Rokiskio Suris

48510000PW42N5W74S872022-01-012022-12-3148510000PW42N5W74S872021-01-012021-12-3148510000PW42N5W74S872022-12-3148510000PW42N5W74S872021-12-3148510000PW42N5W74S872020-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872020-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872020-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872020-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872020-12-31ifrs-full:OtherReservesMemberiso4217:EURiso4217:EURxbrli:shares48510000PW42N5W74S872020-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872020-12-3148510000PW42N5W74S872021-01-012021-12-31ifrs-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:RetainedEarningsMember48510000PW42N5W74S872022-01-012022-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872022-01-012022-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872022-01-012022-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872022-01-012022-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872022-01-012022-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872022-01-012022-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872022-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872022-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872022-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872022-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872022-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872022-12-31ifrs-full:RetainedEarningsMember ENDORSEMENT BY THE RESPONSIBLE PERSONS 07/04/2023 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 2022 as well as annual consolidated financial statements of Rokiskio suris AB for the year 2022, 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,KAVALIAUSKAS Data: 2023-04-07 08:27:07 Dokumentą elektroniniu parašu pasirašė DALIUS,TRUMPA Data: 2023-04-07 09:26:40 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE COMPANY’S FINANCIAL STATEMENTS, CONSOLIDATED ANNUAL REPORT AND INDEPENDENT AUDITOR’S REPORT 31 December 2022 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 9-52 CONSOLIDATED ANNUAL REPORT 53–144 INDEPENDENT AUDITOR'S REPORT 145–154 ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on ___2023 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 3 Income statement Group Company Notes 2022 2021 2022 2021 Sales 5 359,269 253,062 342,529 233,658 Cost of sales 10 (319,381) (234,435) (308,064) (219,356) Gross profit 39,888 18,627 34,465 14,302 Selling and marketing expenses 6,10 (15,258) (12,483) (12,365) (10,951) General and administrative expenses 7,10 (11,942) (5,609) (9,200) (3,654) Other income 8 352 256 1,525 2,038 Other gains/(losses) - net 9 2 174 2 174 Operating profit 13,042 965 14,427 1,909 Finance costs 11 (449) (369) (449) (369) Profit before income tax 12,593 596 13,978 1,540 Income tax 12 (79) (43) (650) 18 Profit for the year 12,514 553 13,328 1,558 Profit for the year attributable to: Owners of the Company 12,514 553 13,328 1,558 Non-controlling interest - - - - 12,514 553 13,328 1,558 Basic and diluted earnings per share 13 (in EUR per share) 0.37 0.02 0.39 0.05 The accompanying notes are an integral part of these annual financial statements. These financial statements were authorised for issue on 7 April 2023 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 _2023 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 4 Statement of comprehensive income Group Company Notes 2022 2021 2022 2021 Profit for the year 12,514 553 13,328 1,558 Other comprehensive income Items that will not be reclassified to profit or loss Remeasurement of post-employment benefit obligations, net of tax (44) - (143) - Gain on revaluation of property, plant and equipment 14 - - - - Deferred income tax on revaluation 17 - - - - Other comprehensive income for the year, net of tax (44) - (143) - Total comprehensive income for the year 12,470 553 13,185 1,558 Total comprehensive income for the year attributable to: Owners of the Company 12,470 553 13,185 1,558 Non-controlling interest - - - - 12,470 553 13,185 1,558 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on ___2023 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 MINUTES No. (All tabular amounts are in EUR ’000 unless otherwise stated) 5 Balance sheet Group Company At 31 December At 31 December ASSETS Notes 2022 2021 2022 2021 Non-current assets Property, plant and equipment 14 82,939 79,056 56,988 54,809 Intangible assets 15 162 203 132 162 Investments in subsidiaries 16 169 169 5,048 5,154 Trade and other receivables 20 827 910 827 910 Loans granted 18 2,213 2,627 2,174 2,585 Current assets 86,310 82,965 65,169 63,620 Inventories 19 72,229 59,030 68,446 55,921 Loans granted 18 2,896 2,984 2,896 3,266 Trade and other receivables 20 56,675 51,711 62,762 53,437 Prepaid income tax 139 548 91 150 Cash and cash equivalents 21 3,401 5,629 1,149 4,511 135,340 119,902 135,344 117,285 Total assets 221,650 202,867 200,513 180,905 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 25,922 27,102 15,104 16,301 Retained earnings 88,453 78,304 84,486 73,605 Total equity 151,449 142,480 136,664 126,980 LIABILITIES Non-current liabilities Borrowings 25 5,950 8,050 5,950 8,050 Deferred income tax liability 17 1,122 3,812 439 2,129 Deferred income 26 2,097 2,190 1,585 1,487 Contract liabilities 31(ii) 2,126 2,356 2,126 2,356 Provisions 28 1,421 683 1,180 307 Current liabilities 12,716 17,091 11,280 14,329 Borrowings 25 24,440 19,344 24,440 19,344 Deferred income 26 399 404 206 211 Trade and other payables 27 30,209 22,864 25,584 19,437 Profit tax payable 2,123 - 2,123 - Provisions 28 314 684 216 604 57,485 43,296 52,569 39,596 Total liabilities 70,201 60,387 63,849 53,925 Total equity and liabilities 221,650 202,867 200,513 180,905 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on _2023 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 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 2021 10,402 18,073 10,850 (2,251) 17,417 74,432 128,923 Profit for the year - - - - - 1,558 1,558 Other comprehensive income for the year - - - - - - - Total comprehensive income for the year - - - - - 1,558 1,558 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,116) 1,116 - Transactions with owners Dividends 22 - - - - - (3,501) (3,501) Total transactions with owners for the year - - - - - (3,501) (3,501) Balance at 31 December 2021 10,402 18,073 10,850 (2,251) 16,301 73,605 126,980 Profit for the year 13,328 13,328 Other comprehensive income for the year - - - - - (143) (143) Total comprehensive income for the year - - - - - 13,185 13,185 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,197) 1,197 - Transactions with owners Dividends 22 - - - - - (3,501) (3,501) Total transactions with owners for the year - - - - - (3,501) (3,501) Balance at 31 December 2022 10,402 18,073 10,850 (2,251) 15,104 84,486 136,664 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB Approved CONSOLIDATED AND SEPARATE on ___2023 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 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 Reserve for acquisiti Share on of capita Share treasury Treasury Other Retained Notes l premium shares shares reserves earnings Total Balance at 1 January 2021 10,402 18,073 10,850 (2,251) 27,716 80,638 145,428 Comprehensive income Profit for the year - - - - - 553 553 Total other comprehensive income for the year - - - - - - - Total comprehensive income for the year - - - - - 553 553 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (614) 614 - Transactions with owners Dividends 22 - - - - - (3,501) (3,501) Total transactions with owners for the year - - - - - (3,501) (3,501) Balance at 31 December 2021 10,402 18,073 10,850 (2,251) 27,102 78,304 142,480 Comprehensive income Profit for the year - - - - - 12,514 12,514 Total other comprehensive income for the year - - - - - (44) (44) Total comprehensive income for the year - - - - - 12,470 12,470 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,180) 1,180 - Transactions with owners Dividends 22 - - - - - (3,501) (3,501) Total transactions with owners for the year - - - - - (3,501) (3,501) Balance at 31 December 2022 10,402 18,073 10,850 (2,251) 25,922 88,453 151,449 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 8 Statement of cash flows Group Company Year ended Year ended 31 December 31 December Notes 2022 2021 2022 2021 Cash flows from operating activities Cash generated from operations 30 11,909 13,546 4,319 9,541 Interest paid (449) (369) (449) (369) Income tax paid (146) (43) (92) - Net cash generated from/ operating activities 11,314 13,134 3,778 9,172 Cash flows from investing activities Purchases of property, plant and equipment 14 (13,817) (13,251) (8,880) (11,182) Purchases of intangible assets 15 (18) (142) (16) (133) Investments in subsidiaries - - - (100) Loans granted to employees (131) (91) (137) (91) Other loans granted - (1,950) - (1,950) Proceeds from sale of property, plant and equipment 30 81 324 81 312 Other loan repayments received 633 1,653 919 1,653 Interest received 221 229 221 229 Dividends received 31 - - 1,173 1,790 Net cash (used in) investing activities (13,031) (13,228) (6,639) (9,472) Cash flows from financing activities Dividends paid 22 (3,501) (3,501) (3,501) (3,501) Repayment of borrowings (2,100) (350) (2,100) (350) Proceeds from borrowings 5,090 3,740 5,100 3,740 Net cash (used in) financing activities (511) (111) (501) (111) Net (decrease) in cash and cash equivalents (2,228) (205) (3,362) (411) Cash and cash equivalents at the beginning of the year 21 5,629 5,834 4,511 4,922 Cash and cash equivalents at the end of the year 21 3,401 5,629 1,149 4,511 The accompanying notes are an integral part of these annual financial statements. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (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. Antanas Trumpa and Dalius Trumpa are ultimate beneficial owners. The consolidated group (“the Group”) consists of the Company and five subsidiaries (2021: five subsidiaries). Information on the Group subsidiaries is presented below: Year of Group’s ownership interest acquisition Main activity (%) as at 31 December Subsidiaries 2022 2021 Rokiškio Pienas UAB Distribution of dairy 2006 products 100.00 100.00 Rokiškio Pieno Gamyba Production of dairy UAB 2013 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 Production of dairy DairyHub.LT UAB 2021 products 100.00 100.00 * This subsidiary was not consolidated in the Group’s financial statements as it was not material (see Note 16). 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 2022 was 808 (2021: 829). The average number of the Group’s employees during the year ended 31 December 2022 was 1,291 (2021: 1,326). ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (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 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 2022 a) The following new standards, amendments to standards and interpretations are effective from 2022, but do not have a significant impact on the Company and the Group: • 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). • Covid-19-Related Rent Concessions – Amendments to IFRS 16 16 (issued on 31 March 2021 and effective for annual periods beginning on or after 1 April 2021). b) The following new standards were endorsed, but not yet effective: • IFRS 17 "Insurance Contracts" (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023). • 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). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 11 • Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). IAS 1 was amended to require companies to disclose their material accounting policy information rather than their significant accounting policies. • Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies should distinguish changes in accounting policies from changes in accounting estimates. • Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and decommissioning obligations (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: • Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued on 22 September 2022 and effective for annual periods beginning on or after 1 January 2024). • Classification of liabilities as current or non-current – Amendments to IAS 1 (originally issued on 23 January 2020 and subsequently amended on 15 July 2020 and 31 October 2022, ultimately effective for annual periods beginning on or after 1 January 2024). 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 those investees, that the Group controls because the Group (i) has power to direct the relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of the investor’s returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Group has power over another entity. For a right to be substantive, the holder must have a practical ability to exercise that right when decisions about the direction of the relevant activities of the investee need to be made. The Group may have power over an investee even when it holds less than the majority of the voting power in an investee. In such a case, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of the investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are consolidated from the date on which control is transferred to the Group (acquisition date) and are deconsolidated from the date on which control ceases. The group uses the acquisition method of accounting to account for the acquisition of subsidiaries. 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. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 12 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. 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 of disposal’ or ‘value in use’. The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognised in prior periods for investment in subsidiary may no longer exist or may have decreased. If any such indication exists, the Company estimates the recoverable amount of investment and reverses impairment loss, if recoverable amount significantly exceeds the carrying amount. 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 monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 2.5 Property, plant, and equipment ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 13 Property, plant and equipment is shown at revalued amount, based on periodic valuations of assets, less subsequent accumulated depreciation and impairment. Property, plant and equipment, except construction in progress, are subject to revaluation with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. 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. 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. 2.7 Impairment of non-financial assets ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 14 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. 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 15 greater than 12 months after the end of the date of the Balance sheet. 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 income or interest expense 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 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 16 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. 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. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 17 ( 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 are carried at cost less provision for impairment. A prepayment is classified as non- current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition. Prepayments to acquire assets are transferred to the carrying amount of the asset once the Group has obtained control of the asset and it is probable that future economic benefits associated with the asset will flow to the Group. Other prepayments are written off to profit or loss when the services relating to the prepayments are received. If there is an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is written down accordingly and a corresponding impairment loss is recognised in profit or loss for the year. 2.11 Cash and cash equivalents Cash and cash equivalents include cash at bank and on hand. Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL. 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 18 Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity. (b) Treasury shares 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, net of any directly attributable incremental transaction costs and the related income tax effects, 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 Financial liabilities are classified as subsequently measured at AC, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments. The Group does not have any financial liabilities at fair value through profit or loss. (b) Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is settled, cancelled or expires. An exchange between the Group and the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 19 are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners. (c) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the following circumstances: (i) in the normal course of business, (ii) in the event of default and (iii) in the event of insolvency or bankruptcy. (d) Trade and other payables. Trade payables are accrued when the counterparty performs its obligations under the contract and are recognised initially at fair value and subsequently carried at AC using the effective interest method. (e) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently carried at AC using the effective interest method. 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. In Latvia distributed profits are taxed at 20% whereas undistributed profits are taxed at 0% tax rate; deemed profit distributions are taxed at a 20% tax rate (25% effective rate, applying 20/80 to the taxable base). 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. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 20 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. The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from subsidiaries or on gains upon their disposal. The Group does not recognise deferred tax liabilities on such temporary differences except to the extent that management expects the temporary differences to reverse in the foreseeable future. The Group and the Company determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty. The Group and the Company assumes that the taxation authority will examine amounts it has a right to examine and will have full knowledge of all related information when making those examinations. If the Group and the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of uncertainty will be reflected in determining the related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates, by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty. The Group and the Company reflects the effect of a change in facts and circumstances or of new information that affects the judgments or estimates required by the interpretation as a change in accounting estimate. The absence of agreement or disagreement by a taxation authority with a tax treatment, in isolation, is unlikely to constitute a change in facts and circumstances or new information that affects the judgments and estimates required. 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. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 21 Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. (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. 2.17 Revenue recognition Revenue is income arising in the course of the Group’s and the Company’s ordinary activities. Revenue is recognised in the amount of transaction price. Transaction price is the amount of consideration to which the Group and the Company expects to be entitled in exchange for transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. Revenue is recognised net of discounts, returns and value added taxes, export duties and other similar mandatory payments. 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 22 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. 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 relating to the purchase of property, plant and equipment are included in non- current liabilities as deferred income and are credited to profit or loss on a straight line basis over the expected lives of the related assets. 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 23 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. 2.28 Finance costs Finance costs represents costs incurred by the Company and the Group from financing activities, such as interest costs on borrowings. 2.29 Transactions with related parties In the normal course of business, the Company and the Group enter into transactions with their related parties. These transactions are priced predominantly at market rates. Judgement is applied in determining if transactions are priced at market or non-market rates, where there is no active market for such transactions. The basis for judgement is pricing for similar types of transactions with unrelated parties, when such information is known to the Company or the Group. 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 24 with fixed interest rates expose the Group to fair value interest rate risk. In 2022 and 2021, 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 26% (2021: 0%) of the short - term borrowings interest and 100% of long term interest (2021: 100%). 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. The exposure of variable rate of the Group’s and the Company’s borrowings (amounted to EUR 22,340 (2021: 17,244)) to interest rate changes are as follows, at the year end: in every change of interest rate amount by 0,1% (100 points), the Group’s and the Company’s interest expense changes by Eur 22 thousand in 2022 and EUR 17 thousand in 2021. As at 31 December 2022 the Company’s and the Group’s net assets sensitive to changes in interest rate amounted to EUR 625 thousand (2021: EUR 625 thousand). (b) Credit risk The Group and the Company exposes itself to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation. Exposure to credit risk arises from trade receivables, cash and cash equivalents and as a result of the Group’s and the Company’s lending and other transactions with counterparties, giving rise to financial assets and off-balance sheet credit-related commitments. Credit risk is managed on a group basis. According to internal rules, the Company’s and the Group’s all cash balances are held at banks that had external credit ratings from ‘A+’ to ‘BBB’, as set by the rating agency Fitch Ratings. As at the year end the Group’s cash amounted EUR 1,669 thousand (2021: EUR 4,163 thousand) and the Company’s cash amounted EUR 548 thousand (2021: EUR 3,958 thousand) were held at bank with rating AA-, remaining miscellaneous balances were held in banks and payment institutions with lower ratings or those which were not rated by Fitch. 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 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 2022 2021 2022 2021 Cash and cash equivalents at banks 3,401 5,629 1,149 4,511 Trade receivables 49,024 46,042 58,503 50,223 Loans granted 5,109 5,611 5,070 5,851 57,534 57,282 64,722 60,585 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 25 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. There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions. 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 2022. Group Amount Company Amount Credit limit receivable Credit limit receivable Customer A 5,600 5,523 5,600 5,523 Customer B 5,000 4,638 5,000 4,638 Customer C 4,800 4,631 - - Customer D 3,600 3,542 3,600 3,542 Customer E 3,000 2,860 3,000 2,860 Customer F 2,960 2,632 2,960 2,632 Customer G 2,400 2,380 2,400 2,380 Customer H 2,500 2,071 2,500 2,071 The table below presents credit limits established for the major customers and amounts receivable from them as at 31 December 2021. Group Amount Company Amount Credit limit receivable Credit limit receivable Customer A 5,500 5,376 5,500 5,376 Customer B 5,000 4,854 5,000 4,854 Customer F 4,345 3,024 - - Customer G 2,700 2,610 2,700 2,610 Customer D 2,200 2,104 2,200 2,104 Customer I 2,000 1,531 2,000 1,531 Customer J 1,500 1,500 1,500 1,500 Customer K 1,500 1,443 1,500 1,443 The table below summaries concentration of the loans granted: Group Company 2022 2021 2022 2021 in excess of EUR 1,000 thousand 3,187 3,187 3,187 3,187 in excess of EUR 500 thousand, but not in excess of EUR 1,000 thousand 687 1,205 690 1,205 not in excess of EUR 500 thousand 1,235 1,220 1,193 1,459 5,109 5,612 5,070 5,851 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. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 26 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 2022 or 31 December 2021 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 2022 and 31 December 2021 was determined as follows for trade receivables grouped (collective model) based on shared characteristics: Group Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2022 due past due past due past due past due past due Total Expected loss rate 0.10% 0.10% 1.00% 1.00% 2.00% 2.00% - Gross carrying amount – trade receivables 39,797 4,496 1,039 602 396 62 46,392 Loss allowance 40 4 10 6 8 1 70 Group Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2021 due past due past due past due past due 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 Company Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2022 due past due past due past due past due past due Total Expected loss rate 0.08% 0.10% 1.00% 1.00% 2.00% 2.00% Gross carrying amount – trade receivables 49,276 4,496 1,039 602 396 62 55,871 Loss allowance 40 4 10 6 8 1 70 Company Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2021 due past due past due past due past due 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 27 Loss allowance 37 39 18 2 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 2022 and 31 December 2021 was determined as follows: Group Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2022 due past due past due past due past due past due Total Gross carrying amount – trade receivables 186 815 1,358 1,367 1,414 1,278 6,418 Expected loss rate 57.9% Loss allowance 3,716 Group Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2021 due past due past due past due past due 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 Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2022 due past due past due past due past due past due Total Gross carrying amount – trade receivables 186 815 1,358 1,367 1,414 1,278 6,418 Expected loss rate 57.9% Loss allowance 3,716 Company Less than More than More than More than More than 31 December Not yet 30 days 30 days 90 days 180 days 365 days 2021 due past due past due past due past due 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 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. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 28 The information on loans receivable is disclosed in Note 18. As at 31 December 2022 debtors collateral placed as security in favor to the Company and the Group for trade receivables and loans receivable are valued at Eur 5,218 thousand (2021: Eur 2,218 thousand). The collateral consists of certain buildings, land plots and milk cows, no negative changes in collateral quality observed during both reporting periods. (c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Prudent liquidity risk management allows maintaining sufficient cash and availability of funding under committed credit facilities. The Group had access to EUR 12,660 thousand (2021: EUR 7,756 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 Less than 3 From 3 to 12 At 31 December 2022 months months From 1 to 5 years After 5 years Borrowings from banks and other financial liabilities 23,015 1,673 6,114 - Trade payables 21,929 - - - Accrued expenses 1,424 46,368 1,673 6,114 - Company Less than 3 From 3 to 12 At 31 December 2021 months 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 - - - Accrued expenses 614 35,145 1,575 8,050 - Group At 31 December 2022 Less than 3 From 3 to 12 From 1 to 5 years After 5 years months months Borrowings from banks and other financial liabilities 25,127 1,598 6,524 - Trade payables 25,195 - - - Accrued expenses 1,806 52,128 1,598 6,524 - Group Less than 3 From 3 to 12 From 1 to 5 years After 5 years At 31 December 2021 months months Borrowings from banks and other financial liabilities 17,769 1,575 8,050 - Trade payables 19,225 - - - Accrued expenses 909 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 29 37,903 1,575 8,050 - 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 2022 2021 2022 2021 Borrowings (Note 25) 30,390 27,394 30,390 27,394 Less: cash and cash equivalents (Note 21) (3,401) (5,629) (1,149) (4,511) Net debt 26,989 21,765 29,241 22,883 Shareholders’ equity 151,449 142,480 136,664 126,980 Total capital 178,438 164,245 165,905 149,863 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 2022 and 31 December 2021, 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 3, • equity/asset ratio more than 40% • 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 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (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 estimation of the useful lives of items of property, plant and equipment is a matter of judgment based on the experience with similar assets. The future economic benefits embodied in the assets are consumed principally through use. However, other factors, such as technical or commercial obsolescence and wear and tear, often result in the diminution of the economic benefits embodied in the assets. Management assesses the remaining useful lives in accordance with the current technical conditions of the assets and estimated period during which the assets are expected to earn benefits for the Group and the Company. The following primary factors are considered: (a) the expected usage of the assets; (b) the expected physical wear and tear, which depends on operational factors and maintenance programme; and (c) the technical or commercial obsolescence arising from changes in market conditions. 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 methods used to value property plant and equipment is presented in Note 14. 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 2022 would be EUR 274 thousand lower/ higher (2021: EUR 5 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 31 of products, production process, types of customers and the method of distribution. From 2022 the Group has introduced a modified segment structure, redistributing the Other segment into Cheese and other dairy products segment. These changes were a result of change in management reporting. Due to the change in the composition of these reportable segments, the Group has re-casted the comparable prior year figures. The main two reportable business segments of the Group are as follows: - Fresh milk products - Cheese and other dairy products Transactions between the operating segments are on normal commercial terms and conditions. The number of segment customers, each generating 10% of total revenue of the segment are: - Fresh milk products: 2 external customers - Cheese and other dairy products: 1 external customer The table below summarizes segment information for the years ended 31 December 2022 and 2021: Cheese and other Fresh milk products dairy products Group 2022 Sales 107,228 276,103 383,331 Inter-segment sales - (24,062) (24,062) Third party sales 107,228 252,041 359,269 Segment’s gross profit 4,417 35,471 39,888 2021 Sales 86,869 181,386 268,255 Inter-segment sales - (15,193) (15,193) Third party sales 86,869 166,193 253,062 Segment’s gross profit 8,268 10,359 18,627 Geographical information The Company’s sales by markets and assets by can be analysed as follows: Sales revenue Total assets Capital expenditure 2022 2021 2022 2021 2022 2021 Lithuania 124,814 89,052 200,513 180,905 8,880 11,185 Europe Union countries 180,950 114,944 - - - - Near East 16,372 3,561 - - - - North America 3,698 12,279 - - - - Far East 9,576 4,885 - - - - Other countries 7,119 8,937 - - - - 342,529 233,658 200,513 180,905 8,880 11,185 The Group’s sales by markets and assets by location can be analysed as follows: ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 32 6. Selling and marketing expenses Group Company 2022 2021 2022 2021 Transportation services 5,236 4,102 5,036 3,753 Wages and salaries 3,808 3,181 1,793 1,640 Intermediation services 535 331 522 307 Product image creation and advertising expenses 964 440 176 130 Repair and maintenance 1,026 887 794 806 Depreciation of property, plant and equipment 631 612 577 548 Warehousing services 328 1,080 328 1,080 Customs fees 301 792 301 792 Other expenses 2,429 1,058 2,838 1,895 15,258 12,483 12,365 10,951 7. General and administrative expenses Group Company 2022 2021 2022 2021 Wages and salaries 4,569 2,978 3,424 2,066 Taxes (other than income tax) 45 52 34 41 Provisions for impairment of loans granted and doubtful receivables and write-offs of loans and receivables (reversals) (Note 20) 3,251 13 3,251 13 Consultations 205 191 150 141 Sales revenue Total assets Capital expenditure 2022 2021 2022 2021 2022 2021 Lithuania 127,571 102,037 214,665 197,212 13,709 13,473 Europe Union countries 194,933 121,363 6,985 5,655 109 3 Near East 16,372 3,561 - - - - North America 3,698 12,279 - - - - Far East 9,576 4,885 - - - - Other countries 7,119 8,937 - - - - 359,269 253,062 221,650 202,867 13,818 13,476 Sales are allocated based on the country in which the customers are located. The breakdown of revenue by category: Group Company 2022 2021 2022 2021 At point of time - sales of goods 357,666 251,970 336,484 227,499 Over time - services 1,603 1,092 6,045 6,159 359,269 253,062 342,529 233,658 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 33 Depreciation of property, plant and equipment and amortisation of intangible assets 670 664 528 453 Repairs and maintenance 303 253 270 217 Telecommunications and IT maintenance expenses 140 131 128 118 Insurance expenses 171 197 156 182 Bank charges 122 117 119 110 Business trips 46 13 44 8 Fines 9 13 1 1 Staff training 62 72 42 53 Membership fees 1 2 - - Charity and support 475 339 96 89 Other expenses 1,873 574 957 162 11,942 5,609 9,200 3,654 8. Other income Group Company 2022 2021 2022 2021 Interest income 221 229 221 229 Dividend and other income 131 27 1,304 1,809 352 256 1,525 2,038 The Company’s other income comprises dividends received from subsidiary Rokiškio Pieno Gamyba UAB. 9. Other (losses)/gains Group Company Result of disposal of property, plant and 2022 2021 2022 2021 equipment 2 174 2 174 2 174 2 174 10. Expenses by nature Group Company 2022 2021 2022 2021 Raw materials and consumables used 256,045 168,571 250,525 160,032 Changes in inventories of finished goods and work in progress (7,719) 10,631 (7,045) 10,971 Inventory write-down to net realizable value (Note 19) (5,480) (97) (5,480) (97) Wages and salaries including social security contributions 27,479 22,176 17,895 13,984 Transportation services 14,478 11,476 14,267 11,114 Depreciation (Notes 14) 9,789 8,108 6,555 5,473 Amortisation of the Government grant for property, plant and equipment (Note 26) (397) (418) (206) (221) ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 34 Intermediation services 535 331 522 307 Repairs and maintenance 7,573 6,311 5,939 4,864 Cost of finished goods resold 352 287 16,628 9,435 Provisions for impairment of loans granted and doubtful receivables and write-offs of loans and receivables (reversals) 2,795 13 2,795 13 Taxes (other than income tax) 570 1,031 548 1,008 Consultations 205 191 150 141 Telecommunication and IT maintenance expenses 149 142 136 126 Utilities (energy) 27,999 15,581 17,756 8,519 Other Total cost of sales, selling and marketing 12,208 8,193 8,644 8,292 expenses and general and administrative expenses 346,581 252,527 329,629 233,961 11. Finance costs Group Company Interest expenses: 2022 2021 2022 2021 − bank borrowings 449 369 449 369 12. Income tax Group Company 2022 2021 2022 2021 Current income tax (2,185) (71) (2,154) - Prior year income tax corrections 111 129 (55) 5 Deferred income tax (Note 17) 1 995 (101) 1,559 13 Income tax (expenses)/ benefit (79) (43) (650) 18 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 2022 2021 2022 2021 Profit before income tax 12,593 596 13,978 1,540 Tax calculated at a rate of 15% (Note 2.15) 1,889 89 2,097 231 Expenses not deductible for tax purposes 110 95 222 54 Income not subject to tax (27) (33) (203) (302) Charity expenses deductible twice for tax purposes (127) (69) (29) - Investment projects relief (1,766) (50) (1,437) - Prior year income tax corrections and other - 11 - (1) Income tax expense/(benefit) 79 43 650 (18) ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 35 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 2022 2021 2022 2021 Net profit attributable to shareholders 12,514 553 13,328 1,558 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) 0.37 0.02 0.39 0.05 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 Motor Plant and vehicles and Construction At 1 January 2021 Buildings machinery other assets in progress Total 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 Year ended 31 December 2022 Opening net book amount 10,902 30,996 10,311 2,600 54,809 Additions - 1,767 3,596 3,517 8,880 Disposals (11) (1) (67) - (79) ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 36 Write-offs - (62) (5) - (67) Transfers from CIP 1,690 11 192 (1,893) - Depreciation charge (626) (3,440) (2,490) - (6,555) Closing net book amount 11,954 29,272 11,538 4,224 56,988 At 31 December 2022 Acquisition cost and revalued amount 20,624 96,412 46,941 4,224 168,201 Accumulated depreciation (8,670) (67,140) (35,403) - (111,213) Net book amount 11,954 29,272 11,538 4,224 56,988 Group Motor Plant and vehicles and Construction Buildings machinery other assets in progress Total At 1 January 2021 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 Year ended 31 December 2022 Opening net book amount 17,654 47,076 10,835 3,491 79,056 Additions 152 2,946 3,925 6,794 13,818 Disposals (11) (1) (67) - (79) Write-offs - (62) (5) - (67) Transfers from CIP 2,137 3,678 247 (6,062) - Depreciation charge (1,118) (6,085) (2,586) - (9,789) Closing net book amount 18,813 47,552 12,350 4,224 82,939 At 31 December 2022 Cost or revaluated amount 32,715 136,916 49,388 4,224 223,243 Accumulated depreciation (13,902) (89,364) (37,038) - (140,304) Net book amount 18,813 47,552 12,350 4,224 82,939 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 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 37 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 2022 and 2021. 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 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 2022 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. . In 2022, the Company also had consultations with the property valuer OBER HAUS Nekilnojamasis Turtas UAB, based on which it was identified that the value of non-current assets of the Company and the Group did not differ significantly from the fair value of the property in the market . 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 2022, the Company’s and the Group’s property, plant and equipment with a carrying value of EUR 34,440 thousand and EUR 51,743 thousand, respectively (31 December 2021: EUR 25,783 thousand and EUR 40,048 thousand, respectively) was pledged as a security for credit limit agreements. ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 38 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 2022 and 2021: Structures and Motor vehicles and Construction in Company Buildings machinery other assets progress Total At 31 December 2021 7,907 19,314 8,343 2,600 38,164 At 31 December 2022 9,067 17,166 11,303 4,224 41,759 Structures and Motor vehicles and Construction in Group Buildings machinery other assets progress Total At 31 December 2021 10,903 27,649 8,704 3,491 50,747 At 31 December 2022 12,182 28,058 11,841 4,224 56,304 15. Intangible assets Company Computer software At 1 January 2021 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 Year ended 31 December 2022 Opening net book amount 162 Additions 16 Amortisation charge (46) Closing net book amount 132 At 31 December 2022 Cost 1,329 Accumulated amortisation (1,197) Net book amount 132 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 39 Group Computer software At 1 January 2021 Cost 759 Accumulated amortisation (677) Net book amount 82 Year ended 31 December 2021 Opening net book amount 82 Additions 145 Amortisation charge (21) Closing net book amount 203 At 31 December 2021 Cost 900 Accumulated amortisation (697) Net book amount 203 Year ended 31 December 2022 Opening net book amount 203 Additions 18 Amortisation charge (59) Closing net book amount 162 At 31 December 2022 Cost 1,462 Accumulated amortisation (1,300) Net book amount 162 Amortisation expenses of computer software and other intangible assets are included in general and administrative expenses in the income statement. 16. Investments in subsidiaries and other investments Group Company 2022 2021 2022 2021 Rokiškio Pieno Gamyba UAB (consolidated) - - 4,733 4,733 Rokiškio Pienas UAB (consolidated) - - 105 105 Jekabpils Piena Kombinats SIA (consolidated) - - 3 3 DairyHub.LT UAB (consolidated) - - 100 100 Kaunata SIA (not consolidated) 165 165 103 103 Other (accounted at cost) 4 4 4 110 169 169 5,048 5,154 The Group’s investments in subsidiaries consist of investment in Kaunata SIA. Kaunata SIA was accounted for at cost in the consolidated and separate financial statements and not consolidated due to immateriality. 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 2022 (unaudited) are as follows: Total assets: EUR 244,505; Property, plant and equipment: EUR 35,853; Results of operations: EUR (18,944). ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 40 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). 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 Deferred income tax assets: 2022 2021 2022 2021 – to be realised after more than 12 913 - 862 - months – to be realised within 12 months 1,587 457 985 368 Deferred income tax liabilities: 2,500 457 1,847 368 – to be realised after more than 12 (3,392) (3,969) (2,086) (2,297) months – to be realised within 12 months (230) (300) (200) (200) (3,622) (4,269) (2,286) (2,497) Net deferred tax liability (1,122) (3,812) (439) (2,129) The gross movement in deferred income tax liabilities was as follows: Group Company 2022 2021 2022 2021 At the beginning of the year (3,812) (3,711) (2,129) (2,116) Recognised in the income statement 1,995 (101) 1,559 (13) Recognized directly to equity 602 - - - (correction) Recognised in other comprehensive income 93 - 131 - At the end of the year (1,122) (3,812) (439) (2,129) 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: Company Inventory write- Employee post- Impairment of Deferred income down to net retirement amounts tax assets realisable value benefits receivable Vacation reserve Total At 1 January 2021 224 56 149 148 577 Recognised in the income statement (209) - - - (209) Recognised in other comprehensive income - - - - - At 31 December 15 56 149 148 368 2021 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 41 Recognised in the income statement 807 23 503 15 1,348 Recognised in other comprehensive income - 131 - - 131 At 31 December 822 210 652 163 1,847 2022 Deferred income tax Revaluation of property, liabilities plant and equipment Total At 1 January 2021 (2,693) (2,693) Recognised in the income statement 196 196 Recognised in other comprehensive income - - At 31 December 2021 (2,497) (2,497) Recognised in the income statement 211 211 Recognised in other comprehensive income At 31 December 2022 (2,286) (2,286) Group Tax loss, Inventory write- Employee post- Impairment of transferable Deferred income down to net retirement amounts Vacation for future tax assets realisable value benefits receivable reserve years Total At 1 January 2021 224 56 149 237 - 667 Recognised in the income statement (209) - - - - (210) Recognised in other comprehensive income - - - - - - At 31 December 2021 15 56 149 237 - 457 Recognised in the income statement 807 23 503 15 602 1,348 Recognised in other comprehensive income - 182 - (89) - 93 At 31 December 2022 822 261 652 163 602 2,500 Deferred income tax Revaluation of property, liabilities plant and equipment Total At 1 January 2021 (4,378) (4,378) Recognised in the income statement 109 109 Recognised in other comprehensive income - - At 31 December 2021 (4,269) (4,269) Recognised in the income statement 647 647 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 42 Recognised in other comprehensive income - At 31 December 2022 (3,622) (3,622) Deferred income tax assets and deferred income tax liabilities were calculated using a tax rate of 15% (2021: 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 2022 2021 2022 2021 Long-term loans to employees 371 249 332 207 Other long-term loans 1,842 2,413 1,842 2,413 Less: provision for impairment of loans receivable - (35) - (35) Long-term loans, net 2,213 2,627 2,174 2,585 Current portion of loans to employees 66 57 66 54 Other short-term loans granted 2,830 2,927 2,830 3,212 Current portion of long-term loans and short- term loans, net 2,896 2,984 2,896 3,266 Repayment terms of other long-term loans granted ranged between 1 and 5 years. The loans bear average weighted interest rate of 3,17% (2021: 3.24%). 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 2022 2021 2022 2021 Loans granted not past due 5,109 5,611 5,070 5,851 Impaired loans granted - 35 - 35 Gross value of loans granted 5,109 5,646 5,070 5,886 Less: Provision for impairment of loans receivable - (35) - (35) Net amount 5,109 5,611 5,070 5,851 19. Inventories Group Company 2022 2021 2022 2021 Raw materials 3,321 3,023 1,475 1,477 Work in progress 14,594 8,154 14,357 7,816 Finished products 57,651 45,940 56,570 45,044 Other inventories 2,143 2,010 1,524 1,681 Total inventories at cost 77,709 59,127 73,926 56,018 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 43 Less: inventory write-down to net realizable value (5,480) (97) (5,480) (97) Total inventories 72,229 59,030 68,446 55,921 As at 31 December 2022 and 2021 inventories were not pledged. The Company’s inventories as at 31 December 2022: 58,8 tons of butter (2021: 0 tons) and 506 tons milk sugar (2021:0 tons) held with third parties in Lithuania, 183,9 tons of hard cheese (2021: 21 tons) held in the USA, 0 tons of hard cheese (2021:875 tons) held in Lithuania and 0 tons of hard cheese (2021: 2,5 tons) in the warehouses based in the European Union. The total value of these inventories is EUR 1,583 thousand (2021: 3,352 thousand). The Company and the Group have to maintain comparably high level of hard cheese levels due to technological process i.e., before selling this type of cheeses to customers, it is needed to mature them for period from 6 month to 2 years. The Company does not have long-term contracts with customers to be able to fix sales price. At the year 2022 end cheese and other dairy product markets suffered a rapid slowdown in EU territory, where the Group and the Company are selling the majority of its production. Because of that, the management have significantly reduced the sales prices of hard cheeses and butter. Until the date of approval of these financial statements the markets did not recovered. Consequently, the management had to establish inventory write down to the net realizable value of EUR 5,480 thousand. Furthermore, if hard cheese and butter prices go down by another 10 percent, the write-down amount should increase by approximately EUR 2,4 million (if take year-end inventory quantities). 20. Trade and other receivables Group Company Non-current receivables 2022 2021 2022 2021 Prepayments for non-current assets 562 236 562 236 Prepayments for milk supply 265 674 265 674 Current receivables 827 910 827 910 Trade receivables 49,024 46,042 58,503 50,223 VAT receivable 4,972 2,916 2,948 1,457 Prepayments for milk supply 1,851 1,800 1,014 811 Other prepayments and deferred expenses 828 953 297 946 56,675 51,711 62,762 53,437 As at 31 December 2022 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 (2021: no larger than EUR 20,000 thousand). At 31 December 2022 and 2021 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 2022 and 2021, it amounted, respectively, to EUR 561 thousand and EUR 340 thousand. The information on credit quality of receivables as at 31 December 2022 is provided in Note 3.1. (b). + ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (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 2022 2021 2022 2021 In the beginning of the reporting period 991 991 991 991 Bad debts reversal during the year - - - - Recognized impairment during the year 2,795 - 2,795 - At the end of the reporting period 3,786 991 3,786 991 Certain EU customers of The Group suffered significant financial losses during the year 2022, because of dairy product prices fluctuations, i.e. rapid price increase in beginning of the year, when they were not able to increase their sales prices to customers and then rapid decrease of their sales prices at the end of the year, when they suffered some losses from sales. Consequently the customers informed management that they will not be able to fulfill their obligations to the Group. Based on their financial position and information received from credit agencies, the management decided to recognize EUR 2,795 thousand impairment allowance on receivables from those 2 customers. 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 2022 2021 2022 2021 Cash at bank and on hand 3,401 5,629 1,149 4,511 3,401 5,629 1,149 4,511 As at 31 December 2022, cash at bank balances pledged amounted to EUR 688 thousand (31 December 2021: EUR 4,054 thousand). For the purposes of the cash flow statement, cash and cash equivalents comprise as follows: Group Company At 31 December At 31 December 2022 2021 2022 2021 Cash at bank and on hand 3,401 5,629 1,149 4,511 3,401 5,629 1,149 4,511 22. Share capital As at 31 December 2022, 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 2022 there were no changes in the Company's authorized capital. Dividends Dividends declared at the Company for the year 2021 were paid out in 2022 in the amount of EUR 0.10 per share (other than treasury shares) and in total amount of EUR 3,501 thousand (2021: EUR 3,501 thousand) (when par value of each share equals EUR 0.29 (2021: EUR 0.29)). ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 45 23. Treasury shares 2022 2021 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. 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 2022. During 2022 the reserve for acquisition of own shares was not increased and amounted to EUR 10,850 thousand as at 31 December 2021. Other reserves Group Company At 31 December At 31 December 2022 2021 2022 2021 Non-distributable reserve 1,975 1,975 1,113 1,113 Revaluation reserve 23,947 25,127 13,991 15,189 25,922 27,102 15,104 16,301 Non-distributable reserves (legal reserves) of Rokiškio Sūris AB, Rokiškio Pieno Gamyba UAB and Rokiškio Pienas UAB can only be used to cover future operating losses, if any. 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: Revaluation Deferred Revaluation Company reserve income tax reserve net of tax At 1 January 2021 18,998 (2,694) 16,305 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,313) 197 (1,116) At 31 December 2021 17,685 (2,497) 15,189 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,408) 211 (1,197) At 31 December 2022 16,277 (2,286) 13,991 Revaluation Deferred Revaluation Group reserve income tax reserve net of tax At 1 January 2021 30,119 (4,378) 25,741 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (723) 109 (614) At 31 December 2021 29,396 (4,269) 25,127 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 46 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,827) 647 (1,180) At 31 December 2022 27,569 (3,622) 23,947 25. Borrowings Group Company Non-current 2022 2021 2022 2021 Non-current borrowings 5,950 8,050 5,950 8,050 Current Current borrowings 24,440 19,344 24,440 19,344 Total borrowings 30,390 27,394 30,390 27,394 The Company’s and the Group’s current borrowings – credit line granted by SEB Bankas. Interest rate for EUR 5,950 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 475 thousand as at 31 December 2022 (2021: (55) thousand). 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 are denominated in Euro only. The fair value of borrowings does not materially differ from the carrying amount. Net debt Reconciliation Group Company 2022 2021 2022 2021 Cash and cash equivalents 21 3,401 5,629 1,149 4,511 Credit line (22,340) (17,244) (22,340) (17,244) Borrowings (excluding credit line) (8,050) (10,150) (8,050) (10,150) Net debt (26,989) (21,765) (29,241) (22,883) As at 31 December 2022, the balance not withdrawn under the committed credit line facilities with the banks amounted to EUR 12,660 thousand (2021: EUR 7,756 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 2022 2021 2022 2021 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 47 Government grants at the beginning of the 2,594 3,021 1,698 1,918 year Government grants recognised 299 - 299 - Recognised in the income statement (397) (427) (206) (220) 2,496 2,594 1,791 1,698 Less: non-current portion (2,097) (2,190) (1,585) (1,487) Current portion 399 404 206 211 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 2022 2021 2022 2021 Trade payables 25,195 19,225 21,929 16,762 Salaries, social security contributions and taxes 2,178 1,595 1,395 979 Advance amounts received and other payables 1,030 1,135 836 1,082 Accrued expenses 1,806 909 1,424 614 30,209 22,864 25,584 19,437 28. Provisions Group Company 2022 2021 2022 2021 Non-current Non-current provisions 1,421 683 1,180 307 Current Current provisions 314 684 216 604 Total provisions 1,735 1,367 1,396 911 Employee benefit obligations Group Company 2022 2021 2022 2021 At the beginning of the year 1,367 1,367 911 911 Recognized in other comprehensive income – remeasurement loss from change in demographic assumptions 212 - 329 - Recognized in profit or loss – interest expense 156 - 156 - At the end of the year 1,735 1,367 1,396 911 The Company’s and the Group’s current and non-current provisions consists of provisions for payments at the day of retirement calculated in accordance with the legal acts of the Republic of Lithuania. The amount of the benefit equals to 2 monthly average salary amounts (calculated on last 3 month of service salary amounts). The amount does not depend on service years. The sensitivity of the defined obligation to changes in the weighted principal assumption is: ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 48 Impact on defined obligation Change of assumption Increase in Decrease in assumption assumption 2022 2021 2022 2021 2022 2021 Discount rate 0.5 % 0.5 % -5% 5% 5,29% 5,29% Salary growth rate 0.5 % 0.5 % 5% 5% -5% 5% The above sensitivity analyses are based on a change while holding all other assumptions constant. The methods of assumptions used did not change compared to prior period. 29. Contingent liabilities and commitments Contingent liabilities As at 31 December 2022 and 2021, no guarantees were granted to third parties on behalf of the Group and the Company. Capital expenditure commitments As at 31 December 2022 and 2021, 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. 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 2022 2021 2022 2021 Net profit (loss) before income tax 12,593 596 13,978 1,540 Adjustments for: -depreciation (Note 14) 9,789 8,108 6,555 5,473 -amortisation (Note 15) 59 21 46 8 -write-off of property, plant and equipment and intangible assets (Notes 14 and 15) 66 23 66 23 -loss/(profit) on disposal of property, plant and equipment (Note 9) (2) (174) (2) (174) -interest expense (Note 11) 449 369 449 369 -interest income (Note 8) (221) (229) (221) (229) -amortisation of loans (230) (230) (230) (230) -inventory write-down to net realisable value (reversal) 5,383 (1,395) 5,383 (1,395) -impairment for doubtful receivables and write- offs of bad debts 3,214 - 3,214 - -accrual for vacation reserve and bonuses 808 - 808 - -amortisation of government grants received (Note 26) (397) (427) (206) (221) ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 49 -dividend income - - (1,173) (1,790) Changes in operating assets and liabilities: -trade and other receivables (7,446) (10,233) (12,051) (11,014) -inventories (18,582) 11,928 17,908) 12,269 -prepayments for milk supply (10) (726) (10) (297) -trade and other payable 6,436 5,914 5,621 5,209 Net cash generated from/(used in) operating activities 11,909 13,546 4,319 9,541 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 2022 2021 2022 2021 Net book amount (Note 14) 79 150 79 138 Profit/(Loss) on disposal of property, plant and equipment (Note 9) 2 174 2 174 Proceeds from sale of property, plant and equipment 81 324 81 312 31. Related-party transactions Main shareholders of the Company: At 31 December 2022 2021 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 92% of the share capital and votes of RSU Holding SIA). The group of persons acting in concert holds in total 81.93% (2021: 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: ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 50 Group Company At 31 December At 31 December 2022 2021 2022 2021 Purchase of milk from other related parties 6,946 3,156 62,371 38,559 Purchase of non-current assets - - - - Purchase of inventory - - 13,148 7,883 Purchases of services 344 134 3,269 1,650 Sales of transportation services to other related parties 42 42 1,515 4,796 Sales of production and other inventories 27,287 15,245 83,717 71,845 Interest charges on credit facility 11 20 19 74 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. (ii) Year-end balances arising from transactions with related parties: Group Company At 31 December At 31 December Non-interest bearing loans granted to directors (and 2022 2021 2022 2021 their family members) 4 8 4 8 Current loan receivable from Jekabpils Piena Kombinats SIA - - - 284 Current loan receivable from Dzūkijos Pienas KB 298 298 298 298 Advance payment received from Fonterra (Europe) Coöperatie U.A – non current 2,126 2,356 2,126 2,356 Advance payment received from Fonterra (Europe) Coöperatie U.A –current 230 230 230 230 Trade payables to other related parties 1,499 1,144 4,317 3,597 Trade receivables from other related parties 1,519 1,659 22,237 13,370 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 total value of sales of products related to the advance payment is EUR 24,055 thousand for the year 2022 (2021: EUR 14,468 thousand). 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 1,172,742 (2021: EUR 1,790,076). Dividends were paid out to Rokiškio ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 51 Sūris AB in May 2022 and 2021 respectively. Dividends were declared to the shareholders of the Company in the amount of EUR 3,501 thousand (2021: EUR 3,501 thousand) and paid out in 2022 (Note 22). (iii) Compensation of key management personnel Group Company At 31 December At 31 December 2022 2021 2022 2021 Salaries 243 227 225 211 Bonuses/management bonuses paid 17 - 17 - Accrual (reversal) for management bonuses - - - - Social security contributions 4 4 4 4 264 231 246 215 Key management personnel include 10 (2021: 9) members of the Board and management officers. 33. 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. 34. 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 2022 the Group’s and the Company’s sales of milk products to the clients in Russia, Belarus and Ukraine totaled EUR 2,600 EUR thousand – 0.7 percent of total sales (2021: 7,169 thousand – 2.8 percent). As at 31 December 2022 there were no accounts receivable from companies in Russia, Belarus and Ukraine (2021: EUR 1,531 thousand). 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 Audit of the financial statements under the 2022 2021 2022 2021 agreement 58 47 37 30 Tax consultation services 20 20 13 13 78 67 50 43 ROKIŠKIO SŪRIS AB CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2022 (All tabular amounts are in EUR ’000 unless otherwise stated) 52 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. 35. Environmental, Social and Governance (ESG) matters - Consideration of climate change and resulting climate related risks The Group is continuously assessing climate related risks and their impact on the Group’s operation, including the physical risks of climate change (such as severe weather events and the effects of rising temperatures), the policy changes and economic consequences of efforts being made towards decarbonisation of the economy. Further disclosure how the Group’s operations are impacted by the climate related risks is provided in the Group’s Social responsibility report and Sustainability report. For the identified climate related risks, the Group has assessed their impact on the recognition/derecognition of assets and liabilities and measurement of such assets and liabilities as well. As at date of preparing financial statements the Group’s management did not identify any material maters that could materially affect assets, liabilities or it’s measurement or require additional disclosures in the financial statements, in addition as disclosed in above mentioned reports. 36. Events after the reporting period On 27 February 2023, amendments to the Credit Agreement were signed with AB SEB bankas, increasing the credit limit to EUR 50,100 thousand and extending the final maturity of the credit limit to 28 February 2024. The Company's assets previously pledged in favour of the Bank were extended to secure the repayment of the loan. 54 CONTENTS MESSAGE FROM THE CEO ............................................................................................................................................................................................................ 56 GENERAL INFORMATION ............................................................................................................................................................................................................. 57 1. REPORTING PERIOD FOR WHICH THE ANNUAL REPORT IS PREPARED ......................................................................................................................... 57 2. BASIC INFORMATION ABOUT THE ISSUER: ......................................................................................................................................................................... 57 3. INFORMATION ABOUT THE COMPANY'S GROUP OF COMPANIES .................................................................................................................................. 57 4. NATURE OF THE PRINCIPAL ACTIVITIES OF THE COMPANY AND GROUP ................................................................................................................... 58 5. GROUP STRATEGY AND OBJECTIVES .................................................................................................................................................................................... 59 6. HIGHLIGHTS OF THE REPORTING PERIOD ........................................................................................................................................................................... 59 7.SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR ................................................................................................................................. 62 INFORMATION ON THE COMPANY'S AND GROUP'S ACTIVITIES ......................................................................................................................................... 62 8. GROUP OPERATING ENVIRONMENT ...................................................................................................................................................................................... 62 9. GROUP SALES ............................................................................................................................................................................................................................. 67 10. PRODUCTS, BRANDS AND ACHIEVEMENTS ....................................................................................................................................................................... 70 11.RISK FACTORS AND RISK MANAGEMENT ........................................................................................................................................................................... 72 ENSURING BUSINESS CONTINUITY OF ROKIŠKIO SŪRIS AB AND MANAGING COVID-19 RISKS ................................................................................. 80 12. INFORMATION ON FINANCIAL RISK MANAGEMENT OBJECTIVES AND HEDGING INSTRUMENTS USED ........................................................... 81 13.KEY FEATURES OF INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS RELEVANT TO THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................................................................................................................................ 81 14. FOOD SAFETY AND QUALITY ............................................................................................................................................................................................... 82 15. ENVIRONMENT ......................................................................................................................................................................................................................... 84 16. RESEARCH AND DEVELOPMENT ACTIVITIES .................................................................................................................................................................... 86 17. FINANCIAL PERFORMANCE ................................................................................................................................................................................................... 87 ADDITIONAL NON-FINANCIAL INFORMATION ....................................................................................................................................................................... 91 DISCLOSURE OF SUSTAINABILITY-RELATED INFORMATION ............................................................................................................................................. 91 18. GROUP ACTIVITY BY SEGMENT ........................................................................................................................................................................................... 91 19. INVESTMENTS .......................................................................................................................................................................................................................... 92 20. GROUP BUSINESS PLANS AND FORECASTS ....................................................................................................................................................................... 93 INFORMATION ON THE COMPANY'S SHAREHOLDERS AND SHARES ......................................................................................................................... 93 21. INFORMATION ON THE COMPANY'S SHARE CAPITAL ..................................................................................................................................................... 93 22. COMPANY CONTRACTS WITH BROKERAGE FIRMS ......................................................................................................................................................... 94 23. DETAILS OF TRADING IN THE ISSUER'S SECURITIES ON REGULATED MARKETS .................................................................................................... 94 24. RESTRICTIONS ON TRANSFER OF SECURITIES ................................................................................................................................................................. 96 25. PROCEDURE FOR AMENDING THE COMPANY'S ARTICLES OF ASSOCIATION ........................................................................................................... 96 26. INFORMATION ABOUT THE COMPANY'S SHAREHOLDERS ............................................................................................................................................ 97 27. RIGHTS OF SHAREHOLDERS .................................................................................................................................................................................................. 98 28. DETAILS OF THE ISSUER'S OWN SHARE BUYBACKS ....................................................................................................................................................... 99 29. DIVIDENDS ................................................................................................................................................................................................................................ 99 CORPORATE GOVERNANCE ...................................................................................................................................................................................................... 101 30. THE GOVERNING BODIES OF THE COMPANY .................................................................................................................................................................. 101 31. CORPORATE GOVERNANCE AND ORGANISATIONAL STRUCTURE OF THE COMPANY GROUP ........................................................................... 102 32. INFORMATION ON THE COMPETENCE AND PROCEDURE FOR CONVENING THE GENERAL MEETING OF SHAREHOLDERS ........................ 102 33. THE BOARD OF DIRECTORS OF THE COMPANY .............................................................................................................................................................. 106 34. COMMITTEES OF THE COMPANY ....................................................................................................................................................................................... 110 35. MANAGEMENT OF THE COMPANY .................................................................................................................................................................................... 112 36. STAFF ........................................................................................................................................................................................................................................ 112 55 37. INFORMATION ON AGREEMENTS BETWEEN THE COMPANY AND MEMBERS OF ITS ORGANS, MEMBERS OF COMMITTEES FORMED OR EMPLOYEES PROVIDING FOR COMPENSATION IN THE EVENT OF THEIR RESIGNATION OR DISMISSAL WITHOUT JUST CAUSE OR IF THEIR EMPLOYMENT IS TERMINATED AS A RESULT OF A CHANGE OF CONTROL OF THE ISSUER ..................................................................................... 116 INFORMATION ON RELATED PARTY TRANSACTIONS AND MATERIAL ARRANGEMENTS ......................................................................................... 116 38. RELATED PARTIES OF AB ROKIŠKIO SŪRIS GROUP ....................................................................................................................................................... 116 39. RELATED PARTY TRANSACTIONS ..................................................................................................................................................................................... 117 40. INFORMATION ON HARMFUL TRANSACTIONS ENTERED INTO ON BEHALF OF THE ISSUER .............................................................................. 117 OTHER INFORMATION ................................................................................................................................................................................................................ 118 41. AUDIT INFORMATION ........................................................................................................................................................................................................... 118 42. DATA ON PUBLICLY AVAILABLE INFORMATION ........................................................................................................................................................... 118 GOVERNANCE REPORT OF AB "ROKIŠKIO SŪRIS" ............................................................................................................................................................... 120 COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE ............................................................................................................................................. 124 56 MESSAGE FROM THE CEO Dear All, The first thing to say as we look back on 2022 is to rejoice. Last year, not only did the companies of Rokiškio sūris AB achieve record results in both sales and profits, but wage growth was also record high. In 2022, the company also paid record high prices to its main partners, raw milk producers, for the milk they buy. During 2022, important efficiency projects were also carried out, including the relocation of curd production to Utena and the reorientation of the Ukmergė plant in a completely new direction, which will allow the Group to benefit more from the sale of its products in future. The construction of a new modern hard cheese ripening building in Rokiškis was also started and successfully continued. The project to improve the organisation of work in the cheese ripening shop at the Rokiškis plant is also noteworthy. It is particularly pleasing that all these projects were carried out on schedule and within budget, despite the geopolitical storms caused by the war in Ukraine and inflation of almost 20%. In 2022, we have not forgotten a relatively new area for our company. Sustainability is increasingly becoming a normal part of the company's operations. The active work of the Sustainability Group, which has been expanded with new members, is increasingly involving the entire company team. It is raising awareness that sustainability is not a fashion statement, but an activity that helps create a better future for our children and grandchildren. To repeat, last year was a very good year. But as it was written on the ring of a famous legendary king, "It won't always be like this..." . Already by the end of 2022, the collapse of prices and demand in export markets has begun. Which reduced both company and farmer incomes. The deteriorating geopolitical situation, the on-going war in Ukraine, the challenges from China, all point to very turbulent times ahead. However, I believe that the accumulated reserves, the projects that have been launched and, most importantly, the experience and professionalism of the employees of AB Rokiškio sūris Group will allow the company to successfully overcome all the challenges and continue to be the leader in the Baltic dairy industry. Dalius Trumpa Director 57 GENERAL INFORMATION 1. Reporting period for which the annual report is prepared This 2022 consolidated report covers the period from 1 January 2022 to 31 December 2022. 2. Basic information about 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 Share trading code AB Nasdaq Vilnius RSU1L 3. Information about the Company's group of companies 31 December 2022 The Rokiškio sūris Group (the Group) consists of the parent company Rokiškio sūris AB and five subsidiaries (2021: parent company and five subsidiaries). 58 Main company: AB "Rokiškio sūris" (company code 173057512, registered office address, Pramonės g. 3, LT- 42150 Rokiškis) Subsidiaries of AB Rokiškio sūris: UAB "Rokiškio pienas" (company code 300561844, registered office address Pramonės g. 8, LT - 28216 Utena). Rokiškio sūris AB is the founder and sole shareholder of Rokiškio pienas UAB, holding 100 % of shares and votes. UAB "Rokiškio pieno gamyba" (company code 303055649, registered office address Pramonės g. 8, LT - 28216 Utena). Rokiškio sūris AB is the founder and sole shareholder of UAB Rokiškio pieno gamyba, holding 100 % of shares and votes. The Latvian company SIA Jekabpils piena kombinats (company code 45402008851, registered office address Akmenu iela 1, Jekabpils, Latvia LV-5201). AB Rokiškio sūris holds 100 % of the shares and votes of the company. The Latvian company SIA Kaunata (company code 240300369, registered office address Rogs, Kaunata pag., Rezeknes nov., Latvia), AB Rokiškio sūris owns 40 % of the company's shares, and UAB Rokiškio pienas owns 20 %. UAB "DairyHub.LT" (company code 305831304, registered office address Kauno g. 65, LT- 20118 Ukmergė). Rokiškio sūris AB is the founder and sole shareholder of UAB DairyHub.LT, holding 100 % of shares and votes. 4. Nature of the principal activities of the company and group The main activities of the Rokiškio sūris Group: •Dairy farming and cheese making (EVRK 10.51) AB "Rokiškio sūris": AB "Rokiškio sūris" is principally engaged in the production and marketing of fermented cheeses, whey products and skimmed milk flour. Subsidiaries: The main activity of UAB Rokiškio Pienas is the sale of fresh dairy products and fermented cheeses. The main activity of UAB Rokiškio pieno gamyba is the production of fresh dairy products (milk, kefir, sour milk, butter, cottage cheese, cottage cheese, sour cream, glazed cheese, desserts). SIA Jekabpils piena kombinats is active in the purchase of raw milk. SIA Kaunata's business is the purchase of raw milk. 59 UAB "DairyHub.LT" - preparation and sale of hard cheeses to final consumers in various countries around the world. 5. Group strategy and objectives 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. The Rokiškio sūris Group is guided by a 3-year strategic plan approved by the Board of Directors, the main provisions of which are presented below: MISSION: AB "Rokiškio sūris" = Reliable Professionals of the Milk Industry. VISION: In Lithuania, which has become Baltlandia, more than 1 million tonnes of raw milk per year are processed sustainably. OBJECTIVES: • Leadership in the dairy sector in the region. • Flexible production and sales of premium quality products that exceed consumer expectations. • To be the most attractive and reliable partner for dairy farmers. • Continuously increase shareholder value. • Achieving sustainability objectives along the entire chain. Achieving our goals • By increasing the amount of milk bought and processed by 5% each year. • We are targeting a net annual yield of 3%. • By continuously reducing greenhouse gas emissions, energy and water consumption and the use of non-recyclable packaging in the production process. 6. Highlights of the reporting period • On 7 April 2022, the Company received notification from Valdas Puzeras, an independent member of the Audit Committee, of his resignation as a member of the Company's Audit Committee with effect from 21 April 2022. 60 • The Ordinary General Meeting of Shareholders of AB Rokiškio sūris held on 29 April 2022: 1. Agreed with the Audit Committee's conclusion. 2. Approved the audited consolidated and Company financial statements for 2021. 3. Approved the allocation of profit/loss for 2021: The total dividend allocation is EUR 3,500,669.60. EUR 0.10 per ordinary registered share. 4. Approved the company's remuneration report. 5. It has taken the decision to acquire its own shares: Acquire treasury shares in the Company on the following terms: The purpose of acquiring treasury shares is to maintain and increase the company's share price; Maximum number of shares to be acquired - the total nominal value of the Company's treasury shares may not exceed 1/10 of the Company's authorised 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 share purchase price - the maximum purchase 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 decides to buy back its own shares and the minimum purchase 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 decides to buy back its own 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 Board of Directors, provided that the minimum sale price of the shares is equal to the acquisition price and that the sale procedure ensures 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 Name thousand EUR 1. Retained earnings of the Company for the year at the beginning of the year 74 432 2. Dividend for 2020 approved by shareholders (3 501) 3. Transferred from other reserves 1 116 4. Retained earnings (losses) for the year at the beginning of the year after payment of dividends and transfer to reserves 72 047 5. Net profit/(loss) of the Company for the year under review 1 558 6. Total distributable profit of the Company 73 605 7. Share of profits allocated to the statutory reserve - 8. Share of profit allocated to other reserves - 9. Share of profit allocated to dividends (3 501) 10. Share of profit allocated to annual payments (bonuses) to members of the Management Board, employee bonuses and other purposes, recorded in the Profit and Loss Account 17 11. Retained earnings (losses) at the end of the financial year to be carried forward to the following financial year 70 104 61 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 award and sale of the shares, the timing, the number of shares and the price of the shares and to carry out any other actions relating to the purchase and sale of own shares. The Company has a reserve of EUR 10.850 million for the acquisition of its own shares. 6. Elected a new member of the Company's Independent Audit Committee - Vilmantas Pečiūra. He is a Director of Virenda UAB. 7. Appointed the audit firm PricewaterhouseCoopers UAB to audit the 2022 annual consolidated financial statements of the Rokiškio sūris AB Group and the Parent Company and to evaluate the 2022 consolidated annual report. • Resignation of a member of the Board received on 11 July 2022 AB "Rokiškio sūris" (hereinafter referred to as the "Company") hereby informs that on 11 July 2022 it received a notice from the member of the Board of Directors, Mr Thijs Bosch, resigning from the position of a member of the Board of Directors of the Company as of 31 August 2022. Thijs Bosch was elected as a member of the Board of Directors of the Company on 10 December 2021. Thijs Bosch was a representative of the Company's strategic investor Fonterra and served as Managing Director for Europe of Fonterra Co-operative Group Limited. Thijs Bosch is resigning from the Board of the Company due to a change of employment and his departure from the Fonterra Group. In the event of the resignation of a member of the Board, an Extraordinary General Meeting of the Company's shareholders will be convened for the election of a new member of the Company's Board. • On 31 August 2022, the six-month results of the Rokiškio sūris Group for 2022 were announced: Consolidated unaudited sales of AB Rokiškio sūris Group for January-June 2022 amounted to EUR 168 217 thousand, i.e. 56.5% more than in the same period of 2021 (EUR 107 461 thousand). AB Rokiškio sūris Group earned a net profit of EUR 5 7811 thousand in the first 6 months of 2022. In contrast, the Group made a net loss of EUR 989 thousand in the first 6 months of 2021. The Group's positive performance was driven by a significant increase in global dairy prices in early 2022. However, the uncontrolled increase in energy prices and the highest raw milk price in Europe paid by Lithuanian dairy processors had a negative impact on the Group's financial results. •At the Extraordinary Meeting of Shareholders of AB Rokiškio sūris held on 7 October 2022, a new member of the Board, Mr Thomas Jan de Bruijn (Commercial Director of Fonterra Co- operative Group Limited), was elected to the Board of Directors of AB Rokiškio sūris until the expiry of the term of office of the current Board. The term of office of the members of the Board runs until 10 December 2025. 62 7.Significant events after the end of the financial year On 27 February 2023, amendments to the Credit Agreement were signed with AB SEB bankas, increasing the credit limit to EUR 50 100 thousand and extending the final maturity of the credit limit to 28 February 2024. Further information on significant events 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 2022. INFORMATION ON THE COMPANY'S AND GROUP'S ACTIVITIES 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 around 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 Register of Farm Animals (hereinafter referred to as the "FARM Register"), on 1 January 2023. 224.13 thousand dairy cows were registered in Lithuania on January 1, 2010, 7.3% less than in the same period of 2022. Milk is purchased from 14,40 thousand producers keeping 208,16 thousand cows, as part of the milk produced on farms is consumed for own use, sold or given for direct consumption. According to the PAIS data of the ŽŪIKVC, the number of cows in January-December 2022 decreased by 0.6%, the number of producers decreased by 10.6% and milk sales increased by 0.5% compared to the same period in 2021. The analysis of milk sales by farm and number of cows shows that milk purchases decreased from farms with 1-5 cows and 6-14 cows. Milk purchases from farms with 1-5 cows decreased by 10.0% between January and 63 December 2022, while milk sales from farms with 6-14 cows decreased by 6.6%. Milk sales from farms with 15 cows and more increased by 2.6% from 1 072.47 thousand tonnes (January-December 2021) to 1 100.28 thousand tonnes (January-December 2022). According to the PAIS data of ŽŪDC, in December 2022, the average buying-in price for natural milk (4.46% fat and 3.50% protein) in Lithuania amounted to EUR 509.51, which was 19.3% higher compared to December 2021 (EUR 427.35). The average price paid to producers in October 2022 for milk of natural fat content is the highest for the whole period December 2021 - December 2022, at 552.95 €. According to the data of the Milk Accountancy Information System (MAIS) maintained by the State Enterprise Agricultural Data Centre (hereinafter referred to as 'EACD PAIS'), approved milk purchasers bought 1 345,57 thousand tonnes of natural milk from 14 404 milk producers in January- December 2022 (1 339,62 thousand tonnes in January-December 2021). For large milk producers selling more than 40 t of raw milk per month, milk purchasers paid an average of €547.96 per tonne in December 2022 for natural milk (4.40% fat and 3.60% protein). This milk price decreased by 6.5% per month (€586.08 per tonne in November 2022). Here are the buying-in prices for natural milk for the years 2020-2022 for milk producers in the Rokiškio sūris group selling more than 40 t of milk per month: The chart shows that the 2022 procurement price for raw natural milk is at an all-time high compared to previous years. In 2022, raw milk farm gate prices in Lithuania were at an all-time high, with the average being on a par with the EU average and the price paid to large farms above the average. The rise in prices was driven by the situation on export markets, increased demand for dairy products, higher fertiliser and feed costs, and sharply rising energy costs. 64 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 the well-known and everyday fermented cheeses, processed cheeses, butter, cottage cheese and curd products, but also other fresh dairy products. At the end of 2022, the Ukmergės pieninė branch of UAB Rokiškio pieno gamyba, UAB Rokiškio pieninė, will cease production and curd production will be transferred to UAB Rokiškio pieno gamyba, UAB in Utena. The premises of Ukmergė pieninė are used for the cutting of GRAND hard cheese by UAB DairyHub.LT The products produced by the companies of the Rokiškio sūris Group are of high quality, which is why they have earned recognition not only in the domestic but also in export markets. In total, 490 640 tonnes of milk were processed in the Group in 2022, an increase of 6.3% compared to 2021. The production of fermented cheeses in 2022 increases by 7.0% compared to 2021. Hard cheese production is 48.4% higher than in 2021. Semi-hard cheese production is 15% higher and fresh 478,545 438,427 469,302 461,553 490,640 430,000 440,000 450,000 460,000 470,000 480,000 490,000 500,000 2018 2019 2020 2021 2022 VOLUME OF NATURAL MILK PROCESSED DURING 2018-2022 65 cheese production is 3.6% lower. The changes in the range are driven by market demand and price changes. In 2022, the production of GRAND hard cheese increased by 28.2%. The GRAND cheese technology was 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 outstanding 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. Rokiškio GRAND hard cheese with its subtle, elegant taste was recognised at the 2022 SUPERIOR TASTE AWARDS of the world's top chefs and sommeliers, and was awarded two gold stars. The International Taste Institute, a global organisation based in Brussels, organises a unique annual awards programme that evaluates and promotes only quality food and drink products with exceptional taste. For the third time in 2022 (previously in 2015 and 2019), Rokiškio GRAND has been awarded two Gold Stars. Rokiškio GRAND cheese is made in Rokiškis and is recognised worldwide. The company's priority is to increase and improve the production of GRAND hard cheese. Therefore, in 2021, new premises will be built with state-of-the-art 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 growing production volumes. Therefore, investments have been planned for the construction of a new warehouse for the long maturation and storage of GRAND cheese. Changes in production volumes of AB Rokiškio sūris Group in 2018-2022: Production / Year 2018 2019 2020 2021 2022 Fermented cheeses, t 36 214 31 745 32 617 35 357 37 831 Milk sugar, t 12 405 10 866 12 592 12 631 12 701 Butter and spreadable fat mixtures, t 7 891 8 143 8 333 5 451 5 816 Fresh milk products, t 48 596 47 370 46 833 45 365 42 317 WPC powder, t 2 635 2 384 2 484 2 615 2 648 Dried milk products, t (including WPC powder) 3 463 2 862 4 348 3 170 3 129 66 In 2022, the company will also produce 0.6% more milk sugar compared to 2021. This is due to the higher volume of milk processed and the knowledge acquired by the craftsmen and technologists to improve this technology. Cooperation with Fonterra New Zealand, one of the world's largest dairy producers, continues with successful whey products such as WPC (whey protein concentrate); IBI (whey protein isolate). This technology is continuously improved and the WPC range is expanded. In 2022, WPC production was 1.3% higher than in the previous year, 2021. The production of butter and spreadable fat mixtures in 2022 is 6.7% higher than in 2021. In 2022, AB Rokiškio sūris launched a new product - spreadable processed cheese with additives. In addition to the well-known and well-liked spreadable processed cheese with ham, a new addition to the market is spreadable processed cheese with chimichuri spices and chanterelles. 0 10,000 20,000 30,000 40,000 50,000 60,000 2018 2019 2020 2021 2022 PRODUCTION, t 2018-2022 Fermented cheeses, t Milk sugar, t Butter and spreadable fat mixtures, t Fresh milk products, t IBK flour, t Dried milk products, t 67 9. Group sales As every year, most of the company's production is exported. In 2022, Rokiškio Sūris will export its production to 42 countries worldwide (2021: 41 countries). During 2022, the Group resumed sales to Armenia, Belgium and India. Sales to Serbia have started. Discontinued sales to countries such as China, Moldova, Chile and South Africa. In 2022, the Group's exports accounted for around 65% of total sales. This is 5% more than in 2021. Italy remains the main and largest buyer of production. A large part of production is also exported to the Netherlands, Germany and Saudi Arabia. Sold Country names 2022 2021 Change thousand EUR % thousand EUR % % Lithuania 127 571 35.51 102 037 35.71 25.02 European countries 194 933 54.26 121 363 54.26 60.62 Middle East 16 372 4.56 3 561 4.56 359.76 Far East 9 576 2.66 9 576 2.66 96.03 North America 3 698 1.03 12 279 1.03 -69.88 Other countries 7 119 1.98 8 937 1.78 -20.34 Total: 359 269 100 359 269 100 41.97 68 In 2022, the Group's sales revenue amounted to EUR 359 269 thousand. Compared to 2021 (EUR 253 062 thousand), the Group's sales revenue increased by 41.97 %. The year 2022 on the dairy market could be divided into two parts: a rise in prices, and thus demand, until July, and a gradual fall in prices from mid/late July onwards. Sales to European countries increase by over 60% in 2022 compared to 2021. This is mainly due to price increases and increased demand for both cheese and whey protein, lactose and cream. The price increases that started in the second half of 2021 continued their upward trend until mid-July. The outbreak of the war in Ukraine and the unprecedented rise in energy prices rapidly increased the cost of dairy production, which consequently fell on the shoulders of buyers, pushing global inflation further up. EU gas prices have risen by as much as 150% in one year (July 2021 - July 2022). The price for whey protein also reached unprecedented levels in July 2022. From the beginning of 2022 until mid-July, rising wholesale prices for dairy products kept pace with demand. Buyers/manufacturers, seeing prices rising steadily, tried to buy as much as possible for their own production, as supply was not fully covered until July, especially for whey proteins. Thanks to the full recovery and renewed boom in tourism in Italy, Greece and other European countries, demand for fresh cheese continued to grow until the end of the summer, even at such high prices. In 2022, the company's production was exported mainly to Western European countries, as before. This is again due to the full recovery from the pandemic with the opening of the catering sector in European countries, the significant increase in tourism and the growing demand for all dairy products on export markets. Compared to 2021, sales to the US have fallen by almost 70% in 2022, as US dairy prices have always kept pace with European prices. At the same time, local producers still had stocks of local hard cheese to cover their demand. It was therefore more profitable for the Group to maximise the production of fresh cheese, such as Cagliata and Mozzarella, and to sell it to Italy, where, until the middle of the year, demand often exceeded supply. As in the past, the Group continued to sell its usual products - cream, milk flour and additional products from 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 for whey products, where demand outstripped supply throughout the half-year and prices for these products reached unprecedented highs at mid-year. Compared to 2021 prices, fat prices, like all dairy products, rose in the second half of the year. However, the price of cream was lower when converted into butter per unit of fat, so instead of cream the company produced butter for storage, where all butter stocks (and new production) were then sold to the Middle East, resulting in a percentage increase of as much as 359% compared to 2021. For all of the above reasons, exports to P.Korea have almost doubled compared to 2021. However, as mentioned before, the market reached a critical level for dairy prices in the middle of the year and started to slide downwards from July. Inflation, together with the rise in the interbank interest rate, has significantly reduced the purchasing power of the final consumer, thereby reducing the level of demand. As a consequence, prices for all dairy products started to fall steadily until the end of the year. 69 One of the biggest goals of the Rokiškio sūris Group is currently to penetrate the European and American retail/HORECA market for hard cheeses, especially Grand, i.e. to increase sales of value- added cheese, which the company is already actively doing. The rapidly rising raw material prices 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 2022, Rokiškio Grupė's consolidated sales turnover in the local market amounted to EUR 127 571 thousand, or 25.02 per cent more than in 2021 (2021 - EUR 102 037 thousand). A key reason for the increase in turnover is the sharp rise in output prices that starts in 2022, driven by record high prices for raw milk, energy and many other inputs. Domestic output price increases have also been directly influenced by the tens of percent increase in world commodity prices for dairy products, which has been passed on to retail products. At the end of 2022, this trend reversed and global prices started to fall, but as the retail market is inert, with domestic price rises delayed by several months, the decline has already moved into 2023. The year 2022 should be described as a challenging year for domestic consumption, with significant price increases in many categories leading to a fall in consumers' relative incomes, which has spilled over into consumption. In dairy categories (as in many others), total consumption has fallen by ~10%, which is probably the highest historical level in recent decades. On the other hand, the company expects these price disparities to gradually even out and would expect some increase in dairy consumption in 2023 (but remaining below the 2020-2021 level). The overall annual price increase on the domestic market in 2022 exceeded 30% and in individual categories (Butter, Sour Cream, Unripened Cheeses) 40%. In financial terms, for the above reasons (the increase in costs has not kept pace with the increase in sales prices), domestic sales in 2022 were loss-making, with export markets covering them. The total volume of production on the Lithuanian market (45.5 thousand tonnes) in 2022 was 11% lower than in 2021.The categories of Cottage cheese and its products, Sour cream had a higher than average decrease. Despite the difficult market, sales volumes in the Fermented Cheese and Kefir categories increased. The overall product mix remained stable during the year, at just over 200 products. The company aims for a balanced sales portfolio between own and private brands, the share of which has increased over the last year. This is also a signal that consumers are trying to save more. 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. The aim is to work with them in a mutually cooperative manner and to produce private labels for them. In 2022, the share of private labels in the company's basket exceeded 25%, helped by increased sales to neighbouring markets. Participation in this segment helps to make better use of the company's production capacity. The share of the domestic market in Rokiškio Grupė's sales has almost significantly decreased in recent years (from 40.3% to 35.6%), due to the fact that product prices on the global markets have been rising faster than at home. 70 10. Products, brands and achievements Recognition of sustainability projects of Rokiškio sūris AB "Rokiškio sūris is on the list of the most sustainable brands for the third year! Since 2011, a list of the most sustainable brands in Europe has been compiled. The Sustainable Brand Index™, one of the largest independent research companies in Europe, which examines how consumers perceive the sustainability of brands both in the overall context of the country as well as in individual sectors, has been conducted for the third time in Lithuania. Brands are selected for the study based on their market share, turnover and awareness. Overall, the results for Lithuania show that Rokiškio sūris is in the top 10 of the list of the most sustainable brands in the Food & Beverage category! The survey conducted by the creators of the ranking revealed that Lithuanian citizens care about sustainability. The majority of respondents take sustainability into account before deciding to buy a product or service. A study 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 care and demand that companies follow 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. Brands are evaluated and classified on the basis of their environmental and social responsibility, based on the definition of sustainability as defined by the United Nations Sustainable Development Goals. In 2022, the Rokiškio Sūris Group was awarded the EcoVadis Sustainability System rating with 57 points. The environmental performance is rated 70 points. The 36-month aged hard cheese Rokiškio GRAND joins the GRAND hard cheese family. 71 Also - Rokiškio GRAND hard cheeses aged 20 and 30 months, 100 g each These long-ripened hard cheeses have developed a special character, in other words, they have reached the peak of their flavour. Dense and layered texture, with a distinct crystalline appearance. Rich, spicy, heady, crumbly and at the same time easily breakable. The multitude of combinations makes you savour every bite. Aromatic and intense, expressive, deep and seemingly indescribable, having acquired so many notes thanks to the special attention paid to them and their long ageing in perfect conditions. New Bifi Active Plus yoghurt with cherries and chia seeds. And - NATURAL yoghurt made with only 2 ingredients: milk and live yoghurt bacteria. 72 • The product family TIKRAS supplemented by a new product - 600 g fixed weight cottage cheese. Cottage cheese is one of the oldest and most valuable fermented milk products. Its greatest benefits are calcium, easily absorbed protein and milk fat. 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 principal activity 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 accounts for the bulk of revenues. The cheese maturation process is rather long, which makes it difficult to react quickly to market changes and may affect the company's performance. 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 counterparties is controlled. The Group has credit insurance cover for its customers. For customers with higher financial risks, a prepayment system 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. 73 The company has specific HALAL and KOSHER quality certificates (for lactose, WPC, butter, skimmed and full-fat milk flour, buttermilk 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 aims to produce safe and quality dairy products with the lowest possible environmental impact. The Group is constantly looking for opportunities to optimise production, reduce costs and minimise and manage risks. Risk factors: Risk factor Source of risk Risk management. Economic factors: Supply of raw materials Small farms; Seasonality; Competition; Lack of a long-term public regulatory framework. The evolution of raw milk prices during the winter and summer periods. Significant movements in milk prices 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. The risk is 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. 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 for cheese and other products such as milk sugar, butter, WPC on the markets. The production of long-ripened hard cheese is a lengthy technological process that lasts between 9 and 24 months. This lengthy process may adversely affect the company's cash flow and results of operations. Internal competition between local producers. Cheaper Polish production on the Lithuanian market. Finding alternatives to imports. Increasing the range of products. Finding new markets. Working with business partners. Risk assessment for each client. 74 Increase in the volume and range of cheaper products from other EU countries. 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. Choosing energy suppliers. Resource saving, accounting and control measures. Process control, automation, modernisation. 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. Deploying technical tools. 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, emission accounting. Use of reserves at a municipal wastewater treatment plant. Cleaning and maintenance of sand oil traps and sewers. Improper management of waste from operations poses a threat to the environment Waste sorting and accounting. Ensuring proper storage conditions. Process management, staff training. Transfer to legitimate processors. Regulation and compliance. Risks are manifested in the high volume of regulation and change in legislation. Certified management system compliant with ISO 14001:2015 Environmental Management Systems. Requirements and guidelines for use. Continuous evaluation of legislation and developments. Reporting, evaluation of 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. Assessment of the impact of planned activities in accordance with the established procedures 75 In the production areas, climate control systems are installed, which not only maintain the set temperature and humidity parameters, but also work 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. Electricity, heat (steam) and water supply influence 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. If one substation loses voltage, the other is immediately energised. We have installed 90 MW of solar power plants. Heat energy is supplied by centralised urban heating networks using biofuels (wood) in Rokiškis and Utena. We also produce our own heat with two boiler plants in Utena and Ukmergė which use natural gas. Strict contractual conditions for the supply of thermal energy (steam), defining maximum requirements for pressure and temperature. Installed steam metering to control and ensure consumption and demand of the respective workshops. Boilers for hot water production. The heat pumps recover some of the heat from the environment and reduce the amount of heat energy purchased. Rokiškis receives most of its water supply from its own waterworks and treats wastewater in its own plants. The technological operation of wastewater treatment plants is strictly controlled, and 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 managed by the city's water management company. The water supply and wastewater treatment services for companies in Utena and Ukmergė are 76 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 and 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 the risk factor occurring and the severity of the consequences. Risk assessment covers the entire production chain, from the purchase of raw materials to delivery to the customer. Based on the level of risk identified and the methodology approved by the Codex Alimentarius Commission, categories of control measures are identified and control measures are defined. Identification of key control measures for the main risk factors at play; Assessing the effectiveness of operational controls to reduce risks to an acceptable level; Developing the necessary action plans to improve the control system; Regular risk management and monitoring of targets. Information security IT risks relate to the use of illegal software, lost and unrecoverable data, and data 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 limited to those rights and roles that are necessary for their work. A test environment is used to test changes to applications. Data loss is prevented by backing up data. All company computers have anti-virus software installed. Old computer equipment is replaced by new equipment with supported software versions. Occupational risk factors: Physical factors: Inadequate workplace design; Non-compliance with the general minimum requirements for work equipment; Mobile self-propelled, non-self- propelled work equipment; Potentially hazardous installations; Stability and robustness of structures; Workplaces and work equipment are maintained. Any deficiencies that may affect workers' health and safety are corrected. Controls for work equipment shall be clearly visible, identifiable and labelled. The work equipment shall have a control system that allows it to be brought to a complete and safe stop. Emergency stop devices shall be 77 Escape routes and exits; Fire detection and extinguishing; Electric current; Activities of other companies in the provision of services and other work for the company. 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 appropriate 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 from work equipment. Mobile work equipment shall be so arranged and constructed as to expose the worker to minimum risk. Such equipment is subject to regular maintenance, training and periodic health checks. Potentially hazardous installations are operated in accordance with the Law on the Maintenance of Potentially Hazardous Installations. Maintenance of potentially hazardous installations is carried out. Employees working with potentially hazardous equipment are trained, periodically checked for their knowledge and periodically checked for their health. To ensure the stability and robustness of buildings, maintenance is carried out in accordance with the technical building regulations. Evacuation routes are maintained and signposted. Fire extinguishing equipment and fire safety engineering systems are appropriate for the size and purpose of the buildings, the equipment in the buildings, the nature 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. Fire extinguishing equipment is labelled. Workplaces are 78 equipped with a ventilation system. Ventilation equipment is maintained and updated. Fire safety training and drills are organised for staff. Hazardous areas in workplaces are marked. Workstations have strong, stable floors. Workers are provided with special footwear that is slip-resistant. Electrical installations 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 installations. Periodic resistance measurements of electrical installations shall be carried out in accordance with the procedures laid down by law. In order to ensure the safety and health of workers, avoiding 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 appointed. Physical: Noise Lighting Chemical factors: Work equipment Inadequate or poorly installed and maintained lighting in workplaces is a major occupational risk factor, affecting workers' emotional stress, reducing productivity and increasing the number of accidents. Use of chemicals in laboratory testing, cleaning of work equipment and facilities. Use of personal protective equipment, compulsory health checks 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. The 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 79 Ergonomic factors: Manual work exists in many workplaces and training for workers. Use of personal protective equipment where hazardous chemical agents are likely. Artificial ventilation system in place. 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. Social factors: Finding and recruiting staff. Staff development, and integrating staff into work processes. Retaining staff and reducing turnover. Search for workers at the labour exchange. Cooperation with research institutions. Recommendations from employees working for the company. Internal company resources (encourages employees to develop their skills and qualifications). The company has a performance appraisal and development system. Staff development plans are drawn up each year. Training is organised both by sending employees to external seminars organised by suppliers and internally. 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 do not depend solely on the actions of the company. The company may be forced to increase investment in robotic production processes, i.e. replacing manual labour with robots. 80 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. Key risk areas: - Potential supply chain disruptions for raw materials and other materials used in production. The company's main raw material, milk, is purchased domestically and in adjacent regions, so there were no disruptions and no additional measures were needed. Stock levels of other essential materials have been reviewed and uninterrupted supply of materials is ensured. - Risk to workers' health, ensuring uninterrupted 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, - Measuring the temperature before entering the production area, - regulating the flow of staff, service providers and visitors, - use of personal protective equipment, - enterprise-wide use of rapid antigen testing. The measures taken 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. On the Russian invasion of Ukraine 24 February 2022 The Russian Federation launches a war in Ukraine, condemned by the world. Economic and financial sanctions were imposed on the Russian regime. The Group's management believes that the crisis has no material direct or indirect impact on the Group's operations, financial position, economic performance, markets or supply chains. The Group's leadership is closely monitoring the situation in Ukraine and the sanctions imposed to ensure compliance. 81 Further information on the Russian invasion of Ukraine is provided in note 34 to the consolidated and parent company financial statements of AB Rokiškio sūris as at 31 December 2022. 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 out of its business activities and damages caused 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 overall risk management. The financial risk factors of the Company and the Group are described in detail in Note 3 to the consolidated and parent company financial statements of AB Rokiškio sūris as at 31 December 2022. 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 preparation of the financial statements of the Company and the Subsidiaries, reviews IFRS to ensure that all changes in IFRS are implemented in the financial statements in a timely manner, analyses transactions material to the operations of the Company and the Subsidiaries, ensures that information is gathered from the Group companies and that it is timely and accurately processed and prepared 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 external and internal audits, and makes recommendations to remedy them. The preparation of financial statements in conformity with IFRSs 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 income and expense during the reporting period. These estimates are based on management's knowledge of current conditions and actions. The financial statements comprise the consolidated financial statements of the Group and the separate financial statements of the Company. 82 Subsidiaries (including special purpose entities) are entities in which the Group has control over financial and operating policies. Such control is generally exercised through the ownership of more than half of the voting shares. In assessing whether the Group controls another entity, the existence and effect of potential voting shares, whether presently held or convertible, are taken into account. 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 adherence of the external auditor and the audit firm to 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 product 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 place great emphasis on 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 international ISO standards (ISO 9001, ISO 14001). In order to meet the needs of customers, expand sales markets 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. It is recognised by retailers and brand owners worldwide; AB Rokiškio sūris successfully certified its food safety systems according to IFS requirements and achieved the highest Higher Level rating (> 95%). The IFS's core objective is to achieve the best possible product safety and quality management system so that consumers can have confidence in the products they buy. 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 83 safe and high quality products that meet customer expectations, the Food Safety, Quality and Safety systems are continuously reviewed and continuously improved. In 2022, changes related to the new IFS Version 7 requirements were introduced as part of the improvement of the company's existing food safety systems. The company places great emphasis on maintaining and improving its food safety and quality culture. Management and all employees are committed to the safe production and distribution of food, and all employees are aware of food safety hazards and the importance of food safety and hygiene. Adequate resources are allocated to this. The company's management reviews and approves annually its food safety, quality and environmental policy, which declares continuous improvement - "Our understanding is 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 its goals and objectives. 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 help 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 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" branch "Ukmergės pieninė" LT 81-01 P EB. In 2022, UAB Rokiškio pieno gamyba, a branch of UAB Ukmergės pieninė, ceased production. Part of the production activities were taken over by UAB DairyHub.LT - cutting and packaging of hard cheeses, production of glazed cottage cheese and cottage cheese. • DairyHub.LT has been granted approval number LT 81-08 P EC. 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 meets its objectives, improves the quality management of the laboratory and the quality of the tests performed by gaining professional experience and ensuring reliable tests. The performance of the laboratories of the Utena and Ukmergė establishments 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 Service. The company has granted HALAL and KOSHER specific WPC To ensure the satisfaction of customers' needs and to contribute to a more sustainable world, Ukmergės pieninė, a subsidiary of UAB Rokiškio pieno gamyba, was certified in accordance with the requirements of the RSPO Supply Chain Certification Systems version 2 on 22-03-2022. 84 9-4556-22-100-00 RSPO (Roundtable on sustainable palm oil) - A global initiative to make sustainable palm oil the standard. The RSPO is a non-profit organisation bringing together stakeholders - palm oil producers, processors, retailers, environmental and social non-governmental organisations (NGOs) - to develop and implement global standards for sustainable palm oil. Palm oil is used as an ingredient in the production of glazed cottage cheese. The changing geopolitical situation is looking for opportunities to expand outlets. The competent authorities of Taiwan, India have issued authorisations to export products to these countries, with approved exporter status. For more information on product safety and quality, see the company's Sustainability Report (Social. Product safety and quality). 15. Environment 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 from industrial 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. The establishment UAB Rokiškio pieno gamyba in Utena is classified as an installation for which an IPPC permit is required. The integrated pollution prevention and control permit was issued on 27.01.2006 No TU(1)-37, amended on 09.08.2017 No TU(1)-37/T-U.4-5/2017. The Ukmergė branch of UAB Rokiškio pieno gamyba, and from 01.11.2022 UAB DairyHub.Lt are not required to have an IPPC permit. The Best Available Techniques (BREF), resource inputs 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. BREF reports are part of the environmental IPPC permits. Environmental monitoring programmes to monitor environmental impacts in 2022: 1. Monitoring programme for the wastewater discharged by AB Rokiškio sūris after treatment at the Ruopiškis (Alseta) lake in Rokiškis district; 2. Groundwater monitoring programme for the AB "Rokiškio sūris" water point; 85 3. Groundwater monitoring programme for AB Rokiškio sūris petrol stations in Rokiškis and Obeliai. The monitoring programmes are carried out by the environmental engineering research company Geoaplinka UAB, and the reports have been submitted to the Environmental Protection Agency, and no adverse environmental effects have been identified; 4. Environmental monitoring programme for AB Rokiškio sūris farm facilities (monitoring of pollutant emissions/discharges). 5. Environmental monitoring programme of UAB "Rokiškio pieno gamyba" (monitoring of pollutants emitted/released from pollution sources). We carry out the identified tests at 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 2025, 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 2022. Rokiškio sūris AB - environmental performance in 2022: Steam condensate return system from remote plants has been extended. This reduces heat and water losses. The volume of condensate returned is increased by 8.7%. To save fuel, vehicle fuel rates are controlled, consumption is recorded and routes are optimised. Overall fuel consumption increased slightly by 1.9%, while fuel consumption per tonne of raw material transported increased by 3.6% to 5.44 l/t raw material. Car park. The vehicle fleet is being gradually renewed and old cars are being phased out to reduce fuel consumption and emissions. In 2022, 21 new vehicles were purchased and 22 vehicles were written off or sold. Among the vehicles in use, 18 units (7.6%) are hybrid vehicles. The total fleet consists of 237 vehicles: 138 trucks, 5 petrol, 125 diesel, 6 tractors, 2 other vehicles; 99 cars, 34 petrol, 65 diesel. 51% of the vehicles are Euro 6 compliant. Eco-friendly packaging: in 2022, we will use a total of 4,361.6 tonnes of packaging. The breakdown of packaging by type is given in the table below in tonnes and percentage: Packaging (t) % Plastics 905,0 20.8% Paper, cardboard 987,6 22.6% Metal 38,5 0.9% Combined 614,4 14.1% Wooden 1 816,0 41.6% Total: 4 361,6 The share of recycled packaging is 79.9%. It is known that 70% of cardboard is recycled. 86 We follow packaging manufacturers' news, 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 (Environment). 16. Research and development activities AB Rokiškio sūris is always looking for ways to make the company more efficient, to continuously increase revenues and to achieve the highest quality, which is why the company invests constantly. In 2022, the Company has earmarked EUR 13.7 million for investments. The development of the Grand hard cheese technology also continues, with investments of EUR 1.39 million, and the construction of a cheese ripening/drying building is scheduled for completion in 2023. A major focus is on improving operational efficiency and developing new technologies to reduce production and operating costs. To this end, a project to digitise the paper logs was launched in 2022. The digitised journals will provide a convenient and time-saving tool for filling in and analysing data records. The constant goal of the companies of the Rokiškio sūris Group is to ensure the production and supply to the consumer of products that meet the highest food safety and quality standards and that create the greatest added value. To this end, research activities are constantly being 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). New products are developed in collaboration with scientific institutions to meet the needs of today's consumers. Product development takes into account sustainable raw materials and technologies, and looks for added values for product functionality (products enriched with vitamins, milk proteins). The company's specialists regularly take part 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. The company works closely with brands such as LIDL, whose products are certified to EN ISO 17025 by the Eurofins Eurofins laboratory, as well as Mars Netherlands, Mars UK, the IKI supermarket chain and others that place great emphasis on exceptional quality. Laboratory tests of products are carried out both in the laboratories of the Group's companies 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 (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. 87 The efficiency of production processes and laboratory activities of AB Rokiškio sūris is ensured by the laboratory information system LabdataLims implemented in 2019. The laboratory information system successfully collects all data related to laboratory tests. The laboratory information system is protected against unauthorised access, and the system is accessible only within the internal network of AB Rokiškio sūris. To better understand market needs, the company has a regular partnership with NIELSEN, an expert in the field, both in terms of purchasing its services and in terms of seminars. Another way of conducting market research is by participating in global exhibitions in the most important regions, working with both the expertise of the largest customers and the representatives of the largest suppliers. AB Rokiškio sūris has established a new subsidiary in Ukmergė - UAB DairyHub.Lt in 2022. The company specialises in packaging hard cheese GRAND for retail sale. During 2022, Rokiškio sūris subsidiary UAB Rokiškio pieno gamyba expanded its product range and installed the latest production lines for cottage cheese products. 17. FINANCIAL PERFORMANCE Alternative performance indicators 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 indicators and the methodology for calculating them: Financial indicators (EUR thousand) 2022 2021 2020 2019 2018 Sales revenue 359 269 253 062 210 829 210 423 203 675 Gross profit 39 888 18 627 21 388 21 902 19 500 EBITDA 22 890 9 094 13 431 13 834 10 865 EBIT 13 042 965 4 171 4 101 1 193 Operating profit 13 042 965 4 171 4 101 1 648 Profit before tax (EBT) 12 593 596 3 972 3 914 1 619 Net profit/loss 12 514 553 4 061 4 101 1 918 Fixed assets 86 310 82 965 76 646 62 294 64 140 Short-term assets 135 340 119 902 120 424 106 774 106 071 Total assets 221 650 202 867 197 070 169 068 170 211 Shareholders' equity 151 449 142 480 145 428 130 771 130 319 Profitability (%) Return on assets [ROA] 6.14 0.28 2.22 2.42 1.15 88 Return on equity [ROE] 8.51 0.38 2.94 3.14 1.45 Gross profit margin 11.10 7.36 10.14 10.41 9.57 EBITDA margin 6.37 3.59 6.37 6.57 5.33 EBIT margin 3.63 0.38 1.98 1.97 0.59 Return on constant capital employed [ROCE] 6.61 0.53 2.45 2.67 0.76 Profitability ratio [EBT margin] 3.51 0.24 1.88 1.86 0.79 Net profit margin 3.48 0.22 1.93 1.95 0.94 Financial structure Liabilities/equity ratio 0.46 0.42 0.36 0.29 0.31 Equity to assets ratio 0.68 0.70 0.74 0.77 0.77 Debt-to-equity ratio 0.20 0.19 0.18 0.12 0.11 Debt ratio 0.32 0.30 0.26 0.23 0.23 Gross liquidity ratio 2.35 2.77 2.70 3.18 2.92 Market value indicators Share price to earnings per share ratio [P/E ratio] 8.00 144 24.33 21.00 50.20 Net earnings per share 0.37 0.02 0.12 0.12 0.05 Name of indicator Methodology for calculating the indicator Value of indicator EBITDA Earnings before interest, tax, depreciation and amortisation. EBITDA - operating profit before depreciation, amortisation and impairment of fixed assets - helps investors assess the potential for profit generation before investing in fixed assets. EBITDA margin EBITDA / Revenue EBITDA to revenue ratio shows the efficiency of a company's operations. EBIT Earnings before interest and tax, i.e. net profit + corporation tax + finance costs. EBIT - operating profit. EBIT is a very important indicator as operating profit is used to pay all liabilities to creditors. It is a good indicator of a company's ability to generate cash flow. EBT Profit before tax, i.e. net profit + corporation tax. Profit before net investment and financing activities and income tax. Average return on assets [ROA] Ratio of operating profit for the last 12 months to average total assets for the last 12 months. This indicator shows how efficiently a company's assets are managed, i.e. how much net profit is generated for every euro of assets, which is one of the most popular measures of a company's performance Rate of return on equity [ROE] Ratio of average (net) profit for the last 12 months to average equity for the last 12 months. The return on equity (or return on equity) shows how many euros of net profit are generated per euro of equity. This indicator is important for shareholders in assessing the return on their past investment in the company. Return on constant capital employed [ROCE] Ratio of the sum of operating profit (EBIT) and financial operating income for the last 12 months to the average capital employed for the last 12 months. The ROCE profitability ratio measures the return on the funds required for the company's ongoing operations. It is often compared with the interest rates on loans available on the market at the time. The ROCE of a company is considered to be higher than the cost of borrowed capital at that time. 89 Liabilities/equity ratio Liabilities/Equity The liabilities/equity ratio shows the amount of a company's total long-term and short-term liabilities per euro of equity. Debt-to-assets ratio Financial debts (long-term + short- term)/ Assets It is a financial ratio that compares a company's financial debts to its total assets. The ratio shows how much of the company's assets are financed by debt. Debt-to-equity ratio Financial debts (long-term + short- term)/Equity This is one of the main indicators of financial leverage. The debt-to-equity ratio shows how many euros of short-term and long-term debt are held per euro of equity. The debt calculation takes into account all the interest-bearing liabilities of the company. Debt ratio Liabilities to assets ratio The debt ratio reflects the proportion of a company's assets that are acquired with borrowed funds. Gross liquidity ratio Ratio of current assets to current liabilities The current ratio measures the ability of an enterprise to meet its short-term liabilities using its current assets. P/E (share price/earnings ratio) Share price at the end of the period / (Net profit/Shares) The share price/earnings ratio reflects how much an investor pays per euro of a company's net profit earned in the previous period. Earnings per share Net profit/Shares Earnings per share shows how much a company earns in net profit per share outstanding. Profit/(loss) statement In 2022, AB Rokiškio sūris Group's sales revenue amounted to EUR 359 269 thousand, an increase of 42% compared to 2021 (in 2021 the Group's sales revenue amounted to EUR 253 062 thousand). 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2022 2021 2020 2019 2018 Financial indicators (EUR thousand) Gross profit Net profit EBITDA EBIT Profit before tax (EBT) 90 In 2022, the main share of revenue is 53.3% (52.1% in 2021) from sales of fermented cheeses. In volume terms, sales of fermented cheeses in 2022 were 2% higher than in 2021, but in value terms the increase was as much as 44%. This was due to the significant increase in world dairy sales prices following the covid pandemic both in Europe and the US. The selling prices of whey products more than doubled in 2022. Compared to 2021, these products were sold at significantly higher prices due to increased demand. Exports of cream in 2022 have increased due to increased demand. Sales volumes and prices in 2022 were higher and revenues were 71% higher than in 2021. The focus of the market developments has been on butter or cream production. Butter sales increased by 54% compared to 2021. The main factor behind the increase in these revenues was the increase in export prices. In 2022, sales of fresh dairy products increased by €7.9 million compared to 2021. This is due to an increase in commodity selling prices. Costs: In 2022, the Rokiškio sūris Group will incur costs of sales of products of EUR 319 381 thousand (EUR 234 435 thousand in 2021). In 2022, the cost of sales increased by 36.2% or EUR 84 946 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, services, etc. due to the war. The largest part of the costs in 2022 (€256,045 thousand) is made up of raw materials and assembly products (€168,571 thousand in 2021). An increase of EUR 87 474 thousand. Sales, marketing and general administrative expenses as a percentage of turnover amounted to 7.6% in 2022 (EUR 27 200 thousand) and 7.1% in 2021 (EUR 18 092 thousand). In 2022, sales and marketing costs increased by 22% (EUR 15 258 thousand), while in 2021 they amounted to (EUR 12 483 thousand). The increase in sales and marketing costs in 2022 is due to the increase in sales volumes of cheeses and an increase in transport costs, freight costs and fuel prices. Profit: The consolidated audited net profit of the Rokiškio sūris Group for 2022 is EUR 12 514 thousand, i.e. EUR 11 961 thousand higher than in 2021 (EUR 553 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 increase in profits was the rapid recovery in sales prices and demand for dairy products following the pandemic, which continued until the end of 2022. The net profit margin of the Rokiškio sūris Group was 3.48% in 2022 (0.22% in 2021). EBITDA in 2022 of EUR 22,890 thousand, i.e. 2.5 times higher compared to 2021 (EUR 9,094 thousand). EBITDA margin of 6.37% in 2022 (3.59% in 2021). 91 Additional non-financial information Disclosure of Sustainability-related information The Consolidated Social Responsibility Report and Sustainability Report of the Rokiškio sūris Group are presented for the period from 1 January to 31 December 2022 and cover the activities of the entire Group. The Sustainability Report is published as a stand-alone document and as part of the Group's annual report. This Social Responsibility Report and Sustainability Report is the Group's report and complies with the Global Reporting Initiative (GRI) standards (2021 update) and the Bank of Lithuania's recommendations on disclosure of sustainability-related information. The content of the report is based on the principle of materiality and the principles of the United Nations (UN) Global Compact. It provides information on the Group's contribution to the UN Sustainable Development Goals (SDGs). The information is also in line with Nasdaq's U.S. disclosure guidelines and describes activities and achievements in the areas of environmental, social and governance (ESG). 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. The two main segments presented in the Group's business financial statements are: - Fresh dairy products - Cheese and other milk products Transactions between operating segments are conducted on normal commercial terms. The number of segment customers, each of which generates 10% of the segment's total revenue, is: - Fresh dairy products: 2 external customers - Cheese and other dairy products: 1 external customer Below is information on the impact of each of the operating segments on the Group's financial performance. 2022 2021 Change (%) Total sales revenue (EUR thousand): 359 269 253 062 41.97 Fresh dairy products 107 228 86 869 23.44 Cheese and other milk products 252 041 161 193 56.36 Total gross profit (EUR thousand): 39 888 18 627 114.13 Fresh dairy products 4 417 8 268 -46.58 Cheese and other milk products 35 471 10 359 242.42 92 Gross profit by segment (EUR thousand) 19. Investments In 2022, AB Rokiškio sūris continued its active, sustainable development and renewal. Particular attention was paid to innovative solutions and sustainability, and to what enables us to remain competitive today and in the future. The exploitation of the opportunities offered by technology has strengthened the company's investment policy, which has increased its competitiveness, the production of higher value-added products, and the uptake of new products and innovative technologies. The policy of implementing the company's strategic priorities was continued. As every year, investments have been made to protect the environment and to rationalise the allocation and use of energy resources. Part of the investment has been for the modernisation of existing equipment and buildings. During the financial year 2022, the value of investments made by Rokiškio sūris Group amounted to EUR 13.7 million. One of the major investments in Rokiškis was the completion of a building housing a robotic packaging line for hard Grand cheese. The investment amounted to €1.37 million. Another major investment was the installation of a slicing line for semi-hard cheeses in the cheese ripening shop. Much attention has been paid to reducing the cost of energy resources and using energy efficiently. In the subsidiary in Utena, the biggest investment in 2022 was the introduction of a curd production line. 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Fresh dairy products Cheese and other products Fresh dairy products Cheese and other products 2022 3,097 36,791 2021 9,046 9,581 2020 11,067 10,321 2019 11,983 9,919 93 20. Group business plans and forecasts The investment objective of AB Rokiškio sūris is to continue to increase production efficiency, focusing on the modernisation, repair and renewal of production units and their equipment. It also focuses on flexible management of energy resources. As every year, the plan is to invest in solving environmental problems, introducing sustainable solutions and generating a clear and strong position. The construction of the cheese ripening warehouse building (2900m 2 ) is scheduled for completion in 2023 and will be equipped with new modern refrigeration equipment. The investment in this warehouse is worth €3.4 million. During 2023, investments will be made in works and repairs in workshops and units related to production and economic activities. Each investment is planned with a view to the future. The Group expects to invest €10.8 million in 2023 to achieve its goals and to expand. The main areas of investment for 2023 are: • Acquisition of equipment for the production of cheese (cheese making, curing, ripening, milk sugar, cheese melting, modernisation of existing equipment, repairs, renovation and completion of ongoing investments in workshops and buildings). • For raw milk and product quality testing and evaluation; • To improve the competitiveness of the company; • Saving, rational use and distribution of energy resources; • Reducing environmental impacts, developing sustainability; • Improving working conditions for employees and the production environment; • Measures to improve sanitation and hygiene in production and service units; • To meet customer needs for the products produced; • For sustainability purposes; • Transport Spec. The subsidiary UAB DairyHub.Lt plans to invest in cheese slicing equipment. INFORMATION ON THE COMPANY'S SHAREHOLDERS AND SHARES 21. Information on the Company's share capital 31 December 2022 The authorised capital of Rokiškio sūris AB consisted of: Number of shares Nominal value Total nominal Share of authorised capital (%) Type of shares (pcs.) (EUR) Value (EUR) Ordinary registered shares promotions 35 867 970 0.29 10,401,711.30 100 94 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 the Company's securities issued by the Company as well as for provision of investment services. 23. Details of 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 (SSSE 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 has not issued any debt securities to the public. There are no debt securities registered and issued for private circulation. There are no securities that do not represent a participation in the authorised capital but whose circulation is regulated by the Securities Law of the Republic of Lithuania. There was no trading on other exchanges or other organised markets. Trading statistics for the Company's shares: 2018 2019 2020 2021 2022 Opening price, EUR 2.75 2.51 2.54 3 2.88 Closing price, EUR 2.51 2.52 2.92 2.88 2.96 Maximum price, EUR 2.81 2.75 2.98 3.18 3.20 Lowest price, EUR 2.25 2.2 2.1 2.6 2.50 Turnover, pcs. 277 058 159 107 161 788 218 200 196 098 Turnover, million euro 0.73 0.4 0.65 0.63 0.57 Capitalisation, million euro 90.03 90.39 104.73 103.3 106.17 95 Dynamics of the Company's share price and turnover during the reporting period Source - AB Nasdaq Vilnius website Rokiškio sūris | Trading - Nasdaq Baltic Exchange (nasdaqbaltic.com) Dynamics of the company's share price and turnover over 4 years Source - AB Nasdaq Vilnius website Rokiškio sūris | Trading - Nasdaq Baltic Exchange (nasdaqbaltic.com) 96 Dynamics of the company's shares (RSU1L), OMX_Baltic_Benchmark_GI and OMX_Baltic_GI indices: Source - AB Nasdaq Vilnius: Baltic Market Indices - Nasdaq Baltic Exchange (nasdaqbaltic.com) Chart data: 24. Restrictions on transfer of securities There are no restrictions on holdings 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 97 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. If the General Meeting of Shareholders adopts a decision to amend the Company's Articles of Association, 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 Articles of Association of the Company 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. by the decision of the Extraordinary General Meeting of Shareholders of AB Rokiškio sūris. 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 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 about the Company's shareholders The total number of shareholders of AB Rokiškio sūris on 31 December 2022 was 5 464. Shareholding held by a group of shareholders (31.12.2022): Name, surname Company name Company code Address Owned With persons acting in concert Number of ordinary registered shares Share of capital and votes % Share of capital and votes % UAB Pieno Industri Investments Management Company code 173748857 Pramonės g. 3, Rokiškis Lithuania 9 758 312 27.21 81.93 RSU Holding Ltd, reg. No 40103739795 Elizabetes iela 45/47, LV-1010 Riga 8 953 883 24.96 Antanas Trumpa Chairman of the Management Board of the Company Sodų 41a, Rokiskis 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 98 Investment and pension funds managed by INVL Asset Management UAB Gynėjų g.14, Vilnius Lithuania 2 073 615 5.78 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), strategic investor Fonterra (Europe) Coöperatie U.A. (10.00% of the Company's authorised capital and votes) and Antanas Trumpa (19.76% of the Company's authorised capital and votes). Distribution of shareholders of AB "Rokiškio sūris" 31 December 2022 27. Rights of shareholders Shareholders have the following moral rights: 1) attend general meetings of shareholders; 2) submit questions to the company in advance on items on the agenda of general meetings of shareholders; 3) voting rights at general meetings of shareholders, based on the rights attached to the shares; 4) to receive the information on the company referred to in Article 18(1) of the Law on Public Limited Companies; 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 board of directors, 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, as well as in 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 moral rights established by the laws of the Republic of Lithuania. 99 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 gratuitously 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 Public Limited Companies and in the case provided for in Article 47 1 of the Law on Public Limited Companies; 4) the right of first refusal to acquire shares or convertible bonds issued by the company, unless the General Meeting of Shareholders decides to cancel the right of first refusal for all shareholders in accordance with the procedure established by the Law on Companies of the Republic of Lithuania; 5) lend money to the company in the manner prescribed by law, but a company may not pledge its assets to its shareholders when borrowing from them. 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 liquidating company; 7) to have other property rights established 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 General Meeting of Shareholders which adopted the relevant resolution. 28. Details of the issuer's own share buybacks During the reporting period (1 January 2022 to 31 December 2022) AB Rokiškio sūris did not acquire or dispose of any of its own shares. Based on own share repurchases in previous years 31 December 2021 Rokiškio sūris AB held 861 274 treasury shares, representing 2.40% of the company's 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 a reserve of EUR 10.850 million for the acquisition of its own shares. The shares were acquired through the Nasdaq Vilnius Stock Exchange's official offering market. The total price of the shares acquired by AB Rokiškio sūris amounts to 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 29 April 2022, approved the audited consolidated financial statements and the Company's financial statements for 100 2021 and the distribution of the Company's profit for 2021. Dividends were distributed in the amount of EUR 3,500,669.60 or EUR 0.10 per ordinary registered share. Below are the dividends declared and paid over the last 10 years: Per year Amount of dividends declared, EUR Dividend per share EUR 2012 1,015,578.08 0.029 2013 1,015,578.08 0.029 2014 No dividends were 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 2021 3,500,669.60 0.10 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 of Directors to be used for investment (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 decide to declare and pay dividends if any of the following conditions are met: 1) has outstanding debts with the company which have fallen due before the decision is taken; 2) the amount of distributable profit (loss) for the financial year 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 are payable to those persons who, at the close of business on the record date for the rights of the General Meeting of Shareholders that declared the dividend (the close of business on the tenth 101 business day after the General Meeting that adopted the resolution), 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 for a financial year or for a period of less than a financial year. Dividends for periods shorter than the financial year are distributed 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 the case 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) a set of interim financial statements for a period of less than one financial year; (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 the part of the profit for the period shorter than the financial year that, in accordance with the Law on Companies of the Republic of Lithuania or the Articles of Association of the Company, is to be allocated to the reserves; 4. the company has no outstanding debts that have fallen due before the decision is taken and would be able to meet its obligations for the current financial year if the dividend were paid. If a dividend is declared for a period shorter than a financial year, it may not be declared for another period shorter than a financial year earlier than 3 months. CORPORATE GOVERNANCE 30. The governing bodies of the Company The Articles of Association of AB Rokiškio sūris, registered in the Register of Legal Entities, provide for the following governing bodies of the Company: • General Meeting of Shareholders, • Board, • Company manager (director). The Company does not have a Supervisory Board. 102 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. 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 AB Rokiškio sūris 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. 103 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 close of business on the record date of the meeting shall be entitled to attend and vote at a general meeting of shareholders or a reconvened general meeting of shareholders, in person or by proxy, or by persons with whom an agreement to transfer the voting right has been concluded, except for the exceptions provided for by law. 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 repeated general meeting. A shareholder may vote in writing by completing a general ballot paper. The form of the general voting ballot is available on the Company's website www.rokiskio.com in the Investors section, and is also attached to 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 take decisions and shall be deemed to have taken place when shareholders holding more than ½ of the total voting rights 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 prescribed in Article 26 1 (3) of the Law on Companies not later than 14 days before the reconvened general meeting of shareholders. The Annual General Meeting of Shareholders must be held annually at the latest within 4 months of the end of the financial year. Shareholders holding shares representing 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 decisions on the proposed items or, where no decisions 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. 104 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 register of shareholders. This list shall indicate the number of votes attached to each shareholder's shareholding. A person attending a General Meeting of Shareholders and entitled to vote must produce proof of identity. A person who is not a shareholder shall, in addition to this document, produce a document confirming his/her right to vote at the General Meeting. The requirement to provide 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 the shareholder so requests, the company shall, not later than 10 days before the general meeting, send the general ballot paper by registered mail or deliver it personally by hand and by signature free of charge. The completed postal ballot paper shall be signed by the shareholder or by 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 on working days at the registered office of the company to the address indicated above. 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 has the exclusive right to: 1) amend the company's articles of association; 2) change your company's registered office; 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 of the company; 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 Company's CEO; 5) to appoint and recall an auditor or audit firm to audit the annual financial statements, and to determine the terms of remuneration for audit services; 6) decide on the approval of the remuneration policy for public limited liability companies whose shares are admitted to trading on a regulated market; 7) determine the class, number, nominal value and minimum issue price of shares to be issued by the company; 8) to adopt a decision to convert 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) approve the annual accounts; 11) decide on the allocation of profits (losses); 12) decide on the establishment, use, reduction and elimination of reserves; 105 13. approve the interim financial statements drawn up for the purpose of deciding on the distribution of dividends for a period of less than one financial year; 14. to decide on the granting of dividends for a period of less than a financial year; 15. decide to issue convertible bonds; 16) decide to withdraw 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 take a decision to reduce the authorised capital, except for the exceptions provided for in the Law on Joint Stock Companies; 19) to decide on the acquisition by the company of its own shares; 20) to decide on the award of Shares to employees and/or members of the organs, 21) approve the rules for the award of Shares; 22) decide on the reorganisation or separation of the company and approve the terms of the reorganisation or separation; 23) decide to reorganise the company; 24) to take decisions on the restructuring of the Company in the cases set out in the Law on Corporate Restructuring; 25) to take a decision to liquidate the company, to cancel the liquidation of the company, except for the exceptions set out in the Companies Act; 26) to elect and remove the company's liquidator, except for the exceptions set out 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 such matters are not within the competence of other organs of the company under the Companies Act and that they are not essentially functions of the management bodies. A resolution of the General Meeting of Shareholders shall be deemed to have been passed 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 decided by a 2/3 (two-thirds) vote of the total number of shares held by 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 and entitled to vote at the General Meeting of Shareholders. The Company's General Meetings of Shareholders are convened in 2022: During 2022, 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 29 April 2022, the shareholders were presented with the consolidated annual report of AB Rokiškio sūris for 2021 and the auditor's report on the consolidated financial statements for 2021 and the annual report, and the audit committee's report was approved, and the audit committee's opinion was approved, and the consolidated financial statements for the year 2021 were approved. The consolidated and consolidated financial statements were approved, the Company's 2021 profit distribution was approved, a dividend of EUR 0.10 per ordinary registered share (total dividend of EUR 3,500,669.60) was distributed, and EUR 17,000 per ordinary registered share was distributed. A decision to buy back up to 10% of own shares was adopted, the remuneration report of the CEO and the members of the Board of Directors of AB Rokiškio sūris was approved, a new independent 106 member of the Audit Committee, Mr Vilmantas Pečiūra, was elected (Director of UAB Virenda), and the auditing firm UAB PricewaterhouseCoopers was selected for the audit of the 2022 annual consolidated financial statements of AB Rokiškio sūris Group and the Parent Company. At the Extraordinary General Meeting of the Company held on 7 October 2022, a new member of the Board of Directors, Thomas Jan de Bruijn (Commercial Director of Fonrerra Co-operative Group Limited), was elected. He replaces Thijs Bosch (Managing Director Europe, Fonrerra Co- operative Group Limited), a member of the strategic investor Fonterra, who resigned. Both General Meetings of Shareholders of AB Rokiškio sūris held in 2022 were attended by the Company's CEO, the Chairman of the Company's Board of Directors and the Company's CFO. 33. The 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 would have 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 Board is dismissed, resigns or otherwise ceases to hold office before the end of its term of office, a new Board shall be elected for a new term of office. If individual Board members are elected, they shall be elected only until the end of the term of office of the existing Board. The Board can take decisions and a meeting will be considered to have taken place when 2/3 or more of the members of the Board are present. Members of the Board who have voted 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 6 meetings during 2022. (7 Board meetings in 2021). All Board meetings were held remotely. All Board meetings were attended by all Board members. Five meetings were held in accordance with the pre-arranged schedule of Board meetings and one meeting was convened in accordance with the procedure laid down in the Companies Act and the Rules of Procedure of the Board in the event of important issues requiring a decision of the Board (resignation of a member of the Board). During the meetings, the Board approved the Company's 2021 consolidated and Company financial statements and annual report, as well as the consolidated report and consolidated financial statements for the first half of 2022, proposed to the General Shareholders' Meeting for approval the 2021 profit distribution project, proposed a project for the repurchase of treasury shares and approved the Company's remuneration report, which has been submitted to the General Shareholders' Meeting for approval. The Board also analysed the reports of the Management and Audit Committees and decided on the distribution of bonuses. Following the resignation of a member of the Board, it proposed a new candidate for election to the Board and the nomination of the Company's audit firm. 107 The members of the Board of Directors are paid bonuses for their work on the Board in accordance with the procedure laid down in Article 59 of the Law on Joint Stock Companies. The amount of royalties depends on the Company's performance. The General Meeting of Shareholders shall decide on the payment of bonuses. In 2022 (for the year 2021), the Company granted bonuses of EUR 17 thousand to the members of the Management Board. There are no other additional payments for the Chairman of the Board in relation to the incentive scheme. Members of the Board of AB "Rokiškio sūris" : (Elected at the Extraordinary General Meeting of the Company on 10.12.2021) Antanas Trumpa - Chairman of the Management Board of the Company (since 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 he defended his thesis "Organisation of the work of vacuum apparatus" at Kaunas Polytechnic Institute, for which he received the degree of Candidate of Technical Sciences 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, 29,387,655 shares (81,93 % of the authorised capital and votes). Involvement in 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). A shareholder of UAB Pieno pramones investiciju valdymas (company code 173748857, address Pramonės g.3, Rokiškis), holding 7.620 units, i.e. 75,60 % of the shares and votes of UAB Pieno pramonės investi valdymas. Darius Norkus - Member of the Management Board of the Company. 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). 108 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. Involvement in other companies A shareholder of UAB Pieno pramones investiciju valdymas (company code 173748857, address Pramonės g. 3, Rokiškis), holding 4,07 % of the shares and votes of UAB Pieno pramonės investi valdymas. Director of UAB "DairyHub.LT" (company code 305831304, address Kauno g. 65, Ukmergė). He has no shares in this company. Paul M Campbell - Independent member of the Company's Board. (Elected for a new 4-year term of office at the Company's General Meeting of Shareholders on 10.12.2021). 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 in New Zealand, Diploma in Dairy Science and Technology. Shares in AB "Rokiškio sūris" It does not own shares in the Company. Participation in other activities Mr Campbell is a director of a multinational dairy joint venture in Brazil and also on the Board of Soprole, Chile's largest dairy company. Ramūnas Vanagas - Member of the Board of Directors of the Company. Member of the Board since 2006 (re-elected for a new 4-year term of office at the Extraordinary General Meeting of Shareholders of the Company on 10.12.2021) Work experience Since 2005 Development Director of AB "Rokiškio sūris" (company code 173057512, address Pramonės g.3, Rokiškis). From 2020 Director of Milk Purchasing for Lithuania at AB Rokiškio sūris (company code 173057512, address Pramonės g.3, Rokiškis). Education Lithuanian Academy of Agriculture, economics and organisation. 109 Shares in AB "Rokiškio sūris" No shares. Involvement in other companies shareholder of UAB Pieno pramones investiciju valdymas, holds 4,07 % of the shares and votes of UAB Pieno pramonės investi valdymas (company code 173748857, adr., Pramonės g.3, Rokiškis); Member of the Board of Directors 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 Board of Directors of the Company. (Elected for a new 4-year term of office at the Company's General Meeting of Shareholders on 10.12.2021). Work experience 1992-2018 m. Head of Branch, AB SEB Bank, Senior Project Manager, Client Department. Education Higher engineering education, Kiev Polytechnic Institute. Shares in AB "Rokiškio sūris" No shares. Involvement in other companies It is not involved in the activities of other companies. Thomas Jan de Bruijn - Member of the Board of Directors. (until the end of the current term of office (10.12.2025), elected at the Extraordinary General Meeting of Shareholders of the Company on 07.10.2022). Work experience M&A consultant at Deloitte (2011-2017) Head of M&A Fonterra Europe (2017-2019) Head of Supply Fonterra Europe (2019-2021) Commercial and Partnerships Director Fonterra Europe (2021) Education Master's degree in Strategic Management (Rotterdam RSM University) Shares in AB "Rokiškio sūris" No shares. Involvement in other companies There is no information on involvement in other companies. Company manager (director): For the company is headed by the Chief Executive Officer (Director) of the Company. 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 company's CEO attends all General Meetings of Shareholders (including those held during the reporting period). 110 Director The duties and powers of the Director are defined in the Law on Joint Stock 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 - Head of the Company (Director) (Appointed by the Board of Directors of the Company as of 01.01.2018) 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. Director of AB Rokiškio sūris since 01.01.2018. Since 2007.01.02 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" He does not hold shares directly in AB Rokiškio sūris. Together with related parties - 29,387,655 shares (81,93 % of the authorised capital and votes) Involvement in other companies Shareholder of UAB Rokvalda (company code 300059165, address Basanavičiaus g.16A-125, Vilnius), holding 100% of the 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). 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). Holds 92 % 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 of the Company Audit Committee of Rokiškio sūris AB: 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 111 shall be elected by the General Meeting of Shareholders on the recommendation of the Board of Directors of the Company. Members of the Audit Committee of Rokiškio sūris AB: 1.Kęstutis Gataveckas - Director of UAB Perlas Finance (independent member). He does not hold any shares in AB "Rokiškio sūris". 2.Vilmantas Pečiūra - Director of UAB Virenda (independent member). He does not hold any shares in AB "Rokiškio sūris". 3. Rasa Žukauskaitė - (employee of the Finance Department of AB "Rokiškio sūris"). Has 2 shares in AB "Rokiškio sūris". The term of office of the members of the Audit Committee ends on 30 April 2025. The Audit Committee is a collegial body that takes its decisions at meetings. The Audit Committee may take decisions and a meeting 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. The 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 Company's Board on the selection of the external audit firm and to monitor the audit process; 4. Monitor the external auditor's and audit firm's compliance with the principles of independence and objectivity; 5. To inform the Company's Board of Directors of significant deficiencies in internal control over financial reporting identified by external and internal audit and to make recommendations for remediation; 6. To act honestly and responsibly for the benefit and welfare of the Company and its shareholders. The Audit Committee held 4 meetings in 2022 to discuss the principles for the preparation of the 2021 consolidated financial statements and the conclusions reached, the process for the preparation of the 2022 half-year consolidated financial statements, the main risks, the impact of Covid- 19/arKar in Ukraine, the measures taken to minimise risks, the application of the accounting principles, and the conclusions reached. The Audit Committee reported on their functions, 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. 112 On 15 December 2022, during a meeting with the audit team of PricewaterhouseCoopers, the audit team discussed a summarised audit plan outlining the stakeholders' and PricewaterhouseCoopers' overall understanding of the current situation, a description of the main risk factors, 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. There are no other committees in the company. 35. Management of the Company Members of the company's management Responsibilities Name, surname In office since Director Dalius Trumpa 2018-01-01 Director of Finance Antanas Kavaliauskas 2002-05-01 Milk Purchasing Director Ramūnas Vanagas 2020-01-01 Director of Central Services 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 of remuneration depending on the Company's performance, market conditions and other factors. The Group does not have any management bonus schemes in place. 36. Staff The average number of employees in the Rokiškio sūris Group in 2022 is 1291, a decrease of 2.64% or 35 employees compared to 2021 (1326). The decrease in the number of employees is related to the reduction of the raw milk collection points, which resulted in a decrease in the number of milk collection point managers and logistics department employees. The number of staff increases slightly during the summer season when more raw milk is purchased. In 2022, 80.9% of the Company's total workforce is made up of workers (80.4% in 2021), 18.5% of the total workforce is made up of professionals (19.0% in 2021); and the number of managerial staff has remained unchanged at 8 managers. Group employees by category Employee group Average number of employees Change 2022.12.31 2021.12.31 (%) Managers 8 8 0 Specialists 239 252 -5.16 Workers 1044 1066 -2.06 Total: 1291 1326 -2.64 113 Functional directors are assigned to the company's senior management. As at 31 December 2022, 56.8% of men and 43.2% of women worked in the Rokiškio sūris group. (31 December 2021: 56,5 % and 43,5 % respectively). The average age of the Company's Group employees is 48 years. In 2021, the average age of employees was 45 years. The company employs highly qualified employees, of which: higher education - 12.55% (11.16% in 2021); higher education - 50.43% (50.60% in 2021); secondary education - 36.87% (39.16% in 2021); incomplete secondary education - 0.15% (0.08% in 2021). Rokiškio sūris Group staff education Education 2022.12.31 2021.12.31 Change (%) Higher education 162 148 9.46 Higher education 651 671 -2.98 Secondary 476 506 -5.93 Unfinished secondary education 2 1 100 Length of service Age of employees Staff education 114 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 (%) 2022.12.31 2021.12.31 Guides 3147 2844 10.65 Specialists 1877 1495 25.55 Workers 1688 1333 26.63 Group average 1860 1372 35.57 The average monthly salary is calculated in accordance with Government Resolution No 496, 21.06.2017. The remuneration paid to employees of AB Rokiškio sūris Group consists of: 1) the fixed remuneration you receive for the work you do - the monthly salary stipulated in your contract; 2) piece rates: for shop floor workers, sales figures, etc. Warehouse workers are remunerated according to the amount of actual work performed and the approved rates; 3) Variable remuneration: in accordance with the provisions of the incentive fund approved in the collective agreement. The Company has a remuneration system in place since 2018, with variable remuneration components determined by the Company, depending on the Company's performance, market conditions 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 of the Company's production workshops or departments has an approved procedure for the allocation of the incentive pool, which includes performance 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 Labour Council was re-elected in May 2021 for another three-year term. 115 Employees of Group companies have 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 the development of professional qualifications, develops professional ethics, and seeks to increase the wages and other incomes of workers in the food industry. The Collective Agreement was approved in September 2020 and renewed in August 2022, improving the existing guarantees for employees. The purpose of this Collective Agreement is to create conditions for the harmonious functioning of the collective, to guarantee a level of work, remuneration, health and safety and other working conditions for the various categories of employees that is better than that provided for by the laws of the Republic of Lithuania, governmental decrees and regulations, and to provide better labour and social guarantees for the Company's employees. The following additional guarantees are envisaged for the employees: - A worker with a disabled child receives a material allowance of 1 MMA once a year; - A funeral allowance is paid to employees of the Company in the event of the death of a family member (spouse, parent, child); a one-off funeral allowance is paid to the family in the event of the death of an employee of the Company; - On work anniversaries (20th, 25th, 30th, 35th, 40th, 45th, 50th), the Company's employees are paid an additional allowance; - Support is provided to the Company's employees with serious and prolonged illnesses and injuries; - The Company's employees, employees' family members, employees who have worked for the Company and retired employees receive a discount on medical treatment at the Company's prophylactic sanatorium; - Unpaid leave provided for in the LC for the celebration of an employee's marriage or for the attendance of a funeral of a deceased family member shall be paid in accordance with the general procedure for granting leave. In addition, leave is granted for the marriage of employees' children and for the death of the parents of the employee's spouse. The rights and obligations of the Company's employees are set out in their job descriptions. There are no specific rights and obligations in the employment contracts. During 2021, 258 employees of the Company Group benefited from the social guarantees of the "Material Incentive and Benefits Procedure" in force prior to the Collective Agreement and subsequently of the Collective 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 meet 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. 116 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 2022, distance training was provided to employees on the basic principles of sustainability. AB Rokiškio sūris also organises special courses and training for farmers in the country in order to ensure that they successfully take care of the health of their cow herds, properly maintain milking, cooling 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. Code of Ethics The Company has an Ethical Employer Policy in place since 2018, which was revised and replaced by a Code of Ethics with effect from November 2022, under which the Company conducts its business in accordance with internationally recognised human and workers' rights, which it considers to be the basis of the International Bill of Human Rights and the principles of fundamental rights as set out in the International Labour Organisation's Declaration of Fundamental Principles and Rights at Work, and which it applies the Principles of Social Responsibility, and operates in a manner that is transparent, credible and fair. For more information on social aspects, see the Sustainability Report (Social area). 37. Information on agreements between the Company and members of its organs, members of committees formed or employees providing for compensation in the event of their resignation or dismissal without just cause or if their employment is terminated 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. The Company does not provide for any additional share-based payments. INFORMATION ON RELATED PARTY TRANSACTIONS AND MATERIAL ARRANGEMENTS 38. Related parties of AB Rokiškio sūris Group The group of persons acting in concert consists of UAB Pieno pramones investiciju 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 117 votes), and Dalius Trumpa (no shareholdings in the Company). The group of persons acting in concert owns 81.93% of the Company's share capital and votes. The remaining 18.07% 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 main shareholder, holding 75.60% of the shares and votes of UAB Pieno pramones investiciju valdymas). RSU Holding SIA is controlled by Dalius Trumpa (holding 92% of the shares and votes of RSU Holding SIA). Certain cooperative companies involved in milk production are considered 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. Related party transactions During 2022, the company did not have any related party transactions that meet the criteria in paragraph 37 2 . 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, (for the sale of dairy products), and KB Dzūkijos pienas, company reg. code 300058288, registered office at Varanausko km., Krokialaukio sen. Alytaus r. (raw mik purchased). Related party transactions are disclosed in note 31 to the Company's consolidated financial statements for 2022. 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. 118 OTHER INFORMATION 41. Audit information The consolidated balance sheet of AB Rokiškio sūris Group as at 31 December 2022 and the related consolidated statements of comprehensive income, cash flows and changes in equity for the year then ended and the assessment of the annual report have been audited and the annual report have been reviewed by PricewaterhouseCoopers UAB, an international audit firm. The General Meeting of Shareholders selects the audit firm for the audit of the annual financial statements and sets the terms of remuneration. 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 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 UAB provides audit, accounting, consulting, tax and legal services to multinational companies and large Lithuanian companies. The Rokiškio sūris Group paid the audit firm a fee of EUR 58,120 for the 2022 audit. 42. Data on publicly available information The information on the 2022 public announcement of AB Rokiškio sūris is available on the company's website www.rokiskio.com in the Investors > Material events section. Summary of information published: Date of publication Brief description of the report 2022.04.07 Independent member of the Audit Committee resigns 2022.04.07 Ordinary General Meeting of Shareholders of AB "Rokiškio sūris" convened on 30 April 2021 2022.04.29 Resolutions adopted at the Ordinary General Meeting of Shareholders of AB Rokiškio sūris held on 29 April 2022 2022.04.29 AB Rokiškio sūris audited annual information 2021 2022.05.06 AB Rokiškio sūris 2021 ex-dividend payment day 2022.05.12 Dividend payment procedure for AB Rokiškio sūris for 2021 2022.05.16 Notification of a manager's transaction in the securities of the Issuer 2022.07.12 A member of the Board of Directors of the Company has resigned 2022.08.31 Six-month results of AB Rokiškio sūris Group for 2022 119 2022.09.13 Extraordinary General Meeting of Shareholders of AB "Rokiškio sūris" convened on 7 October 2022 2022.10.07 Decisions adopted at the Extraordinary General Meeting of Shareholders of AB Rokiškio sūris on 7 October 2022 2022.12.30 Dates of publication of AB "Rokiškio sūris" Group results for 2023 The Company publishes public information by uploading it to the Central Database of Regulated Information, publishing it on the website of AB Nasdaq Vilnius at http://www.nasdaqbaltic.com, and uploading it to the Company's website at www.rokiskio.com 120 GOVERNANCE REPORT OF AB "ROKIŠKIO SŪRIS" AB Rokiškio sūris Corporate Governance Report prepared in accordance with the Law on Financial Reporting of the Republic of Lithuania 1. Reference to the applicable corporate governance code and where it is publicly available and/or reference to any relevant publicly available information on corporate governance practices The consolidated report for 2022, together with the Corporate Governance Report and the audited financial statements of the Company and its Group, is published on the Company's website www.rokiskio.com and on the website of the stock exchange AB Nasdaq Vilnius www.nasdaqbaltic.com 2. Where the provisions of the applicable corporate governance code are deviated from and/or not complied with, the provisions deviated from and/or not complied with and the reasons for this Information on compliance and/or non-compliance with the provisions of the Corporate Governance Code is presented in a structured table (No.2). 3. Information on the extent and management of risks - a description of the management of risks associated with the financial statements, mitigating measures and the entity's internal control system The Company shall disclose information on the extent of risk and risk management, risk mitigation measures and the internal control system in place at the Company in paragraphs 11- 12 to 13 of the consolidated annual report for 2022. 4. Information on significant direct or indirect shareholdings Information on significant direct or indirect holdings is provided in paragraph 26 of the 2022 consolidated annual report. 121 5. Information on transactions with related parties as set out in Article 37 of the Law on Joint Stock Companies 2 (specifying the parties to the transaction (legal form of the legal entity, name, code, the register in which the data concerning this person are collected and stored, the registered office (address) name of the natural person, the address for correspondence) and the value of the transaction) During 2022, the company did not have any related party transactions that meet the criteria in paragraph 37 2 . For further details, please refer to paragraph 39 of the 2022 Consolidated Annual Report. 6. Information on shareholders with special control rights and a description of those rights The company has no shareholders with special control rights. 7. Information on any existing restrictions on voting rights, such as restrictions on the voting rights of persons holding a certain percentage or number of votes, time limits for the exercise of voting rights, or systems whereby the rights attached to the securities are separated from the security holder The Company is not subject to restrictions on voting rights. All shareholders have the same property and non-property rights (except for the Company's treasury shares, which have no voting rights). 8. Information on the rules governing the election and replacement of members of the board of directors and amendments to the articles of association The Company does not have rules governing amendments to the Company's Articles of Association and the election and replacement of members of the Company's Board. The Company's activities are governed by the Law on Companies of the Republic of Lithuania, the Company's Articles of Association and other legal acts. For further details see paragraphs 25 and 33 of the Company's 2022 Consolidated Annual Report. 9. Information on the powers of the members of the Board The members of the Board have not delegated any authority to others to perform the functions falling within the Board's competence. The members of the Company's Board act in accordance with the Companies Act, the Company's Articles of Association and the Board's Rules of Procedure. 10. Information on the competence of the general meeting of shareholders, the rights of shareholders and their exercise, unless this information is provided for by law Information on the competences, rights and exercise of the General Meeting of Shareholders, as well as on the procedures for organising shareholders' meetings, is provided in point 32 of the 2022 Consolidated Annual Report. 122 11. Information on the composition of the management and supervisory bodies and their committees, and their activities and those of the chief executive The Company's information on the composition of the management and supervisory bodies and their committees, and the scope of their activities and the activities of the Company's Chief Executive Officer, is set out in paragraphs 34 and 35 of the 2022 Consolidated Annual Report. 12. A description of the diversity policy for the election of the members of the company's management, governing and supervisory bodies, including aspects such as age, gender, education, professional experience, the objectives of the policy, how it has been implemented and the results achieved during the reporting period. If the diversity policy is not applied, the reasons for not applying it shall be explained The Company does not have a policy on diversity in the election of the CEO and the management and supervisory bodies. The requirements for candidates for nomination to the Company's governing bodies do not discriminate between candidates on the basis of age, gender, education or professional experience. The Company does not impose any restriction on persons standing for election on the grounds of sex or age. The main criterion for the election of members of the management bodies is the competence of the candidate. 13. Information on the remuneration of each member of the management or supervisory body (average remuneration paid during the reporting period, with separate reference to bonuses, allowances, royalties and other payments Amounts and average amounts of money per member of the management bodies, assets transferred and guarantees granted to the members of the Board of AB Rokiškio sūris, the Company's CEO and the Chief Financial Officer during 2022: Members of the management bodies Number of people Total amounts accrued, (salaries and bonuses) thousand EUR TOTAL average per member, (salaries and bonuses) thousand EUR incl. average wage levels incl. average royalty rate incl. average size of bonuses Board members 6 101.87 16.98 14.15 2.83 0 Chief Executive Officer and Chief Financial Officer 2 69.15 34.58 34.58 0 0 * Two members of the Board are employees of the Company. The amounts accrued and paid for 2022 (salaries) relate to employment. During the period under review, the Company did not make any loans, guarantees or transfers of assets to the members of the Board of Directors, the Chief Executive Officer or the Chief Financial Officer. 14. Details of any agreements between shareholders (substance, terms) 123 On 13 October 2017, the Strategic Investment Agreement and the Shareholders' Agreement were signed between the Company's shareholders - UAB Pieno pramonės investi valdymas, SIA RSU Holding, Antanas Trumpa and Ledina Trumpienė, Daliaus Trumpa and Rasa Trumpienė, the Strategic Investor - Fonterra (Europe) Coöperatie U.A., and the Company - AB Rokiškio sūris. The purpose of this agreement was to define the relationship between the parties in relation to the Company, to ensure joint action in the development of the Company and in the exercise of voting rights at General Meetings of Shareholders, to agree on specific conditions and restrictions on the disposal of the shares, and to enable the shareholders to protect their interests in their investment in the Company. The Company has no record of any other agreements between shareholders. 124 COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE Rokiškio sūris Joint Stock Company (hereinafter referred to as the "Company"), in accordance with Article 22(3) of the Securities Law of the Republic of Lithuania and Clause 24.5 of the Listing Rules of AB Nasdaq Vilnius, hereby discloses the extent to which it has complied with the Code of Corporate Governance of Companies Listed on Nasdaq Vilnius, and the specific provisions or recommendations thereof. In the event of non-compliance with the Code or any of its provisions or recommendations, it shall state which specific provisions or recommendations are not complied with and the reasons for non-compliance, as well as any other explanatory information as specified in this form. Structured table 2 PRINCIPLES/GUIDELINES YES /NO /NOT APPLICABLE COMMENTARY 1. Principle 1: General Meeting of Shareholders, fair treatment of shareholders and shareholders' rights The corporate governance system should ensure fair treatment of all shareholders. The corporate governance system should protect shareholders' rights. 1.1 All shareholders should have equal access to the information and/or documents provided for in the legislation and should be able to participate in the adoption of decisions of importance to the company. Yes All shareholders have equal access to information and/or documents required by law and to participate in decisions of importance to the company. The Company provides information through the Central Regulated Information Database of AB Nasdaq Vilnius Stock Exchange in Lithuanian and English simultaneously. The information shall be published immediately and simultaneously, thus ensuring simultaneous provision of information to all. 1.2 It is recommended that a company's capital should consist only of shares that give their holders equal voting, ownership, dividend and other rights. Yes The Company's authorised capital consists of ordinary registered shares, giving all holders of the Company's shares equal voting, ownership, dividend and other rights. 1.3 It is recommended that investors should be given the opportunity to familiarise themselves with the rights attaching to new or existing shares in advance, i.e. before purchasing them. Yes The Company makes available to investors in advance the rights attaching to new or existing shares to be issued. 125 1.4. Exceptional transactions of major importance, such as the disposal of all or substantially all of the company's assets, which would effectively amount to a disposal of the company, should be subject to the approval of the General Meeting of Shareholders. Yes In accordance with the Company's Articles of Association, significant transactions, i.e. decisions on investment, transfer, lease, pledge and mortgage of fixed assets with a carrying amount exceeding 1/5 of the Company's authorised capital, decisions on guaranteeing or guaranteeing the performance of obligations of other persons exceeding 1/5 of the Company's authorised capital and decisions on the acquisition of fixed assets for a price exceeding 1/5 of the Company's authorised capital, do not require the approval of the Company's shareholders. These decisions (in accordance with the Company's Articles of Association) shall be approved by the Management Board. For very important exceptional transactions, such as the disposal of all or almost all of the Company's assets, the Company would be guided by the Law on Joint Stock Companies of the Republic of Lithuania as well as by other legal acts setting out the requirements for approval of such transactions. 1.5 The procedures for organising and participating in the General Meeting of Shareholders should ensure that shareholders have an equal opportunity to participate in the General Meeting of Shareholders and should not prejudice the rights and interests of shareholders. The choice of the place, date and time of the General Meeting of Shareholders should not preclude the active participation of shareholders in the General Meeting of Shareholders. In the notice convening the general meeting, the company should indicate the latest date on which proposed draft resolutions may be submitted Yes All shareholders of the Company shall be informed of the date, place and time of the General Meeting of Shareholders by publicly announcing the General Meeting of Shareholders, the agenda, and draft resolutions in advance in accordance with the procedure established by law, in the Central Regulated Information Base of the AB Nasdaq Vilnius Stock Exchange, in the electronic publication "Public Announcements of Legal Entities" issued by the Centre of Registers of Legal Entities, as well as in the Company's website www.rokiskio.com In the notice of the General Meeting of Shareholders, the Company shall indicate by when shareholders may supplement the agenda of the General Meeting of Shareholders and propose draft resolutions. 126 1.6 In order to ensure the right of shareholders living abroad to access information, it is recommended that, where possible, the documents prepared for the General Meeting of Shareholders be made available to the public in advance not only in the Lithuanian language, but also in English and/or in other foreign languages. It is also recommended that the minutes of the General Shareholders' Meeting after signing and/or the decisions adopted are made public not only in Lithuanian but also in English and/or other foreign languages. It is recommended that this information be published on the company's website. Not all documents may be made publicly available if their public disclosure would be detrimental to the company or would disclose the company's business secrets. Yes The documents prepared for the General Meeting of Shareholders, including the draft resolutions of the meeting, in accordance with the procedure established by the Law on Companies of the Republic of Lithuania, shall be published on the website of the Nasdaq Vilnius Stock Exchange and on the Company's website not later than 21 days prior to the General Meeting of Shareholders, and shall be made available to the shareholders for public inspection in Lithuanian and English. The resolutions approved by the General Meeting of Shareholders, including the financial statements, the audit report, the annual report, amendments to the Articles of Association, etc., are publicly disclosed in Lithuanian and English through the Central Regulated Information Database of Nasdaq Vilnius and on the Company's website www.rokiskio.com. 1.7 Shareholders entitled to vote should be given the opportunity to vote at the shareholders' meeting in person, either present or absent. Shareholders should not be prevented from voting in advance in writing by completing a single ballot paper. Yes The Company's shareholders have the right to participate in the General Meeting of Shareholders both in person and through a representative, provided that the person has a proper power of attorney or a contract for transfer of voting rights has been concluded with him/her in accordance with the procedure established by the legislation, as well as the Company shall enable the shareholders to cast their votes by completing a general ballot paper, as provided for by the Law on Companies of the Republic of Latvia. 1.8 In order to enhance shareholders' ability to participate in general meetings, it is recommended that companies should increase the use of modern technology to enable shareholders to participate and vote in general meetings by electronic means. In such cases, the security of the information transmitted must be ensured and the identity of the attendees and voters must be identifiable. No The Company does not comply with the provisions of this Recommendation as it is not possible to ensure the security of the information transmitted and the identity of the person who participated and voted cannot be established. 127 1.9 It is recommended to disclose in the notice of the draft decisions of the convened General Meeting of Shareholders the new nominations of the members of the collegial body, the remuneration proposed for them, the proposed appointment of the audit firm, if these matters are included in the agenda of the General Meeting of Shareholders. When a new member of the collegial body is proposed for election, it is recommended to disclose his/her educational background, work experience and other management positions held (or proposed to be held). Yes The company shall disclose in the draft resolutions, when giving notice of a general meeting of shareholders and if the agenda of the general meeting of shareholders includes the election of a new member of the collegial body or the appointment of an audit firm, the nominations of the proposed new members of the collegial body and the audit firm to be appointed. Information on candidates for the members of the collegial body shall be provided in advance by publishing this information on the website of the Nasdaq Vilnius Stock Exchange, on the website of AB "Rokiškio sūris" www.rokiskio.com, or by publicly announcing it to the shareholders present at the General Shareholders' Meeting at the time of the meeting, if the shareholders whose shares represent at least 1/20 of the total number of votes nominate an additional candidate during the meeting. The company publicly discloses the position, experience and educational background of the collegiate body in its annual and six-monthly interim reports. 1.10 Members of the Company's collegial body, the Chief Executive Officers 1 or other competent persons associated with the Company who are in a position to provide information relating to the agenda of the General Meeting of Shareholders should be present at the General Meeting of Shareholders. Proposed candidates for membership of a collegiate body should also attend the General Meeting if the election of new members is on the agenda of the General Meeting. Yes General Shareholders' Meetings are attended by members of the company's collegial body and the Chief Executive Officer. Proposed candidates for election to the collegiate body shall also be present if the election of new members is on the agenda of the General Meeting of Shareholders, except in special cases (e.g. if physical attendance at the meeting would be prevented due to quarantine regime or other important circumstances). 1 For the purposes of this Code, chief executives are those employees of a company who hold senior management positions. 128 2. Principle 1: Supervisory Board 2.1. Functions and responsibilities of the Supervisory Board 1.1.1. The Supervisory Board should ensure that the interests of the company and its shareholders are represented, that it is accountable to the shareholders and that it exercises objective and impartial oversight of the company's activities and its management bodies, and that it makes regular recommendations to the management bodies. 1.1.2. 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 honestly, diligently and responsibly in the best interests of the Company and its shareholders and represent their interests, taking into account the interests of employees and the public good. Not applicable According to the Articles of Association of AB Rokiškio sūris, the Company has only one collegial body - the Management Board. There is no Supervisory Board in the Company. The shareholders of the Company have decided to delegate all management functions to a collegiate body, the Management Board. 2.1.2. Where the Supervisory Board's decisions may affect the interests of the company's shareholders differently, the Supervisory Board should treat all shareholders impartially. It should ensure that shareholders are adequately informed about the company's strategy, risk management and control, and the management of conflicts of interest. Not applicable See point 2.1.1. 2.1.3. The Supervisory Board should be impartial in making decisions relevant to the company's operations and strategy. The work and decisions of the members of the Supervisory Board should not be influenced by those who elected them. Not applicable See point 2.1.1 2.1.4. Members of the Supervisory Board should make clear their objection when they consider that a decision of the Supervisory Board could be detrimental to the company. Independent members of the 2 Supervisory Board should: a) remain independent in their analysis and decision-making; b) neither seek nor accept any undue preferences that may cast doubt on the independence of the members of the Supervisory Board. Not applicable 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 law, in order to avoid perverse practices that are not in the long-term interests of the company and its shareholders, which could give rise to reputational, legal or other risks. Not applicable See point 2.1.1 2 For the purposes of this Code, the criteria for independence of the members of the Supervisory Board shall be understood in the same way as the criteria for non-affiliated persons are defined in Article 31(7) and (8) of the Law on Joint-Stock Companies. 129 2.1.6 The company should ensure that the Supervisory Board is provided with sufficient resources (including financial resources) to carry out its duties, including access to all relevant information and the right to seek independent professional advice from external legal, accounting or other specialists on matters within the competence of the Supervisory Board and its committees. Not applicable See point 2.1.1 2.2. Formation of the Supervisory Board 1.1.3. The procedures for the composition of the Supervisory Board should ensure that conflicts of interest are properly managed , and that the company is governed efficiently and fairly. 2.2.1 The members of the Supervisory Board elected by the General Meeting of Shareholders should collectively ensure a diversity of qualifications, professional experience and competences, and strive for gender balance. In order to maintain an appropriate balance of qualifications among the members of the Supervisory Board, it should be ensured that the members of the Supervisory Board as a whole have a broad range of knowledge, views and experience to perform their tasks properly. Not applicable See point 2.1.1 2.2.2. Members of the Supervisory Board should be appointed for a fixed term, with the possibility of individual re-election, in order to ensure the necessary development of professional experience. Not applicable See point 2.1.1 2.2.3.The Chairperson of the Supervisory Board should be a person whose current or former position would not be an obstacle to the impartial exercise of his/her duties. A former director or member of the management board of a company should not be immediately appointed as chairman of the Supervisory Board. Where a company decides not to comply with these recommendations, information should be provided on the measures taken to ensure the impartiality of the activity. Not applicable See point 2.1.1 2.2.4 Each member should devote sufficient time and attention to his/her duties as a member of the Supervisory Board. Each member of the Supervisory Board should undertake to limit his/her other professional commitments (in particular managerial positions in other companies) in such a way that they do not interfere with the proper performance of his/her duties as a member of the Supervisory Board. If a member of the Supervisory Board has attended less than half of the meetings of the Supervisory Board during the company's financial year, the company's shareholders should be informed. Not applicable See point 2.1.1 2.2.5. When the appointment of a member of the Supervisory Board is proposed, it should be disclosed which members of the Supervisory Board are considered independent. The Supervisory Board may decide that a particular member of the Supervisory Board, although Not applicable See point 2.1.1 130 fulfilling the criteria for independence, may not be considered to be independent because of particular personal or company-related circumstances. 2.2.6 The amount of remuneration for the members of the Supervisory Board should be approved by the company's General Meeting of Shareholders for their activities and participation in the meetings of the Supervisory Board. Not applicable See point 2.1.1 2.2.7 The Supervisory Board should carry out an annual evaluation of its activities. This should include an assessment of the Supervisory Board's structure, organisation and ability to act as a group, as well as an assessment of the competence and effectiveness of each member of the Supervisory Board and an assessment of whether the Supervisory Board has achieved its stated performance objectives. The Supervisory Board should publish, at least once a year, relevant information on its internal structure and operating procedures. Not applicable See point 2.1.1 3. Principle: Board 3.1. Functions and responsibilities of the Management Board 1.1.4. The Board should ensure the implementation of the company's strategy, as well as the proper governance of the company, taking into account the interests of shareholders, employees and other interest groups. 3.1.1 The Executive Board should ensure the implementation of the company's strategy, as approved by the Supervisory Board, if one is established. In cases where the Supervisory Board is not established, the Management Board is also responsible for approving the company's strategy. Yes The Company has only one collegiate body, the Board of Directors. The Company's Board is responsible for the proper strategic management of the Company (approving the Company's business strategy, approving the annual budget and performance targets, and making important decisions on the Company's organisational management structure as provided for by law). 3.1.2 The Management Board, as the collegial management body of the Company, shall perform the functions assigned to it by the Act and the Articles of Association of the Company and, in cases where the Company does not have a Supervisory Board, shall perform, inter alia, the supervisory functions provided for in the Act. In exercising the functions assigned to it, the Management Board should take into account the needs of the company, its shareholders, employees and other interest groups, as appropriate, with a view to building a sustainable business. 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 information, all members of the Board of Directors act in good faith in the interests of the Company and 131 its shareholders, are guided by the interests of the Company rather than their own interests or those of third parties, and endeavour to maintain their independence in their decision- making. 3.1.3.The Board should ensure compliance with the laws and internal company policies applicable to the company or group of companies to which it belongs. It should also establish appropriate risk management and control measures to ensure regular and direct accountability of management. Yes The Board ensures compliance with the law and the company's internal policies, both for the company and the Group. The company also has a risk management and control programme. Risk management is carried out by the Company's management. 3.1.4 The Board should also ensure that the company has in place the measures included in the OECD Good Practice Guidance 3 on internal control, ethics and compliance to ensure compliance with applicable laws, regulations and standards. Yes The Company has adopted an Anti- Corruption Policy, which clearly and publicly declares its negative attitude towards bribery and corruption. The provisions of this policy apply to all employees, agents, intermediaries and suppliers of the Company. The Company has also adopted a Code of Ethics, a Human Rights Policy, an Equal Opportunities Policy, a Violence and Harassment Prevention Policy and a Personal Data Protection Policy. 3.1.5 When appointing a director of the company, the Board should take into account an appropriate balance of qualifications, experience and competence. Yes When appointing the company's CEO, the Board considers the candidate's qualifications, experience and competence. 3.1. Formation of the Management Board 3.2.1 The members of the Management Board elected by the Supervisory Board, or by the General Meeting of Shareholders in the absence of a Supervisory Board, should collectively ensure a diversity of qualifications, professional experience and competences, and strive for gender balance. In order to maintain an appropriate balance of qualifications among the members of the Management Board, it should be ensured that the members of the Management Board as a whole have a wide range of knowledge, views and experience to perform their tasks adequately. Yes The members of the Company's Management Board are elected by the General Meeting of Shareholders. The members of the Company's Board of Directors are qualified and competent to perform their functions and have many years of management experience. One member of the Board is delegated by a strategic investor (Fonterra), which has extensive experience in corporate strategy development, 3 Link to the OECD Good Practice Guidance on Internal Control, Ethics and Compliance: https://www.oecd.org/daf/anti-bribery/44884389.pdf 132 management and development in multinational 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 The names of the candidates for election to the Management Board, their education, qualifications, professional experience, positions held, other relevant professional commitments and potential conflicts of interest should be disclosed, without prejudice to the requirements of the legislation on the processing of personal data, at the meeting of the Supervisory Board at which the Management Board or individual members thereof are to be elected. In the absence of a Supervisory Board, the information set out in this point should be provided to the general meeting of shareholders. The Management Board should compile the data referred to in this point on its members on an annual basis and present them in the company's annual report. Yes Information on the candidates for the Company's Management Board shall be provided to the shareholders in accordance with the procedure established by the Law of the Republic of Lithuania on Joint- Stock Companies in the materials of the shareholders' meeting, which shall be made available to the shareholders in advance. Information on the members of the collegial management bodies (names, surnames, information on their education, qualifications, professional experience, participation in the activities of other companies, other relevant professional commitments) shall be provided in the Company's periodic reports and on its website. 3.2.3 All new board members should be familiarised with their duties, the company's structure and activities. Yes All new members of the company's board are briefed on their duties, the company's structure and activities. 3.2.4 Board members should be appointed for a fixed term, with the possibility of individual re-election, to ensure the necessary growth in professional experience and sufficiently frequent reconfirmation of their status. Yes The members of the Board are elected for a 4-year term. There is no limit to the number of terms. The members of the Board are elected by the General Meeting of Shareholders. Shareholders nominate and vote for candidates for the Board based on their own views as to which candidates are best placed to represent the interests of shareholders. 3.2.5 The Chairperson of the Board should be a person whose current or former position would not be an obstacle to the impartial conduct of business. In the absence of a Supervisory Board, a former director of the company should not be immediately appointed to the post of Chairman of the Board. Where a company decides not to comply with these recommendations, information should be provided on the measures taken to ensure the impartiality of the activity. No The Chairman of the Board of Directors of the company is the former CEO of the company. In appointing the former CEO as Chairman of the Board, the members of the Board took into account the former CEO's long- standing managerial experience and his competence for the position of Chairman of the Board. Yes 133 3.2.6 Each member should devote sufficient time and attention to his/her duties as a Board member. If a member of the Management Board has attended less than half of the meetings of the Management Board during the company's financial year, the company's Supervisory Board should be informed, or, in the absence of a Supervisory Board, the general meeting of shareholders. Members of the Company perform their assigned functions well: they actively participate in the meetings of the collegial body and devote sufficient time to the performance of their duties as a collegial member. A quorum of Board members is established at all Board meetings, which allows the Board to take decisions in a constructive manner. During 2022, the Board held 6 Board meetings. All Board meetings were held remotely. All Board meetings were attended by all Board members. 3.2.7. If, in the cases provided for in the Act, some of the members of the Management Board will be independent in the election of the Management Board where no Supervisory Board is established, 4 , it should be published which members of the Management Board are considered independent. The board may decide that a particular member of the board, although fulfilling all the criteria for independence set out in the Act, cannot be considered independent because of particular personal or company- related circumstances. 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 amount of remuneration to be paid to the members of the Board for their activities and participation in Board meetings should be approved by the company's general meeting of shareholders. Yes In accordance with the Law on Joint- Stock Companies of the Republic of Lithuania, the members of the Board of Directors are paid remuneration for their work on the Board of Directors by the decision of the General Meeting of Shareholders. The members of the Board of Directors do not receive any other remuneration for their activities and participation in meetings. 3.2.9 Board members should act honestly, diligently and responsibly in the best interests of the Company and its shareholders and represent their interests, taking into account other interest holders. They should not pursue personal interests in their decision-making, they should be subject to non-competition agreements and they should not take advantage of business information and opportunities that are relevant to the company's business to the detriment of the company. Yes According to the Company's information, all members of the Board of Directors act in good faith in the interests of the Company and its shareholders, are guided by the interests of the Company rather than their own interests or the interests of third parties, and endeavour to maintain their independence in their decision-making. 4 For the purposes of this Code, the criteria for independence of the members of the Board of Directors shall be understood in the same way as the criteria for unrelated persons are defined in Article 33(7) of the Law of the Republic of Lithuania on Public Limited Companies. 134 3.2.10. Each year the Board should carry out an evaluation of its own performance. This should include an assessment of the Board's structure, organisation and ability to act as a group, as well as an assessment of the competence and effectiveness of each member of the Board and an assessment of whether the Board has achieved its stated performance objectives. The Board should, at least once a year, publish relevant information on its internal structure and operating procedures, without prejudice to the requirements of the legislation on the processing of personal data. No The Company does not have a practice of evaluating the performance of the Board. As two members of the Board are members of the Company's management (functional directors of the Company) and one member of the Board is a former long-serving manager of the Company, the Board is considered to have sufficient organisation and ability to work as a group. Therefore, it does not carry out any assessment of competence and effectiveness. The other two members of the Board are independent members. 4. Principle 1: Working procedures of the Company's Supervisory Board and Management Board 1.1.5. The company's procedures for the work of the Supervisory Board, if established, and the Management Board should ensure the effective work and decision-making of these bodies and promote active cooperation between the company's bodies. 4.1 The Management Board and the Supervisory Board, if established, should work closely together for the benefit of both 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, if necessary, promptly inform the Supervisory Board on all matters of importance to the company, such as planning, business development, risk management and control, and compliance with company commitments. The Executive Board should inform the Supervisory Board of actual deviations of the business development from the previously formulated plans and objectives, indicating the reasons for this. No The Company does not have a Supervisory Board. The shareholders of the Company have decided to delegate all management functions to a single collegiate body, the Management Board. They believe that. that a single collegial body, the Management Board, is sufficient to ensure the effective management of the Company. 4.2 It is recommended that meetings of the Company's collegial bodies be held at appropriate intervals in accordance with a pre-approved schedule. It is up to each company to decide on the frequency of meetings of its collegial bodies, but it is recommended that they be held at a frequency that ensures uninterrupted discussion of key corporate governance issues. Meetings of the company's collegial bodies should be convened at least once a quarter of the year. Yes The Board shall meet in accordance with a timetable approved in advance in the Rules of Procedure of the Board, i.e. at least once every 3 months, and more frequently if necessary. The agenda for the Board meeting, together with the notice convening the meeting, shall be sent to all Board members at least five (5) days before the Board meeting, indicating the items to be discussed at the meeting. Scheduled meetings of the Board shall be convened by its Chairperson or, in his/her absence, by his/her Deputy. 135 4.3 Members of the collegial body should be informed in advance of the convening of a meeting in order to allow sufficient time for adequate preparation of the issues to be discussed at the meeting and for the discussion leading to the adoption of decisions. The members of the collegial body should be provided with all relevant material relating to the agenda of the meeting together with the notice of the convened meeting. The agenda should not be amended or supplemented during the meeting unless all members of the collegial body are present and agree to such amendment or supplementation or unless there is an urgent need to deal with matters of importance to the company. Yes The agenda may only be added to a meeting if all Board members are present, there is an important matter and all Board members agree that it should be dealt with urgently. 4.4 In order to coordinate the work of the company's collegial bodies and ensure an efficient decision-making process, the chairpersons of the company's collegial supervisory and management bodies should coordinate the dates and agendas of the meetings convened and cooperate closely on other issues related to the company's governance. Meetings of the company's Supervisory Board should be open to the members of the company's Management Board, in particular where the meeting deals with issues relating to the removal of members of the Management Board, liability, remuneration. Not applicable The company does not have a Supervisory Board and therefore cannot comply with this provision. 5. Principle 1: Nomination, Remuneration and Audit Committees 5.1. Purpose and composition of committees 1.1.6. The committees established in the company should enhance the effectiveness of the Supervisory Board and, where there is no Supervisory Board, of the Management Board, which performs supervisory functions, by ensuring that decisions are taken after due consideration and by helping to organise the work in such a way as to ensure that decisions are not influenced by material conflicts of interest. 1.1.7. The Committees should act independently and in a principled manner and make recommendations related to the decision of the collegial body, but the final decision is taken by the collegial body itself. 5.1.1 Depending on the specific circumstances of the company and the governance structure chosen, the company's Supervisory Board and, in the absence of a Supervisory Board, the Board of Management, which performs supervisory functions, shall set up Committees. It is recommended that the collegial body form nomination, remuneration and audit committees 5 . Yes/No The Company has an Audit Committee. The Audit Committee was formed and elected at the General Meeting of Shareholders on 24 April 2009. The General Shareholders' Meeting approved the Terms of Reference for the establishment and operation of the Audit Committee. 30 April 2021 The Company's General Meeting of Shareholders elected 3 new members of the Audit Committee, 2 5.1.2 Companies may decide to form fewer than three committees. In this case, companies should provide an explanation as to why they have chosen an alternative 5 Legislation may provide for an obligation to set up an appropriate committee. For example, the Law on Audit of Financial Statements of the Republic of Lithuania stipulates that public interest entities (including, but not limited to, joint stock companies whose securities are traded on the regulated market of the Republic of Lithuania and/or any other Member State) are obliged to establish an audit committee (the legislation provides for exceptions when the functions of the audit committee may be performed by a collegial body exercising oversight functions). 136 approach and how the chosen approach meets the objectives set for three separate committees. 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, objective monitoring, research, evaluation and advisory committee dedicated to improving the organisation's performance and creating added value. Its main function is to systematically and comprehensively assess and promote improvements in the effectiveness of the organisation's risk management, control and oversight processes, and to report to the Board and Management on the achievement of objectives and targets, the effectiveness of risk management procedures, and the functioning of the internal controls. The Company does not have nomination and remuneration committees. As the Company's Board is composed of competent members and performs its functions effectively, the Company does not see the need for any other committees at present. 5.1.3. the functions assigned to the committees formed in the companies may be performed by the collegial body itself in the cases provided for by law. In such a case, the provisions of this Code relating to committees (in particular as regards their role, functioning and transparency) should apply to the collegiate body as a whole where appropriate. Not applicable The Board of Directors of the Company does not perform the functions assigned to the Audit Committee. 5.1.4 Committees set up by a collegiate body should normally consist of at least three members. Subject to legal requirements, committees may be composed of as few as two members. The members of each committee should be selected primarily on the basis of their expertise, with a preference for independent members of the collegial body. The Chairperson of the Board should not be the Chairperson of the Committees. Yes The Audit Committee shall be composed of 3 members, 2 of whom shall be independent, with at least 5 years' experience in the accounting field, with relevant experience in the finance and accounting of listed companies. The Chairman of the Board is not a member of the Committee. 5.1.5 The mandate of each committee formed should be determined by the collegiate body itself. The committees should carry out their duties in accordance with their terms of reference and regularly report to the collegial body on their activities and their results. The terms of reference of each committee, defining its role and specifying its rights Yes The Audit Committee shall be governed by the rules of procedure established by the Committee and approved by the General Meeting of Shareholders. These bylaws lay down the rules defining the rights 137 and duties, should be published at least once a year (as part of the information that the company publishes annually on its governance structure and practices). Companies should also publish each year in their annual report, without prejudice to the requirements of the legislation on the processing of personal data, reports by existing committees on their composition, number of meetings and attendance of members at meetings during the previous year, as well as on their main activities and performance. and duties of the Audit Committee, the size of the Audit Committee, the period of membership of the Audit Committee, the educational and professional requirements of the members of the Audit Committee and the principles of independence. The Audit Committee shall submit an annual activity report to the General Meeting of Shareholders each year, disclosing the composition of the Committee, the number of meetings and attendance of its members, a description of the work carried out and the results. 5.1.6 In order to ensure the independence and objectivity of committees, members of the collegial body who are not members of the committee should normally be entitled to attend committee meetings only at the invitation of the committee. The committee may invite or require the attendance of certain employees or experts of the company. The chairman of each committee should be able to communicate directly with shareholders. The circumstances in which this should be done should be set out in the rules governing the operation of the committee. Yes The members of the collegial body take decisions at meetings of its members, but in certain cases the Committee shall invite the Chief Executive Officer of the Company and the responsible employees of the Company who are in charge of the areas of activity of the matters under discussion to attend its meetings. The Chairman of the Audit Committee is also able to communicate with shareholders. 5.2. Nomination Committee. 5.2.1 The main functions of the Nomination Committee should be: (1) to select candidates for vacancies in the Supervisory, Governing Body and Executive Management positions and to recommend them to the collegial body for consideration. The Nomination Committee should assess the balance of skills, knowledge and experience in the management body, prepare a description of the functions and skills required for the specific position and assess the time required to complete the assignment; (2) regularly assess the structure, size, composition, skills, knowledge and performance of the supervisory and management bodies, and make recommendations to the collegiate body on how to bring about the necessary changes; 3) giving due attention to succession planning. No The Company does not have a nomination committee. 138 5.2.2 The Chief Executive Officer should be consulted on matters relating to members of the collegial body who have an employment relationship with the company and the Chief Executive Officer, with the right to make proposals to the Nomination Committee. 5.3. Remuneration Committee. No The Company does not have a Remuneration Committee. The company has a remuneration policy covering all forms of remuneration, including fixed remuneration, performance-related benefits, pension modules and severance payments. The Company's policy is approved by the Company's management in consultation with the Company's Trade Union Committee. The main functions of the Remuneration Committee should be: 1) submitting proposals to the college for consideration on the remuneration policy applicable to members of the supervisory and management bodies and the chief executive officers. Such a policy should cover all forms of remuneration, including fixed remuneration, performance-related remuneration, incentive schemes with financial incentives, pension schemes, severance payments, as well as conditions that would allow the company to recover amounts or suspend payments, indicating the circumstances that would make it appropriate to do so; 2) proposing to the collegial body the individual remuneration of members of the collegial bodies and of the chief executive officers, in order to ensure that it is in line with the company's remuneration policy and the assessment of their performance; 3) regularly review the remuneration policy and its implementation. 5.4 Audit Committee. 5.4.1 The main functions of the Audit Committee are defined in the legislation governing the Audit Committee 6 . Yes The Audit Committee shall be governed by the Audit Committee Charter approved by the General Meeting of Shareholders of the Company. The Audit Committee carries out independent, objective monitoring, research, evaluation and advisory activities to improve the Company's performance and create added value. Yes 6 The activities of audit committees are governed by Regulation No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific statutory audit requirements for public-interest entities, the Law on Audit of Financial Statements of the Republic of Lithuania, as well as by the rules of the Bank of Lithuania governing the activities of audit committees. 139 5.4.2 All members of the Committee should be provided with detailed information relating to the company's specific accounting, financial and operational characteristics. The audit committee should be informed by the company's senior management of the accounting treatment of significant and unusual transactions, which may be accounted for in different ways. All members of the Committee are provided with detailed information relating to the specific accounting, financial and operational features of the Company and, on request, are provided with information on the execution of significant transactions. 5.4.3 The Audit Committee should decide whether (and if so, when) the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer (or senior finance and accounting staff), the Internal Auditor and the External Auditor should attend its meetings. The Committee should be able to meet i with the relevant persons, if necessary, in the absence of the members of the management bodies. Yes The Audit Committee shall decide on the attendance of other persons at its meetings and, if necessary, the Audit Committee shall invite to its meetings the Chief Executive Officer of the Company and the responsible employees of the Company who are in charge of the areas of activity of the matters under discussion. The Chairman of the Audit Committee shall also be able to communicate with the shareholders. 5.4.4 The Audit Committee should be informed of the work programme of the internal auditors and receive internal audit reports or a periodic summary. The audit committee should also be informed of the work programme of the external auditors and should receive a report from the audit firm describing any relationship between the independent audit firm and the company and its group. Yes The Audit Committee is informed of the work carried out by the Internal Auditor and receives the conclusions of the investigations carried out. The Audit Committee receives reports each year from the external auditors describing any relationship between the independent audit firm and the Company and its Group. 5.4.5 The Audit Committee should review the company's compliance with the provisions in place governing the ability of employees to make a complaint or anonymously report allegations of wrongdoing within the company, and should ensure that there are procedures in place for a proportionate and independent investigation of such matters and for the appropriate follow-up action. Yes The Company has given employees the opportunity to file complaints or anonymous reports of irregularities committed by the Company, but the Company has not received any such complaints or reports during the reporting period. 5.4.6 The Audit Committee should report to the Supervisory Board, or if no Supervisory Board is formed, to the Management Board, at least once every six months, at the same time as the approval of the annual and half-yearly reports. Yes The Audit Committee analyses and evaluates the company's annual and half-yearly financial statements and makes recommendations to the Board of Directors for their approval, together with its own performance reports for that period. 140 6. Principle 1: Avoidance and disclosure of conflicts of interest 1.1.8. The corporate governance framework should encourage members of the supervisory and management bodies of the company to avoid conflicts of interest and ensure a transparent and effective mechanism for disclosure of conflicts of interest by members of the supervisory and management bodies of the company. 1.1.9. The corporate governance system should recognise the rights of stakeholders as enshrined in law and promote active cooperation between the company and stakeholders to create wealth, jobs and financial stability. In the context of this principle, stakeholders include investors, employees, creditors, suppliers, customers, the local community and others with an interest in the company. A member of a company's supervisory and management body should avoid a situation where his or her personal interests conflict or may conflict with the interests of the company. If such a situation does arise, the member of the supervisory or management body of the company should, within a reasonable period of time, inform the other members of the same body, or the body of the company which elected him, or the shareholders of the company of the situation of such a conflict of interests, indicating the nature of the interests and, where possible, the value. Yes Members of the Company's governing bodies shall conduct themselves in such a way as to avoid any conflict of interest with the Company. During the reporting period, there are no known cases of conflict of interest between the Company and a member of its governing body. 7. Principle 1: Company remuneration policy 1.1.10. The company's remuneration policy and the procedures for its review and disclosure should prevent potential conflicts of interest and abuse in determining the remuneration of members of the collegiate bodies and the chief executive officers, as well as ensure the openness and transparency of the company's remuneration policy, including the company's long-term strategy. 7.1 The Company should adopt and publish on the Company's website a remuneration policy, which should be reviewed regularly and be consistent with the Company's long-term strategy. Yes/No The Company has a remuneration policy in place and approved by the Company's management, but it is not published on the Company's website. The Remuneration Policy was approved at the company's 2020 Annual General Meeting and is published on the company's website. 7.2 Remuneration policies should cover all forms of remuneration, including fixed remuneration, performance- related remuneration, financial incentive schemes, pension schemes, termination payments, and conditions that provide for the company to recover amounts paid or to suspend payments Yes The company has a remuneration policy covering all forms of remuneration, including fixed remuneration, performance-related benefits, pension modules and severance payments. 7.3 In order to avoid potential conflicts of interest, the remuneration policy should stipulate that members of the collegiate bodies which exercise supervisory functions should not receive remuneration which is linked to the performance of the company. Yes See point 3.2.8. 141 7.4 The remuneration policy should provide sufficient detail on the severance pay policy. Severance payments should not exceed a fixed amount or a fixed number of annual salaries and should generally not exceed a fraction of two years' fixed remuneration or its equivalent. Termination payments should not be made if the contract is terminated due to poor performance. Yes Severance payments are granted in accordance with the provisions of Chapter 5 of the Labour Code of the Republic of Lithuania and the Collective Agreement of the Company. 7.5 If the company has a financial incentive scheme, the remuneration policy should include sufficient details on the retention of shares after vesting. In the case of share-based awards, the shares should not vest for at least three years after the award. After vesting, members of the collegiate bodies and chief executives should retain a certain number of shares until the end of their term of office, depending on the need to cover any costs associated with the acquisition of shares. No The Company does not have a financial incentive scheme. 7.6 The company should publish on the company's website information on the implementation of the remuneration policy, which should focus on the remuneration policy of the collegiate bodies and the management for the next and, where appropriate, the following financial year. It should also provide an overview of how the remuneration policy was implemented in the previous financial year. Such information should not contain commercially valuable information. Particular attention should be paid to material 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 material change to the remuneration policy, should be placed on the agenda of the general meeting of shareholders. Schemes where members of the collegial body and employees are remunerated in shares or share options should be approved by the general meeting of shareholders. No See point 7.1. 8. Principle 1: The role of stakeholders in corporate governance 1.1.11. The corporate governance system should recognise the rights of stakeholders, whether enshrined in law or in mutual agreements, and promote active cooperation between the company and stakeholders in order to create wealth, jobs and financial stability. In the context of this principle, stakeholders include investors, employees, creditors, suppliers, customers, the local community and others with an interest in the company. 8.1 The corporate governance framework should ensure that the rights and legitimate interests of interest holders are respected. Yes The company's corporate governance system ensures that the rights of interest holders protected by law are respected. The Company provides for the participation of interest holders in the management of the Company through the participation of the Company's employees and milk producers in the share capital of the Company. The majority of the employees are shareholders of the Company and 8.2 The corporate governance framework should allow interest holders to participate in the governance of the company in accordance with the law. Examples of the participation of interest holders in the governance of the company could include the participation of employees or their representatives in important decisions of the company, consultations with employees or their representatives on 142 corporate governance and other important issues, participation of employees in the share capital of the company, the involvement of creditors in the governance of the company in cases of insolvency, etc. therefore participate directly in the management of the Company. Interest holders involved in the governance process are given access to relevant information and the opportunity to vote on relevant decisions. In addition, the Company has made arrangements for confidential reporting of illegal or unethical practices. 8.3 Where stakeholders are involved in the governance of the company, they should be given access to relevant information. 8.4 Interest holders should be able to confidentially report illegal or unethical practices to the collegiate body exercising the supervisory function. 9. Principle 1: Disclosure of information 1.1.12. The corporate governance framework should ensure that timely and accurate disclosures are made on all material matters relating to the company, including its financial position, performance and corporate governance. . 9.1 Without prejudice to the Company's procedures for confidential information and trade secrets, as well as the requirements of the legislation governing the processing of personal data, the Company's public disclosure of information should include, but not be limited to: Yes The information referred to in this Recommendation is disclosed in the Company's annual and half-yearly reports, subject to the requirements of data processing legislation and the confidential information regime. This information shall be published on the website of AB Nasdaq Vilnius Stock Exchange and on the Company's website. 9.1.1. the Company's performance and financial results; 9.1.2. the company's business objectives and non-financial information; 9.1.3. the persons owning or controlling a shareholding in the company, directly and/or indirectly and/or jointly with related persons, as well as the structure of the group of companies and the interrelationships between them, indicating the final beneficiary; 9.1.4. the members of the company's supervisory and management bodies, which of them are considered independent, the company's chief executive officer, the shares or votes they hold in the company, and their participation in the management of other companies, their competence and remuneration; 9.1.5. reports from existing committees on their composition, number of meetings and attendance of members during the previous year, as well as on their main activities and results; 9.1.6. the foreseeable material risk factors and the company's risk management and oversight policies; 143 9.1.7. the Company's transactions with related parties; 9.1.8. key issues relating to employees and other stakeholders (e.g. human resources policy, employee participation in the management of the company, promotion through shares or stock options, relations with creditors, suppliers, the local community, etc); 9.1.9. the company's governance structure and strategy; 9.1.10. initiatives and measures in the areas of social responsibility policy, anti-corruption, and major investment projects underway or planned. This list is to be considered as a minimum and companies are encouraged to go beyond the disclosures contained in this list. This principle of the Code does not relieve companies of their obligation to disclose information as required by law. 9.2 For the disclosures referred to in paragraph 9.1.1 of Guideline 9.1, it is recommended that a company that is a parent company in relation to other companies should disclose the consolidated results of the whole group. Yes The Company discloses information on the consolidated results of the Company and its group of subsidiaries. The disclosures are made in the consolidated annual report and consolidated half-yearly financial statements. 9.3 In the disclosures referred to in paragraph 9.1.4 of Guideline 9.1, it is recommended to provide information on the professional experience and qualifications of the members of the company's supervisory and management bodies and the company's chief executive officer, and on any potential conflicts of interest that could affect their decisions. It is also recommended to disclose the remuneration or other income received by the members of the supervisory and management bodies of the company and by the company's manager from the company, as detailed in Principle 7. Yes The information referred to in the Recommendation is provided in the Company's annual and half-yearly reports. The consolidated annual report shall disclose information on total employee-related costs, the amount of remuneration paid to the Company's chief executive officer during the year, and the Remuneration Report shall disclose the remuneration received by the members of the collegial body. 9.4 Disclosures should be made in such a way that no shareholders or investors are discriminated against in terms of the manner and extent to which they receive information. Disclosure should be made to all and at the same time. Yes The Company discloses all regulated information through the AB Nasdaq Vilnius news distribution system. This ensures that it is available to the widest possible public. The information is simultaneously available in both Lithuanian and English. In addition, the Company publishes the information before or after the Nasdaq Vilnius trading session to ensure that all shareholders and investors of the Company have equal access to the information and to make appropriate investment decisions. The Company shall not 144 disclose information that may affect the price of its issued securities in comments, interviews or otherwise until such information is made publicly available through the Central Regulated Information Base. 10. Principle 1: Selection of the Company's audit firm The company's mechanism for selecting the audit firm should ensure the independence of the audit firm's report and opinion. 10.1 In order to obtain an objective opinion on the Company's financial position and financial performance, the Company's set of annual financial statements and the financial information contained in the Annual Report should be reviewed by an independent audit firm. Yes An independent audit firm audits the separate and consolidated annual financial statements of the Company and its subsidiaries (the Group) in accordance with International Financial Reporting Standards as adopted by the European Union. The independent audit firm also assesses the consistency of the annual report with the audited financial statements. 10.2 It is recommended that the nomination of the audit firm be proposed to the General Meeting of Shareholders by the company's Supervisory Board or, if the company does not have a Supervisory Board, by the company's Management Board. Yes The Board of Directors of the Company proposes the appointment of the auditor to the General Meeting of Shareholders. 10.3 If the audit firm has received fees from the company for non-audit services, the company should disclose this publicly. This information should also be made available to the company's supervisory board or, if the company does not have a supervisory board, to the company's management board when considering which audit firm to propose 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 2022, the Audit Firm received a fee of Tk. 24 thousand. The Audit Committee received a fee of EUR 24,000 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 2022, and of the Company’s and of the Group’s separate and consolidated financial performance and 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 7 April 2023. 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 2022; ● the separate and consolidated income statement and statement of 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 2022 to 31 December 2022, are disclosed in note 32 to the separate and consolidated financial statements. Our audit approach Overview ● Overall Company and Group materiality: EUR 2,740 million and EUR 2,874 million, respectively. ● 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. We conducted audit at 3 Group entities, all operating in Lithuania, covering 99.5% of the Group’s revenues and 99% of the Group’s total assets. ● 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 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 2,740 million (2021: EUR 1,9 million) Overall Group materiality EUR 2,874 million (2021: EUR 2 million) Materiality Group scoping Key audit matters How we determined it 0.8% of the Group’s and Company’s revenue, respectively 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 137 thousand and EUR 143 thousand for the Company and the Group, respectively, 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 2022 amounted to EUR 359,3 million and EUR 342,5 million, respectively, and mostly consisted of sales of goods. The Group and 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 agreements or sale orders, 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 2022, the Group’s and the Company’s trade receivables amounted to EUR 52,8 million and EUR 62,3 million, respectively, including the credit loss allowance of EUR 3,786 million, and loans granted amounted to EUR 5,1 million and EUR 5,07 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. 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 2022 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 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 profiles of sales over a period of 36 months before 31 December 2022 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 2022. 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 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 2022 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 72,2 million and EUR 68,5 million, respectively, as at 31 December 2022. 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 5,5 million as at 31 December 2022. • 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 analysed sales prices of the finished goods items sold after the balance sheet date and compared results with the figures used in the management’s calculation of inventory write-down allowance. • We analysed the aging of inventories other than finished goods, by periods, to identify slow-moving or obsolete items. We also verified the reliability of the inventory ageing report and compared our estimated inventory write-down allowance to the management’s calculations. 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 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, the remuneration report and the social responsibility 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, including the corporate governance report and the remuneration report, we considered whether the consolidated annual report, including the corporate governance report and the remuneration report, includes the disclosures required by the Law of the Republic of Lithuania on Consolidated Reporting by Groups of Undertakings, the Law of the Republic of Lithuania on 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, including the corporate governance report and the remuneration report, for the financial year for which the financial statements are prepared, is consistent with the financial statements; and ● the consolidated annual report, including the corporate governance report and the remuneration report, has been prepared in accordance with the Law of the Republic of Lithuania on Consolidated Reporting by Groups of Undertakings and the Law of the Republic of Lithuania on Reporting by Undertakings. The Company and the Group have 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 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 Group’s consolidated financial statements, including the consolidated annual report, for the year ended 31 December 2022 (the “Single Electronic Reporting Format of the consolidated financial statements”). Description of a subject matter and applicable criteria The Single Electronic Reporting Format of the 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 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 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 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 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 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 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 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 consolidated financial statements, including the preparation of the XHTML format and marking up the consolidated financial statements; • verification whether the XHTML format was applied properly; • evaluating the completeness of marking up the 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 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 consolidated financial statements for the year ended 31 December 2022 complies, in all material aspects, with the ESEF Regulation. Report on the compliance of the format of the separate financial statements with the requirements of the European Single Electronic Reporting Format The European single electronic reporting format has been applied by the management of the Company to the Company’s financial statements to comply with the requirements of Article 3 of 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”). These requirements specify the Company’s obligation to prepare its financial statements in a XHTML format. We confirm that the European single electronic reporting format of the financial statements for the year ended 31 December 2022 complies with the ESEF Regulation in this respect. Appointment We were first appointed as auditors of the Company and the Group on 1996. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 27 years. The key audit partner on the audit resulting in this independent auditor’s report is Jurgita Krikščiūnienė. On behalf of PricewaterhouseCoopers UAB /signed with electronic signature/ Jurgita Krikščiūnienė Assurance Director Auditor's Certificate No. 000495 Vilnius, Republic of Lithuania 7 April 2023 The auditor's electronic signature is used herein to sign only the Independent Auditor's Report

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