/(loss) 965 4,171 1,909 3,467 Finance costs 11 (369) (199) (369) (199) Profit/(loss) before income tax 596 3,972 1,540 3,268 Income tax 12 (43) 89 18 61 Profit/(loss) for the year 553 4,061 1,558 3,329 Profit/(loss) for the year attributable to: Owners of the Company 553 4,061 Non-controlling interest - - 553 4,061 Basic and diluted earnings/(deficit) per share (in EUR per share) 13 0.02 0.12 0.05 0.10 The accompanying notes are an integral part of these annual financial statements. These financial statements were authorised for issue on 7 April 2022 by the Board of Directors and signed on behalf of the Board of Directors by the Managing Director and the Finance Director. Dalius Trumpa Antanas Kavaliauskas Managing Director Finance Director ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on _2022 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 4 Statement of comprehensive income Group Company Notes 2021 2020 2021 2020 Profit/(loss) for the year 553 4,061 1,558 3,329 Other comprehensive income Gain on revaluation of property, plant and equipment 14 - 16,453 - 10,131 Deferred income tax on revaluation 17 - (2,468) - (1,519) Other comprehensive income for the year - 13,985 - 8,612 Total comprehensive income/(loss) for the year 553 18,046 1,558 11,941 Total comprehensive income/(loss) for the year attributable to: Owners of the Company 553 18,046 1,558 11,941 Non-controlling interest - - - - 553 18,046 1,558 11,941 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on ___2022 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 5 Balance sheet Group Company At 31 December At 31 December Notes 2021 2020 2021 2020 ASSETS Non-current assets Property, plant and equipment 14 79,056 73,862 54,809 49,259 Intangible assets 15 203 82 162 37 Investments in subsidiaries 16 169 169 5,154 5,054 Prepayments 20 910 879 910 879 Loans granted 18 2,627 1,654 2,585 1,608 82,965 76,646 63,620 56,837 Current assets Inventories 19 59,030 69,564 55,921 66,795 Loans granted 18 2,984 3,642 3,266 3,901 Trade and other receivables 20 51,711 40,354 53,437 42,149 Prepaid income tax 548 1,030 150 84 Cash and cash equivalents 21 5,629 5,834 4,511 4,922 119,902 120,424 117,285 117,851 Total assets 202,867 197,070 180,905 174,688 EQUITY Attributable to owners of the Company Share capital 22 10,402 10,402 10,402 10,402 Share premium 18,073 18,073 18,073 18,073 Reserve for acquisition of treasury shares 24 10,850 10,850 10,850 10,850 Treasury shares 23 (2,251) (2,251) (2,251) (2,251) Other reserves 24 27,102 27,716 16,301 17,417 Retained earnings 78,304 80,638 73,605 74,432 Total equity 142,480 145,428 126,980 128,923 LIABILITIES Non-current liabilities Borrowings 25 8,050 - 8,050 - Deferred income tax liability 17 3,812 3,711 2,129 2,116 Deferred income 26 2,190 2,601 1,487 1,705 Advance payments received 31(ii) 2,356 - 2,356 - Non-current provisions 28 683 683 307 307 17,091 6,995 14,329 4,128 Current liabilities Borrowings 25 19,344 26,820 19,344 26,820 Deferred income 26 404 420 211 213 Trade and other payables 27 22,864 16,723 19,437 14,000 Current provisions 28 684 684 604 604 43,296 44,647 39,596 41,637 Total liabilities 60,387 51,642 53,925 45,765 Total equity and liabilities 202,867 197,070 180,905 174,688 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on _2022 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 6 The Company’s statement of changes in equity Notes Share capital Share premium Reserve for acquisiti on of treasury shares Treasury shares Other reserves Retained earnings Total Balance at 1 January 2020 10,402 18,073 10,850 (2,251) 10,240 73,169 120,483 Profit/(loss) for the year - - - - - 3,329 3,329 Other comprehensive income for 2020 - - - - 8,612 - 8,612 Total comprehensive income for 2020 - - - - 8,612 3,329 11,941 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,435) 1,435 - Transactions with owners Acquisition of treasury shares - - - - - - - Transfer to reserves - - - - - - - Dividends for 2019 24 - - - - - (3,501) (3,501) Total transactions with owners for 2020 - - - - - (3,501) (3,501) Balance at 31 December 2020 10,402 18,073 10,850 (2,251) 17,417 74,432 128,923 Profit/(loss) for the year - - - - - 1,558 1,558 Other comprehensive income for 2021 24 - - - - (1,116) 1,116 - Total comprehensive income for 2021 - - - - (1,116) 2,674 1,558 Transactions with owners Acquisition of treasury shares - - - - - - - Transfer to reserves - - - - - - - Dividends for 2020 24 - - - - - (3,501) (3,501) Total transactions with owners for 2021 - - - - - (3,501) (3,501) Balance at 31 December 2021 10,402 18,073 10,850 (2,251) 16,301 73,605 126,980 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on ___2022 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 7 The Group’s statement of changes in equity Attributable to owners of the Company Notes Share capital Share premium Reserve for acquisiti on of treasury shares Treasury shares Other reserves Retained earnings Total Balance at 1 January 2020 10,402 18,073 10,850 (2,251) 15,138 78,559 130,771 Comprehensive income Profit/(loss) for the year - - - - - 4,061 4,061 Other comprehensive income for 2020 - - - - 13,985 - 13,985 Total comprehensive income for 2020 - - - - 13,985 4,061 18,046 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,407) 1,519 112 Transactions with owners Acquisition of treasury shares - - - - - - - Transfer to reserves - - - - - - - Dividends relating to 2019 24 - - - - - (3,501) (3,501) Total transactions with owners for 2020 - - - - - (3,501) (3,501) Balance at 31 December 2020 10,402 18,073 10,850 (2,251) 27,716 80,638 145,428 Comprehensive income Profit/(loss) for the year - - - - - 553 553 Other comprehensive income for 2021 24 - - - - (614) 614 - Total comprehensive income for 2021 - - - - (614) 1,167 553 Transactions with owners Acquisition of treasury shares - - - - - - - Transfer to reserves - - - - - - - Dividends relating to 2020 24 - - - - - (3,501) (3,501) Total transactions with owners for 2021 - - - - - (3,501) (3,501) Balance at 31 December 2021 10,402 18,073 10,850 (2,251) 27,102 78,304 142,480 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 8 Statement of cash flows Group Company Year ended 31 December Year ended 31 December Notes 2021 2020 2021 2020 Cash flows from operating activities Cash generated from/(used in) operations 30 13,546 1,800 9,541 (1,140) Interest paid (369) (199) (369) (199) Income tax paid (43) - - - Net cash generated from/(used in) operating activities 13,134 1,601 9,172 (1,339) Cash flows from investing activities Purchases of property, plant and equipment 14 (13,251) (8,348) (11,182) (7,531) Purchases of intangible assets 15 (142) (45) (133) - Investments in subsidiaries - - (100) - Loans granted to employees (91) (50) (91) (50) Other loans granted (1,950) (540) (1,950) (540) Proceeds from sale of property, plant and equipment 30 324 213 312 154 Government grants received 26 - 417 - 417 Other loan repayments received 1,653 1,219 1,653 1,219 Interest received 229 254 229 251 Dividends received 31 - - 1,790 2,649 Net cash (used in)/generated from investing activities (13,228) (6,880) (9,472) (3,431) Cash flows from financing activities Dividends paid 24 (3,501) (3,501) (3,501) (3,501) Non-current loans repaid (350) - (350) - Loans received 3,740 11,626 3,740 11,626 Net cash (used in)/generated from financing activities (111) 8,125 (111) 8,125 Net (decrease)/increase in cash and cash equivalents (205) 2,846 (411) 3,355 Cash and cash equivalents at the beginning of the year 21 5,834 2,988 4,922 1,567 Cash and cash equivalents at the end of the year 21 5,629 5,834 4,511 4,922 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 9 Notes to the financial statements 1. General information Rokiškio Sūris AB (“the Company”) is a public limited liability company based in Rokiškis. The Company’s code is 173057512, address: Pramonės g. 3, LT-42150 Rokiškis, Lithuania. The Company’s core line of business is the production and trade in fermented cheese, skimmed milk powder and wide range of other dairy products. The shares of Rokiškio Sūris AB are quoted on the Baltic Main List (ticket: RSU1L) of Nasdaq Vilnius stock exchange. The main shareholders of the Company are disclosed in Note 31. The consolidated group (“the Group”) consists of the five subsidiaries (2020: four subsidiaries). Information on the Group companies and branches is presented below: Year of acquisition Main activity Group’s ownership interest (%) as at 31 December Subsidiaries 2021 2020 Rokiškio Pienas UAB 2006 Distribution of dairy products 100.00 100.00 Rokiškio Pieno Gamyba UAB 2013 Production of dairy products 100.00 100.00 Jekabpils Piena Kombinats SIA 2005-2011 Raw milk collection 100.00 100.00 Kaunata SIA 2010 Raw milk collection 60.00 60.00 DairyHub.LT UAB 2021 Production of dairy products 100.00 - * This subsidiary was not consolidated in the Group’s financial statements as it was not material (see information below). Kaunata SIA, company code 240300369, VAT payer’s code: LV42403003695, address: S. Rogs, Kaunatas pag. Rezekne novads. Results of operations for the year ended 31 December 2021 (unaudited) are as follows: Total assets: EUR 264,456; Property, plant and equipment: EUR 45,547; Results of operations: EUR (33,188). Core line of business of the subsidiary: collection and realisation of milk. The company is the main supplier of raw milk to company Jekabpils Piena Kombinats SIA (subsidiary of Rokiškio Sūris AB). Kaunata SIA was accounted for at cost. All the above-listed subsidiaries have been registered in Lithuania, except for Jekabpils Piena Kombinats SIA and Kaunata SIA which have been registered in Latvia. The average number of the Company’s employees during the year ended 31 December 2021 was 829 (2020: 883). The average number of the Group’s employees during the year ended 31 December 2021 was 1,326 (2020: 1,386). ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 10 2. Accounting policies 2.1 Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial statements have been prepared on a going concern basis and under the historical cost convention. Pursuant to the Law on Companies of the Republic of Lithuania, the annual financial statements prepared by the management must be approved by the general meeting of shareholders. The shareholders of the Company have a statutory right to approve these financial statements or not to approve them and to require preparation of a new set of financial statements. The financial year of the Company and other Group companies coincides with the calendar year. These financial statements include the consolidated financial statements of the Group and the separate financial statements of the Company. The financial statements have been prepared under the historical cost convention, as modified for available-for-sale financial assets measured at fair value and property, plant and equipment measured at revalued amount. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates (Note 4). Amendments to standards and interpretations effective in 2021 a) The following new standards, amendments to standards and interpretations are effective from 2021, but do not have a significant impact on the Company and the Group: Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021). The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one. The amendments cover the following areas: ● Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform: For instruments to which the amortised cost measurement applies, the amendments require entities, as a practical expedient, to account for a change in the basis for determining the contractual cash flows as a result of IBOR reform by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9. As a result, no immediate gain or loss is recognised. This practical expedient applies only to such a change and only to the extent it is necessary as a direct consequence of IBOR reform, and the new basis is economically equivalent to the previous basis. Insurers applying the temporary exemption from IFRS 9 are also required to apply the same practical expedient. IFRS 16 was also amended to require lessees to use a similar practical expedient when accounting for lease modifications that change the basis for determining future lease payments as a result of IBOR reform. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 11 ● End date for Phase 1 relief for non contractually specified risk components in hedging relationships: The Phase 2 amendments require an entity to prospectively cease to apply the Phase 1 reliefs to a non-contractually specified risk component at the earlier of when changes are made to the non-contractually specified risk component, or when the hedging relationship is discontinued. No end date was provided in the Phase 1 amendments for risk components. ● Additional temporary exceptions from applying specific hedge accounting requirements: The Phase 2 amendments provide some additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships directly affected by IBOR reform. ● Additional IFRS 7 disclosures related to IBOR reform: The amendments require disclosure of: (i) how the entity is managing the transition to alternative benchmark rates, its progress and the risks arising from the transition; (ii) quantitative information about derivatives and non- derivatives that have yet to transition, disaggregated by significant interest rate benchmark; and (iii) a description of any changes to the risk management strategy as a result of IBOR reform. Amendment to IFRS 4 – deferral of IFRS 9 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023). The amendments to IFRS 4 addressed the temporary accounting consequences of the different effective dates of IFRS 9 and the forthcoming IFRS 17. The amendments to IFRS 4 extended the expiry date of the temporary exemption from applying IFRS 9 until 2023 in order to align the effective date of IFRS 9 with the new IFRS 17. The fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 has been deferred to annual reporting periods beginning on or after 1 January 2023. Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effective for annual periods beginning on or after 1 April 2021). In May 2020 an amendment to IFRS 16 was issued that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments due on or before 30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the practical expedient from 30 June 2021 to 30 June 2022. b) The following new standards were endorsed, but not yet effective Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022). The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items, together with the costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended use. The amendment to IAS 16 also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intended by management and subject to depreciation before it has achieved the level of operating performance expected by management. The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 12 IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3 referred to the 2001 Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3 was added for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without this new exception, an entity would have recognised some liabilities in a business combination that it would not recognise under IAS 37. Therefore, immediately after the acquisition, the entity would have had to derecognise such liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date. The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test. Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives. IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure its assets and liabilities at the carrying amounts that would be included in its parent’s consolidated financial statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption. The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis. Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023). The amendments include a number of clarifications intended to ease implementation of IFRS 17, simplify some requirements of the standard and transition. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard. The following amendments to IFRS 17 were made: ● Effective date: The effective date of IFRS 17 (incorporating the amendments) has been deferred by two years to annual reporting periods beginning on or after 1 January 2023; and the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 has also been deferred to annual reporting periods beginning on or after 1 January 2023. ● Expected recovery of insurance acquisition cash flows: An entity is required to allocate part of the acquisition costs to related expected contract renewals, and to recognise those costs as an asset until the entity recognises the contract renewals. Entities are required to assess the recoverability of the asset at each reporting date, and to provide specific information about the asset in the notes to the financial statements. ● Contractual service margin attributable to investment services: Coverage units should be identified, considering the quantity of benefits and expected period of both insurance coverage and investment services, for contracts under the variable fee approach and for other contracts with an ‘investment-return service’ under the general model. Costs related to investment activities should be ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 13 included as cash flows within the boundary of an insurance contract, to the extent that the entity performs such activities to enhance benefits from insurance coverage for the policyholder. ● Reinsurance contracts held – recovery of losses: When an entity recognises a loss on initial recognition of an onerous group of underlying insurance contracts, or on addition of onerous underlying contracts to a group, an entity should adjust the contractual service margin of a related group of reinsurance contracts held and recognise a gain on the reinsurance contracts held. The amount of the loss recovered from a reinsurance contract held is determined by multiplying the loss recognised on underlying insurance contracts and the percentage of claims on underlying insurance contracts that the entity expects to recover from the reinsurance contract held. This requirement would apply only when the reinsurance contract held is recognised before or at the same time as the loss is recognised on the underlying insurance contracts. ● Other amendments: Other amendments include scope exclusions for some credit card (or similar) contracts, and some loan contracts; presentation of insurance contract assets and liabilities in the statement of financial position in portfolios instead of groups; applicability of the risk mitigation option when mitigating financial risks using reinsurance contracts held and non-derivative financial instruments at fair value through profit or loss; an accounting policy choice to change the estimates made in previous interim financial statements when applying IFRS 17; inclusion of income tax payments and receipts that are specifically chargeable to the policyholder under the terms of an insurance contract in the fulfilment cash flows; and selected transition reliefs and other minor amendments. The Company and the Group intends to adopt the above-mentioned standards and interpretations as soon as they become effective. The Company and the Group is currently assessing the impact of the new standards and amendments on its financial statements. (c) Standards, interpretations and amendments that have not yet been adopted by the European Union and that have not been early adopted by the Company and the Group: IFRS 14, Regulatory deferral accounts; Sale or contribution of assets between an investor and its associate or joint venture - Amendments to IFRS 10 and IAS 28; Classification of liabilities as current or non-current – Amendments to IAS 1; Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies; Amendments to IAS 8: Definition of Accounting Estimates; Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12; Transition option to insurers applying IFRS 17 – Amendments to IFRS 17. The Company and the Group intends to adopt the above-mentioned standards and interpretations as soon as they become effective. The Company is currently assessing the impact of the following new standards on its financial statements. 2.2 Consolidation (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 14 The group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognized directly in the income statement. Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (b) Transactions and minority interest The group treats transactions with non-controlling interest as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss. 2.3 Stand-alone financial statements Subsidiaries in the stand-alone financial statements are accounted at cost less impairment charge – that is the income from the investment is recognized in full where Company receives distributions from accumulated profits of the investee. Distributions received from accumulated profits arising before the date of acquisition are tested for impairment. 2.4 Foreign currency translation (a) Functional and presentation currency The items shown in the financial statements of the Company and each entity of the Group are valued by the currency of the original economic environment wherein a specific company operates (hereinafter the “functional currency”). These financial statements have been presented in euros (EUR), which is the Company’s (and the Group’s each entity’s) functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 15 monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 2.5 Property, plant, and equipment Property, plant and equipment is shown at revalued amount, based on periodic valuations of assets, less subsequent accumulated depreciation and impairment. Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to other comprehensive income and shown as revaluation reserve in shareholders’ equity (other reserves). Decreases in the carrying amount on subsequent revaluations that offset previous increases of the carrying amount of the same asset are charged in other comprehensive income and debited against revaluation reserve in equity all other decreases are charged to the income statement. Increases in the carrying amount on subsequent revaluations that offset previous decreases of the carrying amount are recognised in the income statement; all other increases in the carrying amount on revaluation of property, plant and equipment are recognised in other comprehensive income and added to revaluation reserve in shareholders’ equity. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement, and depreciation based on the asset’s original cost is transferred from revaluation reserve to retained earnings net of deferred income tax. Subsequent costs are included in the asset’s carrying amount or recognised as separate assets only when it is probable that future economic benefits associated with the item will flow to the Company or the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives at the Group. Useful lives of property, plant and equipment are given in the table below: Buildings 7-75 years Plant and machinery 2-25 years Motor vehicles 2-10 years Equipment and other property, plant and equipment 2-25 years The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Construction in progress is transferred to appropriate group of property plant and equipment when it is completed and ready for its intended use. When property is retired or otherwise disposed, the cost and related depreciation are removed from the financial statements and any related gains or losses are determined by comparing proceeds with carrying amount and are included in operating profit. 2.6 Intangible assets (a) Computer software Software assets expected to provide economic benefit to the Company and the Group in future periods are valued at acquisition cost less subsequent amortisation. Software is amortised on the straight-line basis over the useful life of 1 to 5 years. (b) Contractual customer relationships Contractual customer relationships recognized as intangible asset upon business acquisition are accounted for at cost less accumulated amortization and impairment. Contractual customer relationships are amortised on the straight-line basis over the estimated useful life of 2 years. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 16 2.7 Impairment of non-financial assets Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). 2.8 Financial assets (a) Following the adoption of IFRS 9, Financial Instruments, the Group and the Company classifies its financial assets into the following 3 new categories: • financial assets subsequently measured at amortised cost; • financial assets subsequently measured at fair value through other comprehensive income; and • financial assets subsequently measured at fair value through profit or loss. Subsequent to initial recognition, financial assets are classified into the aforementioned categories based on the business model the Group and the Company apply when managing their financial assets. The business model applied to the financial assets of the Group and the Company is determined at a level that reflects how all financial assets of the Group and the Company are managed together to achieve a particular business objective of the Group and the Company. The intentions of the Group and the Company’s management regarding individual items of instruments have no effect on the adopted business model. The Group and the Company and the Company may adopt more than one business model to manage its financial assets. The business model for managing of financial assets is based not merely on an assertion, but also on facts that are observable in the activities that the Group and the Company and the Company undertakes in order to achieve the objectives of the business model. In determining the business model applicable for managing financial assets, the Group and the Company makes its decision in view of not individual factors or activity, but in view of all evidence that is available in the course of the assessment. The Group and the Company and the Company recognises a financial asset in its statement of financial position only when the Group and the Company becomes a party to the contractual provisions of the instrument. The purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. At initial recognition, the Group and the Company measures financial assets at fair value, except for trade receivables that do not have a significant financing component. Transaction costs comprise all charges and commission that the Group and the Company would not have paid if it had not entered into an agreement on the financial instrument. If the fair value of the financial asset at initial recognition differs from the transaction price, the difference is recognised in profit or loss. In view of the business model applied for managing the Group and the Company of financial assets, the accounting for financial assets is as follows: Financial assets measured at amortised cost Loans granted by the Company and the Group and the Company and amounts receivable are accounted for under the business model the purpose of which is to hold financial assets in order to collect contractual cash flows that can contain cash flows related to the payment of the principal amount and interest inflows. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 17 Loans and amounts receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the date of the statement of financial position. These are classified as non-current assets. Loans and receivables are initially recognised at cost (the fair value of consideration receivable) and subsequently carried at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when these assets are derecognised, impaired or amortised. Financial assets at fair value through profit or loss The Group and the Company measures financial assets, which are stated at fair value in subsequent periods, through profit or loss, using the business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. The Group and the Company does not have any financial assets held for trading and acquired for the purpose of selling in the near term and attributes to this category only financial assets arising from the disposal of business or investments classified as non-equity contingent consideration. (b) Effective interest method The effective interest method is used in the calculation of the amortised cost of a financial asset and in the allocation of the interest revenue in profit or loss over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash inflows through the expected life of the financial asset to the gross carrying amount of the financial asset that shows the amortised cost of the financial asset, before adjusting for any loss allowance. When calculating the effective interest rate, the Group and the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. There is an assumption that the cash flows and the expected life of a Group and the Company of similar financial instruments can be estimated reliably. However, when it is not possible to reliably estimate the cash flows or the expected life of a financial instrument (or Group and the Company of financial instruments), the Group and the Company uses the contractual cash flows over the full contractual term of the financial instrument (or Group and the Company of financial instruments). (c) Expected credit losses Credit losses incurred by the Group and the Company are calculated as the difference between all contractual cash flows that are due to the Group and the Company in accordance with the contract and all the cash flows that the Group and the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate. The Group and the Company estimates cash flows by considering all contractual terms of the financial instrument through the expected life of that financial instrument, including cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. Expected credit losses show the weighted average of credit losses with the respective risks (probability) of a default occurring as the weights. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the period from the date of initial recognition of a financial asset to the subsequent date of settlement of the financial asset or ultimate write-off of the financial asset. The Group and the Company seeks for lifetime expected credit losses to be recognised before a financial instrument becomes past due. Typically, credit risk increases significantly before a financial ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 18 instrument becomes past due or other lagging borrower-specific factors (for example, a modification or restructuring) are observed. Consequently when reasonable and supportable information that is more forward-looking than past due information is available without undue cost or effort, it must be used to assess changes in credit risk. Expected credit losses are recognised by taking into consideration individually or collectively assessed credit risk of loans granted and trade receivables. Credit risk is assessed based on all reasonable and verifiable information including future oriented information. The lifetime expected credit losses of trade receivables are assessed based on both the collective and individual assessment basis. The Group and the Company’s management decides on the performance of the assessment on an individual basis reflecting the possibility of obtaining information on the credit history of a particular borrower, its financial position as at the date of assessment, including forward- looking information that would allow to timely determine whether there has been a significant increase in the credit risk of that particular borrower, thus enabling making judgment on the recognition of lifetime expected credit losses in respect of that particular borrower. In the absence of reliable sources of information on the credit history of a particular borrower, its financial position as at the date of assessment, including forward-looking information, the Group and the Company assesses the debt on a collective basis. The lifetime expected credit losses of trade receivables are recognised at the recognition of amounts receivable. When granting the loan the Group and the Company assesses and recognises 12-month expected credit losses. In subsequent reporting periods, in case there is no significant increase in credit risk related to the lender, the Group and the Company adjusts the balance of 12-month expected credit losses in view of the outstanding balance of the loan at the assessment date. Having determined that the financial position of the lender has deteriorated significantly compared to the financial position that existed upon the issue of the loan, the Group and the Company records all lifetime expected credit losses of the loan. The latest point at which the Group and the Company recognises all lifetime expected credit losses of the loan granted is identified when the borrower is late to pay a periodic amount or the total debt for more than 30 days. In case of other evidence available, the Group and the Company accounts for all lifetime expected credit losses of the loan granted regardless of the more than 30 days past due assumption. Loans for which lifetime expected credit losses were calculated are considered credit-impaired financial assets. (d) Credit-impaired financial assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events: a) significant financial difficulty of the borrower; b) a breach of contract, such as a default or event that is past due for more than 90 days; c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; e) the disappearance of an active market for that financial asset because of financial difficulties; f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. The combined effect of several events that may occur simultaneously or subsequently throughout the term of validity of the agreement on the financial assets may have caused financial assets to become credit-impaired. The lifetime expected credit losses of loans receivable and trade receivables is recognised in profit or loss through the contra account of doubtful receivables. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 19 The Group and the Company writes off the loans receivable and trade receivables when it loses the right to receive contractual cash flows from financial assets. (e) Derecognition of financial assets The Group and the Company derecognises financial assets in case of the following: - the rights to receive cash flows from the asset have expired; - the Group and the Company has retained the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass through” arrangement; or - the Group and the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset: • if the Group and the Company has not retained control, it shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer; • if the Group and the Company has retained control, it shall continue to recognise the financial asset to the extent of its continuing involvement in the financial asset. Whether the Group and the Company has retained control of the transferred asset depends on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer, the Group and the Company has not retained control. In all other cases, the Group and the Company has retained control. 2.9 Inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined by the first-in first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related indirect production overheads, but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. 2.10 Prepayments Prepayments made are cash paid for the right to receive future good or service, not cash or a financial asset. The Company has prepayments for the Milk supply and for property, plant and equipment. All such items are not financial instruments under IFRS 7. 2.11 Cash and cash equivalents Cash and cash equivalents are carried at nominal value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and at bank and bank overdrafts. Bank overdrafts are included in borrowings in current liabilities on the balance sheet. 2.12 Share capital (a) Ordinary shares Cash and cash equivalents are carried at nominal value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and at bank and bank overdrafts. Bank overdrafts are included in borrowings in current liabilities on the balance sheet. (b) Treasury shares ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 20 Where the Company or its subsidiaries purchase the Company’s equity share capital, the consideration paid, including any attributed incremental external costs, is deducted from shareholders’ equity as treasury shares until they are sold, reissued or cancelled. No gain or loss is recognised in the income statement on the sale, issuance or cancellation of treasury shares. Where such shares are subsequently sold or reissued, any consideration received is presented in the consolidated financial statements as a change in shareholders’ equity. 2.13 Reserves (a) Other reserves Other reserves are established upon the decision of annual general meeting of shareholders on profit appropriation. This reserve may be used only for the purposes approved by annual general meeting of shareholders. Legal reserve is included into other reserves. A legal reserve is a compulsory reserve under the Lithuanian legislation. Annual transfers of 5 per cent of net profit are required until the reserve reaches 10 per cent of the share capital. The legal reserve cannot be used for payment of dividends and it is established to cover future losses only. Revaluation reserve is included into other reserves. (b) Reserve for acquisition of treasury shares This reserve is maintained as long as the Group is involved in acquisition/disposal of its treasury shares. This reserve is compulsory under the Lithuanian regulatory legislation and should not be lower than the acquisition cost of treasury shares acquired. 2.14 Financial liabilities (a) Financial liabilities Liabilities are classified as financial liabilities at fair value through profit or loss, or other financial liabilities. The Group does not have any financial liabilities at fair value through profit or loss. (b) Other financial liabilities Other financial liabilities, including borrowings, are recognised at fair value, less transaction costs. In subsequent periods, other financial liabilities are measured at amortised cost using the effective interest rate method. Interest expenses are recognised using the effective interest rate method. Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. If a financing agreement concluded before the balance sheet date proves that the liability was non- current by its nature as of the date of the balance sheet, that financial liability is classified as non- current. (c) Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is settled, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as derecognition of the original liability and the recognition of a new liability. The difference between the respective carrying amounts is recognised in the statement of comprehensive income. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 21 2.15 Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Profit is taxable at a rate of 15 per cent in accordance with the Lithuanian regulatory legislation on taxation. Deferred income tax is recognised using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities are recognised on all temporary differences that will increase the taxable profit in future, whereas deferred tax assets are recognised to the extent it is probable that they will reduce the taxable profit in future. However the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. 2.16 Employee benefits (a) Social security contributions The Group pays social security contributions to the state Social Security Fund (the Fund) on behalf of its employees based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under which the Group pays fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period. Social security contributions are recognised as expenses on an accrual basis and are included in payroll expenses. (b) Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. (c) Bonus plans The Group recognises a liability and an expense for bonuses and profit-sharing where contractually obliged or where there is a past practice that has created a constructive obligation. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 22 2.17 Revenue recognition The Company and the Group manufactures and sells a range of cheese and milk products in the wholesale market. Sales are recognised when control of the products has transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied. The goods are often sold with retrospective volume discounts based on aggregate sales over a 12 months period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Revenue from transportation services is recognised in the period when services are performed. Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. 2.18 Expense recognition Expenses are recognised on an accrual basis and matching principle in the reporting period in which they are incurred. Expenses incurred during the reporting period, which cannot be attributed directly to specific income earned and will not generate any income in subsequent reporting periods, are recognised as expenses during the period when incurred. Expenses are stated at fair value. 2.19 Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. 2.20 Earnings per share Basic earnings per share are calculated by dividing net profit attributed to the shareholders from average weighted number of ordinary registered shares in issue, excluding ordinary registered shares purchased by the Company and the Group and held as treasury shares. 2.21 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Board of Directors that makes strategic decisions. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 23 The Group’s management distinguished the following operating segments of the Group: hard cheese, semi-hard cheese, butter, milk cream, sour cream, sour milk, yogurt, curd, curd cheese and other. These segments were combined into two main reportable segments based on the similar nature of products production process types of customers and the method of distribution. 2.22 Government grants and subsidies Government grants are recognised at fair value where there is sufficient evidence that the grant will be received and the Group and the Company will comply with all attached conditions. Government grants received to finance acquisition of property plant and equipment are included in non-current deferred income in the balance sheet. They are recognised as income on a straight-line basis over the useful life of property plant and equipment concerned. 2.23 Provisions Provisions for restructuring costs and legal claims are recognised when: the Group and the Company have a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of expenditures expected to be required to settle the obligation using pre-tax rate that reflects current market assessments of the time value of money and the risks specified to the obligation. The increase in the provision due to passage of time is recognised as operating expenses. 2.24 Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using effective interest method. 2.25 Derivative financial instruments The Company uses derivative financial instruments such as interest rate swaps to hedge its cash flow interest rate risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re -measured at fair value. Changes in the fair value of the interest rate swap are recognised immediately in profit or loss and are included in finance cost. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. The fair value of currency interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. Additionally, the instruments’ value is agreed upon with bank. All of the resulting fair value estimates are included in level 2 in the fair value hierarchy. 2.26 Events after the reporting period Post-balance sheet events that provide additional information about the Company’s and Group’s position at the statement of financial position date (adjusting events) are reflected in the financial statements. Events after the reporting period that are non-adjusting events are disclosed in the notes when material. 2.27 Contingent assets and liabilities Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 24 3. Financial risk management 3.1 Financial risk factors The Group’s and the Company’s activities expose them to a variety of financial risks. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group. Risk management is carried out by the Company’s management. There are no written principles for overall risk management in place. (a) Market risk (i) Foreign exchange risk The Company and the Group operate internationally, however, their exposure to foreign exchange risk is set at minimum level, since sales outside Lithuania are performed mostly in the euros. (ii) Cash flow and fair value interest rate risk The Company’s and the Group’s interest rate risk arises from interest-bearing loans and borrowings. Borrowings with variable interest rates expose the Group to cash flow interest rate risk. Borrowings with fixed interest rates expose the Group to fair value interest rate risk. In 2021 and 2020, loans granted by the Group at a fixed interest rate were denominated in the euros. Borrowings were denominated in the euros. IBOR reform had no material impact for the Company and Group, as major borrowings are either EURIBOR linked, or have fixed interest rates, therefore there was no need to transition to alternative benchmark interest rates. Changes in how EURIBOR is determined (determination has shifted from a quotes-based to a transactions-based methodology) had no impact on interest rates applied, as for all EURIBOR linked borrowings three months EURIBOR is subject to a 0% floor. Before and after the changes in how EURIBOR is determined EURIBOR was negative, therefore 0% floor was applicable to arrive at interest rate and therefore those changes had no impact on interest rate itself and no effect on future cash flows. The financial liabilities denominated at EURIBOR based interest rate are disclosed in Note 25. Instruments used by the group (Note 25) The Company and the Group uses Interest rate swap to minimise the risk of interest rate fluctuations. The interest rate swap currently in place covers approximately 30% (2020 – 0%) of the variable loan principal outstanding. The swap contract requires settlement of net interest receivable or payable every 30 days. The settlement dates coincide with the dates on which interest is payable on the underlying debt. As at 31 December 2021 the Company’s and the Group’s net assets sensitive to changes in interest rate amounted to EUR 625 thousand (2020: EUR 1,844 thousand). (b) Credit risk Credit risk arises from cash and cash equivalents at bank, loans granted, and outstanding trade receivables. Credit risk is managed on a group basis. As at 31 December 2021, the Company’s and the Group’s all cash balances were held at banks that had external credit ratings from ‘A+’ to ‘BBB’, as set by the rating agency Fitch Ratings (31 December 2020: from ‘A+’ to ‘BBB’). While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. i) Maximum exposure to credit risk ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 25 The table below summarises the Company’s and the Group’s credit risk exposures relating to on- balance sheet items. Maximum exposure to credit risk before collateral held or other credit enhancements as at 31 December: Group Company 2021 2020 2021 2020 Cash and cash equivalents at banks 5,629 5,834 4,511 4,922 Trade receivables 51,711 40,354 53,437 42,149 Loans granted 5,611 5,296 5,851 5,509 62,951 51,484 63,799 52,580 ii) Credit quality of financial assets The Group does not classify amounts receivable and other financial assets exposed to credit risk according to credit quality. Credit risk is managed through established credit limits for a major customers and monitoring of overdue receivables and loans. Credit limits and overdue receivables are continuously monitored by the Company’s and the Group’s management. The table below presents credit limits, if management has established for the major customers and amounts receivable from them before allowance as at 31 December 2021. Group Company Credit limit Amount receivable Credit limit Amount receivable Customer A 5,500 5,376 5,500 5,376 Customer B 5,000 4,854 5,000 4,854 Customer C 4,345 3,024 - - Customer D 2,700 2,610 2,700 2,610 Customer E 2,200 2,104 2,200 2,104 Customer F 2,000 1,531 2,000 1,531 Customer G 1,500 1,500 1,500 1,500 Customer H 1,500 1,443 1,500 1,443 The table below presents credit limits established for the major customers and amounts receivable from them as at 31 December 2020. Group Company Credit limit Amount receivable Credit limit Amount receivable Customer C 4,345 2,954 - - Customer B 4,000 2,939 4,000 2,939 Customer D 3,000 2,566 3,000 2,566 Customer A 3,800 2,218 3,800 2,218 Customer F 2,000 1,743 2,000 1,743 Customer I 2,700 1,389 2,700 1,389 Customer J 1,200 828 - - Customer K 4,000 810 4,000 810 The table below summaries concentration of the loans granted: Group Company 2021 2020 2021 2020 in excess of EUR 1,000 thousand 3,187 3,481 3,187 3,481 in excess of EUR 500 thousand, but not in excess of EUR 1,000 thousand 1,205 - 1,205 - not in excess of EUR 500 thousand 1,220 1,816 1,459 2,029 5,612 5,297 5,851 5,510 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 26 Loans in excess of EUR 1,000 thousand were granted to two business entities. iii) Impairment of financial assets The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2021 or 31 December 2020 respectively and the corresponding historical credit losses experienced within this period. The forward looking analysis lead to the conclusion that an adjustment of historical loss rates is not necessary. On that basis, the loss allowance as at 31 December 2021 and 31 December 2020 was determined as follows for trade receivables grouped (collective model) based on shared characteristics: Group 31 December 2021 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Expected loss rate 0.10% 0.41% 1.82% - 2.10% - Gross carrying amount – trade receivables 31,867 9,974 1,044 - 95 - 42,980 Loss allowance 31 44 19 2 96 Group 31 December 2020 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Expected loss rate 0.15% 0.69% 0.92% 0.66% 0.66% 0.66% Gross carrying amount – trade receivables 24,739 6,043 1,629 30 167 16 32,624 Loss allowance 35 42 15 2 1 1 96 Company 31 December 2021 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Expected loss rate 0.12% 0.28% 1.72% - 2.11% - Gross carrying amount – trade receivables 32,587 13,436 1,044 95 47,161 Loss allowance 37 39 18 2 96 Company 31 December 2020 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 27 Expected loss rate 0.15% 0.45% 0.61% 0.65% 0.65% 0.65% Gross carrying amount – trade receivables 24,426 9,359 2,449 30 167 16 36,447 Loss allowance 35 42 15 2 1 1 96 ECL for significant trade receivables overdue for more than 90 days is evaluated individually based on external information from credit insurance agency, collaterals received as security of repayment and past history of default. For such trade receivables the loss allowance as at 31 December 2021 and 31 December 2020 was determined as follows: Group 31 December 2021 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Gross carrying amount – trade receivables 1,065 189 459 355 973 1,012 4,053 Expected loss rate 22% Loss allowance 895 Group 31 December 2020 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Gross carrying amount – trade receivables 678 250 369 492 1,476 466 3,731 Expected loss rate 24% Loss allowance 895 Company 31 December 2021 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Gross carrying amount – trade receivables 1,065 189 459 355 973 1,012 4,053 Expected loss rate 22% Loss allowance 895 Company 31 December 2020 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total Gross carrying amount – trade receivables 678 250 369 492 1,476 466 3,731 Expected loss rate 24% Loss allowance 895 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 28 The Group has followed the three-stage model for impairment of financial assets other than trade receivables and considered all its loans granted at amortised cost to have Stage 1 (performing) credit. The ECL model is based on the financial information of the Company’s and the Group’s debtors and the assessment of collaterals as security of loan repayment. The Company and the Group carried out an assessment of collaterals as security of loan repayment and determined that the credit losses determined based on probability of default within 12 months resulted in immaterial impairment loss. The information on loans receivable is disclosed in Note 18. (c) Liquidity risk Prudent liquidity risk management allows maintaining sufficient cash and availability of funding under committed credit facilities. The Group had access to EUR 7,756 thousand (2020: EUR 10,896 thousand) undrawn borrowing facilities at the end of the reporting period expiring within one year. The table below summarises the Group’s and the Company‘s financial liabilities. The financial liabilities are classified into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are contractual undiscounted cash flows. Accounts payable and other financial liabilities due within 3 months or less are equal to their carrying amounts as the impact of discounting is insignificant. Company At 31 December 2021 Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years Borrowings from banks and other financial liabilities 17,769 1,575 8,050 - Trade payables 16,762 - - - 34,531 1,575 8,050 - Company At 31 December 2020 Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years Borrowings from banks and other financial liabilities 26,820 - - - Trade payables 11,628 - - - 38,448 - - - Group At 31 December 2021 Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years Borrowings from banks and other financial liabilities 17,769 1,575 8,050 - Trade payables 19,225 - - - 36,994 1,575 8,050 - At 31 December 2020 Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years Borrowings from banks and other financial liabilities 26,820 - - - Trade payables 13,465 - - - 40,285 - - - ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 29 3.2 Capital risk management The Company’s and the Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group and Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company and the Group define their capital as equity and debt, less cash and cash equivalents. As at 31 December, the Group’s and the Company’s capital structure was as follows: Group Company 2021 2020 2021 2020 Borrowings (Note 25) 27,394 26,820 27,394 26,820 Less: cash and cash equivalents (Note 21) (5,629) (5,834) (4,511) (4,922) Net debt 21,765 20,986 22,883 21,898 Shareholders’ equity 142,480 145,428 126,980 128,923 Total capital 164,245 166,414 149,863 150,821 Pursuant to the Lithuanian Law on Companies the authorised share capital of a public company must be not less than EUR 40 thousand (the authorised share capital of a private company must not be less than EUR 2.5 thousand) and the shareholders’ equity should not be lower than 50 per cent of the company’s registered share capital. As at 31 December 2021 and 31 December 2020, the Company and its subsidiaries registered in Lithuania complied with these requirements. Under the terms of the major borrowing facilities, the Group is required to comply with the following financial covenants: • net Debt/EBITDA ratio no more than 2, • equity/asset ratio more than 40% • net working capital/sales ratio less than 40% and • current borrowings/working capital ratio less than 70%. The Group has complied with these covenants throughout the reporting period. 3.3 Fair value estimation Trade payables and trade receivables accounted for in the balance sheet should be settled within a period shorter than three months therefore it is deemed that their fair value equals to their carrying amount less impairment. Interest rate on the borrowings received by the Company is subject to repricing at least every six months therefore it is deemed that their fair value equals their carrying amount. Companies and Group issued loans fair value disclosed in Note 18. Property, plant and equipment fair value disclosed in Note 14. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of the fair value hierarchy have been defined as follows: Level 1 includes the fair value of assets which is established based on quoted prices (unadjusted) in active markets for identical assets. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 30 Level 2 includes the fair value of assets which is established based on other directly or indirectly observable inputs. Level 3 includes the fair value of assets which is established based on unobservable inputs. 4. Critical accounting estimates and judgements Impairment of financial assets The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed in Note 3.1. Estimates of useful lives of property, plant and equipment The Company and the Group have old buildings and machinery, where the useful lives are estimated based on the expected product lifecycles. However, economic useful lives may differ from the currently estimated as a result of technical innovations and actions of competitors. Fair value of property plant and equipment The Company and the Group accounts property plant and equipment at revalued amount based on periodic valuations performed by independent valuators and Company’s experts. The valuation techniques involve judgement and are subject to estimation. At the end of each reporting period, the Company’s and Group’s management update their assessment of the fair value of each property, taking into account the most recent independent valuations and internal experts’ analysis. The fair value estimation of property plant and equipment, except for motor vehicles, is based on the comparable sales price method. The valuation of other categories of assets is based on the replacement cost method. The fair value of motor vehicles was established using the comparable sales price method. Inventory write-down to net realizable value The Group and the Company recognise inventory at the lower of cost and net realizable value. The Group and the Company assess whether the value of inventory recognised at cost is not lower that its net realisable value based on the historical data and actual results of inventory items sold below cost after the financial year end. If the recognised inventory write-down to net realisable value was 5 % higher/lower, the Group’s and the Company’s profit before income tax for the year 2021 would be EUR 5 thousand lower/ higher (2020: EUR 75 thousand, respectively). See Note 19 for more details. 5. Segment reporting Operating segments and reportable segments The Group’s management has distinguished the following operating segments of the Group: hard cheese, semi-hard cheese, butter milk, cream, sour cream, sour milk, yogurt, curd, curd cheese and other. These segments were combined into two main reportable segments based on the similar nature of products, production process, types of customers and the method of distribution. The main two reportable business segments of the Group are as follows: - Fresh milk products - Cheese and other dairy products ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 31 Other operations of the Group mainly comprise milk collection activity the size of which is insufficient to be reported separately. Transactions between the operating segments are on normal commercial terms and conditions. The segment of fresh milk products includes 2 external customers each generating 10% of total revenue of the segment. The table below summarizes segment information for the years ended 31 December 2021 and 2020: Fresh milk products Cheese and other dairy products Other segments (unallocated) Group 2021 Sales 81,905 233,967 36,067 351,939 Inter-segment sales (322) (62,735) (35,820) (98,877) Sales to external customers 81,583 171,232 247 253,062 Segment’s gross profit 9,046 9,348 233 18,627 Depreciation and amortization 2,635 5,481 13 8,129 Income tax expense (benefit) (61) 18 - (43) Total assets 35,333 180,945 4,802 221,080 Elimination of intercompany transactions - - - (18,213) Total assets, less intercompany transactions - - - 202,867 Additions to non-current assets (other than financial instruments and deferred tax assets) 2,288 11,185 3 13,476 Total liabilities 24,289 53,922 3,092 81,303 Elimination of intercompany transactions - - - (20,916) Total liabilities less intercompany transactions - - - 60,387 Fresh milk products Cheese and other dairy products Other segments (unallocated) Group 2020 Sales 76,997 188,381 29,510 294,888 Inter-segment sales (299) (56,025) (27,735) (84,059) Sales to external customers 76,698 132,356 1,775 210,829 Segment’s gross profit 11,067 8,852 1,469 21,388 Depreciation and amortization 3,339 5,906 15 9,260 Income tax expense (benefit) 28 61 - 89 Total assets 44,320 169,693 3,715 217,728 Elimination of intercompany transactions - - - (20,658) Total assets, less intercompany transactions - - - 197,070 Additions to non-current assets (other than financial instruments and deferred tax assets) 669 7,346 138 8,153 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 32 Total liabilities 24,518 45,765 2,207 72,490 Elimination of intercompany transactions - - - (20,848) Total liabilities less intercompany transactions - - - 51,642 Geographical information All assets of the Company are located in Lithuania. The Company’s sales by markets can be analysed as follows: Sales revenue Total assets Capital expenditure 2021 2020 2021 2020 2021 2020 Lithuania 89,052 69,210 180,905 174,688 11,185 7,346 Europe Union countries 114,944 74,660 - - - - Near East 3,561 19,701 - - - - North America 12,279 13,388 - - - - Far East 4,885 5,047 - - - - Other countries 8,937 7,864 - - - - 233,658 189,870 180,905 174,688 11,185 7,346 The breakdown of the Group’s assets by geographical segments is presented below. The Group’s sales by markets can be analysed as follows: Sales revenue Total assets Capital expenditure 2021 2020 2021 2020 2021 2020 Lithuania 102,037 84,329 197,212 192,637 13,473 8,015 Europe Union countries 121,363 80,500 5,655 4,433 3 138 Near East 3,561 19,701 - - - - North America 12,279 13,388 - - - - Far East 4,885 5,047 - - - - Other countries 8,937 7,864 - - - - 253,062 210,829 202,867 197,070 13,476 8,153 Sales are allocated based on the country in which the customers are located. The breakdown of revenue by category: Group Company 2021 2020 2021 2020 Revenue from sales of goods 251,970 209,642 227,499 183,441 Revenue from other services 1,092 1,187 6,159 6,429 253,062 210,829 233,658 189,870 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 33 6. Selling and marketing expenses Group Company 2021 2020 2021 2020 Transportation services 4,102 3,091 3,753 2,718 Wages and salaries 3,181 3,096 1,640 1,659 Intermediation services 331 407 307 407 Product image creation and advertising expenses 440 169 130 169 Repair and maintenance 887 740 806 670 Depreciation of property, plant and equipment 612 648 548 604 Warehousing services 1,080 831 1,080 831 Customs fees 792 607 792 607 Other expenses 1,058 1,103 1,895 1,863 12,483 10,692 10,951 9,528 7. General and administrative expenses Group Company 2021 2020 2021 2020 Wages and salaries 2,978 2,908 2,066 2,018 Taxes (other than income tax) 52 40 41 38 Provisions for impairment of loans granted and doubtful receivables and write-offs of loans and receivables (reversals) 13 581 13 581 Consultations 191 257 141 212 Depreciation of property, plant and equipment and amortisation of intangible assets 664 631 453 444 Repairs and maintenance 253 231 217 197 Telecommunications and IT maintenance expenses 131 141 118 126 Insurance expenses 197 214 182 199 Bank charges 117 130 110 126 Business trips 13 22 8 22 Fines 13 36 1 18 Staff training 72 33 53 15 Membership fees 2 42 - 40 Charity and support 339 409 89 153 Other expenses 574 1,157 162 800 5,609 6,832 3,654 4,989 8. Other income Group Company 2021 2020 2021 2020 Interest income 229 254 229 251 Dividend and other income 27 38 1,809 2,649 256 292 2,038 2,900 The Company’s other income comprises dividends received from subsidiary Rokiškio Pieno Gamyba UAB. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 34 9. Other operating (loss)/profit Group Company 2021 2020 2021 2020 Result of disposal of property, plant and equipment 174 15 174 13 174 15 174 13 10. Expenses by nature Group Company 2021 2020 2021 2020 Raw materials and consumables used 168,571 147,359 160,032 142,146 Changes in inventories of finished goods and work in progress 10,534 (10,045) 10,874 (9,856) Wages and salaries including social security contributions 22,176 21,948 13,984 13,792 Transportation services 11,476 8,809 11,114 8,425 Bonuses - - - - Depreciation (Notes 14) 8,108 9,253 5,473 5,899 Amortisation of the Government grant for property, plant and equipment (Note 26) (418) (476) (221) (265) Intermediation services 331 407 307 407 Repairs and maintenance 6,311 5,514 4,864 4,183 Cost of finished goods resold 287 357 9,435 8,128 Provisions for impairment of loans granted and doubtful receivables and write-offs of loans and receivables (reversals) 13 581 13 581 Taxes (other than income tax) 1,031 796 1,008 779 Consultations 191 257 141 212 Telecommunication and IT maintenance expenses 142 154 126 137 Utilities (energy) 15,581 13,211 8,519 7,248 Other 8,193 8,840 8,292 7,500 Total cost of sales, selling and marketing expenses and general and administrative expenses 252,527 206,965 233,961 189,316 11. Finance costs Group Company 2021 2020 2021 2020 Interest expenses: − bank borrowings 369 199 369 199 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 35 12. Income tax Group Company 2021 2020 2021 2020 Current income tax (71) (193) - (183) Prior year income tax corrections 129 - 5 - Deferred income tax (Note 17) (101) 282 13 244 Income tax benefit/(expenses) (43) 89 18 61 The income tax on the Company’s and the Group’s profit before tax differs from the theoretical amount that would arise when using the basic tax rate as follows: Group Company 2021 2020 2021 2020 (Loss)/profit before income tax 596 3,972 1,540 3,268 Tax calculated at a rate of 15% (Note 2.15) 89 596 231 490 Expenses not deductible for tax purposes 95 176 54 135 Income not subject to tax (33) (21) (302) (422) Charity expenses deductible twice for tax purposes (69) (195) - (46) Other expenses deductible for tax purposes (50) (394) - (227) Prior year income tax corrections and other 11 (251) (1) 9 Income tax expense/(benefit) 43 (89) (18) (61) Expenses not deductible for tax purposes include representation expenses, write-offs, etc. Income not subject to tax include interest on late payment and insurance benefits received. The Tax Authorities may at any time during 3 successive years after the end of the reporting tax year carry out the inspection of book-keeping and accounting records and impose additional taxes or fines (for certain transactions period is 5 years). The Company‘s management is not aware of any circumstances that might result in a potential material liability in this respect. 13. Earnings per share Group Company 2021 2020 2021 2020 Net profit/(loss) attributable to shareholders 553 4,061 1,558 3,329 Weighted average number of ordinary shares in issue (thousand) 35,007 35,007 35,007 35,007 Weighted average number of treasury shares held (thousand) (861) (861) (861) (861) Basic earnings/(deficit) per share (EUR per share) 0.02 0.12 0,05 0.10 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 36 The Group has no dilutive potential ordinary shares, therefore, the diluted earnings per share are the same as basic earnings per share. 14. Property, plant, and equipment Company Buildings Plant and machinery Motor vehicles and other assets Construction in progress Total At 1 January 2020 Acquisition cost and revalued amount 18,714 76,478 38,878 1,881 135,951 Accumulated depreciation (7,242) (60,493) (30,392) - (98,127) Net book amount 11,472 15,985 8,486 1,881 37,824 Year ended 31 December 2020 Opening net book amount 11,472 15,985 8,486 1,881 37,824 Revaluation - 8,526 1,605 - 10,131 Additions 61 714 1,355 5,216 7,346 Disposals (49) - (92) - (141) Write-offs - (2) - - (2) Transfers from CIP - 1,319 958 (2,277) - Depreciation charge (579) (2,767) (2,553) - (5,899) Closing net book amount 10,906 23,773 9,760 4,820 49,259 At 31 December 2020 Acquisition cost and revalued amount 18,609 86,361 42,043 4,820 151,833 Accumulated depreciation (7,703) (62,588) (32,283) - (102,574) Net book amount 10,906 23,773 9,760 4,820 49,259 Year ended 31 December 2021 Opening net book amount 10,906 23,773 9,760 4,820 49,259 Additions 102 2,026 2,035 7,022 11,185 Disposals (40) (15) (83) - (138) Write-offs - (6) (18) - (24) Transfers from CIP 508 8,131 603 (9,242) - Depreciation charge (574) (2,913) (1,986) - (5,473) Closing net book amount 10,902 30,996 10,311 2,600 54,809 At 31 December 2021 Acquisition cost and revalued amount 19,011 96,249 43,631 2,600 161,491 Accumulated depreciation (8,109) (65,253) (33,320) - (106,682) Net book amount 10,902 30,996 10,311 2,600 54,809 Group Buildings Plant and machinery Motor vehicles and other assets Construction in progress Total At 1 January 2020 Cost or revaluated amount 30,355 106,632 39,443 2,136 178,566 Accumulated depreciation (12,321) (76,859) (30,636) - (119,816) Net book amount 18,034 29,773 8,807 2,136 58,750 Year ended 31 December 2020 Opening net book amount 18,034 29,773 8,807 2,136 58,750 Revaluation - 14,719 1,734 - 16,453 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 37 Additions 81 860 1,521 5,691 8,153 Disposals (49) - (149) - (198) Write-offs - (2) - (41) (43) Transfers from CIP 395 1,602 969 (2,966) - Transfers from other groups 90 (182) 92 - - Depreciation charge (936) (5,639) (2,678) - (9,253) Closing net book amount 17,615 41,131 10,296 4,820 73,862 At 31 December 2020 Cost or revaluated amount 29,294 122,788 44,298 4,820 201,200 Accumulated depreciation (11,679) (81,657) (34,002) - (127,338) Net book amount 17,615 41,131 10,296 4,820 73,862 Year ended 31 December 2021 Opening net book amount 17,615 41,131 10,296 4,820 73,862 Additions 205 2,318 2,084 8,869 13,476 Disposals (40) (15) (95) - (150) Write-offs - (6) (18) - (24) Transfers from CIP 909 8,613 676 (10,198) - Depreciation charge (1,035) (4,965) (2,108) - (8,108) Closing net book amount 17,654 47,076 10,835 3,491 79,056 At 31 December 2021 Cost or revaluated amount 30,364 132,971 45,904 3,491 212,730 Accumulated depreciation (12,710) (85,895) (35,069) - (133,674) Net book amount 17,654 47,076 10,835 3,491 79,056 On 31 December 2020 the Group and the Company, with the help of independent experts UAB OBER HAUS Nekilnojamasis Turtas, performed an appraisal of property, plant and equipment (excluding vehicles) in order to determine its fair value. The Company's and the Group's property, plant and equipment was revaluated as at 31 December 2020. The valuation of real estate was based on the comparable sales price method by comparing sales prices in Lithuania. The valuation of other categories of assets was based on the replacement cost method. The valuation of motor vehicles was conducted by the Group's experts who established the fair value using the comparable sales price method. Gain arising on revaluation is disclosed in the tables on the movements in property, plant and equipment and was recorded under the line item of other comprehensive income. Assets that were evaluated using the replacement cost method were tested for impairment, as a result of which no indications for possible impairment were identified. Building and Motor vehicles and other assets were attributed to Level 2 of fair value hierarchy in 2020 and 2019. Property, plant and equipment within Level 2 was measured using the comparable sales price method. This method was used for the measurement of real estate, the majority of motor vehicles and constructions in respect of which sale transactions or offer examples were observable in the market. The comparable real estate objects were selected due to the similarity with the object being measured with respect to size, purpose, location, intended use, condition, engineering support and other parameters. The valuation of real estate required adjustments to reflect differences between the objects being measured and comparable objects. Comparable objects selected are of the closest possible similarity with the objects being measured and differences are related only to the location and surroundings, the year of construction and the total area of the object. The valuation of motor vehicles was based on the supply data. The value calculated based on at least 2 or 3 comparable inputs was treated as the value of the assets. Comparable inputs selected were similar to the assets subject to valuation. Meanwhile Plant and Machinery was attributed to Level 3 of fair value hierarchy. Property, plant and equipment within Level 3 was measured using the replacement cost method. This method was used for the measurement of a part of special purpose movable property in respect of which no sale or offer market data ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 38 was available. When estimating the value of movable property (plant and machinery) under the cost method the cost of replacing the item were equated to the acquisition cost of an item (replacement cost model of the valued item). For the purpose of valuation the impairment (depreciation) was established under the fragmentation calculation model. When establishing physical obsolescence it was assumed that the value of property being measured is written off in proportion to the number of years. The assets subject to valuation were classified into categories in respect of which the useful life up to 30 years depending on the group of asset was established based on the expert opinion of the valuer. When establishing functional obsolescence it is assumed that movable property (plant and machinery) produced and sold during the valuation is of higher efficiency than property already produced or still in the process of production. When establishing economic obsolescence the valuers assumed that the economic situation was rather stable, therefore it was acceptable that economic obsolescence is equal to zero percent. The valuation of movable property was based on the rationale that the asset cannot have no value if it was used, irrespective of the fact that the asset is fully depreciated for accounting purposes. Therefore, a possible net book value of the asset was obtained from market data. As at 31 December 2021 no revaluation of assets was performed as, in management view, no significant changes in the market and in Group’s and Company’s activities took place during the year, therefore it is considered that the fair value of the Group‘s and the Company‘s property plant and equipment, adjusted under the methods described above, did not differ significantly from their carrying amounts. Revaluation reserve is disclosed in Note 24 Construction in progress items were recently purchased from third parties, therefore their fair value agrees value in balance sheet. As at 31 December 2021, the Company’s and the Group’s property, plant and equipment with a carrying value of EUR 25,783 thousand and EUR 40,048 thousand, respectively (31 December 2020: EUR 23,773 thousand and EUR 35,080 thousand, respectively) was pledged as a security for credit limit agreements. Depreciation expenses of property plant and equipment are included in selling and marketing expenses, general and administrative expenses and cost of sales in the income statement, as well as in work in progress and finished goods in the balance sheet. Had no revaluation been performed for property, plant and equipment, the net book amounts of the Group’s and the Company’s property, plant and equipment would have been as follows as of 31 December 2021 and 2020: Company Buildings Plant and machinery Motor vehicles and other assets Construction in progress Total At 31 December 2020 7,806 10,977 7,700 4,820 31,303 At 31 December 2021 7,907 19,314 8,343 2,600 38,164 Group Buildings Structures and machinery Motor vehicles and other assets Construction in progress Total At 31 December 2020 14,515 22,141 8,108 4,820 49,584 At 31 December 2021 10,903 27,649 8,704 3,491 50,747 15. Intangible assets Company Computer software At 1 January 2020 Cost 761 Accumulated amortisation (717) Net book amount 44 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 39 Year ended 31 December 2020 Opening net book amount 44 Additions - Amortisation charge (7) Closing net book amount 37 At 31 December 2020 Cost 761 Accumulated amortisation (724) Net book amount 37 Year ended 31 December 2021 Opening net book amount 37 Additions 133 Amortisation charge (8) Closing net book amount 162 At 31 December 2021 Cost 891 Accumulated amortisation (729) Net book amount 162 Group Computer software At 1 January 2020 Cost 761 Accumulated amortisation (717) Net book amount 44 Year ended 31 December 2020 Opening net book amount 44 Additions 45 Amortisation charge (7) Closing net book amount 82 At 31 December 2020 Cost 759 Accumulated amortisation (677) Net book amount 82 Year ended 31 December 2021 Opening net book amount 82 Additions 142 Amortisation charge (21) Closing net book amount 203 At 31 December 2021 Cost 900 Accumulated amortisation (697) Net book amount 203 Amortisation expenses of computer software and other intangible assets are included in general and administrative expenses in the income statement. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 40 16. Investments in subsidiaries The Company’s investments in subsidiaries as at 31 December 2021 and 2020 are listed below: Investment cost Impairment loss recognised Investment value after impairment Rokiškio Pienas UAB 105 - 105 Rokiškio Pieno Gamyba UAB 4,122 - 4,122 Jekabpils Piena Kombinats SIA 853 (122) 731 DairyHub.LT UAB 100 - 100 Kaunata SIA 96 - 96 5,276 (122) 5,154 The Group’s investments in subsidiaries consist of joint investments in Kaunata SIA. DairyHub LT UAB net assets were EUR 80 thousand as at 31 December 2021. There were no sales for year 2021. Main activity of the subsidiary is slicing and sale of certain cheeses. 17. Deferred income tax Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows: Group Company 2021 2020 2021 2020 Deferred income tax assets: – to be realised after more than 12 months - - - - – to be realised within 12 months 457 667 368 577 457 667 368 577 Deferred income tax liabilities: – to be realised after more than 12 months (3,969) (3,978) (2,297) (2,393) – to be realised within 12 months (300) (400) (200) (300) (4,269) (4,378) (2,497) (2,693) Net deferred tax liability (3,812) (3,711) (2,129) (2,116) The gross movement in deferred income tax liabilities was as follows: Group Company 2021 2020 2021 2020 At the beginning of the year (3,711) (1,525) (2,116) (841) Recognised in the income statement (101) 282 (13) 244 Recognised in other comprehensive income - (2,468) - (1,519) At the end of the year (3,812) (3,711) (2,129) (2,116) The movement in deferred income tax assets and liabilities during the period, without taking into consideration the offsetting of balances within the same fiscal jurisdiction is as follows: ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 41 Company Deferred income tax assets Inventory write-down to net realisable value Amortised cost of loans granted Impairment of amounts receivable Bonuses and vacation reserve Total At 1 January 2020 233 56 149 148 586 Recognised in the income statement (9) - - - (9) Recognised in other comprehensive income - - - - - At 31 December 2020 224 56 149 148 577 Recognised in the income statement (209) - - - (209) Recognised in other comprehensive income - - - - - At 31 December 2021 15 56 149 148 368 Deferred income tax liabilities Revaluation of property, plant and equipment Total At 1 January 2020 (1,427) (1,427) Recognised in the income statement 253 253 Recognised in other comprehensive income (1,519) (1,519) At 31 December 2020 (2,693) (2,693) Recognised in the income statement 196 196 Recognised in other comprehensive income - - At 31 December 2021 (2,497) (2,497) Group Deferred income tax assets Inventory write-down to net realisable value Amortised cost of loans granted Impairment of amounts receivable Bonuses and vacation reserve Total At 1 January 2020 234 56 149 237 676 Recognised in the income statement (9) - - - (9) Recognised in other comprehensive income - - - - - At 31 December 2020 225 56 149 237 667 Recognised in the income statement (210) - - - (210) Recognised in other comprehensive income At 31 December 2021 15 56 149 237 457 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 42 Deferred income tax liabilities Accelerated tax depreciation Revaluation of property, plant and equipment Total At 1 January 2020 (47) (2,154) (2,201) Recognised in the income statement - 282 282 Recognised in other comprehensive income - (2,468) (2,468) At 31 December 2020 (47) (4,331) (4,378) Recognised in the income statement - 109 109 Recognised in other comprehensive income - - - At 31 December 2021 (47) (4,222) (4,269) Deferred income tax assets and deferred income tax liabilities were calculated using a tax rate of 15% (2020: 15%) enacted by the balance sheet date and expected to apply when the related deferred income tax asset is realised or deferred income tax liability is settled. 18. Loans granted Group Company 2021 2020 2021 2020 Long-term loans to employees 249 257 207 212 Other long-term loans 2,413 1,432 2,413 1,431 Less: provision for impairment of loans receivable (35) (35) (35) (35) Long-term loans, net 2,627 1,654 2,585 1,608 Current portion of loans to employees 57 41 54 38 Other short-term loans granted 2,927 3,601 3,212 3,863 Less: provision for impairment of loans receivable - - - Current portion of long-term loans and short- term loans, net 2,984 3,642 3,266 3,901 Repayment terms of other long-term loans granted ranged between 1 and 5 years. The loans bear average weighted interest rate of 3.24% (2020: 2.9%). Other loans repayments are secured with pledges of assets or guarantees. The fair value of borrowings is attributed to Level 2 in the fair value hierarchy. The fair value of loans granted approximated their carrying amount. Information on loans receivable that were past due as at 31 December is provided in the table below: Group Company 2021 2020 2021 2020 Loans granted not past due 5,611 5,296 5,851 5,509 Loans granted past due but not impaired - - - - Impaired loans granted 35 35 35 35 Gross value of loans granted 5,646 5,331 5,886 5,544 Less: Provision for impairment of loans receivable (35) (35) (35) (35) Net amount 5,611 5,296 5,851 5,509 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 43 19. Inventories Group Company 2021 2020 2021 2020 Raw materials 3,023 2,192 1,477 862 Work in progress 8,154 8,741 7,816 8,398 Finished products 45,940 59,118 45,044 58,442 Other inventories 2,010 1,005 1,681 585 Total inventories at cost 59,127 71,056 56,018 68,287 Less: inventory write-down to net realizable value (97) (1,492) (97) (1,492) Total inventories 59,030 69,564 55,921 66,795 As at 31 December 2021 and 2020 inventories were not pledged. The Company’s inventories as at 31 December 2021: 0 tons of butter (2020: 1,683 tons) held with third parties in Lithuania, 21 tons of hard cheese (2020: 212 tons) held in the USA, 875 tons of hard cheese (2020:0 tons) held in Lithuania and 2,5 tons of hard cheese (2020: 697 tons) in the warehouses based in the European Union. The total value of these inventories is EUR 3,352 thousand (2020: 9,404 thousand). 20. Trade and other receivables Group Company 2021 2020 2021 2020 Non-current receivables Prepayments for non-current assets 236 460 236 460 Prepayments for milk supply 674 419 674 419 910 879 910 879 Current receivables Trade receivables 46,042 35,364 50,223 39,187 VAT receivable 2,916 1,824 1,457 748 Prepayments for milk supply 1,800 2,092 811 1,146 Other prepayments and deferred expenses 953 1,074 946 1,068 51,711 40,354 53,437 42,149 As at 31 December 2021 and 2020 the Group’s and the Company’s trade receivables and claim rights to future trade receivables were pledged as collateral respectively for amount not larger than EUR 20,000 thousand and no larger than EUR 14,000 thousand. At 31 December 2021 and 2020 prepayments for milk supply were granted with repayment terms ranging between 1 month and 4 years. The annual interest rate ranged between 1,1 and 6%. Majority part of prepayments for milk supply were secured with pledges of assets (land, building) of the farmers. Most of prepayments for milk supply are repaid not in the form of money but are offset with amounts payable for raw milk purchases from farmers, therefore they do not meet criteria for the financial assets. In view of the deterioration of the economic situation of certain farmers, an impairment provision was established for certain prepayments for milk supply. As at 31 December 2021 and 2020, it amounted, respectively, to EUR 340 thousand and EUR 340 thousand. The information on credit quality of receivables as at 31 December 2021 is provided in Note 3.1. (b). ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 44 Movement in impairment during the financial year for trade receivables under contracts with clients: Group Company 2021 2020 2021 2020 In the beginning of the reporting period 991 991 991 991 Bad debts reversal during the year - - - - Recognized impairment during the year - - - - At the end of the reporting period 991 991 991 991 The Group received no collaterals as a security for impaired amounts receivable. 21. Cash and cash equivalents Group Company At 31 December At 31 December 2021 2020 2021 2020 Cash at bank and on hand 5,629 5,834 4,511 4,922 5,629 5,834 4,511 4,922 As at 31 December 2021, cash at bank balances pledged amounted to EUR 4,054 thousand (31 December 2020: EUR 4,557 thousand). For the purposes of the cash flow statement, cash and cash equivalents comprise as follows: Group Company At 31 December At 31 December 2021 2020 2021 2020 Cash at bank and on hand 5,629 5,834 4,511 4,922 5,629 5,834 4,511 4,922 22. Share capital As at 31 December 2021, the authorized capital of the Company amounted to 35,867,970 ordinary registered shares with a par value of EUR 0.29 per share. All shares are fully paid. The total amount of the authorized capital is EUR 10,401,711. During 2021 there were no changes in the Company's authorized capital. 23. Treasury shares 2021 2020 Number Amount Number Amount At the beginning of the year 861,274 (2,251) 861,274 (2,251) Treasury shares acquired - - - - 861,274 (2,251) 861,274 (2,251) Treasury shares purchased through the official bidding market of Nasdaq Vilnius stock exchange. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 45 24. Other reserves and reserve for acquisition of treasury shares Reserve for acquisition of treasury shares Total reserve for acquisition of own shares was EUR 10,850 thousand as at 31 December 2021. During 2021 the reserve for acquisition of own shares was not increased and amounted to EUR 10 850 thousand as at 31 December 2020. Other reserves Non-distributable reserves (legal reserves) of Rokiškio Sūris AB, Rokiškio Pieno Gamyba UAB and Rokiškio Pienas UAB amounting to EUR 1,113 thousand, EUR 556 thousand and EUR 305 thousand, respectively, can only be used to cover future operating losses, if any. The remaining amount of other reserves totaling EUR 15,189 thousand for the Company and EUR 25,128 thousand for the Group (2020: EUR 16,304 thousand and EUR 25,741 thousand, respectively) consists of the revaluation reserve of property, plant and equipment. (See below for the disclosure of the revaluation reserve). Dividends Dividends declared at the Company for the year 2020 were paid out in 2021 in the amount of EUR 0.10 per share (other than treasury shares) and in total amount of EUR 3,501 thousand (when par value of each share equals EUR 0.29). Revaluation reserve Revaluation reserve represents an increase in the value of property, plant and equipment as a result of its revaluation. This reserve may not be used to cover losses. Movements in revaluation reserve are given in the table below: Company Revaluation reserve Deferred income tax Revaluation reserve net of tax At 1 January 2020 10,738 (1,611) 9,127 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,688) 253 (1,435) Revaluation of PP&E 10,131 (1,519) 8,612 At 31 December 2020 19,181 (2,877) 16,304 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,313) 197 (1,116) At 31 December 2021 17,868 (2,680) 15,188 Group Revaluation reserve Deferred income tax Revaluation reserve net of tax At 1 January 2020 15,506 (2,343) 13,163 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,675) 268 (1,407) Revaluation of PP&E 16,453 (2,468) 13,985 At 31 December 2020 30,284 (4,543) 25 741 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (722) 108 (614) At 31 December 2021 29,562 (4,435) 25,127 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 46 25. Borrowings Group Company 2021 2020 2021 2020 Non-current Non-current borrowings 8,050 - 8,050 - Current Current borrowings 19,344 26,820 19,344 26,820 Finance lease liabilities - - - - 19,344 26,820 19,344 26,820 Total borrowings 27,394 26,820 27,394 26,820 The Company’s and the Group’s current borrowings overdraft granted by SEB Bankas. Interest rate for EUR 8,050 thousand non-current borrowings is fixed, interest rate for current borrowings is Euribor plus margin at market level. The Group acquired IR/SWAP and fixed entire amount of non-current borrowings interest rate for entire period of the loan. The fair value of the derivative is EUR(55) thousand as at 31 December 2021. Under the loan agreements signed with the banks, certain property, plant and equipment (Note 14), inventories (Note 19), trade receivables (Note 20) and cash balances in bank accounts (Note 21) were pledged as collateral. The carrying amounts of the Group’s and the Company’s borrowings (excluding finance lease liabilities) are denominated in the following currencies: Group Company 2021 2020 2021 2020 in EUR 27,394 26,820 27,394 26,820 27,394 26,820 27,394 26,820 The fair value of borrowings does not materially differ from the carrying amount. As at 31 December 2021, the balance not withdrawn under the committed credit line facilities with the banks amounted to EUR 7,756 thousand (2020: EUR 10,896 thousand) for the Company and the Group. The Group was not in breach of the set borrowing limits or financial covenants (Note 3.2). 26. Deferred income Group Company 2021 2020 2021 2020 Government grants at the beginning of the year 3,021 3,081 1,918 1,766 Government grants recognised - 417 - 417 Recognised in the income statement (427) (477) (220) (265) 2,594 3,021 1,698 1,918 Less: non-current portion (2,190) (2,601) (1,487) (1,705) Current portion 404 420 211 213 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 47 Deferred government grant is related to acquisition of property, plant and equipment using the European Union funds and the funds of the Lithuanian Government under the SAPARD, Rural Development Programme and other programmes. The Company has no obligation to repay or otherwise refund the grants received unless it breaches the contractual provisions contained in the agreements with the grantors. 27. Trade and other payables Group Company 2021 2020 2021 2020 Trade payables 19,225 13,465 16,762 11,628 Salaries, social security contributions and taxes 1,595 1,669 979 1,095 Advance amounts received and other payables 1,135 711 1,082 661 Accrued expenses 909 878 614 616 22,864 16,723 19,437 14,000 28. Provisions Group Company 2021 2020 2021 2020 Non-current Non-current provisions 683 683 307 307 Current Current provisions 684 684 604 604 Total provisions 1,367 1,367 911 911 As at 31 December 2021 and 2020, the Company’s and the Group’s current and non-current provisions consisted of provisions for pension benefits calculated in accordance with the legal acts of the Republic of Lithuania and provisions under the collective agreement of the Company and the Group. 29. Contingent liabilities and commitments Contingent liabilities As at 31 December 2021 and 2020, no guarantees were granted to third parties on behalf of the Group and the Company. Capital expenditure commitments As at 31 December 2021 and 2020, there were no capital expenditure contracted for property, plant and equipment at the balance sheet date but not recognised in the financial statements. Assets pledged as collateral to the bank are disclosed in Notes 14, 20 and 21. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 48 30. Cash flows from operating activities Reconciliation of profit before income tax to cash generated from operating activities: Group Company At 31 December At 31 December 2021 2020 2021 2020 Net profit (loss) before income tax 596 3,972 1,540 3,268 Adjustments for: -depreciation (Note 14) 8,108 9,253 5,473 5,899 -amortisation (Note 15) 21 7 8 7 -write-off of property, plant and equipment and intangible assets (Notes 14 and 15) 23 43 23 2 -loss/(profit) on disposal of property, plant and equipment (Note 9) (174) (15) (174) (13) -interest expense (Note 11) 369 199 369 199 -interest income (Note 8) (229) (254) (229) (251) -amortisation of loans (230) (230) (230) (230) -inventory write-down to net realisable value (reversal) (1,395) (61) (1,395) (61) -impairment for doubtful receivables and write- offs of bad debts - 571 - 571 -accrual for vacation reserve and bonuses - - - - -amortisation of government grants received (Note 26) (427) (477) (221) (265) -dividend income - - (1,790) (2,649) Changes in working capital: -amounts receivable and prepayments (10,233) (820) (11,014) 2,957 -inventories 11,928 (9,982) 12,269 (9,795) -prepayments for milk supply (726) (226) (297) (154) -amounts payable 5,914 (180) 5,209 (626) Net cash generated from/(used in) operating activities 13,546 1,800 9,541 (1,141) For the purpose of the cash flow statement, proceeds from disposal of property, plant and equipment comprised as follows: Group Company At 31 December At 31 December 2021 2020 2021 2020 Net book amount (Note 14) 150 198 138 141 Profit/(Loss) on disposal of property, plant and equipment (Note 9) 174 15 174 13 Proceeds from sale of property, plant and equipment 324 213 312 154 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 49 31. Related-party transactions Main shareholders of the Company: At 31 December 2021 2020 Antanas Trumpa (Chairman of the Board of the Company) 19.76% 19.76% Pieno Pramonės Investicijų Valdymas UAB (established in Lithuania) 27.21% 27.21% RSU Holding SIA (established in Latvia) 24,96% 24,96% Fonterra (Europe) Coöperatie U.A. 10.00% 10.00% Other shareholders (legal entities and natural persons) 18.07% 18.07% * Pieno Pramonės Investicijų Valdymas UAB is controlled by Mr Antanas Trumpa (as a principal shareholder holding 73.84% of the share capital and votes of Pieno Pramonės Investicijų Valdymas UAB). RSU Holding SIA is controlled by Mr Dalius Trumpa (as a single shareholder holding 100% of the share capital and votes of RSU Holding SIA). The group of persons acting in concert holds in total 82.17% (2020: 82.17%) of the Company’s share capital and votes. Members of the Board of Directors of Pieno Pramonės Investicijų Valdymas UAB, RSU Holding SIA, Fonterra (Europe) Coöperatie U.A., and Rokiškio Sūris AB and their family members are treated as related parties. All Fonterra group companies are also treated as related parties. Certain cooperative societies engaged in the production of milk are treated as related parties of the Company because the Company can exercise a significant influence over daily activities of these cooperative societies through close family members of its directors and certain employees. (i) The following transactions were carried out with related parties: Group Company At 31 December At 31 December 2021 2020 2021 2020 Purchase of milk from other related parties 3,156 2,552 38,559 30,030 Purchase of non-current assets - - - - Purchase of inventory - - 7,883 8,152 Purchases of services 134 65 1,650 1,328 Sales of transportation services to other related parties 42 107 4,796 5,054 Sales of production and other inventories 15,245 11,123 71,845 60,951 Interest charges on credit facility 20 20 74 32 In order to properly indicate the internal turnover of Rokiškio Sūris AB, Rokiškio Pienas UAB, and Rokiškio Pieno Gamyba UAB, the management of the Group has decided that raw materials used in the production of exported products of Rokiškio Sūris UAB will be bought at a zero price, while the production generated by Rokiškio Pienas UAB and Rokiškio Pieno Gamyba UAB will be sold as a service, i.e. excluding the value of raw materials. Transactions related to the purchase of milk, acquisition of non-current assets and inventories, purchase and sale of services and goods with related parties are carried out under normal market conditions, including Fonterra group companies. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 50 (ii) Year-end balances arising from transactions with related parties: Group Company At 31 December At 31 December 2021 2020 2021 2020 Non-interest bearing loans granted to directors (and their family members) 8 13 8 13 Current loan receivable from Jekabpils Piena Kombinats SIA - - 284 284 Current loan receivable from Dzūkijos Pienas KB 298 298 298 298 Advance payment received from Fonterra (Europe) Coöperatie U.A 2,586 2,815 2,586 2,815 Trade payables to other related parties 1,144 63 3,597 63 Trade receivables from other related parties 1,659 825 13,370 12,775 In 2012 the agreement was signed with Fonterra (Europe) Coöperatie U.A. for the purpose of financing the acquisition of certain production facilities and improvement of certain production lines. Together with the financing agreement the Company signed long term sales agreement, where the Company committed to produce by the above mentioned production lines the agreed quantity of certain products and sell it to Fonterra (Europe) Coöperatie U.A., while Fonterra (Europe) Coöperatie U.A. committed to purchase them. According to the financing agreement the prepayment received is amortised in equal parts until 2033, if the Company is fulfilling its obligations under the sales agreement. The Company accounted both agreements as single performance obligation, since the products developed and sold and financing services received by the purchaser are not distinct. By the decision of the Shareholder of Rokiškio Pieno Gamyba UAB, it was decided to approve and allocate dividends in the amount of EUR 1,790,076(2020: EUR 2,649,388). Dividends were paid out to Rokiškio Sūris AB in May 2021 and 2020 respectively. (iii) Compensation of key management personnel Group Company At 31 December At 31 December 2021 2020 2021 2020 Salaries 227 222 211 206 Bonuses/management bonuses paid - - - - Accrual (reversal) for management bonuses - - - - Social security contributions 4 4 4 4 231 226 215 210 Key management personnel include 9 (2020: 9) members of the Board and management officers. 32. Services rendered by the audit firm Presented below are all services rendered by the audit firm to the Group / the Company (in EUR thousands): Group Company At 31 December At 31 December 2021 2020 2021 2020 Audit of the financial statements under the agreement 47 47 30 30 Assurance and other related services 20 20 13 13 Business consultation services - - - - Tax consultation services - - - - 67 67 43 43 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE THE COMPANY’S FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021 (All tabular amounts are in EUR ’000 unless otherwise stated) 51 33. Events after the reporting period On 24 February 2022, amendments to the Credit Agreement were signed with AB SEB bankas, increasing the credit limit to EUR 40,100 thousand and extending the final maturity of the credit limit to 28 February 2023. The Company's assets and claims on receivables previously pledged in favour of the Bank were extended to secure the repayment of the loan. 34. Impact of COVID-19 virus on the Group's and company’s activities The operations of the Group and the Company returned to the normal level of operations as it was before the pandemic. In the opinion of the Group's management, the current restrictions do not have a significant impact on the Group's and the Company’s sales, production volumes or financial position. 35. Impact of war in Ukraine On 24 February 2022 the Russian Federation started a war in eastern Ukraine, which was condemned by the World. The economic and financial sanctions were imposed on Russian regime. Management of the Group has assessed the possible consequences of these sanctions and the effect of the war for the financial results to the Companies of the Group should not be significant. During the year 2021 the Group’s and the Company’s sales of milk products to the clients in Russia, Belarus and Ukraine totaled EUR 7,169 thousand -2,8 percent of total sales (2020: 6,498 thousand – 3,1 percent). As at 31 December 2021 accounts receivable from companies in Russia, Belarus and Ukraine amounts to EUR 1,531 thousand. At the date of issue of these financial statements there were no overdue unpaid invoices relating to these markets. At date of approval of financial statements there were no significant adverse changes in accounts receivable balances from the above mentioned companies. The management of the Group carefully monitors the situation in Ukraine and the sanctions imposed in order to comply. However, based on Group’s Management evaluation, the current situation does not affect the Group’s ability to continue as a going concern. The management of the Group considers the war in Ukraine as non-adjusting post balance sheet event. ROKISKIO SURIS, AB Consolidated audited annual report 2021 53 TABLE OF CONTENTS MESSAGE FROM THE CEO .................................................................................................................................................................................................................. 55 GENERAL INFORMATION ................................................................................................................................................................................................................... 56 1. REPORTING PERIOD FOR WHICH THE ANNUAL REPORT IS PREPARED ............................................................................................................................... 56 2. KEY DATA ON THE ISSUER: ........................................................................................................................................................................................................... 56 3. INFORMATION ON THE COMPANY'S GROUP OF COMPANIES ................................................................................................................................................ 56 4. TYPES OF MAIN ACTIVITIES OF THE COMPANY AND THE COMPANY GROUP .................................................................................................................. 57 5. STRATEGY AND OBJECTIVES OF THE GROUP ........................................................................................................................................................................... 57 6. KEY EVENTS IN THE REPORTING PERIOD .................................................................................................................................................................................. 58 7. SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR ...................................................................................................................................... 61 INFORMATION ON THE ACTIVITIES OF THE COMPANY AND THE GROUP.............................................................................................................................. 61 8. GROUP OPERATING ENVIRONMENT ............................................................................................................................................................................................ 61 9. GROUP SALES ................................................................................................................................................................................................................................... 65 10. PRODUCTS, BRANDS AND ACHIEVEMENTS ............................................................................................................................................................................. 67 11. RISK FACTORS AND RISK MANAGEMENT ................................................................................................................................................................................ 70 12. INFORMATION ON FINANCIAL RISK MANAGEMENT OBJECTIVES AND HEDGING INSTRUMENTS USED ................................................................. 78 13. KEY FEATURES OF INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS RELEVANT TO THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................................................................................................................................... 78 14. FOOD SAFETY AND QUALITY ..................................................................................................................................................................................................... 79 15. ENVIRONMENT PROTECTION ...................................................................................................................................................................................................... 81 16. RESEARCH AND DEVELOPMENT ACTIVITIES .......................................................................................................................................................................... 83 17. FINANCIAL RESULTS OF THE OPERATIONS ............................................................................................................................................................................. 84 18. GROUP ACTIVITY BY SEGMENT ................................................................................................................................................................................................. 87 19. INVESTMENT................................................................................................................................................................................................................................... 89 20. GROUP BUSINESS PLANS AND FORECASTS ............................................................................................................................................................................. 89 INFORMATION ON THE COMPANY'S SHAREHOLDERS AND SHARES ............................................................................................................................... 90 21. INFORMATION ON THE COMPANY'S SHARE CAPITAL ........................................................................................................................................................... 90 22. COMPANY CONTRACTS WITH BROKERAGE FIRMS ............................................................................................................................................................... 91 23. DATA ON TRADING IN THE ISSUER'S SECURITIES ON REGULATED MARKETS ............................................................................................................... 91 24. RESTRICTIONS ON TRANSFER OF SECURITIES ....................................................................................................................................................................... 93 25. PROCEDURE FOR AMENDING THE COMPANY'S ARTICLES OF ASSOCIATION ................................................................................................................. 93 26. INFORMATION ON THE COMPANY'S SHAREHOLDERS .......................................................................................................................................................... 94 27. SHAREHOLDERS' RIGHTS ............................................................................................................................................................................................................. 95 28. DETAILS OF REPURCHASES OF THE ISSUER'S OWN SHARES ............................................................................................................................................... 96 29. DIVIDENDS ...................................................................................................................................................................................................................................... 96 COMPANY MANAGEMENT ................................................................................................................................................................................................................. 98 30. THE COMPANY'S GOVERNING BODIES ..................................................................................................................................................................................... 98 31. CORPORATE GOVERNANCE AND ORGANISATIONAL STRUCTURE OF THE COMPANY GROUP ................................................................................... 98 32. INFORMATION ON THE COMPETENCE AND PROCEDURE FOR CONVENING THE GENERAL MEETING OF SHAREHOLDERS ................................ 99 33. BOARD OF DIRECTORS OF THE COMPANY ............................................................................................................................................................................ 102 34. COMMITTEES WITHIN THE COMPANY .................................................................................................................................................................................... 106 35. MANAGEMENT OF THE COMPANY .......................................................................................................................................................................................... 108 36. EMPLOYEES .................................................................................................................................................................................................................................. 108 37. INFORMATION ON AGREEMENTS BETWEEN THE COMPANY AND THE MEMBERS OF ITS ORGANS, THE MEMBERS OF THE COMMITTEES IT HAS SET UP, OR ITS EMPLOYEES, WHICH PROVIDE FOR COMPENSATION IN THE EVENT OF THEIR RESIGNATION OR DISMISSAL WITHOUT JUST CAUSE, OR IN THE EVENT OF THE TERMINATION OF THEIR EMPLOYMENT AS A RESULT OF A CHANGE OF CONTROL OF THE ISSUER ......................................................................................................................................................................................................................................... 112 INFORMATION ON RELATED PARTY TRANSACTIONS AND SIGNIFICANT ARRANGEMENTS ........................................................................................... 112 38. RELATED PARTIES OF AB ROKIŠKIO SŪRIS GROUP ............................................................................................................................................................. 112 ROKISKIO SURIS, AB Consolidated audited annual report 2021 54 39. TRANSACTIONS WITH RELATED PARTIES ............................................................................................................................................................................. 113 40. INFORMATION ON HARMFUL TRANSACTIONS ENTERED INTO ON BEHALF OF THE ISSUER .................................................................................... 113 OTHER INFORMATION ...................................................................................................................................................................................................................... 113 41. INFORMATION ON THE AUDIT .................................................................................................................................................................................................. 113 42. DATA ON PUBLICLY AVAILABLE INFORMATION ................................................................................................................................................................. 114 ROKIŠKIO SŪRIS AB GOVERNANCE REPORT ............................................................................................................................................................................... 115 ROKISKIO SURIS, AB Consolidated audited annual report 2021 55 MESSAGE FROM THE CEO Like the rest of the world, we are living in an exceptional period, which requires us to take on new challenges and make courageous decisions to continue to be a leading dairy company, with a team of professionals and the highest standards of performance. We can be proud of the way we managed the impact of Covid-19, operating at full capacity throughout the pandemic and ensuring the health and safety of our employees, as well as the safety and quality of our products. Today, as we live through the instability of the war in Ukraine, our hearts go out to the innocent people who are suffering, and we do our best to help them. Over the past year, we have continued to successfully modernise our production processes to increase efficiency and to make the company's operations sustainable and as environmentally neutral as possible. Investing in improving operations, production, people and sustainability has always been and continues to be the company's top priority. We have formulated new sustainability ambitions and commitments to society. For the first time, we have produced a Sustainability Report in line with GRI (Global Reporting Initiative) standards. This report is presented alongside our consolidated annual report for 2021. Looking ahead, we plan to develop processes to assess whether the Group's governing bodies are adequately overseeing the organisation's impact on the economy, nature and people. All of the company's production units have adopted the new IFS (International Food Standard) food safety standard and are rated with the highest scores. This standard and such high rating for our companies is an even greater guarantee of food safety and quality, ensuring a wider range of customers for our products worldwide. I am grateful to all the employees of AB "Rokiškio sūris" Group, raw milk suppliers, other business partners, customers, buyers and consumers for their smooth cooperation in this difficult period! Dalius Trumpa CEO ROKISKIO SURIS, AB Consolidated audited annual report 2021 56 GENERAL INFORMATION 1. Reporting period for which the annual report is prepared This 2021 consolidated report covers the period from 1 January 2021 to 31 December 2021. 2. Key data on the issuer: Name of the issuer: Joint Stock Company "Rokiškio sūris" (hereinafter referred to as the Company) Legal form: Public limited company Date and place of registration: 28 February 1992. State Enterprise Centre of Registers Company code: 173057512 Address: Pramonės g. 3, LT 42150 Rokiškis, Republic of Lithuania Keeper of the register of legal persons: State Enterprise Centre of Registers Telephone number: +370 458 55200 Fax number: +370 458 55300 Email address: [email protected] Website address: www.rokiskio.com ISIN code: LT0000100372 LEI (Legal Entity Identifier) code: 48510000PW42N5W74S87 Trading code AB Nasdaq Vilnius RSU1L 3. Information on the Company's group of companies 31 December 2021 The Rokiškio sūris Group (the "Group") consists of the parent company Rokiškio sūris AB and five subsidiaries. (2020: parent company and four subsidiaries). Parent company: Rokiškio sūris, AB (registration number 173057512, Pramonės g. 3, LT-42150 Rokiškis). ROKISKIO SURIS, AB Consolidated audited annual report 2021 57 Subsidiaries of Rokiškio sūris, AB: Rokiškio pienas, UAB, address of the registered office Pramonės g. 8, LT-28216 Utena. Registration number: 300561844. Rokiškio sūris, AB is the founder and the sole shareholder of Rokiškio pienas, UAB, holding 100% of shares and votes. Rokiškio pieno gamyba, UAB, address of the registered office Pramonės g. 8, LT-28216 Utena. Registration number: 303055649. Rokiškio sūris, AB is the founder and the sole shareholder of Rokiškio, UAB, pieno gamyba, holding 100% of shares and votes. Latvian company SIA Jekabpils piena kombinats (registration number 45402008851, address of the registered office Akmenu iela 1, Jekabpils, Latvia LV-5201). Rokiškio sūris, AB holds 100% of shares and votes in the company. Latvian company SIA Kaunata (registration number 240300369, address of the registered office Rogs, Kaunata pag., Rezeknes nov., Latvia). Rokiškio sūris, AB holds 40 percent of member shares in the company, whereas Rokiškio pienas, UAB, holds 20 percent of member shares in the company. DairyHub.LT, UAB (company code 305831304, registered office address Kauno str. 65, LT- 20118 Ukmergė). Rokiškio sūris, AB is the founder and sole shareholder of DairyHub.LT, UAB, holding 100 % of shares and votes. 4. Types of main activities of the Company and the Company group Main activities of Rokiškio sūris, AB group: • Operation of dairies and cheese making (NACE 10.51) Rokiškio sūris, AB: The main activity of Rokiškio sūris, AB is production and sale of fermented cheeses, whey products, skimmed milk powder. Subsidiaries: The main activity of UAB Rokiškio pienas is sale of fresh milk products and fermented cheeses. The main activity of UAB Rokiškio pieno gamyba is production of fresh milk products (milk, kefir, sour milk, butter, curd, curd cheese, sour cream, glazed curd cheese bars, desserts). The activity of SIA Jekabpils piena kombinats is purchase of raw milk. The activity of SIA Kaunata is purchase of raw milk. UAB "DairyHub.LT" - preparation and sale of hard cheeses to the final consumer in different parts of the world. 5. Strategy and objectives of the Group In order to ensure that all members of the Company's governing bodies have a clear understanding of the Company's goals, directions and objectives, the Company's strategy is being developed to set out long-term strategic goals and objectives. ROKISKIO SURIS, AB Consolidated audited annual report 2021 58 The Rokiškio sūris Group is guided in its activities by a 3-year strategic plan approved by the Board, the main provisions of which are set out below: MISSION: AB "Rokiškio sūris" = Trusted Dairy Professionals VISION: Sustainable processing more than 1 million tonnes of raw milk per year, as Lithuania turns into Baltland. GOALS: -Leadership in the dairy sector in the region -Flexible production of premium quality products and sales that exceed customer expectations -To be the most attractive and reliable partner for dairy farmers -To continuously increase value for shareholders -Achieving sustainability objectives along the entire chain of operations WE SEEK OUR GOALS BY: • Increasing the volume of purchased and processed milk by 5 percent annually. • Aiming at 3 percent annual net profit rate. • By continuously reducing gas emissions, energy and water consumption and the use of non- recyclable packaging in the production processed. 6. Key events in the reporting period Ordinary General Meeting of Shareholders of AB "Rokiškio sūris" held on 30 April 2021: 1.Agreed to the Audit Committee's report; 2.Approved the audited consolidated and Company financial statements for 2020; 3.Approved the allocation of profit/loss for 2020: Title kEUR 1. Non-distributed profit (loss) at beginning of year 73 169 2. Approved by shareholders dividends related to the year 2018 (3 501) 3. Transfers from other reserves 1 435 4. Non-distributed profit (loss) at beginning of year after dividend payout and transfer to reserves 71 103 5. Net profit (loss) of the Company of fiscal year 3 329 6. Distributable profit (loss) of the Company 74 432 ROKISKIO SURIS, AB Consolidated audited annual report 2021 59 7. Profit share for mandatory reserve - 8. Profit share for other reserves - 9. Profit share for dividend payout * (3 501) 10. Profit share for annual payments (tantiemes) to the Board of Directors, employee bonuses and other as accounted by Profit (loss) statement - 11. Non-distributed profit (loss) at end of year transferred to the next fiscal year 70 931 it will be allocated 0.10 eur per ordinary registered share. In total to the dividends payout EUR 3,500,669.60. 4.Decided to acquire treasury shares in the Company: The purpose of the acquisition of treasury shares is to maintain and increase the Company's share price; The maximum number of shares that may be acquired - the total nominal value of the Company's treasury shares may not exceed 1/10 of the Company's share capital. The period within which the Company may acquire its own shares is 18 months from the date of adoption of this Decision; Maximum and minimum acquisition price - the maximum acquisition price per share shall be 10% higher than the market price of the Company's shares on the Nasdaq Vilnius Stock Exchange when the Board of Directors decides on the purchase of treasury shares and the minimum acquisition price per share shall be 10% lower than the market price of the Company's shares on the Nasdaq Vilnius Stock Exchange when the Board of Directors decides on the purchase of treasury shares. Procedure for the sale of treasury shares and minimum sale price - Treasury shares acquired by the Company may be cancelled by a decision of the General Meeting of Shareholders or sold by a decision of the Management Board, provided that the minimum sale price of the shares shall be equal to the acquisition price and that the sale procedure shall ensure equal opportunities for all shareholders to acquire the Company's shares; To instruct the Management Board of the Company, in accordance with the conditions set out in this Decision and the requirements of the Law on Joint Stock Companies of the Republic of Lithuania, to take decisions on the purchase of the Company's own shares, to organise the purchase and sale of own shares, to determine the procedure for the purchase of the shares, the granting of the shares and the sale of the shares, the timing, the number of the shares and the price of the shares and to carry out any other action related to the purchase and sale of the own shares. 5.Approved the company's remuneration report; 6. Appointed the auditing firm PricewaterhouseCoopers UAB to audit the annual consolidated financial statements of AB Rokiškio sūris Group and the Parent Company for 2021 and to evaluate the consolidated annual report for 2021. 7.Elected new members of the Audit Committee: Kęstutis Gataveckas - Director of UAB "Perlas Finance" (independent member); Valdas Puzeras - independent management and financial consultant (independent member); and Rasa Žukauskaite - (employee of the Finance Department of AB "Rokiškio sūris"). The members of the Audit Committee were elected for a 4-year term of office. ROKISKIO SURIS, AB Consolidated audited annual report 2021 60 29 June 2021 The Board of Rokiškio sūris AB has taken a decision to establish a subsidiary UAB DairyHub.LT, which will be 100% owned by Rokiškio sūris AB. The share capital shall be formed by a cash contribution. The estimated amount of the authorised capital is EUR 100 thousand. The main objective of this company will be the preparation and sale of hard cheeses to final consumers in various countries. The separate company is being set up in order to efficiently manage the costs of production and sales of hard cheese prepared for the final consumer and to create an efficient sales system. The 100 % owned companies of AB Rokiškio sūris are UAB Rokiškio pienas, UAB Rokiškio pieno gamyba, SIA Jekabpils piena kombinats. On 31 August 2021, the results of the Rokiškio sūris Group for the six months ended 31 August 2021 are announced: Consolidated unaudited sales of AB Rokiškio sūris Group for January-June 2021 amounted to EUR 107,461 thousand, i.e. 4.54% more than in the same period in 2020 (EUR 102,796 thousand). The Rokiškio sūris Group made a net loss of EUR 989 thousand in the first 6 months of 2021. In contrast, the Group generated a net profit of EUR 2 134 thousand in the first 6 months of 2020. The negative result for the first half of 2021 is due to the significant increase in raw milk prices in the first half of this year compared to the same period in 2020, which affected the profitability of cheese and fresh dairy products. AB Rokiškio sūris participated in the Rimi Baltic Sustainability Awards On 25 November 2021, the finalists of the first Rimi Baltic Sustainability Awards were announced. AB Rokiškio sūris participated in the Sustainability Innovation nomination with 104 applicants. The international jury of experts selected AB Rokiškio sūris' project "Introduction of renewable energy capacity into the company's production process" as one of the final three. The winners were announced on 9 December, the project of Rokiskio suris AB was awarded as a first runner-up. More information: https://www.balticsustainabilityawards.eu/finalists Extraordinary General Meeting of Shareholders of AB "Rokiškio sūris" held on 10 December 2021: 1.Approved the new version of the Articles of Association of AB "Rokiškio sūris". 2. Elected the new Board of Directors of AB Rokiškio sūris - Antanas Trumpas (Chairman of the Board of Directors of the former term), Darius Norkus (Sales and Marketing Director of AB Rokiškio sūris), Ramūnas Vanagas (Director of Raw milk purchasing for Lithuania of AB Rokiškio sūris), Paul M Campbell (independent member), Jonas Vaičaitis (independent member) and Thijs Bosch (Managing Director for Europe of Fonrerra Co-operative Group Limited). The Board members were elected for a 4-year term of office. 28 December 2021 The new version of the Articles of Association of Rokiškio sūris AB was registered in the Register of Legal Entities and the new elected members of the Board of Directors - Thijs Bosch, Antanas Trumpa, Ramūnas Vanagas, Darius Norkus, Malcolm Paul Campbell, and Jonas Vaičaitis - were registered for a term of four years. Chairman of the Board Antanas Trumpa. The Articles of Association were amended to increase the number of Board members and to bring the company's Articles of Association in line with the relevant provisions of the Law on Joint Stock Companies of the Republic of Lithuania. ROKISKIO SURIS, AB Consolidated audited annual report 2021 61 7. Significant events after the end of the financial year On 24 February 2022, amendments to the Credit Agreement were signed with AB SEB bankas, increasing the credit limit to EUR 40 100 000 and extending the final maturity of the credit limit to 28 February 2023. The Company's assets and receivables previously pledged in favour of the Bank were extended to secure the repayment of the loan. Further information on significant events occurring after the end of the financial year is disclosed in note 34 to the consolidated and parent company financial statements of AB "Rokiškio sūris" as at 31 December 2021. INFORMATION ON THE ACTIVITIES OF THE COMPANY AND THE GROUP 8. Group operating environment Basic provisions Who we are: - We process more than 500,000 tonnes of milk in three dairies. - We produce and sell more than 35,000 tonnes of different cheeses. - About two-thirds of our production is exported outside Lithuania. - We are a responsible employer of more than 1 300 employees. The Group's activities include the purchase of raw milk, the production of various dairy products and their sale on the Lithuanian and export markets. Purchase of raw milk According to the ŽŪIKVC PAIS data, during January- December 2021, a total of 1 333.2 thousand tonnes of milk with an average fat content of 4.44% and a protein content of 3.57% were purchased from 16 117 milk producers in Lithuania, who keep 212.0 thousand cows. The average buying-in price for natural milk in December 2021 was 427.2 €/t, 6.7% higher than in November and 35.2% higher than in December 2020. The milk price for large farms in December 2021 was €466.62/t, an increase of 34% on 1 January 2022 compared to the same period in 2020. 226.05 thousand dairy cows were registered in Lithuania, 6.5% less than in the same period in 2020. According to the PAIS data of the MAICVC, the number of cows in January-December 2021 decreased by 3.3% and the number of producers by 9.9% compared to the same period in 2020. ROKISKIO SURIS, AB Consolidated audited annual report 2021 62 Here are the natural milk purchase prices of AB Rokiškio sūris group for 2019-2021, comparing milk purchased from European-sized milk producers selling more than 40 t of milk per month: The graph shows that this year the farm gate price for raw natural milk is significantly higher than in previous years. While the pandemic has had a negative impact on milk procurement prices all over the world, Lithuania has a unique situation. Prices are influenced by seasonality and declining milk production volumes. According to the data of the Ministry of Agriculture, milk purchases decreased by 5.9% in February this year compared to February 2021. Since August 2021, raw milk prices have started to increase, not only due to increased demand for products in the main importing countries, but also due to rising costs (feed, energy, transport, wages, etc.). Production of dairy products AB Rokiškio sūris Group is the largest Lithuanian dairy processing company, producing and supplying more than 300 product names to consumers. These include not only fermented cheeses, but also various whey products such as milk sugar, WPC (whey protein concentrate), WPI (whey protein isolate). The group also produces milk powder, butter, processed cheese, curd and cottage cheese products and other fresh dairy products. The Group's products have earned consumer recognition for their impeccable quality in both domestic and export markets. ROKISKIO SURIS, AB Consolidated audited annual report 2021 63 The volume of milk processed in the Group in 2021 was 1.7% lower than in 2020, i.e. 461 553 tonnes. The production of fermented cheeses is 8.4% higher compared to 2020. The volume of hard cheeses is 41.3% lower than in 2020. The volume of semi-hard cheeses produced is 6.3% lower and the production of fresh cheeses is 39.5% higher. The changes in the range are due to fluctuations in market prices. The company's priority is to increase and improve the production of GRAND hard cheese. Therefore, in 2021, new premises will be built with the latest automated equipment for the packaging of this cheese. The increased production of GRAND hard cheese has also created new challenges, as the need for maturation facilities increases with the increase in production volumes. Faced with these challenges, the production of this cheese was reduced in 2021 and investments were planned for the construction of a new warehouse. The technology of this cheese has been developed by the Company's production technologists and craftsmen in collaboration with Angelo Frosio, a cheese master and professor from Italy. GRAND hard cheese (GRANA type) weighs approximately 32 kg. These hard cheeses are characterised by their exceptional mature, rich and savoury flavour. The production process for this type of cheese is very complex, requiring a great deal of investment, exceptional knowledge, time and patience. These cheeses can only be made by a company with a very high technical level and a team of highly qualified specialists. ROKISKIO SURIS, AB Consolidated audited annual report 2021 64 The company's milk sugar production in 2021 is 0.3% higher than in 2020. This is due to higher volumes of milk processed. This production technology is being further developed in 2021, using the knowledge acquired by the craftsmen and technologists. The company continues to cooperate with Fonterra New Zealand, one of the largest dairy producers in the world, and has a successful track record in the production of whey products such as WPC (Whey Protein Concentrate); WPI (Whey Protein Isolate). This technology is continuously improved and the IBK range is expanded. In 2021, WPC production was 5.3% higher than the previous year, 2020. Market prices made it more profitable to sell cream rather than to produce butter or butter products, resulting in a 36.5% decrease in the production of butter and spreadable fat blends compared to the previous year. As in the previous year, 2020 and 2021 saw a decrease in the consumption of fresh dairy products in Lithuania. The production of fresh dairy products decreased by 3.1% compared to the previous year. The production of dried milk products was also lower, by 27.1% compared to 2020. Changes in production volumes of AB Rokiškio sūris Group in 2017-2021: Production / Year 2017 2018 2019 2020 2021 Fermented cheeses, t 3 .463 36 214 31 745 32 617 35 357 WPC powder, t 2 857 2 635 2 384 2 484 2 615 Milk sugar, t 13 661 12 405 10 866 12 592 12 631 Butter and spreadable fat mixtures, t 7 285 7 891 8 143 8 333 5 451 Dried milk products, t 3 335 3 463 2 862 4 348 3 170 Fresh milk products, t 49 734 48 596 47 370 46 833 45 365 ROKISKIO SURIS, AB Consolidated audited annual report 2021 65 9. Group sales As every year, most of the company's production is exported. In 2021, Rokiškio Sūris Group will export its production to 41 countries worldwide. (2020: 49 countries). In 2021, the Group resumed sales to Romania and Slovenia. In 2021, sales to Singapore were launched. Discontinued sales to countries such as Switzerland, India, Malaysia, Peru. In 2021, the Group's exports accounted for around 60% of total sales. This remained at the same level as in 2020. Italy remains the main and largest buyer of production. A significant part of production is also exported to the USA, the Netherlands, the Philippines. Sold Countries 2021 2020 Change kEUR % kEUR % % Lithuania 102 037 40.32 84 329 40.00 21.00 Europe 121 363 47.96 80 500 38.18 50.76 Middle East 3 561 1.41 19 701 9.35 -81.92 Far East 4 885 1.93 5 047 2.39 -3.21 North Americas 12 279 4.85 13 388 6.35 -8.28 Other countries 8 937 3.53 7 894 3.73 13.21 Total: 253 062 100 210 829 100 20.03 ROKISKIO SURIS, AB Consolidated audited annual report 2021 66 In 2021, the Group's sales revenues amounted to EUR 253 062 thousand. Compared to 2020 (EUR 210 829 thousand), the Group's sales revenue increased by 20,03 %. In 2021, sales to European countries increased by almost 50% compared to 2020. This is of course influenced by the countries completely paralysed and fully closed by the 2020 Covid pandemic, in particular Italy. At the end of spring 2021, Italy reopened to tourists and the HOREKA market started to climb again in terms of consumption. The same happened with other European countries. A full recovery from the pandemic was visible: the HOREKA sector was active in most countries, although consumption was down compared to pre-pandemic levels. However, the main reason for the increase in sales was the significant increase in product prices in early autumn, influenced by the general increase in inflation in both Europe and the US. Together with the increase in world energy prices, dairy prices rose for weeks, sometimes even days. In 2021, the company's exports were, as before, mainly to Western European countries. This was again influenced by some recovery from the pandemic, with the opening of the catering sector in European countries, and the growing demand for all dairy products on export markets. Compared to 2020, sales to the US fell by 8 per cent in 2021, as the HOREKA sector there had not yet recovered at the time of contracting. At the same time, a significant amount of low-cost local cheese was available during the pandemic, which was used by customers. As in the past, the Group continued to sell its usual products - cream, dairy powders and the additional products obtained in the cheese-making process, such as WPC and lactose - on export markets. The price of lactose, like all dairy products, also increased, but not to the same extent as whey products, where demand has far outstripped supply throughout the year and prices for these products have reached unprecedented heights and continue to rise. There is still a significant shortage of these products on the market and prices continue to rise. Compared to 2020 prices, fat prices, like all dairy products, increased in the second half of the year. However, the price of cream was lower when converted into butter per unit of fat, so the company produced butter instead of cream. Exports of mozzarella to South Korea decreased slightly compared to 2020. However, sales to this country remain low in 2021 as the Koreans have an alternative market for US mozzarella, where the price level is often more favourable for them. Hard cheese exports to Mexico and South America also increased slightly during the year. One of the Rokiškio sūris group's biggest goals at the moment is to penetrate the European and American retail/HOREKA markets for hard cheeses, in particular Grand, i.e. to increase the sales of value-added cheeses, which the company is already doing actively. The rapidly rising prices of raw materials dictate that we sell as much value-added as possible and gradually reduce the production and sales of raw cheese. Sales on the local market In 2021, Rokiškio Group's consolidated sales turnover in the local market amounted to EUR 102.037 million, or 21% more than in 2020 (2020: EUR 84.329 million). The increase in sales is primarily attributable to the significant increase in commodity prices for dairy products from the second half of 2021 onwards, which also triggered an increase in retail prices. The highest annual price increase was recorded in drinking milk (+6%), but it is likely that a significant part of the product price increase will be visible in the 2022 results. ROKISKIO SURIS, AB Consolidated audited annual report 2021 67 The total volume of production on the Lithuanian market (50.9 thousand tonnes) in 2021 was 3% lower than in 2020 and identical to the 2019 level. The highest annual growth in 2021 was in the categories of hard cheeses (+47%), unripened cheeses (+26%) and sour cream (+23%), but with a 12% decrease in the volume of drinkable milk (the latter has a significant impact on the total tonnage of production). In 2021, the share of private labels produced by the company in total domestic sales increased (from 17% in 2020 to 20% in 2021). The latter contribute to a better use of production capacity. The impact of Covid-19 on the dairy industry is relatively small (necessities), but by the end of 2021 the market started to see an overall decline in dairy consumption, probably due to a higher share of the population's expenditure in the context of the sharply rising energy costs. The share of the domestic market in Rokiškio Group's sales has remained almost unchanged in recent years (40.2%), but has increased since 2019 (38.6%). In most product categories, Rokiškio Group is first or second on the market, with a slightly weaker performance in the dessert product groups. According to the Association of Lithuanian Trade Enterprises, the most popular products on the market in their respective groups are semi-hard fermented cheese, processed cheese, kefir, buttermilk and natural lactose-free yoghurt. The company does not try to participate in small market segments, focusing on mass production, which ensures low cost and consistency of quality for high quality products. The company's preferred sales channel is retail chains. In working with them, mutual cooperation is sought, and private labels are also produced for them. 10. Products, brands and achievements Recognition of sustainability projects of Rokiškio sūris AB The Sustainable Brand Index™ ranks brands annually according to sustainability. The study is based on the opinion of Lithuanian consumers and shows how brands are perceived in terms of environmental and social responsibility. The more brands communicate sustainability, the higher consumers' expectations. The more companies communicate their achievements and their approach to sustainability, the more interest and trust they receive from consumers. A survey conducted by the creators of the ranking showed that the Lithuanian population cares about sustainability. The majority of respondents take sustainability into account before deciding to purchase a product or service. The survey, based on the opinion of Lithuanian consumers, shows that brands are perceived in terms of environmental and social responsibility. The more brands talk about sustainability, the more consumers are concerned and demand that companies comply with these principles. It is expected that by committing to and communicating their sustainability principles, companies will increase consumer interest and trust in these issues. As interest increases, so does consumer knowledge of the company's standards. Rokiškio sūris AB, which is in the top 20 of the most sustainable brands, has undoubtedly the richest history among Lithuanian dairy companies, and over the years has built up an image of a strong, reliable partner that does not chase short-term gains, but rather builds strong, long-term relationships with consumers, customers, employees and business stakeholders. Here, tradition merges with the latest world-class production technologies to bring quality, value and healthy products to the market. ROKISKIO SURIS, AB Consolidated audited annual report 2021 68 In 2021, Rimi Baltic organised the Rimi Baltic Sustainability Awards for the first time. The competition was held in 3 categories: Innovation, Change and Impact. Three hundred and twenty-three achievements were submitted for the Rimi Baltic Sustainability Awards from all Baltic countries. The entries were judged by a jury based on a methodology developed by Plan A, one of Europe's leading GreenTech companies. The jury consisted of sustainability and innovation experts from 12 countries, including the US, Germany, UK, Finland, Sweden, all the Baltic States, etc.. Our project "Incorporating renewable energy capacity into a company's production process" took part in the Innovation nomination and came second out of 104 applicants. Grated cheese Rokiškio MOZZARELLA Thanks to its excellent taste qualities and user- friendly packaging, Rokiškio MOZZARELLA grated cheese has been recognised as the Lithuanian Product of the Year 2021 by the Lithuanian Confederation of Industrialists. The cheese is presented in a hermetically sealed package with an optimum weight of 200 g. Italian pizza masters emphasise that the cheese on the pizza should be as mild and neutral as possible, so as not to overpower the other flavours and important ingredients of the pizza. In addition, the shavings of this cheese can be sprinkled on hot sandwiches, on meat roasts, on sauces, where the cheese will be a wonderful seasoning that will add richness. Mozzarella cheese family expanded with thinly sliced slices of Rokiškio MOZZARELLA, 150 g. ROKISKIO SURIS, AB Consolidated audited annual report 2021 69 Sour milk Rokiškio NAMINIS Šaltibarščių NIELSEN (Market research. Retail research. Consumer surveys, quantitative and qualitative research. Brands: INFACT, NITE, SPACEMAN. Public Opinion Research) has published the strongest news of the year based on retail sales data: Sour milk Rokiškis NAMINIS Šaltibarščių – in the top three Lithuanian news stories! AB Rokiškio sūris Group also has a whole range of quality and exclusive high added value products: BiFi Active Plius yoghurts: These yoghurts are lactose-free and enriched with vitamins A (benefits for skin, eyesight, nerves) and D (immunity, energy). The company launches a new line of dairy products in collaboration with Gian Luca Demarco. Gian Luca Demarco, host of the Culinary Studio, TV presenter, excellent chef and friendly Italian who loves Lithuania as much as Lithuanians themselves, shares the recipes he has learned from his family and the wonderful people he has met along the way. Luca, who has been living and working in Lithuania for many years, knows the tastes of its people and has selected dishes that are sure to find their way into the hearts of Lithuanians, are delicious and easy to prepare. ROKISKIO SURIS, AB Consolidated audited annual report 2021 70 11. Risk factors and risk management Risk is understood as the impediment to the achievement of objectives due to potential events and their potential impact on the business. The Company's objectives include both long-term strategic goals and specific actions related to operations. The Company's Board is responsible for managing the Company's risks and assessing the adverse impact on the objectives and results. The identification and management of specific risks is assigned to the relevant functions within the Company. The level of risk is assessed in both strategic and operational decision-making, taking into account the external and internal environment. Risk management is integrated into the Company's business processes, so that potential risks are continuously monitored and analysed. The Group's core business is milk processing. The dairy processing business is linked to raw material suppliers, competition in the raw milk market and fluctuations in raw milk prices. Shortages of raw milk, which lead to continuous volatility in milk prices, may affect the Issuer's results of operations. Specialisation in the production of fermented cheeses is the main revenue driver. The cheese maturation process is rather long, which makes it difficult to react quickly to changes in the market and may affect the company's results. In addition, there is strong competition for dairy products on the domestic and export markets, cheaper Polish products and the Russian market ban limits sales. The Group's credit risk relates to receivables. The risk of default by partners is controlled. The Group has credit insurance cover for its customers. For customers with higher financial risks, a system of prepayment of goods is in place. The Group's activities are subject to regular food safety, environmental and social responsibility audits. Food safety systems are in place and operational in the Group. The company (Lactose, IBK, butter, skimmed milk flour, rennet cheeses) has been granted specific quality certificates by HALAL and KOSHER (Lactose, IBK, skimmed and whole milk flour, buttermilk flour, butter). This ensures consumer confidence in product safety. Certified organic products are produced and labelled with additional information. The Group's management's objective is to produce safe and high quality dairy products with the lowest possible environmental impact. The Group is constantly looking for opportunities to optimise production, reduce costs and seek to minimise and manage risk factors to the maximum extent possible. Risk factors: Risk factor Risk nature Risk management Economic factors: Raw material supply Small farms; Seasonality; Competition; Lack of a long-term public regulatory framework. Evolution of raw milk prices during winter and summer periods. Significant milk price movements on world markets. To mitigate potential risks and their impact, milk producers are paid milk price premiums for long-term cooperation, higher milk quality, loyalty and balancing seasonality in milk production. Risks are managed by additional imports of milk from other countries (Estonia, Latvia) and by diversifying the purchase of raw milk from different sized suppliers in Lithuania. ROKISKIO SURIS, AB Consolidated audited annual report 2021 71 Sales of products The group's principal activity is milk processing. Its main product is rennet cheese. Revenue from the sale of cheese accounts for the majority of revenue. The Company's revenue, profit and cash flow may be adversely affected by changes in demand and prices in the markets for cheese and other products such as milk sugar, butter, WPC. The production of long-ripened hard cheese is a lengthy technological process which takes between 9 and 24 months. This lengthy process may have a negative impact on the company's cash flow and results of operations. Internal competition between local producers. Cheaper Polish production on the Lithuanian market. Increase in the volume and range of cheaper products from other EU countries. Finding alternatives to imports. Increasing the product range. Finding new markets. Cooperation with business partners. Risk assessment of each customer. Environmental factors Our activities consume large amounts of energy and natural resources. This poses a risk of environmental pollution directly and/or indirectly, as well as air pollution from technological installations. Vehicle replacement, maintenance, control of operating conditions. Choice of suppliers of energy resources. Resource saving, accounting and control measures. Control, automation, modernisation of technological processes. Monitoring the use and impact of natural resources. Use of chemicals. This poses risks to workers, products and the environment. Employee training, personal protective equipment. Accounting and control. Process automation. Physical environmental pollution: noise, smell, light Control measurements and assessment. Installation of technical instruments. Focus on design. Treatment of industrial and surface wastewater. Discharge of pollutants with industrial and surface wastewater. Maintenance, operating conditions, process control. Pollutant concentration studies, discharge accounting. Use of the reserves of the urban waste water treatment plant. Cleaning and maintenance of sand oil traps and effluent. ROKISKIO SURIS, AB Consolidated audited annual report 2021 72 Improper management of waste from operations poses a threat to the environment Waste sorting and accounting. Ensuring proper storage conditions. Process management, staff training. Handing over to legitimate handlers. Regulation and compliance. Risks are manifested in the high volume of regulation and changes in legislation. Certified management system compliant with ISO 14001:2015 Environmental Management Systems. Requirements and guidelines for use. Continuous assessment of legislation and developments. Reporting and evaluation of the established reports. Environmental concerns of residents, neighbouring businesses and local authorities. The company is located in an industrial area of the city and is adjacent to both other businesses and residential areas. Disseminating information about company news in the local press and on the internet. Active cooperation with local authorities, residents and business communities. Assessing the impact of planned activities in accordance with the established procedures Climate control systems have been installed in the production facilities, which not only maintain the set temperature and humidity parameters, but also operate in a recuperative mode. Energy risks We consume a lot of electricity, heat and water in our operations. All production and non- production equipment relies on electricity to operate. This poses a risk to the uninterrupted supply of electricity. The supply of electricity, thermal energy (steam) and water influences the production and technological processes. Electricity is supplied by an independent energy supplier under the terms of a contract. Distribution is provided by the Energy Distribution Operator. Medium-voltage switchgear is fed from two independent sources, which feed the power transformers. In the event of a voltage failure in one substation, the other is immediately supplied. We have installed 90 MW of solar power plants. Thermal energy is supplied by centralised urban heating networks using biofuels (wood) in Rokiškis and Utena. We also generate our own heat with two boiler plants in Utena and Ukmergė, which use natural gas. We have strict contractual conditions for the supply of thermal energy (steam), defining maximum requirements for pressure and temperature. Installed steam heat metering to control and ensure consumption and needs of the respective workshops. Boilers for hot ROKISKIO SURIS, AB Consolidated audited annual report 2021 73 water production. The heat pumps installed recover part of the heat from the environment and reduce the amount of purchased thermal energy by 4.1%. Rokiškio receives most of its water supply from its own waterworks and treats its waste water in its own plants. The technological operation of the wastewater treatment plant is strictly controlled, monitoring is carried out and reports are submitted and made public in accordance with the established procedures. Part of the water is purchased from the city's waterworks and part of the wastewater is treated by the city's water management company. The water supply and wastewater treatment services for companies in Utena and Ukmergė are provided by the urban water management companies. Food safety and quality In order to achieve one of the most important objectives of Rokiškio sūris AB - to ensure food safety and quality, to avoid product recalls, the existing and potentially dangerous risk factors (biological, chemical, physical) have been identified, and the favourable conditions for their occurrence and increase have been analysed. The risk assessment consists of an evaluation of the likelihood of a risk factor occurring and the severity of its consequences. The risk assessment covers the entire product production chain, from the purchase of raw materials to the delivery to the customer Based on the level of risk identified and the methodology adopted by the Codex Alimentarius Commission, categories of control measures are identified and control measures are defined. Identification of control measures for the main risk factors at play; Assessment of the effectiveness of operational controls to reduce the risk to an acceptable level; Establishing the necessary action plans to improve the control system; Regular risk management and monitoring of objectives. Information security IT risks relate to the use of illegal software, lost and unrecoverable data and vulnerabilities. Only legal, licensed IT software is used to avoid potential threats. A configurable firewall is used to protect against unauthorised access to the company from outside. Unauthorised access to data is restricted by giving employees only the rights and roles they need to do their job. ROKISKIO SURIS, AB Consolidated audited annual report 2021 74 A test environment is used to test changes to applications. Data loss is prevented by backing up data. Antivirus software is installed on all company computers. Old computer equipment is replaced by new equipment with supported software versions. Occupational risk factors: Physical factors Inadequate workplace design; Failure to comply with the general minimum requirements for work equipment; Mobile self-propelled, non-self- propelled work equipment; Potentially hazardous equipment; Stability and robustness of structures; Escape routes and exits; Fire detection and extinguishing; Electrical installation; Activities of other companies in the performance of services and other works for the company. Workplaces and work equipment are maintained. Any deficiencies that may affect workers' health and safety are corrected. Work equipment controls are clearly visible, identifiable and labelled. Work equipment is equipped with a control system that allows it to be stopped completely and safely. Emergency stop devices shall be provided for this purpose. Where there is a risk of injury to a worker as a result of mechanical contact with moving parts of the work equipment, such parts shall be covered by guards and protective devices shall be fitted to prevent access to dangerous areas. Work equipment shall bear the necessary safety and health signs to ensure the safety of workers. Workers shall receive the necessary information on the use of work equipment, on-the- job training and instruction, i.e. they shall be made aware of the hazards they may encounter as a result of work equipment. Mobile work equipment shall be so equipped and constructed as to minimize the risks to the worker. Such equipment is subject to regular maintenance, training and periodic health checks. Potentially hazardous installations are operated in accordance with the Law on Maintenance of Potentially Hazardous Installations. Potentially hazardous installations are supervised and potentially hazardous installation supervisors are appointed. Employees working with potentially hazardous equipment are trained, periodically checked for their knowledge, and undergo periodic health checks. To ensure the stability and robustness ROKISKIO SURIS, AB Consolidated audited annual report 2021 75 of structures, maintenance is carried out in accordance with the technical building regulation. It includes regular monitoring of the condition of structures, as well as periodic and specialised inspections. Evacuation routes shall be maintained and marked. Appropriate fire extinguishing equipment and fire safety engineering systems are in place, taking into account the dimensions and purpose of the buildings, the equipment in the buildings, the characteristics of the materials stored in the buildings, and the number of employees in the workplaces. Fire extinguishers and fire safety engineering systems are subject to maintenance testing. The fire reservoir has been reconstructed. It is fully compliant with the relevant laws as foreseen by the LR. The fire extinguishing equipment is labelled. A ventilation system is installed in the workplaces. Ventilation equipment is maintained and updated. Fire safety training and drills are organised for the staff. Hazardous areas in workplaces are marked. Workstations have strong, stable floors. Workers are provided with special footwear that is slip-resistant. Electrical wiring shall be installed in such a way as to avoid the risk of fire or explosion and to protect workers from direct or indirect contact with electrical wiring. Periodic resistance measurements of electrical installations shall be carried out in accordance with the procedures laid down by law. In order to ensure the health and safety of workers and to avoid risks arising from the activities of another undertaking and risks to their workers from the activities of the company, a description of the procedures for cooperation and coordination shall be drawn up, and coordinating persons shall be designated. ROKISKIO SURIS, AB Consolidated audited annual report 2021 76 Physical: Noise Light Chemical factors Ergonomic factors Work equipment Inadequate or poorly installed or maintained lighting in workplaces is one of the key occupational risk factors affecting workers' emotional stress, reducing productivity and increasing the number of accidents. Use of chemicals in laboratory testing, cleaning of work equipment and facilities. Manual work exists in many workplaces Use of personal protective equipment, compulsory health screening for noise, training for workers. Occupational risk assessments measure lighting in workplaces. If the lighting does not meet the hygiene standards, the luminaires are replaced with new LED luminaires. Their advantages are lower energy consumption, longer lifetime and higher efficiency. High-pressure washing stations are installed to fully control the doses of chemicals needed for cleaning and disinfecting rooms and to improve staff conditions. Occupational risk assessments are carried out in workplaces where chemicals are used. Mandatory health checks. Information and training for workers. Use of personal protective equipment where hazardous chemical agents are likely. Artificial ventilation system installed. An occupational risk assessment is carried out. An ergonomic risk assessment to prevent musculoskeletal disorders. Compulsory health screening. Manual and electric wheelchairs are used to reduce ergonomic risks. Lifts are also used. The company has introduced robotic technology to avoid heavy lifting. Job rotation is implemented. In 2021, the GRAND cheese packaging line became operational. It avoids ergonomic factors such as lifting, pushing, prolonged physical effort, repetitive forceful movements. Social factors: Recruitment and placement of staff. Staff qualification and the integration of staff into work processes. Search for workers at the labour exchange. Cooperation with educational institutions. Recommendations from in-house staff. Internal company resources (encourages employees to improve their skills and qualifications). The company has a system of performance appraisal and development of employees. Staff ROKISKIO SURIS, AB Consolidated audited annual report 2021 77 Retaining staff and reducing turnover. development plans are drawn up each year. Training is organised both by sending employees to external seminars organised by suppliers and within the group. The company strives to build a stable workforce by fostering good relations, providing opportunities for development, growth, participation in decision-making, and employee benefits under the Collective Agreement. These social factors are not solely dependent on the actions of the company. The company may have to increase investment in robotic production processes, i.e. replacing manual labour with robots. Ensuring business continuity of Rokiškio sūris AB and managing COVID-19 risks The COVID-19 pandemic, which has affected many industries around the world, inevitably affected our company. Since the first quarantine was introduced in Lithuania in March 2020, the company has taken all necessary measures to ensure that the Group's employees work in the safest possible conditions and that the spread of the virus is prevented as much as possible. The company has reviewed and updated its Emergency and Critical Situations Management Plan to ensure that risks in various areas are managed quickly and effectively. The main areas of risk are: •Potential disruptions in the supply chain of raw materials and other materials used in production. The company's main raw material is milk, which is purchased domestically and in adjacent regions, so there were no disruptions and no additional measures were needed. Stock levels of other essential materials were reviewed and uninterrupted supply was ensured. •Risk to workers' health, continuity of milk processing and continuity of the production chain. In accordance with the recommendations of the Ministry of Health and the State Food and Veterinary Service, the establishment has established procedures to prevent COVID-19: - monitoring the health of workers, - temperature measurement before entering the production premises, - regulating the flow of workers, service providers and visitors, - use of personal protective equipment, - the use of rapid antigen testing throughout the company. ROKISKIO SURIS, AB Consolidated audited annual report 2021 78 The measures were sufficiently effective, avoiding a significant increase in the number of cases throughout the pandemic period and ensuring uninterrupted milk processing and continuity of the production chain. The procedures established to prevent COVID-19 also include the safe organisation of the collection of raw milk from dairy farms and its reception in establishments. •Market volatility and changes in consumption patterns. The company constantly monitors and analyses the market situation and adapts to changing customer needs. 12. Information on financial risk management objectives and hedging instruments used The Company and the Group are exposed to various financial risks in the course of their business. The Group's overall risk management programme focuses on the unpredictability of the financial markets and seeks to mitigate any potential negative impact on the Group's financial performance. The Group is insured against general civil liability arising from its operations and damage to the Group's products or services. The insurance policy is valid worldwide. Risk management is carried out by the Company's management. There are no written principles for the management of general risks. The Company's and the Group's financial risk factors are described in detail in note 3 to the consolidated and parent company financial statements of AB Rokiškio sūris as at 31 December 2021. 13. Key features of internal control and risk management systems relevant to the preparation of the consolidated financial statements The preparation of the Company's consolidated financial statements, internal control and financial risk management systems, and compliance with the legislation governing the preparation of the consolidated financial statements are supervised by the Audit Committee. The consolidated financial statements of Rokiškio sūris AB and the Company are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. The Audit Committee monitors the process of preparation of the Company's and Subsidiaries' financial statements, reviews IFRS to ensure that all changes in IFRS are implemented in the financial statements in a timely manner, analyses transactions material to the Company's and Subsidiaries' operations, ensures the collection of information from the Group's entities and the timely and accurate processing and preparation of that information for the purpose of the financial statements and informs the Company's Board of Directors of material internal control weaknesses in the financial statements identified by the external and internal audits, and makes recommendations for their correction. The preparation of financial statements in conformity with IFRS involves making estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on management's knowledge ROKISKIO SURIS, AB Consolidated audited annual report 2021 79 of current conditions and actions. The financial statements comprise the consolidated financial statements of the Group and the separate financial statements of the Company. Subsidiaries (including special purpose entities) are entities in which the Group has control over the financial and operating policies. Such control is generally obtained by holding more than half of the voting shares. The existence and effect of any existing or convertible potential voting shares are taken into account in assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which the Group obtains control of those entities and are deconsolidated from the date on which control is lost. The Audit Committee makes recommendations to the Board on the selection of the external audit firm and monitors the external auditor's and the audit firm's compliance with the principles of independence and objectivity. 14. Food safety and quality The company's products are internationally recognised for their quality, with internationally recognised food safety and environmental systems in place and validated, allowing it to provide consumers with a wide range of products with excellent taste. The experience gained over the years, the focus on the introduction of new technologies and the continuous investment, allow us to remain competitive in the raw milk purchasing and sales markets. The production of hard-ripened cheese is a lengthy process that can take from a few months to several years. This specificity of production does not allow for a rapid response to sudden changes in the cheese market, which may affect the results of operations. The Company's companies pay great attention to product safety and quality, meeting customer needs and environmental requirements. AB Rokiškio sūris was the first company in Lithuania to certify its Food Safety System, the first dairy company to certify its Quality Management and Environmental Management Systems in accordance with the requirements of international ISO standards (ISO 9001, ISO 14001). The most important aspect of the companies' activities is ensuring food safety. One of the companies of AB ,,Rokiškio sūris", in Rokiškis, in order to achieve a higher level of efficiency in food safety assurance, has improved the existing food safety system and in 2013 was certified according to the FSSC 22000 Food Safety Systems Certification Scheme. This scheme includes ISO 22000:2018 and ISO/TS 22002-1:2009. This food safety scheme is recognised by the Global Food Safety Initiative (GFSI) as well as other food safety standards under the BRC, IFS and SQF requirements. In 2021, changes to the new FSSC 22000 Version 5 requirements were introduced to improve the company's existing food safety systems. The key changes in the new version relate to understanding the organisation and its context, taking into account positive and negative external and internal factors; identifying stakeholder needs and requirements; and emphasising the leadership of top management. The FSSC 22000 Food Safety Systems Certification Scheme demonstrates that the Company's operations and associated resources are a managed process. The interrelated processes are perceived and managed as a system, which enhances the effectiveness and efficiency of the company. A well-functioning food safety system allows the management of identified risks at both control and critical control points related to production processes, transport and consumption. ROKISKIO SURIS, AB Consolidated audited annual report 2021 80 Every year, the international certification company BUREAU VERITAS Lit carries out surveillance audits of the companies, and every 3 years the system is re-certified (recertification). During the validity period of the certificate, one of the surveillance audits is carried out without prior notice (unannounced audit). The unannounced audit carried out by Rokiškio sūris AB in 2021 was assessed very favourably. In order to meet the needs of customers, expand outlets and improve processes, it was decided to implement the IFS food safety standard in all companies of the Rokiškio sūris Group. The IFS - International Food Standard is developed by the German, French and Italian retail associations and is recognised by the Global Food Safety Initiative (GFSI) and retail organisations. AB Rokiškio sūris successfully certified its food safety systems according to IFS requirements and achieved the highest Higher Level rating (> 95%). The requirements of the food safety standards establish rules to ensure the production of stable, uniform, quality and safe products without deviating from the policies of the organisation. The system covers processes from the purchase of raw materials to the satisfaction of customer needs and is constantly reviewed and improved to maintain high product quality. In order to produce only safe and high quality products that meet customer expectations, the Food Safety, Quality and Safety systems are continuously reviewed and continuously improved. The company's management reviews and approves annually the Food Safety, Quality and Environmental Policy, which declares continuous improvement - "It is our understanding that 'doing well' is never enough. We know that 'What we do well today, we will do even better tomorrow!' The company has created an atmosphere in which every employee is involved in achieving the goals and objectives set. The Company has developed and implemented operational essential programmes that provide conditions, measures and rules to prevent biological, chemical, physical, allergenic and radiological contamination and to ensure the production of safe products. In 2007, the State Food and Veterinary Service of the Republic of Lithuania approved the compliance of dairy production with the requirements of the new EU hygiene regulations and issued veterinary approval numbers: •AB ,,Rokiškio sūris“ LT 73-01 P EB; •UAB “Rokiškio pieno gamyba“ LT 82-01 P EB; •UAB “Rokiškio pieno gamyba” subsidiary „Ukmergės pieninė“ LT 81-01 P EB. The laboratory of AB Rokiškio sūris is accredited according to the international standard LST EN ISO/IES 17025 "General requirements for the competence of testing and calibration laboratories". The laboratory shall comply with its objectives, improve the quality management of the laboratory, the quality of the tests performed, acquire professional experience and ensure reliable tests. The performance of the laboratories of the Utena and Ukmergė enterprises has been assessed in accordance with the description of the procedure for the approval of the authorisation of laboratories of food business operators approved by the State Food and Veterinary Office. In 2003, the State Enterprise "EKOAGROS" confirmed that AB "Rokiškio sūris" complies with the requirements of the EU Council Regulation (EC) No 834/2007 and is certified for the ROKISKIO SURIS, AB Consolidated audited annual report 2021 81 production of organic products. Fermented cheese BIO, Hard cheese BIO, Cagliata BIO, Mozzarella BIO, Gouda BIO were approved in 2021. Since 2017, Rokiškio pieno gamyba UAB and Ukmergės pieninė, a branch of Rokiškio pieno gamyba UAB, have been certified for the production of organic products - short shelf-life dairy products intended for the local market, such as various yoghurts, sour milk, cream, cream, kefir, kefir, sour milk, milk, cottage cheese, curd, cottage cheese, as well as butter and skimmed milk powder. Annual inspections and certificates issued by the SNE ,,EKOAGROS" show the company's compliance with the requirements set. The production of organic products is subject not only to strict requirements in terms of production processes, but also in terms of ingredients. The main ingredient is organic milk, which is supplied only from organic farms approved by certification bodies. On these farms, special requirements apply to the care of the cows, the feed and the milk production environment. In order to find new outlets and to meet the needs of our customers, the organic skimmed milk powder and butter have been certified in accordance with the current requirements for the handling of organic products in China and have been issued with an Organic Product Certificate. The certification was carried out by the China Organic Food Certification Center (COFCC), an authorised certification centre of the PRC. The company has granted HALAL and KOSHER specific quality certificates (for lactose, IBK, butter, skimmed milk flour, butter, buttermilk flour, buttermilk flour, buttermilk flour, buttermilk flour, etc.) for a number of products (lactose, WPC, butter, skimmed milk powder). AB Rokiškio sūris is granted the status of approved exporter to the Republic of South Korea. The competent authorities of Argentina, Brazil and Colombia have extended or issued authorisations for the export of AB Rokiškio sūris products to these countries. AB Rokiškio sūris is listed in the Certification and Accreditation Administration of the People's Republic of China. For more information on the safety and quality of the products, please refer to the company's Sustainability Report (Social area. Product safety and quality). 15. Environment protection AB Rokiškio sūris is a leader in the region's dairy processing sector, a socially responsible and transparent business partner, constantly striving for sustainability and continuity of its activities, and upholding long-standing traditions. We are committed to protecting the environment and continuously reducing the negative impact of our activities, to efficient use of resources, including energy and natural resources, and to complying with legal and standard requirements related to quality, food safety, environmental protection and all our activities. Risks arising from production activities are managed in accordance with Directive 2010/75/EC of the European Parliament and of the Council on "Industrial Emissions (Integrated Pollution Prevention and Control - IPPC)". AB Rokiškio sūris is classified as an installation subject to an IPPC permit. The IPPC permit was issued on 30-12-2005, renewed on 12-09-2014, revised on 10- 07-2019. ROKISKIO SURIS, AB Consolidated audited annual report 2021 82 The establishment Rokiškio pieno gamyba UAB in Utena is classified as an installation subject to an IPPC permit. Integrated Pollution Prevention and Control permit No TU(1)-37 issued on 27.01.2006, amended on 09.08.2017 No TU(1)-37/T-U.4-5/2017. The Ukmergė branch of UAB "Rokiškio pieno gamyba" is not required to have an IPPC permit. The best available techniques (BAT-BREF), resource consumption and emission levels of the plants are in line with those achieved in the European Union, IPPC Reference Document on the Best Available techniques in the Food, Drink and Milk Industries. BAT reports are part of the environmental IPPC permits. Environmental monitoring programmes were carried out in 2021 to monitor environmental impacts: 1.Monitoring programme for the wastewater discharged by AB Rokiškio sūris after treatment at the Ruopiškis (Alseta) Lake in Rokiškis district; 2. Monitoring programme for groundwater at the water supply point of AB "Rokiškio sūris"; 3. Groundwater monitoring programme for AB Rokiškio sūris petrol stations in Rokiškis and Obeli. The above monitoring programmes are carried out by the environmental engineering research company Geoaplinka UAB, the reports have been submitted to the Environmental Protection Agency, and no adverse environmental effects have been identified; 4. Environmental monitoring programme for the AB Rokiškio sūris farm facilities (monitoring of emissions/discharges from pollution sources). 5. Environmental monitoring programme of UAB Rokiškio pieno gamyba (monitoring of emissions/releases of pollutants). We carry out the identified analyses in the authorised companies UAB Ekometrija and UAB Rokvesta. Reports are submitted to the Environmental Protection Agency and no adverse environmental effects have been identified. To improve the management of environmental risks and performance, Rokiškio sūris AB voluntarily implemented the ISO 14001 Environmental Management System standard in 2001 and its subsidiaries in 2002 and 2003. The ISO 14001:2015/LST EN ISO 14001:2015 certificate is valid until 16 June 2022, and the certificate of UAB Rokiškio pieno gamyba is valid until 10 March 2024. The certificate of the Ukmergė branch of UAB Rokiškio pieno gamyba is valid until 21-10-2023, the management system is certified and independently audited by UAB Bureau Veritas Lit. No observations or non-conformities were found during the internal and external audits in 2021. Rokiškio sūris AB - environmental performance in 2021: Steam condensate return system from remote plants expanded. This reduces heat and water losses. The volume of condensate returned increased by 8.7%. To save fuel, fuel rates for vehicles are controlled, consumption records are kept and routes are optimised. Overall fuel consumption increased slightly by 0.3%, but fuel consumption per volume of raw material transported decreased by 9.8% to 5.29 l/t raw material. Vehicle fleet. In order to reduce fuel consumption and emissions, the vehicle fleet is gradually being renewed and old vehicles are being phased out. In 2021, 17 new vehicles were purchased and 24 vehicles were written off or sold. Of the vehicles in use, 14 are in the end-of-life category. (5%) with hybrid drive. The total vehicle fleet consists of 289 vehicles: 170 trucks, of which 11 petrol-gasoline, 160 diesel, 6 tractors, 111 cars, of which 27 petrol, 84 diesel. 31.5% of the vehicles are Euro 6 compliant. ROKISKIO SURIS, AB Consolidated audited annual report 2021 83 Environmentally friendly packaging: in 2021, we will use a total of 3 643.6 tonnes of packaging. The breakdown of packaging by type is given in the table below in tonnes and percentage: Packaging (t) % Plastic 497.1 13.20% Paper, cardboard 988.6 26.20% Metal 41.2 1.10% Combined 669 17.70% Wooden 1 438.5 38.10% Total: 3 634.6 The exact share of recycled packaging will not be known until next year, as the accounting of packaging has only changed from 2022, separating recyclable packaging. But it is already clear that the share of paper, metal and wooden packaging is 70%. It is also known that 70% of cardboard is recycled. We follow the news of packaging manufacturers, packaging market trends and consumer expectations and are ready for technological innovations in packaging, especially eco-friendly ones. For more information on waste generation, water consumption, Greenhouse Gas Emissions (GHG) and other environmental issues, please refer to the Sustainability Report (Environmental area). 16. Research and development activities AB Rokiškio sūris is constantly investing and looking for ways to ensure continuous revenue growth and improved operational efficiency.In 2021, the Company has earmarked EUR 14.9 million for investments. It has invested EUR 1.4 million in the improvement of the Grand hard cheese technology alone. The focus is on improving operational efficiency and developing new technologies to reduce production and operating costs. The constant objective of the companies of the Rokiškio sūris Group is to ensure the production and supply to the consumer of products which meet the highest food safety and quality standards and which create the highest added value. To this end, research activities are constantly carried out both within the company and in cooperation with scientific institutions such as KTU FTMC and Vilnius University. Most of the research is carried out by the company's production specialists together with Prof. Angelo Frosio from Italy (collaborator and founder of Centro Latte Lodi and Scuola d'Arte Bergognone). In collaboration with scientific institutions, new products are developed to meet the needs of today's consumers. The products are developed with sustainable raw materials and technologies in mind, seeking added values for the functionality of the products (products enriched with vitamins, milk proteins). The company's specialists regularly participate in exhibitions and seminars. By taking advantage of the fact that Fonterra, one of the world's largest dairy companies, has become a shareholder of AB Rokiškio sūris, the company's specialists can use the company's accumulated knowledge and research capabilities in their research activities. Research and testing with Fonterra's specialists is carried out both in-house and in Fonterra's research laboratory located in the company's Research and Development Centre. Laboratory testing of products is carried out both in the Group's in-house laboratories and in other laboratories in Lithuania and abroad, such as the National Institute of Food and Veterinary Risk Assessment, KTU MI, Eurofins Germany, Poland, China, Campden Bri food and drink innovation (UK), Galab laboratories (Germany), Qlip quality assurance in agrofood ROKISKIO SURIS, AB Consolidated audited annual report 2021 84 (Netherlands), Mérieux NutriSciences Italia (Italy), Nutricontrol laboratory (Netherlands). The company's laboratory in Rokiškis is accredited, certificate No LA01.129. The aim of these activities is to ensure the safety of the products, to improve the recipes in order to achieve product uniqueness and a more efficient production process, as well as to develop new products. In 2020, the laboratory of AB Rokiškio sūris was recertified according to the new standard LST EN ISO 17025:2018. In order to manage production processes more efficiently and to improve laboratory activities, in 2019 AB Rokiškio sūris implemented the LabdataLims laboratory information system in the company's laboratory. The laboratory information system collects all the data related to the tests: tests, repositories, hosting files, generating reports, importing files from the analyser, and integrating software that automatically calculates the required data. The laboratory's information system is protected against unauthorised access, and the system is only accessible on the internal network of AB Rokiškio sūris. In order to better understand the needs of the market, the company constantly cooperates with the research company NIELSEN, an expert in the field, both by purchasing its services and by participating in seminars organised by it. Another way of conducting market research is to participate in global exhibitions in the most important regions, working with both the expertise of the largest customers and the representatives of the largest suppliers. As a result of these activities, the company is constantly offering completely new or improved products to the market, tailored both to the specific market and to the specific customer. In order to respond to the fact that market needs are changing faster and faster, the company will continue to strengthen its research and development departments. 17. FINANCIAL RESULTS OF THE OPERATIONS Alternative performance results AB Rokiškio sūris presents in its financial statements financial performance indicators prepared in accordance with International Financial Reporting Standards (IFRS) together with non-IFRS financial performance indicators. These alternative performance indicators are important indicators of its performance for investors and other users of financial statements. The alternative performance measures should be treated as supplementary information prepared in accordance with IFRS. The Company sets out below the alternative performance measures and the methodology for calculating them: Financial indices (kEUR) 2021 2020 2019 2018 2017 Sales revenue 253 062 210 829 210 423 203 675 243 566 Gross profit 18 627 21 388 21 902 19 500 28 150 EBITDA 9 094 13 431 13 834 10 865 17 042 EBIT 965 4 171 4 101 1 193 8 330 Operating profit 965 4 171 4 101 1 648 8 330 Profit before tax (EBT) 596 3 972 3 914 1 619 8 290 Net profit/loss 553 4 061 4 101 1 918 8 156 Fixed assets 82 965 76 646 62 294 64 140 74 070 Current assets 119 902 120 424 106 774 106 071 88 589 Total assets 202 867 197 070 169 068 170 211 162 659 Shareholders' equity 142 480 145 428 130 771 130 319 134 096 Profitability (%) Return on assets [ROA] 0.28 2.22 2.42 1.15 5.35 ROKISKIO SURIS, AB Consolidated audited annual report 2021 85 Return on equity [ROE] 0.38 2.94 3.14 1.45 6.37 Gross profit margin 7.36 10.14 10.41 9.57 11.56 EBITDA margin 3.59 6.37 6.57 5.33 7.00 EBIT margin 0.38 1.98 1.97 0.59 3.42 Return on constant capital employed [ROCE] 0.53 2.45 2.67 0.76 5.18 Profitability ratio 0.24 1.88 1.86 0.79 3.40 [EBT margin] 0.22 1.93 1.95 0.94 3.35 Financial structure Liabilities/equity ratio 0.42 0.36 0.29 0.31 0.21 Equity to assets ratio 0.70 0.74 0.77 0.77 0.82 Debt to equity ratio 0.19 0.18 0.12 0.11 0.01 Debt ratio 0.30 0.26 0.23 0.23 0.18 Gross liquidity ratio 2.77 2.70 3.18 2.92 3.56 Market value indicators Share price to earnings per share ratio [P/E ratio] 144 24.33 21.00 50.20 11.00 Net earnings per share 0.02 0.12 0.12 0.05 0.25 Ratio Method of calculation Meaning of ratio EBITDA Earnings before Interest, Tax, Depretiation and Amoritization EBITDA – Operating profit before depreciation of fixed assets, amortization and impairment costs helps investors to assess the potential for profit before investing in fixed assets. EBITDA margin EBITDA / Income EBITDA - the relationship with income shows the effectiveness of company performance EBIT Profit before tax and interest, i.e. net profit + income tax + financial activity costs. EBIT – operational profit. EBIT is a very important indicator, as all liabilities to creditors are paid from the operational profit. This indicator well reflects the company's ability to generate cash flow. EBT Profit before tax, i.e. net profit + profit tax. Profit before deduction of income tax and investing and financing activities at net value Return on assets [ROA] The ratio of EBIT for the past 12 months to the average of the total assets over the past 12 months. This indicator shows how much the company's assets are effectively managed, i.e. share of net profit to every euro of the company's assets, which is one of the most popular valuation rates Return on equity [ROE] The ratio of the net profit of the last 12 months to the average equity of the last 12 months. The return on equity shows how much euro s of net profit is attributable to one euro of equity. This indicator is important for the shareholders, taking into account their past return on investment. Returned on Capital Employed [ROCE] The ratio of operating profit (EBIT) to operating income over the last 12 months and the average capital employed over the past 12 months. The ROCE Profitability Index evaluates the recoverability of funds required by the firm for its regular operations. It is often compared to the loan rates on the market of that year. ROCE is considered to be above the cost of borrowed capital at that time. Liability to equity ratio Liability/Equity capital The ratio of liabilities to equity shows what the total amount of long-term and short-term liabilities of the company is per euro of equity. Debt-to-assets ratio Financial debts (long-term + short- Its a financial indicator comparing company's ROKISKIO SURIS, AB Consolidated audited annual report 2021 86 term) / Assets financial debts with its entire assets. The coefficient shows what part of the company's assets is financed by borrowed funds. Debt-to-equity ratio Financial debts (long-term + short- term) / Equity This is one of the key financial leverage indicators. The debt-to-equity ratio shows how many euros of short-term and long-term debt are per euro of equity. In calculating debts, all liabilities of the company related to interest payment are assessed. Debt ratio Net Debt / Equity The ratio of net financial debt to equity shows how many long-term and short-term financial debts related to interest payments minus available cash and other highly liquid short- term financial assets are attributable to one equity euro General liquidity ratio The ratio of current assets to current liabilities The current liquidity ratio shows the ability of the company to settle short-term liabilities using its current assets. Price/earnings ratio (P/E ratio) Share price at end of period / (Net profit / Number of shares) The share price/earnings ratio reflects how much investor pays for one euro of net profit earned by the company in the past period. Net earnings per share Net profit / Number of shares Earnings per share show how much of the net profit earned by the company is attributable to one share in circulation. Profit/(loss) statement In 2021, the sales revenue of AB Rokiškio sūris Group amounted to EUR 253 062 thousand, an increase of 21% compared to 2020 (in 2020, the Group's sales revenue amounted to EUR 210 829 thousand). In 2021, revenues from sales of fermented cheeses accounted for 52.1% (2020: 45.2%). In volume terms, sales of fermented cheeses in 2021 are 31% higher than in 2020. This is due to the recovery of the global dairy sales markets after the pandemic, both in Europe and the US. ROKISKIO SURIS, AB Consolidated audited annual report 2021 87 Whey products are also up in 2021. Compared to 2020, these products were sold at higher prices due to increased demand. Export sales volumes of cream remained almost at the same level as in 2020, but there was an almost 30% increase in sales prices for this product in 2021. The focus of the market developments has been on the production of butter or cream. However, sales of butter decreased compared to 2020, which influenced the small residual of this product at the beginning of 2021 compared to the beginning of 2020. In 2021, the revenue from the sale of fresh dairy products increased by 3.4 million euro compared to 2020. This is due to an increase in selling prices of the commodity. Costs: In 2021, the Rokiškio sūris Group will incur product sales costs of EUR 234 435 thousand (in 2020 they will be EUR 189 441 thousand). In 2021, cost of sales increased by 23.8% or EUR 44 994 thousand. This significant change is due to the increase in the purchase price of raw milk and the increase in the prices of energy resources (steam, electricity, gas), fuel, packaging, auxiliary materials, spare parts, etc. due to the pandemic. The main cost items in 2021 (EUR 168 571 thousand) were raw materials and consumables (EUR 147 359 thousand in 2020). Sales, marketing and general administrative costs represented 7.4% of turnover in 2021 (EUR 18 815 thousand) and 8.3% in 2020 (EUR 17 524 thousand). In 2021, sales and marketing costs increased by 17% (EUR 12 483 thousand), while in 2020 they amounted to (EUR 10 692 thousand). In 2021, the increase in sales and marketing costs is due to an increase in sales volumes of cheese and an increase in transport costs due to rising fuel prices. Profit: The consolidated audited net profit of AB Rokiškio sūris Group for 2021 is EUR 553 thousand, i.e. EUR 3 508 thousand lower than in 2020 (EUR 4 061 thousand). The calculation of net profit takes into account direct and indirect production costs and costs not related to direct activities. The main factor contributing to the decrease in profit was the low selling prices of products in the first half of the year due to the pandemic and the increase in the second half of the year, which started to increase and continued until the end of the year, as well as the increasing prices of milk purchases, basic and auxiliary materials and services. Another important factor contributing to the increase in costs was the drastic increase in energy prices in the fourth quarter, starting in October. The net profit margin of the Rokiškio sūris Group decreased to 0.22% in 2021 (1.93% in 2020). EBITDA in 2021 will amount to EUR 9 094 thousand, i.e. 32.29 % down compared to 2020 (EUR 13 431 thousand). EBITDA margin in 2021: 3.59% (2020: 6.37%). 18. Group activity by segment AB "Rokiškio sūris" The Group's business consists of the following segments: hard cheese, semi- hard cheese, butter, milk, cream, sour cream, sour milk, yoghurt, cottage cheese, cottage cheese and others. These segments have been aggregated into two main segments in the financial statements on the basis of the similar nature of the products, the production process, the customer group and the distribution method. ROKISKIO SURIS, AB Consolidated audited annual report 2021 88 The two main segments presented in the Group's business financial statements are: - Fresh dairy products - Cheese and other dairy products The Group's other activities consist mainly of the collection of raw milk and this segment is not large enough to be disclosed separately. Transactions between the segments are conducted in the normal course of business. The fresh dairy segment has 2 external customers, each of which individually accounts for more than 10% of the segment's total revenue. The following is information on the impact of each of the operating segments on the Group's financial performance. 2021 2020 Change (%) Total sales revenue (EUR thousand): 253 062 210 829 20.03 Fresh dairy products 81 583 76 698 6.40 Cheese and other dairy products 171 232 132 356 29.37 Other segments 247 1 775 -86.08 Total gross profit (EUR thousand): 18 627 21 388 -12.91 Fresh dairy products 9 046 11 067 -18.26 Cheese and other dairy products 9 348 8 852 5.60 Other segments 233 1 469 -84.14 Gross profit by segment (EUR thousand) ROKISKIO SURIS, AB Consolidated audited annual report 2021 89 19. Investment In 2021, AB Rokiškio sūris continued its investment policy to increase the company's competitiveness, production of higher value-added products, adoption of new products and innovative technologies. The policy of implementation of the company's strategic objectives was continued. As in previous years, the investments were aimed at environmental protection, rational allocation and use of energy resources. Part of the investments were aimed at modernising existing equipment and buildings, saving cold, heat and water resources. The transport fleet was renewed with the purchase of trucks and vans for the transport of products. In the financial year 2021, the value of investments made by Rokiškio sūris Group amounted to EUR 14.9 million. One of the largest, innovative and significant investments at Rokiškio was the project to produce a new product (protein), which was completed in the second half of 2021. This will cost €7.7 million. In a relatively short space of time, new equipment was built, production technology was mastered, a lot of laboratory tests were carried out, and a number of consultations and expert opinions took place. Thanks to the efficient and professional work of the specialists, the technological process has been speeded up and the production of the product accelerated. One of the other major investments in Rokiškis was the construction of an innovative robotic packaging line for hard Grand cheese. The line's work has ensured traceability of production, preservation of information and constant product inspection. Value of €1.2 million. The investments in cheese production, whey processing, the laboratory and the energy bar were small but technologically and technically significant and important. In the transport department, new trucks, milk tankers and vans were purchased for the transport of products. In the subsidiary in Utena, the modernisation of the dry dairy and butter workshops was carried out in 2021, and the yoghurt process was improved in the fresh dairy workshop. In Ukmergė, all the investments have been in the cutting and packaging processes for Grand cheeses: - Weighing labelling unit - Pallet wrapping unit - Vacuum lifters (3 pcs) - Vacuum line for hard cheese packaging - Metal detectors Investments in subsidiaries amounted to EUR 1.4 million. 20. Group business plans and forecasts The investment objective of AB Rokiškio sūris is to continue to increase the efficiency of production, focusing on production units, modernisation, repair and renewal of their equipment, as well as on energy resources (steam, electricity, compressed air), water distribution and preparation for production activities. As every year, investment is planned to address environmental issues and to implement sustainability. Investments will also be made in works and repairs on the shop floor and in production-related departments. The Group expects to invest EUR 9.7 million in 2022 to achieve its objectives and to expand. The main areas of investment in 2022 are as follows: ROKISKIO SURIS, AB Consolidated audited annual report 2021 90 - Acquisition of new equipment for the production workshops (cheese production, curing, ripening, milk sugar, melting), modernisation of existing equipment, renovation of workshops and buildings; - Equipment for control modules; - Testing and evaluation of raw milk and product quality; - Improving the competitiveness of the company; - Saving, rational use and distribution of energy resources; - Reduction of environmental impact; - Improvement of working conditions of employees and the production environment; - Measures to improve the level of sanitation and hygiene in production and service units; - To meet customer needs for the products produced; - Modernisation of waste water treatment; - Special transport; - Other. In the subsidiary in Utena, it is planned to invest in the acquisition of equipment for curd production, improvement of the quality of dairy products, and improvement of the infrastructure servicing the production process, which is essential for the success and efficiency of other equipment. In Ukmergė, investments are planned for cheese-cutting equipment. Plans for sales markets The most important and key challenge for the Company in 2022 is to launch and expand sales of Grand cheese in the retail and foodservice markets in the EU and the US. On the Lithuanian market, the Company plans to maintain sales at least at the current level (market share in Lithuania ~ 22%), by purifying the most valuable segments and aiming to reduce the total number of assortment, which is a common market trend (shelf SKUs are planned to be reduced by supermarket chains). One of the priority sales areas is to strengthen sales of fresh produce and fermented cheeses in the neighbouring Baltic countries. INFORMATION ON THE COMPANY'S SHAREHOLDERS AND SHARES 21. Information on the Company's share capital 31 December 2021 The authorised capital of Rokiškio sūris AB consisted of: Type of shares Quantity of shares (pcs.) Nominal value (EUR) Total nominal value (EUR) Share of authorised capital (%) Ordinary registered shares 35 867 970 0.29 10,401,711.30 100 ROKISKIO SURIS, AB Consolidated audited annual report 2021 91 22. Company contracts with brokerage firms AB "Rokiškio sūris" has concluded an agreement with UAB FMĮ "Orion securities" (A.Tumėno g. 4, LT-01109 Vilnius, tel. (8-5) 231 38 33, [email protected]) for the management of accounting of securities issued by the Company and provision of investment services. 23. Data on trading in the issuer's securities on regulated markets 35 867 970 ordinary registered shares of AB "Rokiškio sūris" are listed on the Nasdaq Vilnius Baltic Official List. (symbol RSU1L). Nominal value per share EUR 0,29. The Nasdaq Vilnius Stock Exchange is the only trading market for the Company's shares. The Company has been listed since 25 July 1995. The Company's shares are included in the OMX Baltic Benchmark Index. The Company has not issued any debt securities to the public. There are no debt securities registered and issued for non-public circulation. There are no securities which do not represent a participation in the authorised capital but whose circulation is regulated by the Securities Law of the Republic of Lithuania. No trading on other stock exchanges and other organised markets Company's share trading statistics: 2017 2018 2019 2020 2021 Opening price, EUR 1.73 2.75 2.51 2.54 3 Closing price, EUR 2.75 2.51 2.52 2.92 2.88 Maximum price, EUR 2.99 2.81 2.75 2.98 3.18 Minimum price, EUR 1.65 2.25 2.2 2.1 2.6 Turnover, pcs. 1 230 178 277 058 159 107 161 788 218 200 Turnover, million euro 2.75 0.73 0.4 0.65 0.63 Capitalisation, million euro 98.64 90.03 90.39 104.73 103.3 ROKISKIO SURIS, AB Consolidated audited annual report 2021 92 Dynamics of the Company's share price and turnover during the reporting period https://nasdaqbaltic.com/statistics/en/instrument/LT0000100372/trading Dynamics of the company's share price and turnover over 4 years https://nasdaqbaltic.com/statistics/en/instrument/LT0000100372/trading ROKISKIO SURIS, AB Consolidated audited annual report 2021 93 Dynamics of the company's shares (RSU1L), OMXBaltic_Benchmark_GI and OMX_Baltic_GI indices: https://nasdaqbaltic.com/statistics/en/charts 24. Restrictions on transfer of securities There are no restrictions on holdings of securities or requirements to obtain the approval of the company or other security holders. 25. Procedure for amending the company's articles of association The Articles of Association of the Company shall be amended in accordance with the procedure provided for by the laws of the Republic of Lithuania and the Articles of Association of the Company. The decision to amend the Company's Articles of Association shall be taken by the General Meeting of Shareholders of the Company by a qualified majority of 2/3 of the votes cast by the shareholders present at the meeting, except for the exceptions provided for in the Law on Joint-Stock Companies of the Republic of Lithuania. ROKISKIO SURIS, AB Consolidated audited annual report 2021 94 If the General Meeting of Shareholders adopts a decision to amend the Articles of Association of the Company, a new version of the Articles of Association shall be drawn up and signed by a person authorised by the General Meeting of Shareholders. All amendments and additions to the Company's Articles of Association shall enter into force only after they have been registered in accordance with the procedure established by the laws of the Republic of Lithuania. The Company's Articles of Association were amended on 10 December 2021. The Articles of Association of Rokiškio sūris AB were adopted on 20 December 2010 by the decision of the Extraordinary General Meeting of Shareholders. The new version of the Articles of Association of Rokiškio sūris AB was registered in the Register of Legal Entities on 28 December 2021. The Articles of Association were amended in order to increase the number of members of the Company's Board of Directors and to bring the Articles of Association into line with the relevant provisions of the Law on Joint-Stock Companies of the Republic of Lithuania. 26. Information on the Company's shareholders The total number of shareholders of AB Rokiškio sūris on 31 December 2021 was 5 485. Shareholding held by a group of shareholders (31/12/2021): Name, surname Name of company Company code Address Ownership of With persons acting jointly Number of ordinary registered shares Share of capital and votes % Share of capital and votes % Pieno pramonės investicijų valdymas, UAB Company code 173748857 Pramonės g. 3, Rokiškis Lithuania 9 758 312 27.21 82.17 SIA RSU Holding, reg. No. 40103739795 Elizabetes iela 45/47, LV-1010 Riga 8 953 883 24.96 Antanas Trumpa Company’s Board Chairman Sodų 41a, Rokiškis Lithuania 7 088 663 19.76 Fonterra (Europe) Coöperatie U.A., CCI 50122541 Barbara Strozzilaan 356-360, EurBld2, 3e verdieping, 1083HN Amsterdam, Netherlands 3 586 797 10.00 Dalius Trumpa Company’s Manager Sodų g.31, Rokiškis Lithuania 83 500 0.23 INVL Asset Management, UAB (investment and pension funds) Gynėjų g.14, Vilnius Lithuania 1 963 973 5.48 The group of persons acting jointly consists of UAB Pieno Industriu Invest valdymas (27.21% of the Company's authorised capital and votes), SIA RSU Holding (24.96% of the Company's authorised capital and votes), the strategic investor Fonterra (Europe) Coöperatie U.A. (10.00% of the Company's authorised capital and votes), Antanas Trumpa (19.76% of the Company's authorised capital and votes), and the Company's manager Dalius Trumpa (0.23% of the Company's authorised capital and votes). ROKISKIO SURIS, AB Consolidated audited annual report 2021 95 Distribution of shareholders of AB "Rokiškio sūris" 31 December 2021 27. Shareholders' rights Shareholders have the following non-proprietary rights: 1) attend general meetings of shareholders; 2) to submit to the company in advance any questions relating to the agenda of general meetings of shareholders; 3) vote at general meetings of shareholders in accordance with the rights attached to the shares; 4) to receive the information about the company referred to in Article 18(1) of the Law on Joint Stock Companies of the Republic of Lithuania; 5) to file a lawsuit with the court, requesting to compensate the company for damages incurred as a result of non-performance or improper performance of the duties of the company's manager and members of the Management Board, as set out in the Law on Companies of the Republic of Lithuania and other laws, as well as the company's Articles of Association, and in any other cases provided for by law; 6) to obtain the information referred to in Article 89(6) of the Law on Markets in Financial Instruments on a public limited liability company whose shares are admitted to trading on a regulated market; 7) other non-property rights established by the laws of the Republic of Lithuania. Shareholders have the following property rights: 1) receive a share of the company's profits (dividend); 2) to receive company funds when the company's share capital is reduced in order to pay out company funds to shareholders; 3) to receive shares free of charge when the authorised capital is increased from the company's funds, except for the exception provided for in Article 42(3) of the Law on Joint Stock Companies of the Republic of Lithuania, and in the case provided for in Article 471 of the Law on Joint Stock Companies of the Republic of Lithuania; 4) the right of first refusal to acquire shares or convertible bonds issued by the company, except in the event that the General Meeting of Shareholders decides to waive the right of first refusal for all shareholders in accordance with the procedure set out in the Law on Companies of the Republic of Lithuania; ROKISKIO SURIS, AB Consolidated audited annual report 2021 96 5) to lend to the company in the manner prescribed by law, but the company shall not be entitled to pledge its assets to the shareholders when borrowing from its shareholders. When a company borrows from a shareholder, the interest shall not exceed the average interest rate of commercial banks in the place of residence or business of the lender at the time of the conclusion of the loan agreement. In such a case, the company and the shareholders are prohibited from agreeing on a higher interest rate; 6) to receive a share of the assets of the company in liquidation; 7) to have other property rights provided for by the laws of the Republic of Lithuania. The rights referred to in paragraphs 1, 2, 3 and 4 shall be vested in the persons who were shareholders of the company at the end of the tenth business day following the date of the general meeting which adopted the relevant resolution. 28. Details of repurchases of the issuer's own shares During the reporting period (1 January 2021-31 December 2021) AB Rokiškio sūris did not acquire or dispose of any of its own shares. Based on the repurchases of treasury shares in previous years, as at 31 December 2021. Rokiškio sūris AB held 861 274 treasury shares, representing 2.40 % of its authorised capital. The total nominal value of the treasury shares to be acquired, together with the nominal value of the treasury shares already held, shall not exceed 1/10 of the Company's authorised capital. The Company has established a reserve of EUR 10,850 million for the acquisition of treasury shares. The shares were acquired through the official offering market of the Nasdaq Vilnius Stock Exchange. The total price of the shares acquired by AB Rokiškio sūris is EUR 2 108 397.82. 29. Dividends The General Meeting of Shareholders decides on the allocation and payment of dividends when distributing the company's distributable profit. The Ordinary General Meeting of Shareholders of AB Rokiškio sūris, held on 30 April 2021, approved the audited consolidated financial statements and the Company's financial statements for 2020 and the distribution of the Company's 2020 profit. Dividends were distributed in the amount of EUR 3 500 669.60 or EUR 0.10 per ordinary registered share. Below are the details of the dividends declared and paid over the last 10 years: Year Dividends, EUR Dividends per share, EUR 2011 1 015 578.08 0.029 2012 1 015 578.08 0.029 2013 1 015 578.08 0.029 2014 Dividends were not paid 2015 2 341 737.37 0.07 2016 3 228 117.30 0.10 2017 3 586 797.00 0.10 2018 3 506 165.30 0.10 2019 3 500 669.60 0.10 2020 3 500 669.60 0.10 ROKISKIO SURIS, AB Consolidated audited annual report 2021 97 AB Rokiškio sūris has a Dividend Policy approved by the General Meeting of Shareholders. In accordance with this Dividend Policy, the Company's Board of Directors, when proposing to the General Meeting of Shareholders to allocate dividends, will be guided by the signed Shareholders' Agreement, according to which 100% of the Company's profit for the financial period, less the Company's funds earmarked by the Board for CAPEX, working capital and/or other purposes, will be allocated to the dividends. In the event that the Company's Board of Directors foresees a significant amount of investments, which would result in the Company's profit for the financial period being insufficient to pay dividends in accordance with the dividend provisions described above, the Board of Directors of the Company will endeavour to maintain the continuity of the payment of the dividends for the previous financial periods, taking into account the Company's financial situation and the trend in the global dairy industry market. The General Meeting of Shareholders may not resolve to declare and pay dividends if any of the following conditions are met: (1) the company has outstanding obligations which have fallen due before the decision is taken; (2) the amount of the distributable profit (loss) for the financial year under review is negative (loss); (3) the company's equity is less than, or would become less if dividends were paid, than the sum of the company's share capital, statutory reserve, revaluation reserve and reserve for the acquisition of own shares. A company that fails to pay its statutory taxes by the due dates cannot pay dividends, annual bonuses to board members and bonuses to employees. Dividends shall be payable to those persons who, at the close of business on the record date for the rights of the General Meeting of Shareholders which declared the dividend (the close of business on the tenth business day following the date of the General Meeting of Shareholders which made the decision), were shareholders in the company or otherwise legally entitled to receive the dividend. The company shall pay the dividend within 1 month from the date of the decision to distribute profits. The dividend may be in respect of a financial year or a period of less than a financial year. Dividends for a period shorter than the financial year shall be granted by a decision of the general meeting of shareholders. Shareholders holding at least 1/3 of the total number of votes shall have the right of initiative in respect of dividends for periods of less than one financial year. A general meeting of shareholders whose agenda shall include the question of the granting of dividends for a period shorter than a financial year shall be held within 3 months of the end of the period for which the dividends are proposed to be granted, but no earlier than the approval of the set of annual accounts and the distribution of the company's profit (loss) for the preceding financial year, and no later than the end of the financial year. Dividends for periods shorter than a financial year may be granted if all the following conditions are met: 1) the set of interim financial statements for the period of less than one financial year is approved; 2) the amount of profit or loss for the period of less than one financial year is positive (no loss); 3) the amount of the dividend payment does not exceed the amount of the profit (loss) for the period shorter than the financial year, the amount of the retained earnings (loss) for the previous financial year carried forward to the current financial year, less any part of the profit for the period shorter than the financial year which is required to be allocated to the reserves in accordance with the Law on Public Limited Companies of the Republic of Lithuania or the Articles of Association of the Company; ROKISKIO SURIS, AB Consolidated audited annual report 2021 98 4) the company has no outstanding obligations which have fallen due before the decision is taken and, after payment of the dividend, would be in a position to meet its obligations in respect of the current financial year. After the payment of a dividend for a period shorter than a financial year, the payment of a dividend for a period shorter than a financial year may not be made earlier than within 3 months. COMPANY MANAGEMENT 30. The company's governing bodies The Articles of Association of AB Rokiškio sūris, registered in the Register of Legal Entities, provide for the following governing bodies of the Company: - The General Meeting of Shareholders, - The Board of Directors, - The Chief Executive Officer of the Company (Director). The Company does not have a Supervisory Board. 31. Corporate governance and organisational structure of the Company Group The management structure of the Rokiškio sūris Group (hereinafter referred to as the Group) is organised according to the main functions, i.e. sales and marketing, production, financial management, milk purchasing, logistics and vindication. The functional directors formulate and develop the Group's strategy, tactics and objectives in accordance with their assigned functions. ROKISKIO SURIS, AB Consolidated audited annual report 2021 99 GENERAL MEETING OF SHAREHOLDERS 32. Information on the competence and procedure for convening the General Meeting of Shareholders The competence and convening procedure of the General Meeting of Shareholders shall not differ from the competence and convening procedure of the General Meeting of Shareholders set out in the Law on Companies of the Republic of Lithuania. The right of initiative to convene the General Meeting of Shareholders of Rokiškio sūris AB shall be vested in the Management Board and the shareholders whose shares carry at least 1/10 of the total number of votes at the General Meeting of Shareholders. The notice of the General Meeting of Shareholders of the Company to be convened shall be made public in the Republic of Lithuania and in all other Member States of the European Union, as well as in the countries belonging to the European Economic Area, at least 21 days before the General Meeting of Shareholders, in accordance with the procedure established by the Securities Law. The notice of convening the General Meeting of Shareholders shall be additionally published in the electronic publication "Public Notices of Legal Entities" published by the State Enterprise Centre of Registers in the source specified in the Articles of Association. Persons who were shareholders of the company at the end of the record date of the meeting shall be entitled to attend and vote at the General Meeting of Shareholders or at a repeated General Meeting of Shareholders, in person, except for the exceptions provided for by law, or by proxy, or by a person with whom a contract of assignment of voting rights has been concluded. A shareholder's right to participate in a general meeting shall also include the right to speak and to ask questions. The record date of a meeting of a public limited liability company shall be the fifth business day preceding the general meeting or the fifth business day preceding a reconvened general meeting of shareholders. A shareholder may vote in writing by completing a general ballot paper. The form of the General Ballot Form is available on the Company's website www.rokiskio.com in the Investors section and is also available with the draft resolutions submitted by the Company via the Central Regulated Information Submission Database. The completed General Ballot Form must be signed by the shareholder or his/her authorised person. The completed and signed by the shareholder or other person entitled to vote general ballot paper and the document confirming the right to vote shall be submitted to the Company in writing not later than on the last business day before the meeting, by registered mail to Pramonės g. 3, LT- 42150, Rokiškis, or by hand delivery to the Company during business days at the Company's registered office. The Company does not offer the possibility to attend and vote at the meeting by electronic means. A general meeting of shareholders may pass resolutions and shall be deemed to have been held when the shareholders holding more than ½ of the total number of votes are present. If a quorum is established, it shall be deemed to be present for the entire meeting. If a quorum is not present, the general meeting shall be deemed not to have been held and a reconvened general meeting shall be convened, which shall have the right to take decisions only on the agenda of the meeting that was not held and shall not be subject to the quorum requirement. The reconvening of the General Meeting of Shareholders shall be convened not earlier than 14 days and not later than 21 days after the date of the failed General Meeting of Shareholders. The shareholders shall be notified of the reconvened general meeting in the manner provided for in Article 261(3) of the Law on Companies no later than 14 days before the reconvened general meeting. ROKISKIO SURIS, AB Consolidated audited annual report 2021 100 An ordinary general meeting of shareholders must be held annually at the latest within 4 months after the end of the financial year. Shareholders holding shares carrying at least 1/20 of the total votes shall have the right to propose items to be added to the agenda. The proposal shall be accompanied by draft resolutions on the proposed items or, where no resolutions are required, explanations of each proposed item on the agenda of the General Meeting of Shareholders. The proposal to supplement the agenda shall be submitted in writing by registered mail to AB "Rokiškio sūris" at the address Pramonės g.3, LT- 42150 Rokiškis, or by e-mail at [email protected]. The agenda shall be supplemented if the proposal is received not later than 14 days prior to the date of the General Meeting of Shareholders. Shareholders holding shares representing at least 1/20 of the total votes shall have the right to propose new draft resolutions on the issues included in the agenda of the meeting. The draft resolutions shall be submitted in writing by registered mail to AB "Rokiškio sūris", Pramonės g.3, LT-42150 Rokiškis, or by e-mail to [email protected]. The shareholders shall also have the right to propose draft resolutions on the items on the agenda of the Meeting in writing during the Meeting. Shareholders attending the General Meeting of Shareholders shall be registered in the shareholders registration list. This list shall indicate the number of votes that each shareholder holds. A person attending a general meeting of shareholders and entitled to vote shall produce proof of identity. A person who is not a shareholder shall, in addition to this document, produce a document certifying that he is entitled to vote at the General Meeting. The requirement to produce proof of identity shall not apply to voting by written ballot in the form of a single ballot paper. The form of the general voting form is available on the Company's website at www.rokiskio.com under "Investors". If a shareholder so requests, the Company shall, not later than 10 days before the General Meeting of Shareholders, send the General Ballot Paper by registered mail free of charge, or deliver it by hand and by signature. The completed postal ballot paper shall be signed by the shareholder or his/her authorised representative. The completed and signed blank ballot paper and the document confirming the right to vote shall be submitted to the company in writing not later than on the last working day before the meeting, by registered post to Pramonės g.3, LT-42150 Rokiškis, or by hand delivery to the company at the registered office of the company at the above address on working days. Only fully paid-up shares confer the right to vote at other General Meetings. Each share carries one vote at a general meeting of shareholders. The General Meeting of Shareholders shall have the exclusive right to: 1) amend the company's statutes; 2) change the registered office of the company; 3) elect the members of the Supervisory Board, or, in the absence of a Supervisory Board, the members of the Management Board, or, in the absence of a Supervisory Board or a Management Board, the Chief Executive Officer; 4) to dismiss the Supervisory Board or its members, as well as the Management Board or its members elected by the General Meeting of Shareholders and the Chief Executive Officer; 5) to elect and dismiss the auditor or audit firm for the audit of the annual financial statements, and to determine the terms of remuneration for audit services; 6) to decide on the approval of the remuneration policy of public limited liability companies whose shares are admitted to trading on a regulated market; ROKISKIO SURIS, AB Consolidated audited annual report 2021 101 7) determine the class, number, nominal value and minimum issue price of the shares to be issued by the company; 8) to decide on the conversion of shares of one class of the company into shares of another class, and to approve the description of the procedure for the conversion of shares; 9) to decide to change the number of shares of the same class issued by the company and the nominal value per share without changing the amount of the share capital; 10) to approve the set of annual accounts; 11) to decide on the appropriation of profits (losses); 12) to decide on the creation, use, reduction and elimination of reserves; 13) to approve the interim financial statements drawn up for the purpose of deciding on the distribution of dividends for a period of less than a financial year; 14) to decide on the distribution of dividends for a period of less than a financial year; 15) to decide on the issue of convertible bonds; 16) to decide to revoke the pre-emptive right of all shareholders to acquire shares or convertible bonds of a particular issue of the company; 17) to decide to increase the share capital; 18) to decide to reduce the authorised capital, except for the exceptions provided for in the Companies Act; 19) to decide on the acquisition by the company of its own shares; 20) to decide on the allotment of Shares to employees and/or members of organs, 21) to approve the rules for the granting of Shares; 22) to decide on the reorganisation or demerger of the company and to approve the terms of the reorganisation or demerger; 23) decide on the restructuring of the Company; 24) to decide on the restructuring of the Company in the cases provided for by the Law on Corporate Restructuring; 25) to take a decision to liquidate a company, to cancel the liquidation of a company, except for the exceptions provided for in the Companies Act; 26) to elect and dismiss the company's liquidator, except for the exceptions provided for in the Companies Act. The General Meeting of Shareholders may also decide on other matters falling within its competence under the company's Articles of Association, provided that, in accordance with the Companies Act, such matters do not fall within the competence of other organs of the company and are not essentially functions of the management bodies. A decision of the General Meeting of Shareholders shall be deemed to be adopted when more shareholders vote in favour of it than against it, with the exception of items 1, 6, 7, 8, 9, 11, 12, 14, 15, 17, 18, 21, 22, 23, 24, 25 above, which shall be adopted by a 2/3 (two-thirds) vote of the total number of shares of all the shareholders present at the Meeting, and for item 16, the decision shall require 3/4 (three-quarters) of the votes of all the shares of the shareholders present at the General Meeting of Shareholders and entitled to vote on the matter. ROKISKIO SURIS, AB Consolidated audited annual report 2021 102 The Company's General Meetings of Shareholders were convened in 2021: During 2021, two General Meetings of Shareholders of AB Rokiškio sūris were convened and held on the initiative and by the decision of the Board of the Company. At the General Meeting of Shareholders of the Company held on 30 April 2021, the shareholders were presented with the consolidated annual report of Rokiškio sūris AB for 2020 and the auditor's report on the consolidated financial statements and the annual report of Rokiškio sūris AB for 2020, and the audit committee's report was approved, and the audit committee's report on the consolidated financial statements of Rokiškio sūris AB for 2020 was approved. The consolidated financial statements were approved, the distribution of the Company's profit for 2020 was approved, a dividend of EUR 0.10 per ordinary registered share (total dividend of EUR 3,500,669.60) was distributed, a decision was taken to buy back up to 10% of the Company's shares, and the Company's share capital was approved. The remuneration report of the manager and the members of the Board of Directors of AB Rokiškio sūris was approved, new members of the Audit Committee were elected for a four-year term - Kęstutis Gataveckas - Director of UAB Perlas Finance (independent member); Valdas Puzeras - independent management and financial consultant (independent member); and Rasa Žukauskaitė - (finance department of AB Rokiškio sūris). The audit firm UAB PricewaterhouseCoopers was selected to audit the 2021 annual consolidated financial statements of AB Rokiškio sūris Group and the Parent Company. 10 December 2021 On 20 December 2021, the Extraordinary General Meeting of Shareholders of the Company approved the new Articles of Association of Rokiškio sūris AB and elected new members of the Board of Directors - Antanas Trumpa (Chairman of the Board of Directors in the previous term), Darius Norkus (Sales and Marketing Director of Rokiškio sūris AB), Ramūnas Vanagas (Director of Preparations for Lithuania, Rokiškio sūris AB), Paul M Campbell (independent member), Jonas Vaičaitis (independent member) and Thijs Bosch (Managing Director Europe, Fonrerra Co-operative Group Limited). The Board members were elected for a 4- year term of office. All General Meetings of Shareholders of Rokiškio sūris AB held in 2021 were attended by the CEO of the Company, the Chairman of the Board of Directors of the Company and the CFO of the Company. 33. Board of Directors of the Company The Board is the collegiate management body of the Company, consisting of 6 (six) members. The members of the Board shall be elected and recalled by the General Meeting of Shareholders in accordance with the procedure established by the Companies Law. The members of the Board shall elect the Chairman of the Board. The number of terms of office of a member of the Board shall be unlimited. Only a natural person may be elected as a member of the Board. A member of the Supervisory Board of the Company (if the Company has a Supervisory Board) and a person who is not entitled to hold such office under the law shall not be a member of the Management Board. The powers of the members of the Management Board are defined in the Companies Act and the Articles of Association of the Company. If the Management Board is recalled, resigns or otherwise ceases to hold office before the expiry of its term of office, a new Management Board shall be appointed for a new term of office. If individual members of the Board are elected, they shall be elected only until the end of the term of office of the existing Board. The Board may take decisions and a meeting of the Board shall be deemed to have taken place when 2/3 or more of the members of the Board are present. Members of the Board who have voted ROKISKIO SURIS, AB Consolidated audited annual report 2021 103 in advance shall be deemed to be present at the meeting. A decision of the Board shall be adopted by a greater number of votes in favour than against. The Board held 7 meetings during 2021. (3 Board meetings in 2020). Due to the COVID-19 pandemic, all Board meetings were held remotely. Six Board meetings were attended by all Board members, one of which was not attended by the Chairperson due to illness, but he had given a proxy to another Board member. Five meetings were held in accordance with the pre-arranged schedule of Board meetings and two meetings were convened in accordance with the procedure laid down in the Law on Public Limited Companies of the Republic of Lithuania and in the Rules of Procedure of the Board in the event of important matters requiring a decision of the Board. The Board approved the Company's 2020 consolidated and Company financial statements and the annual report, proposed the 2020 profit distribution project to the General Meeting of Shareholders for approval, proposed the project for the buy-back of treasury shares, approved the Company's remuneration report, which was submitted to the General Meeting of Shareholders for approval. The Board also analysed the reports of the Management and Audit Committees. 29 June 2021. The Company's Board of Directors adopted a decision to establish a subsidiary UAB DairyHub.LT, which is 100% owned by AB Rokiškio sūris. The Board proposed candidates for the new Board of the Company and the nomination of the Company's audit firm. The members of the Board are paid bonuses for their work on the Board in accordance with the procedure set out in Article 59 of the Companies Law. The amount of royalties depends on the Company's performance. The General Meeting of Shareholders shall decide on the payment of bonuses. In 2021 (for 2020), the Company did not grant any bonuses to the members of the Management Board. There are no other additional payments to the Chairman of the Board in connection with the incentive scheme. Board Members of Rokiškio sūris, AB: (Elected at the Extraordinary General Meeting of the Company on 10.12.2021) Antanas Trumpa – the Company‘s Board Chairman (as from 13.12.2017) Work experience AB Rokiškio sūris has been operating since 1966. 1971 - 2017 Head of the Company (Director). Education 1966 Kaunas Polytechnic Institute, specialist in food industry machinery and apparatus, qualified as a mechanical engineer. In 1979, at Kaunas Polytechnic Institute, he defended his thesis as a candidate of technical sciences entitled "Organisation of the work of vacuum apparatus", for which he was awarded a PhD in mechanical engineering on 12 October 1994. The doctorate degree was awarded by the Lithuanian Science Council on 1994. Shares in AB "Rokiškio sūris" Directly owns 7 088 663 shares (19,76 % of the authorised capital and votes) Together with related parties 29 471 155 shares (82,17 % of the authorised capital and votes). Participation in the activities of other companies Chairman of the Board of Rokiškio pienas UAB (company code 300561844, registered office address Pramonės g. 8, Utena) and Rokiškio pieno gamyba UAB (company code 303055649, registered office address Pramonės g. 8, Utena). ROKISKIO SURIS, AB Consolidated audited annual report 2021 104 Darius Norkus – Member of the company's board. Deputy Chairman of the Board. Member of the Board since 2008 (re-elected for a new 4-year term of office at the Company's General Meeting of Shareholders on 10.12.2021). Work experience Since 2001 Sales and Marketing Director of AB "Rokiškio sūris" (company code 173057512, address Pramonės g.3, Rokiškis). Education Kaunas University of Technology, graduated engineer (1993). Baltic Management Institute, Master's degree in Business Administration (EMBA programme, 2000). Shares in AB "Rokiškio sūris" No shares. Participation in the activities of other companies Shareholder of UAB Pieno pramonės investiciju valdymas (company code 173748857, adr., Pramonės g. 3, Rokiškis), owns 4,07 % of the shares and votes of UAB Pieno pramonės investiciju valdymas. Paul M Campbell - Independent member of the Company's Board. Work experience Director and owner of Osmotics Consulting Ltd. Osmotics Consulting provides dairy and other agricultural companies with strategic, M&A, management and financial advice. Paul has over 35 years of experience in general management, setting up and managing international joint ventures, marketing, engineering and finance. Worldwide, Paul has worked in Australia, USA, Japan, Latin America, Russia, China, India, Europe and North Africa. Paul M. Campbell currently lives in London. Education University of Canterbury, New Zealand, Chemical and Industrial Engineering. Massey University, New Zealand, Diploma in Dairy Science and Technology. Shares in AB "Rokiškio sūris" No shares Participation in the activities of other companies Mr Campbell is a director of a multinational joint venture in Brazil and of the largest dairy processing company in Chile ("Soprole"). Ramūnas Vanagas – Member of the company's board. Member of the Board since 2006 (re-elected for a new 4-year term of office on 10.12.2021 at the Company's Extraordinary General Meeting of Shareholders) Work experience Since 2005 Development Director of AB "Rokiškio sūris" (company code 173057512, address Pramonės g.3, Rokiškis). Since 2020 Director of Milk Purchasing for Lithuania at AB Rokiškio sūris (company code 173057512, address Pramonės g.3, Rokiškis). Education Lithuanian Academy of Agriculture, specialisation in economics and organisation. Shares in AB "Rokiškio sūris" No shares. ROKISKIO SURIS, AB Consolidated audited annual report 2021 105 Participation in the activities of other companies Shareholder of UAB Pieno pramonės investiciju valdymas, holds 4,07 % of shares and votes in UAB Pieno pramonės investiciju valdymas (company code 173748857, adr., Pramonės g.3, Rokiškis); Member of the Management Board of the Latvian company SIA Jekabpils piena kombinats (company code 45402008851, registered office address Akmenu iela 1, Jekabpils, Latvia), no shares. Jonas Vaičaitis – Independent member of the Company's Board. Work experience 1992-2018 m. Head of Branch, AB SEB Bank, Senior Project Manager, Client Department. Education Higher engineering degree, Kyiv Polytechnic Institute. Shares in AB "Rokiškio sūris" No shares. Participation in the activities of other companies Not involved in other companies. Thijs Bosch - Member of the company's board. Work experience Strategy consultant at Bain & Company (2006-2010) Sourcing director Fonterra Europe (2011-2015) Sales director Fonterra Europe (2016-2019) GM Fonterra Europe (2019-2021) Managing Director Europe (2022) Education Msc in Finance from VU university Amsterdam Shares in AB "Rokiškio sūris" No shares. Participation in the activities of other companies No information available on participation in other companies. Company manager (director): The Company is managed by the Chief Executive Officer (Director). The Chief Executive Officer (Director) of the Company is the Company's sole management body, which organises the day-to- day business activities of the Company, considers and decides on the Company's long-term strategic plan and business plan. In the Company's relations with other persons, the Director shall act on behalf of the Company with sole authority. The Chief Executive Officer attends all General Meetings of Shareholders, including those held during the period under review. The duties and powers of the Director are defined in the Law on Companies of the Republic of Lithuania and the Articles of Association of the Company. Details of the Company's Chief Executive Officer (Director): Dalius Trumpa - Company's Chief Executive Officer (Director) (Appointed by the Board of Directors of the Company as of 01.01.2018) ROKISKIO SURIS, AB Consolidated audited annual report 2021 106 Work experience AB Rokiškio sūris (company code 173057512, address Pramonės g.3, Rokiškis) has been operating since 1991. 2002-2006 Production Director of AB Rokiškio sūris. 2007-2017 Deputy Director of Rokiškio sūris AB. Since 2018.01.01.01 Director of AB Rokiškio sūris. Since 02.01.2007 Director of the subsidiary UAB Rokiškio pienas (company code 300561844, registered office address Pramonės g.8, Utena). Since 29.04.2013 Director of the subsidiary UAB "Rokiškio pieno gamyba" (company code 303055649, registered office address Pramonės g.8, Utena). Education Kaunas University of Technology, Food Industry Machinery and Apparatus, Mechanical Engineer. Shares in AB "Rokiškio sūris" Directly owns 83 500 shares (0.23 % of authorised capital and votes). Together with related parties, holds 29 471 155 shares (82.17 % of authorised capital and votes) Participation in the activities of other companies Shareholder of UAB Rokvalda (company code 300059165, address Basanavičiaus g.16A-125, Vilnius), holding 100% of shares and votes. Since 2010 Chairman of the Board of the Latvian company SIA Kaunata (company code 240300369, registered office address Rogs, Kaunata pag., Rezeknes nov., Latvia). He does not own shares in this company. Since 11 December 2013 Director of SIA "RSU Holding" (company code 40103739795, business address Elizabetes iela 45/47, Riga). He holds 100 % of the shares of SIA RSU Holding. The shareholder of UAB "Pieno pramones investiciju valdymas" (company code 173748857, address Pramonės g.3, Rokiškis) holds 4.07 % of the shares and votes of UAB "Pieno pramones investiciju valdymas"; 34. Committees within the Company Audit Committee of AB Rokiškio sūris: The Company's Audit Committee is composed of 3 members, 2 of whom are independent. The term of office of the members of the Audit Committee is 4 years. The members of the Audit Committee shall be elected by the General Meeting of Shareholders on the recommendation of the Board of Directors of the Company. On 30 April 2021, the General Meeting of Shareholders elected new members of the Audit Committee: 1.Kęstutis Gataveckas - Director of UAB Perlas Finance (independent member). He is a member of the Board of Directors of AB "Rokiškio sūris" (Member of the Board). 2.Valdas Puzeras - independent management and financial consultant (independent member). Does not hold any shares in Rokiškio sūris AB. ROKISKIO SURIS, AB Consolidated audited annual report 2021 107 3. Rasa Žukauskaitė - (Employee of the Finance Department of Rokiškio sūris AB). Has 2 shares in AB "Rokiškio sūris". The term of office of the members of the Audit Committee expires on 30 April 2025. The Audit Committee is a collegiate body, which takes its decisions at meetings. The Audit Committee may take decisions and a meeting of the Audit Committee shall be deemed to have taken place when at least two (2) members of the Committee are present. A decision shall be adopted by the affirmative vote of at least two (2) members of the Audit Committee present at the meeting. The functions, rights and duties of the Audit Committee shall be regulated by the Regulations on the Establishment and Activities of the Audit Committee of AB Rokiškio sūris, approved by the General Meeting of Shareholders of the Company, as well as by other documents regulating the activities of the Audit Committee. Main functions of the Audit Committee: 1.Monitor the process of preparing the financial statements of the Company and its Subsidiaries; 2.Monitor the effectiveness of the Company's internal control, risk management and internal audit systems; 3. To make recommendations to the Board of Directors of the Company in relation to the selection of the external audit firm and to monitor the audit process; 4.To monitor the independence and objectivity of the external auditor and the audit firm; 5. To inform the Board of Directors of the Company of significant deficiencies in internal control over the financial statements identified by the external and internal auditors and to make recommendations for their correction; 6.Act honestly and responsibly for the benefit and welfare of the Company and its shareholders. In 2021, the Audit Committee held 5 meetings to discuss the principles for the preparation of the 2020 consolidated financial statements and the conclusions reached, the process for the preparation of the 2021 half-yearly consolidated financial statements, the main risks, the measures to minimise risks, the application of the accounting principles, and the conclusions reached. The meeting of 30 April 2021 included an assessment of the independence of the independent members of the Audit Committee, after which it was found that the independent members fulfilled all the requirements and the Chairman of the Audit Committee was elected. The Audit Committee reported on the functions assigned to their activities, i.e. the preparation of the financial statements of the Company and its subsidiaries, the functioning of the Company's internal control risk management and internal audit systems. During a meeting on 18 November 2021, the audit team discussed with PricewaterhouseCoopers UAB a summarised audit plan setting out the stakeholders' and PricewaterhouseCoopers UAB's overall understanding of the current situation, a description of the main risks, the ESEF's financial reporting, the reporting of corporate sustainability information, the audit plan of the external auditors, and other issues. The Audit Committee approved the draft audit engagement and had no comments. In accordance with the requirements of the Audit Law of the Republic of Lithuania, the Audit Firm has provided the Audit Committee with a written confirmation of the Audit Firm's independence. The Audit Committee has not identified any instances of the provision of services that are contrary to the laws on auditing of the Republic of Lithuania and the principles of professional ethics of auditing and that may affect the independence of the audit firm. ROKISKIO SURIS, AB Consolidated audited annual report 2021 108 There are no other committees in the company. 35. Management of the company Members of the company's management Position Name, surname In office since Director Dalius Trumpa 2018-01-01 Director of Finance Antanas Kavaliauskas 2002-05-01 Director of Milk Purchasing for Lithuania Ramūnas Vanagas 2020-01-01 Director of Vindication Jonas Kvedaravičius 2002-05-01 Director of Logistics Jonas Kubilius 2002-05-16 Sales and Marketing Director Darius Norkus 2001-07-18 Management bonus system: Members of the Company's management receive a salary and variable components depending on the Company's performance, market conditions and other factors. The Group does not have any management bonus schemes in place. 36. Employees The average number of employees in the Rokiškio sūris Group in 2021 is 1,326, a decrease of 4.33% or 60 employees compared to 2020 (1,386). The decrease in the number of employees is due to the reduction of the raw milk outlets, which resulted in a reduction in the number of milk outlet managers and the number of employees in the logistics department. The number of staff increases slightly during the summer season when more raw milk is purchased. In 2021, the Company's total workforce consists of 80.4% labourers (81.5% in 2020), 19.0% professionals (17.96% in 2020) and the number of managerial staff remains unchanged with 8 managers. Group employees by category Employee group Average number of employees Change 2021.12.31 2020.12.31 (%) Managers 8 8 0 Professionals 252 249 1.2 Workers 1066 1129 -5.58 Total: 1326 1386 -4.33 Functional directors are assigned to the company's senior management. ROKISKIO SURIS, AB Consolidated audited annual report 2021 109 As at 31 December 2021, 56.5% of men and 43.5% of women were employed in the Rokiškio sūris group. (54,8 % and 45,2 % respectively on 31 December 2020). The average age of the Company's employees in the Group is 45 years. The same average age of the employees was also the same in 2020. The Company's highly qualified employees are: 11.16% (10.82% in 2020) with higher education; 50.60% (50.00% in 2020) with higher education; 38.16% (39.11% in 2020) with secondary education; and 0.08% (0.07% in 2020) with incomplete secondary education. Rokiškio sūris Group staff education Education 2021.12.31 2020.12.31 Change (%) University degree 148 150 -1.33 Higher education 671 693 -3.17 Secondary 506 582 -6.64 Secondary incomplete 1 1 0 Years of service Age of employees Educational background of staff ROKISKIO SURIS, AB Consolidated audited annual report 2021 110 Payroll system The company has an efficient and fair remuneration system to attract, retain and motivate staff. All employment contracts with the Company's employees, including managers, are concluded in accordance with the requirements of the Labour Code of the Republic of Lithuania. Employees are recruited and dismissed in accordance with the requirements of the Labour Code. Average monthly earnings of Rokiškio sūris Group by employee group Employee group Average monthly salary (gross) EUR Change (%) 2021.12.31 2020.12.31 Executives 2844 2780 2.30 Specialists 1495 1432 4.40 Workers 1333 1248 6.81 Group average 1372 1290 6.36 The average monthly salary is calculated in accordance with Government Resolution No 496, 21.06.2017. The salary paid to the employees of AB "Rokiškio sūris" Group consists of: 1) fixed remuneration for the work performed - monthly salary stipulated in the contract; 2) piece rate remuneration: for employees on the production floor, for the sales department, for the sales manager, for the sales assistant, for the sales assistant, for the sales assistant, for the sales assistant, for the sales assistant, for the sales assistant. For production workers, the wages are based on the quantity of actual work performed and on approved rates; 3) variable remuneration: in accordance with the provisions of the incentive fund approved in the collective agreement. From 2018 to the present, the Company has applied a remuneration system based on variable remuneration components established by the Company, depending on the Company's performance, market situation and other factors. The variable remuneration components are allocated to each division in accordance with the approved functional management system. These remuneration arrangements shall be approved by the Chief Executive Officer of the Company. Each production department or division of the Company has an approved procedure for the allocation of the incentive pool, which includes performance evaluation criteria and incentives for all employees. Performance appraisal is one of the most important tasks of the Company in order to organise work as efficiently as possible, to achieve the objectives set, to foster positive relations between managers and their subordinates, and to increase the motivation of employees. Social dialogue As of 2018, the Company has an elected Labour Council with 11 members. The Council is established for a three-year term of office, starting from the beginning of the Council's mandate. At the end of the term, the Works Council was re-elected in May 2021 for another three-year term. ROKISKIO SURIS, AB Consolidated audited annual report 2021 111 Employees of Group companies are guaranteed the right to participate in trade union activities. The companies have a trade union committee which defends the labour, economic and social rights and interests of its members, defends the right to employment and social security of its members, takes care of professional development, develops professional ethics, and seeks to increase the wages and other incomes of workers in the food industry. Collective agreement approved in September 2020. The purpose of this collective agreement is to create conditions for harmonious collective activity, to guarantee the level of work, remuneration, health and safety and other working conditions for various categories of employees, better than those provided for by the laws of the Republic of Lithuania, governmental decrees and legal acts, and to provide better labour and social guarantees for the company's employees. The following additional guarantees are envisaged for employees: - A material allowance of 1 MMA shall be paid once a year to an employee raising a disabled child; - A funeral allowance is paid to employees of the Company in the event of the death of a family member (spouse, parent, child); In the event of the death of an employee of the Company, a one- off funeral allowance is granted to the family of the employee; - On work anniversaries (20th, 25th, 30th, 35th, 40th, 45th, 50th), an additional allowance is paid to employees of the Company; - Support is provided to the Company's employees with serious and prolonged illnesses and injuries; - Company employees, family members of employees, employees who have worked for the Company and retired employees are granted a discount for medical treatment at the Company's preventive health centre; - Employees who have reached retirement age and retire from the Company are paid a severance pay higher than the severance pay provided for in the Labour Code. - Unpaid leave provided for in the LRC for the celebration of an employee's marriage, for the attendance of an employee at the funeral of a deceased family member, shall be paid in accordance with the general procedure for granting leave. In addition, leave shall be granted for the marriage of employees to their children. The rights and obligations of the employees of the company are laid down in their job descriptions. There are no specific rights and obligations in the contracts of employment. During 2021, 400 employees of the Company Group benefited from the social guarantees of the "Procedure for granting material incentives and allowances" in force prior to the Collective Bargaining Agreement and subsequently from the Collective Bargaining Agreement. Developing competences The development of Rokiškio sūris staff and the improvement of special and general skills is one of the company's top priorities, as only educated employees with the right knowledge and experience can create a quality product. Training plans are drawn up annually, taking into account the Company's objectives and the adequacy of the staff's competences to achieve these objectives. The Group's employees are provided with opportunities to improve their knowledge and skills at various training courses, seminars and conferences, and the Company supports the acquisition of professional education at national universities, colleges or other qualifying educational institutions. A strong emphasis is placed on learning foreign languages. ROKISKIO SURIS, AB Consolidated audited annual report 2021 112 The company continuously trains its employees internally, taking into account the nature of the work and the requirements of the workplace and product quality. In 2021, the Group's management team completed the Sustain Academy organisational sustainability course. Rokiškio sūris also organises special courses and training for the country's farmers in order to ensure that they successfully take care of the health of their herds, properly maintain their milking, refrigeration and storage equipment, and modernise their dairy farm. A modern dairy farm, milk quality and herd health are key to the success of a dairy business. Ethical Employer Policy The Company has an Ethical Employer Policy in place since 2018, under which the Company conducts its business on the basis of internationally recognised human and workers' rights, including the International Bill of Human Rights and the principles set out in the International Labour Organisation's Declaration on Fundamental Principles and Rights at Work, applies the principles of socially responsible business conduct, and operates in a manner that is transparent, credible and fair. For more information on social aspects, please refer to the Sustainability Report (Social area). 37. Information on agreements between the Company and the members of its organs, the members of the committees it has set up, or its employees, which provide for compensation in the event of their resignation or dismissal without just cause, or in the event of the termination of their employment as a result of a change of control of the issuer There are no agreements between the Company and the members of the Board of Directors or employees providing for compensation in the event of their resignation or dismissal without just cause, or in the event of termination of their employment as a result of a change of control of the Company. All employment contracts with the Company's employees, including members of the Company's management, are concluded in accordance with the requirements of the Labour Code of the Republic of Lithuania. Nor does the Company provide for any additional share-based payments. INFORMATION ON RELATED PARTY TRANSACTIONS AND SIGNIFICANT ARRANGEMENTS 38. Related parties of AB Rokiškio sūris Group The group of persons acting in concert consists of UAB Pieno pramonės investicijų valdymas (27.21% of the Company's share capital and votes), SIA RSU Holding (24.96% of the Company's share capital and votes), Fonterra (Europe) Coöperatie U.A. (Netherlands) (10.00% of the Company's share capital and votes), Antanas Trumpa (19.76% of the Company's share capital and votes), and Dalius Trumpa (83,500 units of shares, 0.23% of the Company's share capital and ROKISKIO SURIS, AB Consolidated audited annual report 2021 113 votes). The group of persons acting in concert owns 82.17% of the Company's share capital and votes. The remaining 17.83% of the Company's shares and votes are held by other small Lithuanian and foreign individuals and legal entities. Closed Joint Stock Company Pieno pramones investiciju valdymas is controlled by Antanas Trumpa (as the major shareholder holding 73.84% of the shares and votes of UAB Pieno pramonės investicijų valdymas). RSU Holding SIA is controlled by Dalius Trumpa (as the sole shareholder holding 100% of the shares and votes of RSU Holding SIA). Certain cooperative companies engaged in milk production are considered to be related parties of the Company as the Company, through close family members of its directors and certain of its employees, can exercise significant influence over the day-to-day operations of these companies. 39. Transactions with related parties During 2021, the company did not have any transactions with related parties that meet the criteria in Article 372. All related party transactions included purchases of raw milk from related parties and sales of dairy products by related parties, see note to the Company's consolidated financial statements "Related party transactions". The transactions were at arm's length, are in the ordinary course of business and do not have a material impact on the Company. The Company considers the related parties to be the Fonterra group companies - Fonterra (Europe) Coöperatie U.A., company reg. code 50122541, registered office at Barbara Strozzilaan 356-360, 1083 HN Amsterdam, The Netherlands, and Fonterra Ingredients Limited, registered office at 109 Fanshawe Street, 1010 Auckland, New Zealand (sales of dairy products), and KB Dzūkijos pienas, company reg. code 300058288, registered office at Varanauskas km., Krokialaukis sen. (purchase of raw milk). Related party transactions are disclosed in note 31 to the Company's consolidated financial statements for 2021. 40. Information on harmful transactions entered into on behalf of the issuer During the reporting period, there were no harmful transactions that were inconsistent with the Company's objectives, were not in line with normal market conditions, were prejudicial to the interests of the shareholders or other groups of persons and had or may in the future have an adverse effect on the Company's business or results of operations. There were also no transactions resulting from conflicts of interest between the duties of the Company's directors, controlling shareholders or other related parties to the Company and their private interests and/or duties. OTHER INFORMATION 41. Information on the audit The consolidated balance sheet of AB Rokiškio sūris Group as at 31 December 2021 and the related consolidated statements of comprehensive income, cash flows and changes in equity for ROKISKIO SURIS, AB Consolidated audited annual report 2021 114 the year then ended and the assessment of the annual report have been audited and the assessment of the annual report have been carried out by the international auditing firm PricewaterhouseCoopers UAB. The audit firm for the audit of the annual financial statements is selected by the General Meeting of Shareholders and the terms of remuneration for the audit are determined. As the Company is listed and maintains its accounts in accordance with International Financial Reporting Standards, the Company's shareholders are required to appoint an international audit firm. PricewaterhouseCoopers International Limited (PwC) is a network of audit and tax advisory firms, one of the members of the so-called Big Four (the others being KPMG, Ernst & Young and Deloitte Touche Tohmatsu). PricewaterhouseCoopers Lithuania is a legally independent firm in Lithuania and a member of the global PwC network. PricewaterhouseCoopers provides audit, accounting, consulting, tax and legal services to multinational companies and large Lithuanian companies. The Rokiškio sūris Group has paid the audit firm a fee of EUR 47,100 for the audit performed in 2021. 42. Data on publicly available information The information on the public announcement of AB Rokiškio sūris in 2021 is available on the company's website www.rokiskio.com in the Investors > Material events section. Summary of published information: Date of publication Brief description of the report 2021.04.07 Ordinary General Meeting of Shareholders of AB "Rokiškio sūris" convened on 30 April 2021 2021.04.30 Resolutions adopted at the Ordinary General Meeting of Shareholders of Rokiškio sūris AB held on 30 April 2021 2021.04.30 Audited Annual Information of AB Rokiškio sūris 2020 2021.05.07 AB Rokiškio sūris ex-dividend payment day for 2020 2021.05.14 Dividend payment procedure of AB "Rokiškio sūris" for 2020 2021.06.29 The Company's Board of Directors has taken a decision to establish a subsidiary UAB "DairyHub.LT". 2021.11.18. Extraordinary General Meeting of Shareholders of AB "Rokiškio sūris" convened on 10 December 2021 2021.11.29 AB Rokiškio sūris participated in the Rimi Baltic Sustainability Awards 2021.12.10 Decisions adopted at the Extraordinary General Meeting of Shareholders of AB Rokiškio sūris held on 10 December 2021 2021.12.27 Dates of publication of the AB "Rokiškio sūris" Group results for 2022 2021.12.29 New version of the Articles of Association of AB "Rokiškio sūris" registered The Company publishes public information by uploading it to the Central Database of Regulated Information, publishing it on the website of AB Nasdaq Vilnius http://www.nasdaqbaltic.com and uploading it to the Company's website www.rokiskio.com ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 115 ROKIŠKIO SŪRIS AB Governance Report The Corporate Governance Report of the Public limited liability company Rokiškio sūris has been prepared in accordance with the Law on Corporate Financial Accountability of the Republic of Lithuania. 1.Reference to the applicable corporate governance code and the place of its publication, and (or) reference to the all necessary published information regarding management practices of the entity 2021 Consolidated Report along with the Company's Management Report and the audited financial statements of the Company and its Group are published on the Company's website www.rokiskio.com and on the website of the Stock Exchange AB Nasdaq Vilnius www.nasdaqbaltic.com 2.In case of derogation from the provisions of the applicable corporate governance code and (or) when the provisions are not complied with, such provisions and the reasons thereof shall be indicated Information on compliance with and / or non-compliance with the Corporate Governance Code is provided in a structured table (No.2). 3.Information regarding the level of risk and risk management – management of risks related to the financial reporting, risk mitigation measures, and internal control systems implemented at the entity shall be described The Company provides information on the extent of risk and risk management, risk mitigation measures and internal control system implemented by the company in 2021, see Clauses 11-12-13 of the consolidated annual report. 4.Information regarding significant directly or indirectly managed holdings The Company provides information regarding the significant directly or indirectly managed holdings in Clause 26 of the consolidated annual report of 2021. 5.Information regarding transactions with related parties, according to the Law on Companies Article 37 2 (by specifying the counterparty (legal form, name, code, register of the legal entity in which the person is stored, premises (address); name, surname, address of the natural person and the value of the transaction); ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 116 In 2021, the Company did not have any Transactions with Related Parties, which would be applicable to the Law on Companies Article 37 2 . The more specific information is provided in Clause 39 of the consolidated annual report of 2021. 6.Information regarding the shareholders who have special rights of control and the description of such rights There are no shareholders having special rights of control in the Company. 7.Information regarding all current restrictions on voting rights (such as the restrictions on voting rights of persons having a certain percentage or number of the votes, the deadlines by which voting rights may be exercised or systems, according to which the property rights granted by the securities are to be separated from the holder of those securities) No restrictions on voting rights are applied in the Company. All shareholders have equal property and non-property rights (except for the Company's own shares that do not have voting rights). 8.Information regarding the rules governing the appointment and dismissal of board members, as well as the amendment of the company’s articles of association The Company has no rules regulating the amendments to the Company's Articles of Association, election and replacement of the members of the Board of the Company. The Company operates in accordance with the Law on Companies of the Republic of Lithuania, the Articles of Association of the Company and other legal acts. More detailed information is provided in Clauses 25 and 33 of the consolidated annual report of 2021. 9.Information regarding the powers of the board members The Board members have not authorized other persons to perform the functions assigned to the competence of the Board. The members of the Board of the Company operate in accordance with the Law on Companies, the Articles of Association of the Company and the Rules of Procedure of the Board. 10.Information regarding the competence of the general meeting of shareholders, the rights of shareholders and implementation thereof, if such information is not established in the applicable legislation The company provides information regarding the competence of the general meeting of shareholders, the rights of shareholders, and implementation thereof, as well as the procedure for convening the meetings of shareholders, in Clause 32 of the consolidated annual report of 2021. 11.Information regarding the composition of the management, supervisory bodies, and the committees thereof, as well as the fields of activity of the aforesaid bodies and the manager of the company Information on the management, supervisory bodies and the committees thereof is provided in Clauses 34 and 35 of the consolidated annual report of 2021. 12.Description of diversity policy applicable in appointing the manager of the company, management, and supervisory bodies, related to the aspects such as age, gender, education, professional experience; objectives of such policy, methods of implementation thereof, and ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 117 results of the reference period. if the diversity policy is not applied, the reasons thereof shall be indicated The company has no policy of diversity in the selection of manager and management and supervisory bodies. The requirements for candidates to nominate members of the Company's management bodies do not discriminate against candidates for age, gender, education or professional experience. The Company does not impose any restrictions on the nomination of persons for gender or age. The key criteria for selecting members of the management bodies is the candidate's competence. 13.Information on the renumeration of each management, supervisory member (medium-term renumeration, stating premiums, bonuses, tantjams and other benefits Amount of money and average amounts of money allocated to one member of the management body, assets and guarantees provided to the members of the Board, the Chief Executive Officer and Chief Financial Officer of AB „Rokiškio sūris“ during 2021: Governing Bodies Number of persons Estimated Total Amount, (Salaries, and Tantjems), kEUR* TOTAL average amount per person, (Salaries, and Tantjems), kEUR incl. average amount of salary incl. average amount of tantjems incl. average amount of bonuses Board members 5 107.86 21.57 21.57 0 0 The Company‘s CEO and CFO 2 66.13 33.07 33.07 0 0 * Three members of the Board were employees of the Company. Estimated and paid amounts in 2021 (salaries) are related to employment relationships. ** As the Company did not pay any tantiemes, only salaries are presented During the reporting period, the Company did not grant any loans, or issued any guarantees or asset assignments to the members of the Board of Directors, the Company's Chief Executive Officer and the Chief Financial Officer. 14.Information on all agreements between shareholders (their terms and conditions) On October 13, 2017 it was signed the Strategic Investment Agreement and Shareholders Agreement between the Company's shareholders – UAB Pieno pramonės investicijų valdymas, SIA RSU Holding, Antanas Trumpa and Ledina Trumpienė, Dalius Trumpa and Rasa Trumpienė, Strategic Investor – Fonterra (Europe) Coöperatie UA and the Company – AB „Rokiškio sūris“. The purpose of this agreement was to establish the relationship between the parties in relation to the Company, to ensure joint action in the development of the Company and to exercise voting rights at general meetings, to agree on specific terms and conditions of share disposal and to enable shareholders to protect their interests in the Company. The Company has no data on other agreements between shareholders. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 118 PURSUE THE GOVERNANCE REPORT Rokiskio suris AB, following Article 22 paragraph 3 of the Law on Securities of the Republic of Lithuania and item 24.5 of the Listing Rules of AB NASDAQ Vilnius, discloses its compliance with the Corporate Governance Code for the Companies, whose securities are traded on the regulated market, as approved by the NASDAQ Vilnius AB, and its specific provisions and recommendations. If any of the provisions or recommendations of the Codex are not respected due to any reasons, the explicable information is provided herein. Structured table No. 2. PRINCIPLES/ RECOMMENDATIONS Yes/ No/ Not appli cable COMMENTARY Principle 1: General meeting of shareholders, equitable treatment of shareholders, and shareholders’ rights The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate governance framework should protect the rights of shareholders. 1.1. All shareholders should be provided with access to the information and/or documents established in the legal acts on equal terms. All shareholders should be furnished with equal opportunity to participate in the decision-making process where significant corporate matters are discussed. Yes All shareholders have equal access to the information and / or documents provided for in legal acts and participate in making important decisions for the company. The Company provides information through the Nasdaq Vilnius Stock Exchange Central Regulated Information Base in Lithuanian and English simultaneously. The information is published immediately at once, thus ensuring the simultaneous provision of information to all. 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 authorized capital of the Company consists of ordinary registered shares, which grant equal voting, ownership, dividend and other rights to all shareholders of the Company. 1.3. It is recommended that investors should have access to the information concerning the rights attached to the shares of the new issue or those issued earlier in advance, i.e. before they purchase shares. Yes The Company enables investors to familiarize themselves with the rights granted by the new or already issued shares well in advance. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 119 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. Yes According to the Articles of Association of the Company, important transactions, such as decisions on the execution, assignment, lease, pledge and mortgage of long-term assets the book value of which exceeds 1/5 of the authorized capital of the company, as well as decisions on fulfillment of obligations of other persons exceeding 1/5 of the authorized capital of the company, and decisions to purchase fixed assets at a price greater than 1/5 of the company's share capital, do not require approbation by the Company’s shareholders. Due to extremely important transactions, such as the transfer of all or almost all of the Company's assets, the Company would be guided by the Law on Companies of the Republic of Lithuania and other legal acts establishing requirements for the approval of such transactions. 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 All shareholders of the Company are informed about the date, place and time of the General Meeting of Shareholders in accordance with the established procedure in advance, in accordance with the terms established by legal acts, announcing the General Meeting of Shareholders, agenda, and draft resolutions in the Central Regulated Information Base of AB Nasdaq Vilnius Stock Exchange. The Company specifies the date of the General Meeting of Shareholders and may propose draft resolutions in the Notice of the General Meeting of Shareholders to be convened on the Company's website www.rokiskio.com In the notice of the convention of the General Meeting of Shareholders, the Company shall indicate when the shareholders may supplement the agenda of the General Shareholders Meeting and propose draft resolutions. 1.6. With a view to ensure the right of shareholders living abroad to access the information, it is recommended, where possible, that documents prepared for the general meeting of shareholders in advance should be announced publicly not only in Lithuanian language but also in English and/or other foreign languages in advance. It is recommended that the minutes of the general meeting of shareholders after the signing thereof and/or adopted decisions should be made available publicly not only in Lithuanian language but also in English and/or other foreign languages. It is recommended that this information should be placed on the website of the company. Such documents may be published to the extent that their public disclosure is not detrimental to the company or the company’s commercial secrets are not revealed. Yes The documents prepared for General meeting of shareholders including draft resolutions of the meeting are available not later than 21 day prior the date of general meeting of shareholders as required by the Law on Joint stock companies. The documents placed on the website of NASDAQ Vilnius security exchange and the company website are available in Lithuanian and English languages. Resolutions accepted by the general meeting of shareholders including financial reports, the audit report, annual report, amendments of articles of association etc. are announce in Lithuanian and English languages are announced via the central base of regulated information of NASDAQ Vilnius security exchange and the company website www.rokiskio.com ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 120 1.7. Shareholders who are entitled to vote should be furnished with the opportunity to vote at the general meeting of shareholders both in person and in absentia. Shareholders should not be prevented from voting in writing in advance by completing the general voting ballot. Yes Shareholders of the Company have the right to participate in the GMS both personally and through a representative, if the person has the appropriate authorization or the contract of transfer of voting rights concluded with him/her in accordance with the procedure established by legal acts, as well as the conditions for the shareholders to vote by filling in the general voting bulletin as provided by the Law on Companies of the Republic of Lithuania. 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 there is no possibility to ensure the security of the information transmitted and it is not possible to identify the person who participated and voted. 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 When announcing the General Meeting of Shareholders, and if the agenda of the General Meeting of Shareholders includes the issue of electing new members of the collegial body or electing the audit firm, it shall disclose in the draft resolutions the nominations of the proposed new members of the collegial body and the proposed election company. Information about the candidates to the members of the collegial body shall be provided in advance by publishing this information on the Nasdaq Vilnius Stock Exchange website, on the website of AB „Rokiškio sūris“ www.rokiskio.com, or by publishing it to the shareholders participating in the general meeting during the meeting if the shareholders, whose shares give at least 1/20 of all votes, propose an additional candidate during the meeting. In its annual and six-month interim report, the company publicly informs about the positions held by the collegial body, work experience and education. 1.10. Members of the company’s collegial management body, heads of the administration 1 or other competent persons related to the company who can provide information related to the agenda of the general meeting of shareholders should take part in the general meeting of shareholders. Proposed candidates to member of the collegial body should also participate in the general meeting of shareholders in case the election of new members is included into the agenda of the general meeting of shareholders. Yes Members of the company's collegial body and heads of administration participate in the general meetings of shareholders. Proposed nominees for members of the collegial body are also present if the election of new members is included on the agenda of the general meeting. 1 For the purposes of this Code, heads of the administration are the employees of the company who hold top level management positions. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 121 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. N/A According to the Articles of Association of AB „Rokiškio sūris“, only one collegial body - the Board - has been formed in the Company. The Supervisory Board is not formed in the Company. The company's shareholders decided to delegate all management functions to the collegial body - the Board. 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. N/A See point 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. N/A See point 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. N/A See point 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. N/A See point 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. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 122 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. N/A See point 2.1.1 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. N/A See point 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. N/A See point 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. N/A See point 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. N/A See point 2.1.1 ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 123 2.2.5. When it is proposed to appoint a member of the supervisory board, it should be announced which members of the supervisory board are deemed to be independent. The supervisory board may decide that, despite the fact that a particular member meets all the criteria of independence, he/she cannot be considered independent due to special personal or company- related circumstances. N/A See point 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. N/A See point 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. N/A See point 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 Only one collegial body is formed in the company and it is the board. The company's shareholders decided to delegate all management functions to the collegial body - the board. They are confident that one collegial body - the Board - is sufficient to ensure effective management of the company. The Board of the Company is responsible for the proper strategic management of the Company (approves the Company's operational strategy, approves the annual budget and operational objectives, adopts important decisions in the legal acts regarding the organizational management structure of the Company). 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 is guided by a corporate strategic plan, according to which the mission of the governing bodies of the Company is to create and maintain a strong, competitive, financially capable and technically advanced company that creates and maximises shareholder value. According to the company's records, all members of the Board act in good faith in the interests of the company and its shareholders, in the interests of the company and not in their own interests or those of third parties, and strive to maintain their independence in their decision-making. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 124 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 Board ensures that the laws and company internal policies applicable to the company and its entire group are respected. The company also operates a risk management and control program. Risk management is carried out by the management of the Company. 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 company has internal control and business ethics policies in place. The Company has adopted a Business Ethics Policy which clearly and publicly declares its negative attitude towards bribery and corruption. The provisions of this policy apply to all employees, agents, intermediaries, suppliers, subcontractors of the Company. 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 Board of the Company are elected by the General Meeting of Shareholders. The members of the Board of the Company are qualified and competent to perform their functions, having a long experience in management. One member of the board is delegated by the strategic investor (Fonterra) who has extensive experience in developing, managing and developing corporate strategy in international companies. The other two independent board members also have extensive experience in general management, marketing, setting up and managing international joint ventures. 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 Yes Information about candidates to the Company’s Board of Directors is provided to the shareholders together with the documents of the shareholders’ meeting following the requirements of the Law on Public Limited Liability Companies of the Republic of Lithuania. Shareholders may see the documents prior the meeting. Information about the members of the Board of Directors (names, education, qualifications, professional experience, participation in the activities of other companies, other important professional obligations) is provided in the periodical reports. 3 Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti- bribery/44884389.pdf ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 125 report. 3.2.3. All new members of the management board should be familiarized with their duties and the structure and operations of the company. Yes All new members of the Board are familiarized with their duties, company structure and activities. 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 members of the Board are elected for a 4- year term. The number of terms is unlimited. Members of the Board are elected by the GMS. Shareholders who nominate and vote for the Board of Directors follow their own approach, which candidates are best to represent the interests of the shareholders. 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. No Former CEO of the Company has been appointed Chairman of the Board of the Company. The members of the Board of Directors, appointed the former CEO of the Company based on his long-term management experience and competence to take the chair of the Board. 3.2.6. In the event that the management board is elected in the cases established by the Law where the supervisory board is not formed at the company, and some of its members will be independent 4 , it should be announced which members of the management board are deemed as independent. The management board may decide that, despite the fact that a particular member meets all the criteria of independence established by the Law, he/she cannot be considered independent due to special personal or company- related circumstances. Yes Each member of the collegial body fulfills his/ her functions properly: actively participates at the meetings of collegial body, and devotes sufficient time to perform his/ her duties as a member of the collegial body. The quorum of each meeting was regulated so the Board of Directors would be enabled to accept decisions constructively. During 2021, the Board held 7 Board meetings. In the context of the COVID-19 pandemic in the country, all Board meetings were held remotely. Six Board meetings were attended by all Board members, one of which was not attended by the Chairperson due to illness, but he had given a proxy to another Board member.. 3.2.7. 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. No As the company does not have a Supervisory Board, two independent members of the Management Board have been elected to the Management Board of the company and meet the criteria of independence set out in the Law on Public Limited Companies. The Board of Rokiškio sūris AB consists of 6 members. Candidates to the Board may be nominated by shareholders whose shares carry at least 1/20 of the total votes. 3.2.8. 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 Yes Remuneration (tantjems) is paid for the work on the Board to its members, by decision of the General Meeting of Shareholders in accordance with the Law on Companies of the Republic of Lithuania. The members of the Board are not remunerated for their 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. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 126 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. performance and participation in the meetings. 3.2.9. 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 By the Company’s information, all Board members should act in good faith, with care and responsibility for the benefit and in the interests of the company and its shareholders. They are guided by the Company’s interests but not their own or any third parties seeking to maintain their independence in decision- making, and they do not accept any unjustified privileges that would compromise their independence. 3.2.10. Each year, the Board should evaluate its performance. It should include an assessment of the board's structure, work organization and ability to act as a group, as well as an assessment of the competence and work efficiency of each board member, and an assessment of whether the board has achieved its operational objectives. The Board should, at least once a year, publicly disclose relevant information about its internal structure and operational procedures, without prejudice to the law governing the processing of personal data. No The Company does not have a practice of evaluating the performance of the Board. As the three members of the Board were part of the Company's management (functional directors of the Company), which has been operating in the Company since 2001, they do not perform an assessment of their ability to act as a group and of their competence and effectiveness. The other two members of the Board are independent members. 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. No The Company does not have a Supervisory Board. Shareholders of the company decided to delegate all management functions to one collegial body – the Board. They are confident that one collegial body – the Board – is sufficient to ensure effective management of 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 Yes Board meetings are held according to the schedule approved in advance by the Board's work regulations, ie. at least once every 3 months and more often if necessary. Along with the notice of the summoned ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 127 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. meeting all members of the Board receive a written agenda of the Board meeting, indicating the issues to be discussed at the meeting not later than 5 (five) days prior the Board meeting. Planned Board meetings are convened by the Board Chairman, in his absence – the Deputy Board Chairman. 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 agenda might be supplemented only if all members of the Board of Directors present at the meeting, and they all agree that the item is important enough to be put on the agenda. 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. No The Company does not have a Supervisory Board and this statement is not applied. 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 ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 128 5.1.1. Taking due account of the company-related circumstances and the chosen corporate governance structure, the supervisory board of the company or, in cases where the supervisory board is not formed, the management board which performs the supervisory functions, establishes committees. It is recommended that the collegial body should form the nomination, remuneration and audit committees 5 . Yes/No The Company has established the Audit Committee. The Committee was formed and elected by the 24 th April 2009 general meeting of shareholders. The General Meeting of Shareholders approved the Terms of Reference for the Audit Committee. 30 April 2021 The Company's General Meeting of Shareholders elected 3 new members of the Audit Committee, 2 of whom are independent members. The members of the Audit Committee were elected for a term of 4 years. The Audit Committee is an independent, and objective committee carrying out the functions of supervision, analyzing, evaluation and consultation in order to improve general organization and create value added. The main function of the Committee is systematic and versatile evaluation, as well as encouragement of better risk management, and sufficient control and maintenance procedures resulting in submission of recommendations to the Board of Directors and management. The nomination and remuneration committees are not formed at the Company. 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. 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. N/A The Board of the Company does not perform the functions assigned to the Audit Committee. 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 The Audit Committee consists of 3 members, two of whom are independent, with at least 5 years of experience in accounting, with relevant experience in finance and accounting in listed companies. The Chairman of the Board is not a member of the Committee. 5.1.5. The authority of each committee formed should be determined by the collegial body itself. Committees should perform their duties according to the authority delegated to them and regularly inform Yes The Audit Committee follows the regulations of the Committee approved by the General Meeting of Shareholders. These Regulations establish the rules defining the rights and duties of the Audit Committee, the size of the 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). ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 129 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. Audit Committee, the period of membership of the Audit Committee, the requirements for the education, professional experience and independence principles of the members of the Audit Committee. The Audit Committee annually submits an annual activity report to the General Meeting of Shareholders, announcing the composition of the Committee, the number of meetings and the attendance of the members, describing the work performed and presenting the results. 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 The members of the collegial body take decisions at the meetings of their members, but in certain cases the committee invites the head of the Company and the responsible employees of the Company to attend its meetings, who are responsible for the areas of activity of the issues under discussion. The Chairman of the Audit Committee is also provided with the opportunity to communicate with the shareholders. 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. No The Nomination Committee is not formed in the Company. 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. No ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 130 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; No There is no Remuneration Committee in the Company. The company has implemented a remuneration policy that includes all forms of remuneration, including fixed salary, performance-based benefits, pension modules and severance payments. The Company is approved by the Company's management in coordination with the Trade Union Committee operating in the Company. 2) submit to the collegial body proposals regarding individual remuneration for members of the collegial bodies and the heads of the administration in order to ensure that they would be consistent with the company’s remuneration policy and the evaluation of the performance of the persons concerned; 3) review, on a regular basis, the remuneration policy and its implementation. 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 Audit Committee follows the provisions of the Audit Committee approved by the General Meeting of Shareholders of the Company. The Audit Committee carries out independent, objective monitoring, investigation, evaluation and advisory activities to improve the company's performance and create added value. 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 All members of the Committee are provided with detailed information on the specific accounting, financial and operational characteristics of the company and, upon request, information on the execution of important transactions. 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. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 131 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 decides on the participation of other persons in its meetings and, if necessary, the Audit Committee invites the Head of the Company and the responsible employees of the Company to its meetings, who are responsible for the areas of activity of the issues under consideration. The Chairman of the Audit Committee is also provided with the opportunity to communicate with the 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 is informed about the work performed by the Internal Auditor and receives conclusions about the research performed. Each year, the Audit Committee receives reports from external auditors describing all relationships between the independent auditor and the Company and its group. 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 Company has provided employees with the opportunity to submit complaints or anonymous reports about violations committed in the Company, however the Company has not received such complaints or reports during the reporting period. 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 analyzes and evaluates the Company's annual and semi-annual financial statements, makes recommendations to the Board for their approval, together with its activity reports for that 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. 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 Company's management bodies behave in such a way that there is no conflict of interest with the Company. During the reporting period, there is no known conflict of interest between the Company and the member of its management body. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 132 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/ No The Company has implemented and operates a remuneration policy approved by the Company's management, but it is not published on the Company's website. The Annual General Meeting of Shareholders of 2020 approved the Remuneration Policy, which is published on the Company's website and regularly reviewed. 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 Company has implemented a remuneration policy that includes all forms of remuneration, including fixed salary, performance-based benefits, pension modules and severance payments. This procedure is approved by the management of the Company in agreement with the Trade Union Committee. 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 See point 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 Termination benefits shall be granted in accordance with the provisions of Chapter 5 of the Labor Code of the Republic of Lithuania and the provisions of the Material Promotion and Allowance Procedure in the Company. 7.5. In the event that the financial incentive scheme is applied at the company, the remuneration policy should contain sufficient information about the retention of shares after the award thereof. Where remuneration is based on the award of shares, shares should not be vested at least for three years after the award thereof. After vesting, members of the collegial bodies and heads of the administration should retain a certain number of shares until the end of their term in office, subject to the need to compensate for any costs related to the acquisition of shares. No The Company does not apply a system of financial incentives. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 133 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. No See point 7.1 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 See point 7.1 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 corporate governance framework shall ensure that the rights of the stakeholders protected by law are respected. The Company has created conditions for interest holders to participate in the management of the Company - participation of the Company's employees and milk producers in the Company's share capital. The majority of employees are shareholders of the Company and are therefore directly involved in the management of the Company. The stakeholders involved in the governance process shall be given access to the information required and to vote in the relevant decisions. In addition, the Company has provided facilities for confidential reporting of unlawful or unethical practices. 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. 8.3. Where stakeholders participate in the corporate governance process, they should have access to relevant information. 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. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 134 Principle 9: Disclosure of information The corporate governance framework should ensure the timely and accurate disclosure of all material corporate issues, including the financial situation, operations and governance of the company. 9.1. In accordance with the company’s procedure on confidential information and commercial secrets and the legal acts regulating the processing of personal data, the information publicly disclosed by the company should include but not be limited to the following: Yes The information contained in this recommendation shall be disclosed in the annual and semi-annual reports of the Company in accordance with the requirements of legal acts regulating data processing and confidential information procedures. This information is published on the website of AB Nasdaq Vilnius Stock Exchange and on the Company's website. 9.1.1.operating and financial results of the company; 9.1.2.objectives and non-financial information of the company; 9.1.3.persons holding a stake in the company or controlling it directly and/or indirectly and/or together with related persons as well as the structure of the group of companies and their relationships by specifying the final beneficiary; 9.1.4.members of the company’s supervisory and management bodies who are deemed independent, the manager of the company, the shares or votes held by them at the company, participation in corporate governance of other companies, their competence and remuneration; 9.1.5.reports of the existing committees on their composition, number of meetings and attendance of members during the last year as well as the main directions and results of their activities; 9.1.6.potential key risk factors, the company’s risk management and supervision policy; 9.1.7.the company’s transactions with related parties; 9.1.8.main issues related to employees and other stakeholders (for instance, human resource policy, participation of employees in corporate governance, award of the company’s shares or share options as incentives, relationships with creditors, suppliers, local community, etc.); 9.1.9.structure and strategy of corporate governance; ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ _ 135 9.1.10.initiatives and measures of social responsibility policy and anti-corruption fight, significant current or planned investment projects. This list is deemed minimum and companies are encouraged not to restrict themselves to the disclosure of information included into this list. This principle of the Code does not exempt companies from their obligation to disclose information as provided for in the applicable legal acts. 9.2. When disclosing the information specified in paragraph 9.1.1 of recommendation 9.1, it is recommended that the company which is a parent company in respect of other companies should disclose information about the consolidated results of the whole group of companies. Yes The Company discloses information on the Company’s and the Group’s consolidated results. The information is disclosed in the consolidated annual report and consolidated financial statements. 9.3. When disclosing the information specified in paragraph 9.1.4 of recommendation 9.1, it is recommended that the information on the professional experience and qualifications of members of the company’s supervisory and management bodies and the manager of the company as well as potential conflicts of interest which could affect their decisions should be provided. It is further recommended that the remuneration or other income of members of the company’s supervisory and management bodies and the manager of the company should be disclosed, as provided for in greater detail in Principle 7. Yes/ No The information specified in the recommendation is presented in the Company's annual and semi-annual reports. 9.4. Information should be disclosed in such manner that no shareholders or investors are discriminated in terms of the method of receipt and scope of information. Information should be disclosed to all parties concerned at the same time. Yes The Company discloses all regulated information through the news distribution system of AB Nasdaq Vilnius. This ensures that it is accessible to the widest possible public. The information is simultaneously available in Lithuanian and English. In addition, the company publishes information before or after the Nasdaq Vilnius trading session so that all shareholders and investors of the company have equal access to information and make appropriate investment decisions. The Company shall not disclose information that may affect the price of the securities issued by it in the comments, interviews or other ways until such information is made public through the Central Regulatory Information Base. ROKIŠKIO SŪRIS, AB Governance report 2021 _ __ ___ 136 Principle 10: Selection of the company’s audit firm The company’s audit firm selection mechanism should ensure the independence of the report and opinion of the audit firm. 10.1. With a view to obtain an objective opinion on the company’s financial condition and financial results, the company’s annual financial statements and the financial information provided in its annual report should be audited by an independent audit firm. Yes An independent audit company performs auditing of the Company’s and its subsidiaries individual and consolidated (the group) annual financial reports in accordance with International Accounting Standards applicable in the EU. An independent auditing company also evaluates conformity of 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 Board of Directors proposes an auditing 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 Information on the remuneration of the audit firm is disclosed publicly in the Company's annual reports. The audit firm shall provide non-audit services only with the approval of the Audit Committee. During 2021, the Audit Firm received a fee of EUR 20 thousand for non-audit services provided to the Company's Group. PricewaterhouseCoopers UAB, J. Jasinskio str. 16B, 03163 Vilnius, Lithuania +370 (5) 239 2300, [email protected], www.pwc.lt Company code 111473315, registered with the Legal Entities’ Register of the Republic of Lithuania Independent auditor’s report To the shareholders of Rokiškio Sūris AB Report on the audit of the separate and consolidated financial statements Our opinion In our opinion, the separate and consolidated financial statements give a true and fair view of the separate and consolidated financial position of Rokiškio Sūris AB (the “Company”) and its subsidiaries (together - the “Group”) as at 31 December 2021 and of the Company’s and of the Group’s separate and consolidated financial performance and their separate and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Our opinion is consistent with our additional report to the Audit Committee dated 6 April 2022. What we have audited The Company’s and the Group’s separate and consolidated financial statements comprise: ● the separate and consolidated balance sheets as at 31 December 2021; ● the separate and consolidated statements of income and comprehensive income for the year then ended; ● the separate and consolidated statements of changes in equity for the year then ended; ● the separate and consolidated statements of cash flows for the year then ended; and ● the notes to the separate and consolidated financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Company and the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and the Law of the Republic of Lithuania on the Audit of Financial Statements that are relevant to our audit of the separate and consolidated financial statements in the Republic of Lithuania. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Law of the Republic of Lithuania on the Audit of Financial Statements. To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Company and the Group are in accordance with the applicable law and regulations in the Republic of Lithuania and that we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014 considering the exemptions of Regulation (EU) No 537/2014 endorsed in the Law of the Republic of Lithuania on the Audit of Financial Statements. The non-audit services that we have provided to the Company and the Group, in the period from 1 January 2021 to 31 December 2021, are disclosed in note 32 to the separate and consolidated financial statements. Our audit approach Overview ● Overall Group materiality is EUR 2 million ● Overall Company materiality is EUR 1.9 million ● We tailored our audit scope based on the risk and size of entities within the Group and performed a full scope audit of the Company and two subsidiaries. At the Group level we tested the consolidation process and performed selected audit procedures over the subsidiary not covered by the above procedures to be able to report on the consolidated financial statements as a whole. ● Revenue recognition ● Valuation of accounts receivable and loans granted ● Inventory write-down to net realisable value As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the separate and consolidated financial statements (together “the financial statements”). In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Company and Group materiality for the separate and consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the financial statements as a whole. Overall Company materiality EUR 1.9 million (2020: EUR 1.5 million) Overall Group materiality EUR 2 million (2020: EUR 1.7 million) How we determined it 0.8% of the Group’s and Company’s revenue, respectively Materiality Group scoping Key audit matters Rationale for the materiality benchmark applied Significant fluctuations in the Company’s and the Group’s profit depend on the prevailing trends in global dairy markets, and therefore, the profits for the last years have been volatile. We have, therefore, chosen revenue as a benchmark for determining the materiality because, in our view, it provides more consistent information year-on-year basis, reflecting the Group’s and the Company’s size and growth, and is one of the key measures of performance that the stakeholders observe. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above EUR 101 thousand as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Revenue recognition Refer to note 2.17 and note 5 ‘Segment reporting’ in the financial statements The Group’s and the Company’s revenue in 2021 amounted to EUR 253 million and EUR 233.7 million, respectively, and mostly consisted of sales of goods. The Company recognises revenues from sales of goods based on the quantity of goods dispatched and the agreed prices. Revenue is recognised only at point of time, when control of goods has been transferred to the customer based on the agreed delivery terms. Revenue is recognised net of discounts or other sales incentives provided. Although revenue recognition involves only limited judgement, due to the size and volume of transactions it continues to be an audit area which requires significant time and resources and is therefore considered to be a key audit matter. We audited revenue recognition through a combination of controls testing and substantive procedures. We evaluated the design and tested, based on a selected sample of relevant information tested, operating effectiveness of key controls in relation to the recognition of revenue, with particular focus on controls over the matching of invoices to related shipping documents and to the agreed prices as indicated in the sale orders or agreements. We read the accounting policy for revenue recognition in respect of all material revenue streams and assessed its compliance with the International Financial Reporting Standards as adopted by the European Union. We also performed the following tests of details: • We obtained a sample of transactions conducted with customers during the year and either obtained third party confirmations of the transactions or reconciled the transactions to the signed agreement or sale order, the shipping documents, the invoices and subsequent receipts of payments from the customers. • We selected a sample of transactions conducted before and after the year-end and evaluated whether revenue was recognised in an appropriate period based on the transfer of control according to the delivery terms and shipping documents. • We assessed the accounting treatment for various sales incentives paid to retail chains, such as publication of advertisements in a supermarket’s newspaper, listing fees etc. • We selected a sample of credit invoices, discounts and returns after the year-end and checked whether they were recorded in the appropriate period. • Our work also included testing a sample of revenue journal entries to identify whether they have been recorded in the General Ledger with any unusual corresponding entries. Valuation of accounts receivable and loans granted Refer to note 2.8, note 4 ‘Critical accounting estimates and judgments’, note 20 ‘Trade and other receivables’, and note 18 ‘Loans granted’ in the financial statements. As at 31 December 2021, the Group’s and the Company’s trade receivables amounted to EUR 47 million and EUR 51.2 million, respectively, including the credit loss allowance of EUR 0,991 million, and loans granted amounted to EUR 5.6 million and EUR 5.9 million, respectively. In accordance with IFRS 9 ‘Financial Instruments’, the Group’s management assesses expected credit losses in relation to trade receivables on a forward-looking basis and recognises an allowance for credit losses at each reporting date. The estimate of expected credit losses represents an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, and reflects all reasonable and supportable information that is available at each reporting date about past events, current conditions and forecasts of future economic conditions. To measure the expected credit losses, the management has grouped trade receivables based on shared credit risk characteristics and the days past due to assess them on a collective or individual basis. The collective assessment was based on the payment We performed the following procedures for testing the management’s assessment of expected credit losses in relation to trade receivables: • We evaluated the methodology used by the Group's management to assess its compliance with the requirements of IFRS 9. • We obtained the ageing analysis of trade receivables as at 31 December 2021 and tested its reliability on the basis of a selected sample of invoices. • We examined the accuracy of management’s classification of trade receivables for their further assessment on a collective or individual basis depending on the credit risk characteristics and the ageing of receivables. • We examined, on a sample basis the models and calculations used for the assessment of credit losses on a collective or individual basis. • We analysed, on a sample basis, whether the ratio of unpaid balances of a customer at the year end to the annual receipts from the customer indicates any potential impairment issues. • For debtors with significant amounts overdue more than 90 days, we examined their credit ratings at a credit insurance agency and assessed whether the probability of default assigned by the Company aligned with these ratings. • For the sample of the amounts overdue more than 90 days, we obtained the data about profiles of sales over a period of 36 months before 31 December 2021 and the corresponding historical credit losses experienced within this period. Expected credit losses for significant trade receivables overdue for more than 90 days were evaluated individually based on external information from credit insurance agency, collaterals received as security for repayment, and past history of default. The degree of accuracy of the management’s estimate will be confirmed or rebutted depending on the future developments that are inherently uncertain. We focused on assessing the allowance for credit losses in relation to trade receivables as the estimation process is complicated and requires significant management’s judgements, and the amount of allowance is significant. The expected credit losses for loans granted were calculated in view of the fair value of the collateral, which was not lower than the balance of loans granted as at 31 December 2021. payments received after the year end to determine whether the payment patterns were consistent with the management’s estimates as at year end. We also enquired whether there was any collateral received or insurance paid in respect of the related receivables, and whether those were appropriately reflected in the calculation of the expected credit losses. • We read the minutes of the Credit Committee containing the results of regular analysis of possible indicators of default or increase in credit risk. We tested the management’s estimates of expected credit losses in relation to loans granted to see whether the fair value of the collateral was not lower than the balance of loans granted, by comparing, on sample basis, the carrying amount of the collateral as at 31 December 2021 with the sale transactions of similar assets in the market. Inventory write-down to net realisable value Refer to note 2.9, note 4 ‘Critical accounting estimates and judgments’ and note 19 ‘Inventory’ in the financial statements The Group’s and the Company’s inventory balance amounted to EUR 59 million and EUR 56 million, respectively, as at 31 December 2021. We focused on this area due to the size of the inventory balance and because the management’s assessment of the net realisable value of finished goods involves estimates about their potential selling price at the balance sheet date. The Group’s and the Company’s inventory write-down to net realisable value amounted to EUR 0.097 million as at 31 December 2021. We obtained the Company’s and the Group’s policies and methodology in respect of inventory write-downs to net realisable value, evaluated their compliance with the requirements of IFRSs. We compared, on a sample basis, the cost of finished goods with their net realisable value, which was based on selling price in transactions that occurred after the balance sheet date and deducted estimated transportation costs. We assessed whether the inventory allowance recognised by the management was within our internally developed estimated range. We evaluated the balance of non-realised items of finished goods at the end of the audit and tested it individually to identify slow-moving inventory items. How we tailored our Group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Accordingly, based on the size and risk characteristics, we performed a full scope audit of the financial information for the following entities within the Group: Rokiškio Pienas UAB, Rokiškio Pieno Gamyba UAB, Rokiškio Sūris AB (parent company). At the Group level we tested the consolidation process to be able to report on the consolidated financial statements as a whole. Reporting on other information including the consolidated annual report Management is responsible for the other information. The other information comprises the consolidated annual report, including the corporate governance report and the remuneration report (but does not include the financial statements and our auditor’s report thereon). Our opinion on the financial statements does not cover the other information, including the consolidated annual report. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the consolidated annual report, we considered whether the consolidated annual report includes the disclosures required by the Law of the Republic of Lithuania on Consolidated Financial Reporting by Groups of Undertakings, the Law of the Republic of Lithuania on Financial Reporting by Undertakings. Based on the work undertaken in the course of our audit, in our opinion: ● the information given in the consolidated annual report for the financial year for which the financial statements are prepared, is consistent with the financial statements; and ● the consolidated annual report has been prepared in accordance with the Law of the Republic of Lithuania on Consolidated Financial Reporting by Groups of Undertakings and the Law of the Republic of Lithuania on Financial Reporting by Undertakings. The Company and the Group has prepared the social responsibility report that was presented as a separate report. In addition, in light of the knowledge and understanding of the Company and the Group and their environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the consolidated annual report which we obtained prior to the date of this auditor’s report. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ● Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control. ● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ● Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. ● Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. ● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and have communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements Report on the compliance of the format of the separate and consolidated financial statements with the requirements of the European Single Electronic Reporting Format We have been engaged based on the amendment to our audit agreement by the management of the Company to conduct a reasonable assurance engagement for the verification of compliance with the applicable requirements of the European single electronic reporting format of the Company’s separate and the Group’s consolidated financial statements, including the consolidated annual report, for the year ended 31 December 2021 (the “Single Electronic Reporting Format of the separate and consolidated financial statements”). Description of a subject matter and applicable criteria The Single Electronic Reporting Format of the separate and consolidated financial statements has been applied by the management of the Company to comply with the requirements of art. 3 and 4 of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (the “ESEF Regulation”). The applicable requirements regarding the Single Electronic Reporting Format of the separate and consolidated financial statements are contained in the ESEF Regulation. The requirements described in the preceding sentence determine the basis for application of the Single Electronic Reporting Format of the separate and consolidated financial statements and, in our view, constitute appropriate criteria to form a reasonable assurance conclusion. Responsibility of the management and those charged with governance The management of the Company is responsible for the application of the Single Electronic Reporting Format of the separate and consolidated financial statements that complies with the requirements of the ESEF Regulation. This responsibility includes the selection and application of appropriate markups in iXBRL using ESEF taxonomy and designing, implementing and maintaining internal controls relevant for the preparation of the Single Electronic Reporting Format of the separate and consolidated financial statements which is free from material non-compliance with the requirements of the ESEF Regulation. Those charged with governance are responsible for overseeing the financial reporting process, which should also be understood as the preparation of financial statements in accordance with the format resulting from the ESEF Regulation. Our responsibility Our responsibility was to express a reasonable assurance conclusion whether the Single Electronic Reporting Format of the separate and consolidated financial statements complies, in all material aspects, with the ESEF Regulation. We conducted our engagement in accordance with International Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews of Historical Financial Information’ (“ISAE 3000 (R)”). This standard requires that we comply with ethical requirements, plan and perform procedures to obtain reasonable assurance whether the Single Electronic Reporting Format of the separate and consolidated financial statements complies, in all material aspects, with the applicable requirements. Reasonable assurance is a high level of assurance, but it does not guarantee that the service performed in accordance ISAE 3000 (R) will always detect the existing material misstatement (significant non-compliance with the requirements). Summary of the work performed Our planned and performed procedures were aimed at obtaining reasonable assurance that the Single Electronic Reporting Format of the separate and consolidated financial statements was applied, in all material aspects, in accordance with the applicable requirements and such application is free from material errors or omissions. Our procedures included in particular: • obtaining an understanding of the internal control system and processes relevant to the application of the Single Electronic Reporting Format of the separate and consolidated financial statements, including the preparation of the XHTML format and marking up the separate and consolidated financial statements; • verification whether the XHTML format was applied properly; • evaluating the completeness of marking up the separate and consolidated financial statements using the iXBRL markup language according to the requirements of the implementation of single electronic format as described in the ESEF Regulation; • evaluating the appropriateness of the Company’s and the Group’s' use of XBRL markups selected from the ESEF taxonomy and the creation of extension markups where no suitable element in the ESEF taxonomy has been identified; and • evaluating the appropriateness of anchoring of the extension elements to the ESEF taxonomy. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion In our opinion, the Single Electronic Reporting Format of the separate and consolidated financial statements for the year ended 31 December 2021 complies, in all material aspects, with the ESEF Regulation. Appointment We were first appointed as auditors of the Company and the Group in 1996. Our appointment has been renewed annually by shareholders resolution representing a total period of uninterrupted engagement appointment of 26 years. The key audit partner on the audit resulting in this independent auditor’s report is Rimvydas Jogėla. On behalf of PricewaterhouseCoopers UAB /signed with electronic signature/ Rimvydas Jogėla Partner Auditor's Certificate No.000457 Vilnius, Republic of Lithuania 7 April 2022 The auditor's electronic signature is used herein to sign only the Independent Auditor's Report
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.