Rokiskio Suris

Annual Report (ESEF) • Apr 8, 2024

Report 48510000PW42N5W74S872023-01-012023-12-3148510000PW42N5W74S872022-01-012022-12-3148510000PW42N5W74S872023-12-3148510000PW42N5W74S872022-12-3148510000PW42N5W74S872021-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872021-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872021-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872021-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872021-12-31ifrs-full:OtherReservesMemberiso4217:EURiso4217:EURxbrli:shares48510000PW42N5W74S872021-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872021-12-3148510000PW42N5W74S872022-01-012022-12-31ifrs-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:RetainedEarningsMember48510000PW42N5W74S872023-01-012023-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872023-01-012023-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872023-01-012023-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872023-01-012023-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872023-01-012023-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872023-01-012023-12-31ifrs-full:RetainedEarningsMember48510000PW42N5W74S872023-12-31ifrs-full:IssuedCapitalMember48510000PW42N5W74S872023-12-31ifrs-full:SharePremiumMember48510000PW42N5W74S872023-12-31ifrs-full:CapitalRedemptionReserveMember48510000PW42N5W74S872023-12-31ifrs-full:TreasurySharesMember48510000PW42N5W74S872023-12-31ifrs-full:OtherReservesMember48510000PW42N5W74S872023-12-31ifrs-full:RetainedEarningsMember ENDORSEMENT BY THE RESPONSIBLE PERSONS 08/04/2024 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 2023 as well as annual consolidated financial statements of Rokiskio suris AB for the year 2023, 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 Chief Financial Officer Dalius Trumpa Antanas Kavaliauskas 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 Income statement 4 Statement of comprehensive income 5 Balance sheet 6 Statement of changes inequity 7 Statement of cash flows 9 Notes to the financial statements 10 Consolidated annual report Governance report Consolidated annual social responsibility and sustainability report Independent auditor’s report (presented as separate file) Income statement Group Company Notes 2023 2022 2023 2022 Sales 5 304,254 359,269 264,072 342,529 Cost of sales 10 (262,487) (319,381) (248,997) (308,064) Gross profit 41,767 39,888 15,075 34,465 Selling and marketing expenses 6, 10 (14,253) (15,258) (10,318) (12,365) General and administrative expenses 7, 10 (8,555) (11,942) (5,376) (9,200) Other income 8 358 352 3,627 1,525 Other gains/(losses) - net 9 39 2 28 2 Operating profit 19,356 13,042 3,036 14,427 Finance costs 11 (1,486) (449) (1,486) (449) Profit before income tax 17,870 12,593 1,550 13,978 Income tax 12 (2,797) (79) 250 (650) Profit for the year 15,073 12,514 1,800 13,328 Profit for the year attributable to: Owners of the Company 15,073 12,514 1,800 13,328 Non-controlling interest - - - - 15,073 12,514 1,800 13,328 Basic and diluted earnings per share (in EUR per share) 13 0.43 0.36 0.04 0.38 The accompanying notes are an integral part of these annual financial statements. These financial statements were authorised for issue on 8 April 2024 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 4 Statement of comprehensive income Group Company Notes 2023 2022 2023 2022 Profit for the year 15,073 12,514 1,800 13,328 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 15,073 12,470 1,800 13,185 Total comprehensive income for the year attributable to: Owners of the Company 15,073 12,470 1,800 13,185 Non-controlling interest - - - - 15,073 12,470 1,800 13,185 The accompanying notes are an integral part of these annual financial statements. 5 Balance sheet Group Company At 31 December At 31 December Notes 2023 2022 2023 2022 ASSETS Non-current assets Property, plant and equipment 14 82,600 82,939 58,228 56,988 Intangible assets 15 93 162 77 132 Investments in subsidiaries 16 169 169 5,048 5,048 Trade and other receivables 20 536 827 536 827 Loans granted 18 1,803 2,213 1,767 2,174 85,201 86,310 65,656 65,169 Current assets Inventories 19 94,397 72,229 90,583 68,446 Loans granted 18 1,539 2,896 1,539 2,896 Trade and other receivables 20 54,466 56,675 44,941 62,762 Prepaid income tax 766 139 766 91 Cash and cash equivalents 21 3,896 3,401 237 1,149 155,064 135,340 138,066 135,344 Total assets 240,265 221,650 203,722 200,513 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 24,729 25,922 13,937 15,104 Retained earnings 99,438 88,453 82,169 84,486 Total equity 161,241 151,449 133,180 136,664 LIABILITIES Non-current liabilities Borrowings 25 3,850 5,950 3,850 5,950 Deferred income tax liability 17 2,068 1,122 780 439 Deferred income 26 2,060 2,097 1,720 1,585 Contract liabilities 31(ii) 1,896 2,126 1,896 2,126 Provisions 28 1,421 1,421 1,180 1,180 11,295 12,716 9,426 11,280 Current liabilities Borrowings 25 39,127 24,440 39,127 24,440 Deferred income 26 500 399 307 206 Trade and other payables 27 25,616 30,209 21,466 25,584 Profit tax payable 2,172 2,123 - 2,123 Provisions 28 314 314 216 216 67,729 57,485 61,116 52,569 Total liabilities 79,024 70,201 70,542 63,849 Total equity and liabilities 240,265 221,650 203,722 200,513 The accompanying notes are an integral part of these annual financial statements. 6 The Company’s statement of changes in equity Notes Share capital Share premium Reserve for acquisition of treasury shares Treasury shares Other reserves Retained earnings Total Balance at 1 January 2022 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 - - - - (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) 16,301 73,605 136,664 Profit for the year - - - - - 1,800 1,800 Other comprehensive income for the year - - - - - - - Total comprehensive income for the year - - - - - 1,800 1,800 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,167) 1,167 - Transactions with owners Dividends 22 - - - - - (5,251) (5,251) Total transactions with owners for the year - - - - - (5,284) (5,284) Balance at 31 December 2023 10,402 18,073 10,850 (2,251) 13,937 82,169 133,180 The accompanying notes are an integral part of these annual financial statements. 7 The group’s statement of changes in equity Attributable to owners of the Company Notes Share capital Share premium Reserve for acquisition of treasury shares Treasury shares Other reserves Retained earnings Total Balance at 1 January 2022 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 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 Comprehensive income Profit for the year - - - - - 15,073 15,073 Total other comprehensive income for the year - - - - - - - Total comprehensive income for the year - - - - - 15,073 15,073 Transfer to retained earnings (transfer of depreciation of revalued assets and disposals of revalued assets, net of deferred income tax) 24 - - - - (1,193) 1,193 - Transactions with owners Bonuses for the Board members - - - - - (30) (30) Dividends 22 - - - - - (5,251) (5,251) Total transactions with owners for the year - - - - - (5,281) (5,281) Balance at 31 December 2023 10,402 18,073 10,850 (2,251) 24,729 99,438 161,241 The accompanying notes are an integral part of these annual financial statements. 8 Statement of cash flows Group Company Year ended Year ended 31-Dec 31-Dec Notes 2023 2022 2023 2022 Cash flows from operating activities Cash generated from operations 30 4,289 11,909 (1,912) 4,319 Interest paid (1,486) (449) (1,486) (449) Income tax paid (1,586) (146) (1,534) (92) Net cash generated from/ operating activities 1,217 11,314 (4,932) 3,778 Cash flows from investing activities Purchases of property, plant and equipment 14 (10,504) (13,817) (8,810) (8,880) Purchases of intangible assets 15 (5) (18) 28 (16) Investments in subsidiaries - - - - Loans granted to employees - (131) - (137) Other loans granted - - - - Proceeds from sale of property, plant and equipment 30 408 81 164 82 Other loan repayments received 1,685 633 1,685 918 Interest received 358 221 358 221 Dividends received 31 - - 3,259 1,173 Net cash (used in) investing activities (8,058) (13,031) (3,316) (6,639) Cash flows from financing activities Dividends paid 22 (5,251) (3,501) (5,251) (3,501) Repayment of borrowings (2,100) (2,100) (2,100) (2,100) Proceeds from borrowings 14,687 5,090 14,687 5,100 Net cash (used in) financing activities 7,336 (511) 7,336 (501) Net (decrease) in cash and cash equivalents 495 (2,228) (912) (3,362) Cash and cash equivalents at the beginning of the year 21 3,401 5,629 1,149 4,511 Cash and cash equivalents at the end of the year 21 3,896 3,401 237 1,149 The accompanying notes are an integral part of these annual financial statements. 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 (2022: five subsidiaries). Information on the Group subsidiaries is presented below: Year of acquisition Main activity Group’s ownership interest (%) as at 31 December Subsidiaries 2023 2022 Rokiškio Pienas UAB 2006 Distribution of dairy products 100.00 100.00 Rokiškio Pieno Gamyba UAB 2013 Production of dairy products 100.00 100.00 Jekabpils Piena Kombinats SIA 2005-2011 Raw milk collection 100.00 100.00 Kaunata SIA 2010 Raw milk collection 60.00 60.00 DairyHub.LT UAB 2021 Production of dairy products 100.00 100.00 * 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 2023 was 763 (2022: 808). The average number of the Group’s employees during the year ended 31 December 2023 was 1,205 (2022: 1,291). 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 (a) New and/or amended standards and interpretations effective from 1 January 2023: The following standards, amendments to the existing standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union (further – EU) are effective for the current period and were adopted by the Group: • IFRS 17 Insurance Contracts which introduces an internationally consistent approach to the accounting for insurance contracts. Prior to IFRS 17, significant diversity has existed worldwide relating to the accounting for and disclosure of insurance contracts, with IFRS 4 permitting many previous (non-IFRS) accounting approaches to continue to be followed. IFRS 17 will result in significant changes for many insurers, requiring adjustments to existing systems and processes. The new standard takes the view that insurance contracts combine features of a financial instrument and a service contract, and that many generate cash flows that vary substantially over time. It therefore takes the approach of: 11 Combining current measurement of future cash flows with recognising profit over the period that services are provided under the contract; Presenting insurance service results (including insurance revenue) separately from insurance finance income or expenses, and; Requiring an entity to make an accounting policy choice for each portfolio whether to recognise all insurance finance income or expenses for the reporting period in profit or loss, or to recognise some in other comprehensive income. Subsequent to the issue of IFRS 17, amendments to the standard and deferral of effective dates have been made. • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Disclosure of Accounting Policies. Amendments to IAS 1 change the disclosure requirements with respect to accounting policies from ‘significant accounting policies’ to ‘material accounting policy information’. The amendments provide guidance on when accounting policy information is likely to be considered material. The amendments to IAS 1 are effective for annual reporting periods beginning on or after 1 January 2023, with earlier application permitted. As IFRS Practice Statements are non-mandatory guidance, no mandatory effective date has been specified for the amendments to IFRS Practice Statement 2; • Amendments to IAS 8 Accounting Policies: Definition of Accounting Estimate added the definition of Accounting Estimates in IAS 8. The amendments also clarified that the effects of a change in an input or measurement technique are changes in accounting estimates, unless resulting from correction of prior period errors (effective for annual periods beginning on or after 1 January 2023); • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction which clarify whether the initial recognition exemption applies to certain transactions that result in both an asset and a liability being recognised simultaneously. The amendments introduce an additional criterion for the initial recognition exemption under IAS 12.15, whereby the exemption does not apply to the initial recognition of an asset or liability which at the time of the transaction, gives rise to equal taxable and deductible temporary differences (effective for annual periods beginning on or after 1 January 2023); • Amendments to IAS 12 Income Taxes: International Tax Reform – Pillar Two Model Rules which create a temporary mandatory exception to the requirements of IAS 12 Income Taxes from recognition and disclosure of information about deferred tax assets and liabilities related to Pillar Two income taxes and provides for additional disclosure requirements with respect to an entity’s exposure to Pillar Two income taxes. The amendments issued in May 2023 are effective immediately and retrospectively in accordance with IAS 8, except for some disclosure requirements with respect to an entity’s exposure to Pillar Two income taxes. (effective immediately, but disclosure requirements are required for annual reporting periods beginning on or after 1 January 2023). The application of these standards, amendments and interpretations had not a material impact on the Group’s consolidated financial statements and so have not been discussed in detail in the notes to the financial statements. (b) Standards, amendments and interpretations to existing standards issued by IASB, adopted by EU, but not yet effective and have not been early adopted by the Group: At the date of authorisation of these consolidated financial statements, the Group has not early adopted the following new and revised IFRS standards, amendments and interpretations that have been issued but are not yet effective: 12 • Amendments to IFRS 16 Lease Liability in a Sale and Leaseback which provide a requirement for the seller-lessee to determine ‘lease payments’ or ‘revised lease payments’ in a way that the seller-lessee would not recognise any amount of the gain or loss that relates to the right of use retained by the seller-lessee (effective for annual periods beginning on or after 1 January 2024); • Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current which require that an entity’s right to defer settlement of a liability for at least twelve months after the reporting period must have substance and must exist at the end of the reporting period. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement for at least twelve months after the reporting period. As a result of the COVID-19 pandemic, the Board deferred the effective date of the amendments by one year to annual reporting periods beginning on or after 1 January 2024. • Amendments to IAS 1 Presentation of Financial Statements¬: Non-current Liabilities with Covenants. If an entity’s right to defer is subject to the entity complying with specified conditions, such conditions affect whether that right exists at the end of the reporting period, if the entity is required to comply with the condition on or before the end of the reporting period and not if the entity is required to comply with the conditions after the reporting period. The amendments also provide clarification on the meaning of ‘settlement’ for the purpose of classifying a liability as current or non-current. (effective for annual periods beginning on or after 1 January 2024). The Group is currently assessing the impact of these new accounting standards and amendments. The management of the Group does not expect that the adoption of these standards, amendments and interpretations listed above will have a material impact on the consolidated financial statements of the Group in future periods. (c) Standards, amendments and interpretations to existing standards that are not yet effective and have not been endorsed by EU: IFRSs currently endorsed by EU are not significantly different from the standards, endorsed by IASB, except the standards, amendments and interpretations that were not endorsed by EU (the effective dates are applicable to IFRS to full extent). These standards, amendments and interpretations are listed below: • Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures which introduce additional disclosure requirements about an entity’s supplier finance arrangements. The amendments also provide clarification on characteristics of supplier finance arrangements. (effective for annual periods beginning on or after 1 January 2024); • Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability which introduce requirements to assess when a currency is exchangeable into another currency and when it is not. The Amendments require an entity to estimate the spot exchange rate when it concludes that a currency is not exchangeable into another currency. (effective for annual periods beginning on or after 1 January 2025). The Group is currently assessing the impact of these new accounting standards and amendments. The management of the Group does not expect that the adoption of these standards, amendments and interpretations listed above will have a material impact on the consolidated financial statements of the Group in future periods. 13 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. 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. 14 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 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. 15 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: Buildings15-75 years Plant and machinery5-50 years Motor vehicles4-15 years Equipment and other property, plant and equipment4-25 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 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: 16 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 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 17 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 forward-looking than past due information is available without undue cost or effort, it must be used to assess changes in credit risk. 18 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. 19 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. (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. 20 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 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. 21 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 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. 22 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. 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. 23 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 benefit 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. 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. 24 The goods are often sold with retrospective volume discounts based on aggregate sales over a 12 months period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Revenue from transportation services is recognised in the period when services are performed. Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. 2.18 Expense recognition Expenses are recognised on an accrual basis and matching principle in the reporting period in which they are incurred. Expenses incurred during the reporting period, which cannot be attributed directly to specific income earned and will not generate any income in subsequent reporting periods, are recognised as expenses during the period when incurred. Expenses are stated at fair value. 2.19 Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. 2.20 Earnings per share Basic earnings per share are calculated by dividing net profit attributed to the shareholders from average weighted number of ordinary registered shares in issue, excluding ordinary registered shares purchased by the Company and the Group and held as treasury shares. 2.21 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Board of Directors that makes strategic decisions. 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. 25 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 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. 26 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 with fixed interest rates expose the Group to fair value interest rate risk. In 2023 and 2022, 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. 27 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 5% (2022: 26%) of the short - term borrowings interest and 100% of long term interest (2022: 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 42,977 (2022: 22,340)) 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 43 thousand in 2022 and EUR 22 thousand in 2022. As at 31 December 2023 the Company’s and the Group’s net assets sensitive to changes in interest rate amounted to EUR 3,422 thousand (2022: 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 3,896 thousand (2022: EUR 1,669 thousand) and the Company’s cash amounted EUR 237 thousand (2022: EUR 548 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: 28 Group Company 2023 2022 2023 2022 Cash and cash equivalents at banks 3,896 3,401 237 1,149 Trade receivables 46,830 49,024 39,797 58,503 Loans granted 3,342 5,109 3,306 5,070 54,068 57,534 43,340 64,722 (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 2023. Group Company Credit limit Amount receivable Credit limit Amount receivable Customer A 4,345 4,119 - - Customer B 4,500 4,036 4,500 4,036 Customer C 5,500 3,751 5,500 3,751 Customer D 4,000 3,375 4,000 3,375 Customer E 3,500 2,673 - - Customer F 2,500 2,397 2,500 2,397 Customer G 2,000 1,726 2,000 1,726 Customer H 2,000 1,623 2,000 1,623 The table below presents credit limits established for the major customers and amounts receivable from them as at 31 December 2022. Group Company Credit limit Amount receivable Credit limit Amount receivable Customer A 5,600 5,523 5,600 5,523 Customer B 5,000 4,638 5,000 4,638 Customer F 4,800 4,631 - - Customer G 3,600 3,542 3,600 3,542 Customer D 3,000 2,860 3,000 2,860 Customer I 2,960 2,632 2,960 2,632 Customer J 2,400 2,380 2,400 2,380 Customer K 2,500 2,071 2,500 2,071 The table below summaries concentration of the loans granted: 29 Group Company 2023 2022 2023 2022 in excess of EUR 1,000 thousand 2,987 3,187 2,987 3,187 in excess of EUR 500 thousand, but not in excess of EUR 1,000 thousand - 687 - 690 not in excess of EUR 500 thousand 355 1,235 319 1,193 3,342 5,109 3,306 5,070 Loans in excess of EUR 1,000 thousand were granted to two business entities. (iii) Impairment of financial assets The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2023 or 31 December 2022 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 was determined as follows for trade receivables grouped (collective model) based on shared characteristics: Group Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2023 Expected loss rate 0.10% 0.10% 1.00% 1.00% 1.00% 0.90% Gross carrying amount – trade receivables 38,250 3,159 538 743 1,017 675 44,382 Loss allowance 38 3 5 7 10 6 70 30 Group Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2022 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 Company Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2023 Expected loss rate 0.12% 0.10% 1.00% 1.00% 1.00% 0.90% Gross carrying amount – trade receivables 31,217 3,159 538 743 1,017 675 37,349 Loss allowance 37 3 5 7 10 6 70 Company Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2022 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 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 was determined as follows: 31 Group Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2023 Gross carrying amount – trade receivables 1,992 438 601 139 357 2,707 6,234 Expected loss rate 59.6% Loss allowance 3,716 Group Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2022 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 Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2023 Gross carrying amount – trade receivables 1,992 438 601 139 357 2,707 6,234 Expected loss rate 59.6% Loss allowance 3,716 Company Not yet due Less than 30 days past due More than 30 days past due More than 90 days past due More than 180 days past due More than 365 days past due Total December 31, 2022 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 The Group has followed the three-stage model for impairment of financial assets other than trade receivables and considered all its loans granted at amortised cost to have Stage 1 (performing) credit. The ECL model is based on the financial information of the Company’s and the Group’s debtors and the assessment of collaterals as security of loan repayment. The Company and the Group carried out an assessment of collaterals as security of loan repayment and determined that the credit losses determined based on probability of default within 12 months resulted in immaterial impairment loss. The information on loans receivable is disclosed in Note 18. 32 As at 31 December 2023 debtors collateral placed as security in favor to the Company and the Group for trade receivables and loans receivable are valued at Eur 6,630 thousand (2022: Eur 5,218 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 12,973 thousand (2022: EUR 12,660 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. Group Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years At 31 December 2023 Borrowings from banks and other financial liabilities 39,485 1,598 4,222 - Accrued expenses 19,898 - - - 59,383 1,598 4,222 - Group Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years At 31 December 2022 Borrowings from banks and other financial liabilities 25,127 1,598 6,524 - Accrued expenses 25,195 - - - 50,322 1,598 6,524 - Company Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years At 31 December 2023 Borrowings from banks and other financial liabilities 39,485 1,598 4,222 - Trade payables 17,507 - - - 56,992 1,598 4,222 - 33 Company Less than 3 months From 3 to 12 months From 1 to 5 years After 5 years At 31 December 2022 Borrowings from banks and other financial liabilities 25,127 1,598 6,524 - Trade payables 21,929 - - - 47,056 1,598 6,524 - 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 2023 2022 2023 2022 Borrowings (Note 25) 42,977 30,390 42,977 30,390 Less: cash and cash equivalents (Note 21) (3,896) (3,401) (237) (1,149) Net debt 39,081 26,989 42,740 29,241 Shareholders’ equity 161,241 151,449 133,180 136,664 Total capital 200,322 178,438 175,920 165,905 Pursuant to the Lithuanian Law on Companies the authorised share capital of a public company must be not less than EUR 25 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 2023 and 31 December 2022, 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. 34 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. 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. 35 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 2023 would be EUR 40 thousand lower/ higher (2022: EUR 274 thousand, respectively). See Note 19 for more details. 5. Segment reporting Operating segments and reportable segments The Group’s management has distinguished the following operating segments of the Group: hard cheese, semi-hard cheese, butter milk, cream, sour cream, sour milk, yogurt, curd, curd cheese and other. These segments were combined into two main reportable segments based on the similar nature of products, production process, types of customers and the method of distribution. 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: 36 Fresh milk products Cheese and other dairy products Group 2023 Sales 110,407 228,843 339,250 Inter-segment sales - (34,996) (34,996) Third party sales 110,407 193,847 304,254 Segment’s gross profit 20,120 21,647 41,767 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 Geographical information The Company’s sales by markets and assets by can be analysed as follows: Sales revenue Total assets Capital expenditure 2023 2022 2023 2022 2023 2022 Lithuania 93,737 124,814 203,722 200,513 8,809 8,880 Europe Union countries 133,549 180,950 - - - - Near East 22,364 16,372 - - - - North America 5,575 3,698 - - - - Far East 3,635 9,576 - - - - Other countries 5,212 7,119 - - - - 264,072 342,529 203,722 200,513 8,809 8,880 The Group’s sales by markets and assets by location can be analysed as follows: Sales revenue Total assets Capital expenditure 2023 2022 2023 2022 2023 2022 Lithuania 111,023 127,571 234,185 214,665 10,487 13,709 Europe Union countries 153,359 194,933 6,129 6,985 17 109 Near East 23,080 16,372 - - - - North America 5,575 3,698 - - - - Far East 5,069 9,576 - - - - Other countries 6,148 7,119 - - - - 304,254 359,269 240,314 221,650 10,504 13,818 Sales are allocated based on the country in which the customers are located. 37 The breakdown of revenue by category: Group Company 2023 2022 2023 2022 At point of time - sales of goods 303,287 357,666 258,187 336,484 Over time - services 967 1,603 5,885 6,045 304,254 359,269 264,072 342,529 6. Selling and marketing expenses Group Company 2023 2022 2023 2022 Transportation services (4,739) (5,236) (4,410) (5,036) Wages and salaries (3,725) (3,518) (1,937) (1,793) Intermediation services (440) (535) (430) (522) Product image creation and advertising expenses (1,188) (964) (205) (176) Repair and maintenance (928) (868) (840) (794) Depreciation of property, plant and equipment (636) (631) (590) (577) Warehousing services (405) (328) (405) (328) Customs fees (365) (301) (365) (301) Other expenses (1,827) (2,877) (1,136) (2,838) (14,253) (15,258) (10,318) (12,365) 7. General and administrative expenses Group Company 2023 2022 2023 2022 Wages and salaries (4,438) (4,569) (2,553) (3,424) Taxes (other than income tax) (53) (45) (36) (34) Provisions for impairment of loans granted and doubtful receivables and write-offs of loans and receivables (reversals) (Note 20) (14) (3,251) (11) (3,251) Consultations (260) (205) (179) (150) Depreciation of property, plant and equipment and amortisation of intangible assets (685) (670) (574) (528) Repairs and maintenance (582) (303) (316) (270) Telecommunications and IT maintenance expenses (184) (140) (141) (128) Insurance expenses (203) (171) (185) (156) Bank charges (134) (122) (130) (119) Business trips (79) (46) (62) (44) Fines (9) (9) (1) (1) Staff training (54) (62) (29) (42) Membership fees (16) (1) (15) - Charity and support (425) (475) (88) (96) Other expenses (1,419) (1,873) (1,056) (957) (8,555) (11,942) (5,376) (9,200) 38 8. Other income Group Company 2023 2022 2023 2022 Interest income 358 221 358 221 Dividend and other income - 131 3,269 1,304 358 352 3,627 1,525 The Company’s other income comprises dividends received from subsidiary Rokiškio Pieno Gamyba UAB. 9. Other (losses)/gains Group Company 2023 2022 2023 2022 Result of disposal of property, plant and equipment 39 2 28 2 39 2 28 2 10. Expenses by nature Group Company 2023 2022 2023 2022 Raw materials and consumables used 215,359 256,045 206,184 250,525 Changes in inventories of finished goods and work in progress (21,378) (7,719) (21,347) (7,045) Inventory write-down to net realizable value (Note 19) (790) (5,480) (790) (5,480) Wages and salaries including social security contributions 28,117 27,479 18,129 17,895 Transportation services 13,219 14,478 12,884 14,267 Depreciation (Notes 14) 10,394 9,789 7,352 6,555 Amortisation of the Government grant for property, plant and equipment (Note 26) (453) (397) (281) (206) Intermediation services 440 535 430 522 Repairs and maintenance 8,383 7,573 6,885 5,939 Cost of finished goods resold 385 352 15,302 16,628 Provisions for impairment of loans granted and doubtful receivables and write-offs of loans and receivables (reversals) - 2,795 - 2,795 Taxes (other than income tax) 774 570 649 548 Consultations 259 205 179 150 Telecommunication and IT maintenance expenses 185 149 150 136 Utilities (energy) 20,538 27,999 12,163 17,756 Other 9,863 12,208 6,802 8,644 Total cost of sales, selling and marketing expenses and general and administrative expenses 285,295 346,581 264,691 329,629 39 11. Finance costs Group Company 2023 2022 2023 2022 Interest expenses: - bank borrowings (1,486) (449) (1,486) (449) 12. Income tax Group Company 2023 2022 2023 2022 Current income tax (1,695) (2,185) - (2,154) Prior year income tax corrections - (535) 747 (55) Deferred income tax (Note 17) (1,102) 2,641 (497) 1,559 Income tax (expenses)/ benefit (2,797) (79) 250 (650) 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 2023 2022 2023 2022 Profit before income tax 17,870 12,593 1,550 13,978 Tax calculated at a rate of 15% (Note 2.15) 2,680 1,889 233 2,097 Expenses not deductible for tax purposes 346 110 289 222 Income not subject to tax (528) (27) (526) (203) Charity expenses deductible twice for tax purposes (101) (127) - (29) Investment projects relief (335) (1,766) (28) (1,437) Prior year income tax corrections and other 735 - (218) - Income tax expense/(benefit) 2,797 79 (250) 650 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. 40 13. Earnings per share Group Company 2023 2022 2023 2022 Net profit attributable to shareholders 15,073 12,514 1,800 13,328 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) 0.43 0.36 0.04 0.38 The Group has no dilutive potential ordinary shares, therefore, the diluted earnings per share are the same as basic earnings per share. 41 14. Property, plant, and equipment Company Buildings Plant and machinery Motor vehicles and other assets Construction in progress Total At 1 January 2022 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) 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 Year ended 31 December 2023 Opening net book amount 11,954 29,272 11,538 4,224 56,988 Additions 58 1,818 3,001 3,933 8,810 Disposals (30) (8) (98) - (136) Write-offs (1) (78) (2) - (81) Transfers from CIP 171 1,302 347 (1,821) (1) Depreciation charge (660) (3,682) (3,010) - (7,352) Closing net book amount 11,492 28,624 11,776 6,336 58,228 At 31 December 2023 Acquisition cost and revalued amount 20,495 97,210 48,577 6,336 172,618 Accumulated depreciation (9,003) (68,586) (36,801) - (114,390) Net book amount 11,492 28,624 11,776 6,336 58,228 42 Group Buildings Plant and machinery Motor vehicles and other assets Construction in progress Total At 1 January 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 2021 Opening net book amount 17,654 47,076 10,835 3,491 79,056 Additions 151 2,946 3,926 6,795 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 2021 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 Year ended 31 December 2022 Opening net book amount 18,813 47,552 12,350 4,224 82,939 Additions 193 2,599 3,033 4,679 10,504 Disposals (30) (7) (332) - (369) Write-offs (1) (77) (2) - (80) Transfers from CIP 339 1,874 354 (2,567) - Depreciation charge (1,236) (6,041) (3,117) - (10,394) Closing net book amount 18,078 45,900 12,286 6,336 82,600 At 31 December 2022 Cost or revaluated amount 32,878 138,611 50,751 6,336 228,576 Accumulated depreciation (14,800) (92,711) (38,465) - (145,976) Net book amount 18,078 45,900 12,286 6,336 82,600 On 31 December 2020 the Group and the Company, with the help of independent experts UAB OBER HAUS Nekilnojamasis Turtas, performed an appraisal of property, plant and equipment (excluding vehicles) in order to determine its fair value. The Company's and the Group's property, plant and equipment was revaluated as at 31 December 2020. The valuation of real estate was based on the comparable sales price method by comparing sales prices in Lithuania. The valuation of other categories of assets was based on the replacement cost method. The valuation of motor vehicles was conducted by the Group's experts who established the fair value using the comparable sales price method. Gain arising on revaluation is disclosed in the tables on the movements in property, plant and equipment and was recorded under the line item of other comprehensive income. Assets that were evaluated using the replacement cost method were tested for impairment, as a result of which no indications for possible impairment were identified. Building and Motor vehicles and other assets were attributed to Level 2 of fair value. 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. 43 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 2023 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 2023, 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 2023, the Company’s and the Group’s property, plant and equipment with a carrying value of EUR 34,257 thousand and EUR 50,849 thousand, respectively (31 December 2022: EUR 34,440 thousand and EUR 51,743 thousand, respectively) was pledged as a security for credit limit agreements. Depreciation expenses of property plant and equipment are included in selling and marketing expenses, general and administrative expenses and cost of sales in the income statement, as well as in work in progress and finished goods in the balance sheet. 44 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 2023 and 2022: Company Buildings Structures and machinery Motor vehicles and other assets Construction in progress Total At 31 December 2022 9,067 17,166 11,303 4,224 41,760 At 31 December 2023 8,711 17,495 11,832 6,336 44,374 Group Buildings Structures and machinery Motor vehicles and other assets Construction in progress Total At 31 December 2022 12,182 28,058 11,841 4,224 56,305 At 31 December 2023 11,634 27,313 12,077 6,336 57,360 15. Intangible assets Company Computer software At 1 January 2022 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 Year ended 31 December 2023 Opening net book amount 132 Additions - Amortisation charge (55) Closing net book amount 77 At 31 December 2023 Cost 1,327 Accumulated amortisation (1,250) Net book amount 77 45 Group Computer software At 1 January 2022 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 Year ended 31 December 2023 Opening net book amount 162 Additions 5 Amortisation charge (74) Closing net book amount 93 At 31 December 2023 Cost 1,466 Accumulated amortisation (1,373) Net book amount 93 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 2023 2022 2023 2022 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 4 169 169 5,048 5,048 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 2023 (unaudited) are as follows: 46 Total assets: EUR 183,614; Property, plant and equipment: EUR 33,452; Results of operations: EUR (41,561). 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 2023 2022 2023 2022 Deferred income tax assets: – to be realised after more than 12 months 1,075 913 1,024 862 – to be realised within 12 months 119 1,587 119 985 1,194 2,500 1,143 1,847 Deferred income tax liabilities: – to be realised after more than 12 months (3,052) (3,392) (1,733) (2,086) – to be realised within 12 months (210) (230) (190) (200) (3,262) (3,622) (1,923) (2,286) Net deferred tax liability (2,068) (1,122) (780) (439) The gross movement in deferred income tax liabilities was as follows: Group Company 2023 2022 2023 2022 At the beginning of the year (1,122) (3,812) (439) (2,129) Recognised in the income statement (946) 2,641 (341) 1,641 Recognised in other comprehensive income - 49 - 49 At the end of the year (2,068) (1,122) (780) (439) 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: 47 Company Deferred income tax assets Inventory write-down to net realisable value Employee post-retirement benefits Impairment of amounts receivable Vacation reserve Total At 1 January 2022 15 56 149 148 368 Recognised in the income statement 807 23 503 15 1,348 Recognised in other comprehensive income - 131 - - 131 At 31 December 2022 822 210 652 163 1,847 Recognised in the income statement (703) (1) - - (704) Recognised in other comprehensive income - - - - - At 31 December 2023 119 209 652 163 1,143 Deferred income tax liabilities Revaluation of property, plant and equipment Total At 1 January 2022 (2,497) (2,497) Recognised in the income statement 211 211 Recognised in other comprehensive income - - At 31 December 2022 (2,286) (2,286) Recognised in the income statement 363 363 Recognised in other comprehensive income - - At 31 December 2023 (1,923) (1,923) 48 Group Deferred income tax assets Inventory write-down to net realisable value Employee post-retirement benefits Impairment of amounts receivable Vacation reserve Tax loss, transferable for future years Total At 1 January 2022 15 56 149 237 - 457 Recognised in the income statement 807 23 503 15 602 1,950 Recognised in other comprehensive income - 182 - (89) - 93 At 31 December 2022 822 261 652 163 602 2,500 Recognised in the income statement (703) (1) - - (602) (1,306) Recognised in other comprehensive income - - - - - - At 31 December 2023 119 260 652 163 - 1,194 Deferred income tax liabilities Revaluation of property, plant and equipment Total At 1 January 2022 (4,269) (4,269) Recognised in the income statement 647 647 Recognised in other comprehensive income - - At 31 December 2022 (3,622) (3,622) Recognised in the income statement 360 360 Recognised in other comprehensive income - - At 31 December 2023 (3,262) (3,262) 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. 49 18. Loans granted Group Company 2023 2022 2023 2022 Long-term loans to employees 316 371 280 332 Other long-term loans 1,487 1,842 1,487 1,842 Less: provision for impairment of loans receivable - - - - Long-term loans, net 1,803 2,213 1,767 2,174 Current portion of loans to employees 39 66 39 66 Other short-term loans granted 1,500 2,830 1,500 2,830 Current portion of long-term loans and short-term loans, net 1,539 2,896 1,539 2,896 Repayment terms of other long-term loans granted ranged between 1 and 5 years. The loans bear average weighted interest rate of 6.72% (2022: 3.17%). 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 2023 2022 2023 2022 Loans granted not past due 3,342 5,109 3,306 5,070 Impaired loans granted - - - - Gross value of loans granted 3,342 5,109 3,306 5,070 Less: Provision for impairment of loans receivable - - - - Net amount 3,342 5,109 3,306 5,070 19. Inventories Group Company 2023 2022 2023 2022 Raw materials 3,601 3,321 1,482 1,475 Work in progress 12,917 14,594 12,710 14,357 Finished products 77,129 57,651 76,010 56,570 Other inventories 1,540 2,143 1,171 1,524 Total inventories at cost 95,187 77,709 91,373 73,926 Less: inventory write-down to net realizable value (790) (5,480) (790) (5,480) Total inventories 94,397 72,229 90,583 68,446 As at 31 December 2023 and 2022 inventories were not pledged. The Company’s inventories as at 31 December 2023: 0 tons of butter (2022: 58.8 tons) and 2,587.5 tons milk sugar (2022: 506 tons) held with third parties in Lithuania, 340.2 tons of hard cheese (2022: 183.9 tons) held in the USA, 1,795.9 tons of hard cheese (2022: 0 tons) held in Lithuania. The total value of these inventories is EUR 12,356 thousand (2022: 1,583 thousand). 50 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. 20. Trade and other receivables Group Company 2023 2022 2023 2022 Non-current receivables Prepayments for non-current assets 456 562 456 562 Prepayments for milk supply 80 265 80 265 536 827 536 827 Current receivables Trade receivables 46,830 49,024 39,797 58,503 VAT receivable 4,247 4,972 2,826 2,948 Prepayments for milk supply 2,628 1,851 2,033 1014 Other prepayments and deferred expenses 761 828 285 297 54,466 56,675 44,941 62,762 As at 31 December 2023 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 (2022: no larger than EUR 20,000 thousand). At 31 December 2023 and 2022 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 2023 and 2022, it amounted, respectively, to EUR 561 thousand and EUR 561 thousand. The information on credit quality of receivables as at 31 December 2023 is provided in Note 3.1. (b). Movement in impairment during the financial year for trade receivables under contracts with clients: Group Company 2023 2022 2023 2022 In the beginning of the reporting period 3,786 991 3,786 991 Bad debts reversal during the year - - - - Recognized impairment during the year - 2,795 - 2,795 At the end of the reporting period 3,786 3,786 3,786 3,786 51 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. During the year 2023 the situation of these customers does not changed. The management of the Group does not identified any new bad debts. 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 2023 2022 2023 2022 Cash at bank and on hand 3,896 3,401 237 1,149 3,896 3,401 237 1,149 As at 31 December 2023, cash at bank balances pledged amounted to EUR 285 thousand (31 December 2022: EUR 688 thousand). For the purposes of the cash flow statement, cash and cash equivalents comprise as follows: Group Company At 31 December At 31 December 2023 2022 2023 2022 Cash at bank and on hand 3,896 3,401 237 1,149 3,896 3,401 237 1,149 22. Share capital As at 31 December 2023, 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 2023 there were no changes in the Company's authorized capital. Dividends Dividends per share (other than treasury shares) declared at the Company for the previous year were paid out in the current year. 52 Company At 31 December 2023 2022 Dividends per share, EUR 0.15 0.10 Total amount of dividends paid (5,251) (3,501) 23. Treasury shares 2023 2022 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 2023. During 2023 the reserve for acquisition of own shares was not increased and amounted to EUR 10,850 thousand as at 31 December 2022. Other reserves Group Company At 31 December At 31 December 2023 2022 2023 2022 Non-distributable reserve 1,975 1,975 1,113 1,113 Revaluation reserve 22,754 23,947 12,824 13,991 24,729 25,922 13,937 15,104 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: 53 Company Revaluation reserve Deferred income tax Revaluation reserve net of tax At 1 January 2022 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 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,374) 206 (1,168) At 31 December 2023 14,903 (2,080) 12,824 Group Revaluation reserve Deferred income tax Revaluation reserve net of tax At 1 January 2022 29,396 (4,269) 25,127 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 Depreciation of revalued amount of PP&E and disposals and write-offs of revalued assets (1,404) 211 (1,193) At 31 December 2023 26,165 (3,411) 22,754 25. Borrowings Group Company 2023 2022 2023 2022 Non-current Non-current borrowings 3,850 5,950 3,850 5,950 Current Current borrowings 39,127 24,440 39,127 24,440 Total borrowings 42,977 30,390 42,977 30,390 The Company’s and the Group’s current borrowings – credit line granted by SEB Bankas. Interest rate for 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 241 thousand as at 31 December 2023 (2022: 475 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. 54 Net debt Reconciliation Group Company 2023 2022 2023 2022 Cash and cash equivalents 3,896 3,401 237 1,149 Credit line (37,027) (22,340) (37,027) (22,340) Borrowings (excluding credit line) (5,950) (8,050) (5,950) (8,050) Net debt (39,081) (26,989) (42,740) (29,241) As at 31 December 2023, the balance not withdrawn under the committed credit line facilities with the banks amounted to EUR 12,973 thousand (2022: EUR 12,660 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 2023 2022 2023 2022 Government grants at the beginning of the year 2,496 2,594 1,791 1,698 Government grants recognised 517 299 517 299 Recognised in the income statement (453) (397) (281) (206) 2,560 2,496 2,027 1,791 Less: non-current portion (2,060) (2,097) (1,720) (1,585) Current portion 500 399 307 206 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 2023 2022 2023 2022 Trade payables 19,898 25,195 17,507 21,929 Salaries, social security contributions and taxes 2,364 2,178 1,536 1,395 Advance amounts received and other payables 1,489 1,030 999 836 Accrued expenses 1,865 1,806 1,424 1,424 25,616 30,209 21,466 25,584 55 28. Provisions Group Company 2023 2022 2023 2022 Non-current Non-current provisions 1,421 1,421 1,180 1,180 Current Current provisions 314 314 216 216 Total provisions 1,735 1,735 1,396 1,396 Employee benefit obligations Group Company 2023 2022 2023 2022 At the beginning of the year 1,735 1,367 1,396 911 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 1,735 1,396 1,396 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: Impact on defined obligation Change of assumption Increase in assumption Decrease in assumption 2023 2022 2023 2022 2023 2022 Discount rate 1.0% 1.0% -1% -1% 1% 1% Salary growth rate 1.0% 1.0% 1% 1% -1% -1% 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 2023 and 2022, no guarantees were granted to third parties on behalf of the Group and the Company. Capital expenditure commitments As at 31 December 2023 and 2022, there were no capital expenditure contracted for property, plant and equipment at the balance sheet date but not recognised in the financial statements. 56 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 2023 2022 2023 2022 Net profit (loss) before income tax 17,870 12,593 1,550 13,978 Adjustments for: depreciation (Note 14) 10,394 9,789 7,352 6,555 amortisation (Note 15) 74 59 27 46 write-off of property, plant and equipment and intangible assets (Notes 14 and 15) 80 66 81 66 loss/(profit) on disposal of property, plant and equipment (Note 9) (39) (2) (28) (2) interest expense (Note 11) 1,486 449 1,486 449 interest income (Note 8) (358) (221) (358) (221) amortisation of loans (230) (230) (230) (230) inventory write-down to net realisable value (reversal) (4,690) 5,383 (4,690) 5,383 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) (453) (397) (281) (206) dividend income - - (3,259) (1,173) Changes in operating assets and liabilities: trade and other receivables 2,000 (7,446) 17,559 (12,051) inventories (17,478) (18,582) (17,447) (17,908) prepayments for milk supply 185 (10) 185 (10) trade and other payable (4,552) 6,436 (3,859) 5,621 Net cash generated from/(used in) operating activities 4,289 11,909 (1,912) 4,319 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 2023 2022 2023 2022 Net book amount (Note 14) 369 79 136 79 Profit/(Loss) on disposal of property, plant and equipment (Note 9) 39 2 28 2 Proceeds from sale of property, plant and equipment 408 81 164 81 31. Related-party transactions Main shareholders of the Company: 57 At 31 December 2023 2022 Antanas Trumpa and family members (Chairman of the Board) 21.02% 20.87% 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) 16.81% 16.96% * Pieno Pramonės Investicijų Valdymas UAB is controlled by Mr Antanas Trumpa (as a principal shareholder holding 51.7% 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 83.18% (2022: 81.93%) of the Company’s share capital and votes. Members of the Board of Directors of Pieno Pramonės Investicijų Valdymas UAB, RSU Holding SIA, Fonterra (Europe) Coöperatie U.A., and Rokiškio Sūris AB and their family members are treated as related parties. All Fonterra group companies are also treated as related parties. Certain cooperative societies engaged in the production of milk are treated as related parties of the Company because the Company can exercise a significant influence over daily activities of these cooperative societies through close family members of its directors and certain employees. (i) The following transactions were carried out with related parties: Group Company At 31 December At 31 December 2023 2022 2023 2022 Purchase of milk from other related parties 4,021 6,946 38,844 62,371 Purchase of non-current assets - - - - Purchase of inventory 59 - 10,467 13,148 Purchases of services 262 344 1,935 3,269 Sales of transportation services to other related parties 26 42 1,534 1,515 Sales of production and other inventories 18,451 27,287 72,988 83,717 Interest charges on credit facility 11 11 11 19 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. 58 (ii) Year-end balances arising from transactions with related parties: Group Company At 31 December At 31 December 2023 2022 2023 2022 Non-interest bearing loans granted to directors (and their family members) - 4 - 4 Current loan receivable from Jekabpils Piena Kombinats SIA - - - - Current loan receivable from Dzūkijos Pienas KB 298 298 298 298 Advance payment received from Fonterra (Europe) Coöperatie U.A – non current 1,896 2,126 1,896 2,126 Advance payment received from Fonterra (Europe) Coöperatie U.A –current 230 230 230 230 Trade payables to other related parties 68 1,499 2,452 4,317 Trade receivables from other related parties 2,795 1,519 6,565 22,237 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 20,315 thousand for the year 2023 (2022: EUR 24,055 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 2,655,534 (2022: EUR 1,172,742). Dividends were paid out to Rokiškio Sūris AB in May 2023 and 2022 respectively. Dividends were declared to the shareholders of the Company in the amount of EUR 5,251 thousand (2022: 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 2023 2022 2023 2022 Salaries 235 243 218 225 Bonuses/management bonuses paid 30 17 30 17 Accrual (reversal) for management bonuses - - - - Social security contributions 4 4 4 4 269 264 252 246 Key management personnel include 10 (2022: 10) members of the Board and management officers. 59 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 2023 2022 2023 2022 Audit of the financial statements under the agreement 75 58 45 37 Tax consultation services 21 20 13 13 96 78 58 50 33. 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 2023 the Group’s and the Company has no any sales to clients in Russia and Belarus. During the year 2023 the Group’s and the Company’s sales of milk products to the clients Ukraine totaled EUR 3,160 EUR thousand (2022: 2,600 thousand). As at 31 December 2023 there were no accounts receivable from companies Ukraine (2022: EUR none). 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. 34. 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. 35. Events after the reporting period On 29 February 2024, amendments to the Credit Agreement were signed with AB SEB bankas, increasing the credit limit to EUR 55,100 thousand and extending the final maturity of the credit limit to 30 April 2025. In addition, the bank granted the new business loan to the company that amounted EUR 15 million, the final maturity term of the loan is on 30 April 2026. 60 The Company's assets previously pledged in favour of the Bank were extended to secure the repayment of the loans. 61 1 Consolidated annual report 2023 2 Contents MESSAGE FROM THE CEO .................................................................................................................................... 4 GENERAL INFORMATION ..................................................................................................................................... 5 1. Reporting period for which the annual report is prepared ..................................................................... 5 2. Key information about the issuer: ........................................................................................................... 5 3. Information about the Company's group of companies ......................................................................... 5 4. Nature of the principal activities of the company and group ................................................................. 6 5. Group strategy and objectives ................................................................................................................. 6 6. Highlights of the reporting period ........................................................................................................... 7 7. Significant events after the end of the financial year .............................................................................. 9 INFORMATION ON THE COMPANY'S AND GROUP'S ACTIVITIES .......................................................................... 9 8. Group operating environment................................................................................................................. 9 9. Group sales ............................................................................................................................................ 14 10. Products, brands and achievements ................................................................................................. 17 11. Risk factors and risk management .................................................................................................... 19 12. Ensuring business continuity of Rokiskio suris AB ............................................................................ 27 13. Information on financial risk management objectives and hedging instruments used .................... 28 14. Key features of internal control and risk management systems relevant to the preparation of the consolidated financial statements .................................................................................................................. 28 15. Food safety and quality ..................................................................................................................... 29 16. Environment ...................................................................................................................................... 31 17. Research and development activities ............................................................................................... 33 18. FINANCIAL PERFORMANCE ............................................................................................................. 34 19. Disclosure of Sustainability-related information ............................................................................... 38 20. Group activity by segment ................................................................................................................ 38 21. Investments ....................................................................................................................................... 39 22. Group business plans and forecasts .................................................................................................. 40 INFORMATION ON THE COMPANY'S SHAREHOLDERS ........................................................................................ 41 23. Information on the Company's share capital .................................................................................... 41 24. Company contracts with brokerage firms ......................................................................................... 41 25. Details of trading in the issuer's securities on regulated markets .................................................... 41 Consolidated annual report 2023 3 26. Restrictions on transfer of securities ................................................................................................ 44 27. Procedure for amending the Company's Articles of Association ...................................................... 44 28. Information about the Company's shareholders .............................................................................. 45 29. Rights of shareholders....................................................................................................................... 46 30. Details of the issuer's own share buybacks ...................................................................................... 47 31. Dividends ........................................................................................................................................... 48 CORPORATE GOVERNANCE ............................................................................................................................... 49 32. The governing bodies of the Company ............................................................................................. 49 33. Corporate governance and organisational structure of the Company Group .................................. 50 GENERAL MEETING OF SHAREHOLDERS ............................................................................................................ 50 34. Information on the competence and procedure for convening the General Meeting of Shareholders 50 35. The Board of Directors of the Company............................................................................................ 54 36. Committees of the Company ............................................................................................................ 58 37. Management of the Company .......................................................................................................... 59 38. Staff ................................................................................................................................................... 60 39. 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 resut of a change of control of the issuer ..... 63 INFORMATION ON RELATED PARTY TRANSACTIONS AND MATERIAL ARRANGEMENTS ............................... 64 40. Related parties of Rokiskio suris AB Group ....................................................................................... 64 41. Related party transactions ................................................................................................................ 64 42. Information on harmful transactions entered into on behalf of the issuer ...................................... 65 OTHER INFORMATION ....................................................................................................................................... 65 43. Audit information .............................................................................................................................. 65 44. Data on publicly available information ............................................................................................. 65 GOVERNANCE REPORT OF ROKISKIO SURIS AB .................................................................................................. 66 COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE .............................................................................. 69 Consolidated annual report 2023 4 MESSAGE FROM THE CEO Dear All, Last year 2023 was the second consecutive successful year for the Rokiškio sūris Group. Although the situation on the export markets deteriorated sharply compared to 2022, with a drop in prices and demand for products, the company achieved good financial results. This is thanks to a professional and, most importantly, cohesive team. In 2023, RECORDS were achieved for the production of cheese, milk sugar and fresh dairy products. The production of various types of cheese alone amounted to 39 500 tonnes for the year. This is neither high nor low, which means that every day of the year, including weekends and holidays, we produced more than 100 (HUNDRED) tonnes of cheese. That is certainly something to be proud of. I would also like to highlight the success of the previous projects: I would single out the production of cottage cheese in Utena, which exceeded all expectations in terms of quality and quantity. The quality of the production and the modern management of the production process are confirmed by the high ratings under the international food safety and quality standard IFS, which has been successfully upgraded in all the Group's companies. The strong financial performance also allowed us to increase staff salaries in 2023 by more than the average salary increase in Lithuania. The company continued to promote the development of its employees by organising and financing various group and individual training courses. We are committed to continuing these activities in the future. In 2023, as in previous years, the company devoted considerable attention, financial and human resources to the promotion of the Sustainability Philosophy. More on this in the Social Responsibility and Sustainability Report. As good as 2023 was, it was not without problems and challenges. (In fact, someone once said: if your business has no problems, you are bankrupt). One of them was to successfully sell record volumes of production. This is certainly not an easy challenge, given that geopolitical tensions in the world continue unabated, with the result that export markets remain weak and turbulent. I firmly believe that not only the Sales Department, but also the rest of the company's employees will be able to successfully overcome this challenge by working efficiently, using new methods of work organisation and adopting new technologies. That is why we have been, are and will continue to be the leaders in the Baltic dairy industry. Consolidated annual report 2023 5 Dalius Trumpa Director GENERAL INFORMATION 1. Reporting period for which the annual report is prepared This 2023 consolidated report covers the period from 1 January 2023 to 31 December 2023. 2. Key information about the issuer: Name of the issuer: ROKISKIO SURIS AB (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: Pramones st. 3, LT 42150 Rokiskis, Republic of Lithuania Keeper of the register of legal persons: State Enterprise Centre of Registers Telephone number: +370 458 55200 Email address: rokiskio.suris@rokiskio.com 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 2023 Rokiskio suris AB Group (the Group) consists of the parent company Rokiskio suris AB and five subsidiaries (2022: parent company and five subsidiaries). Main company: Consolidated annual report 2023 6 Rokiskio suris AB (company code 173057512, registered office address, Pramones st. 3, LT-42150 Rokiskis) Subsidiaries of Rokiskio suris AB: Rokiskio pienas UAB (company code 300561844, registered office address Pramones st. 8, LT - 28216 Utena). Rokiskio suris AB is the founder and sole shareholder of Rokiskio pienas UAB, holding 100 % of shares and votes. Rokiskio pieno gamyba UAB (company code 303055649, registered office address Pramones st. 8, LT - 28216 Utena). Rokiskio suris AB is the founder and sole shareholder of Rokiskio pieno gamyba UAB, 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). Rokiskio suris AB 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), Rokiskio suris AB owns 40 % of the company's shares and Rokiskio pienas UAB owns 20 %. DairyHub.LT UAB (company code 305831304, registered office address Kauno st. 65, LT-20118 Ukmerge). Rokiskio suris AB is the founder and sole shareholder of DairyHub.LT UAB, holding 100 % of shares and votes. 4. Nature of the principal activities of the company and group The main activities of the Rokiskio suris Group: Dairy farming and cheese production (EVRK 10.51) Rokiskio suris AB: Rokiskio suris AB is principally engaged in the production and marketing of fermented cheeses, whey products and skimmed milk flour. Subsidiaries: The main activity of Rokiskio pienas UAB is the sale of fresh dairy products and fermented cheeses. The main activity of Rokiskio pieno gamyba UAB 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 business is the purchase of raw milk. DairyHub.LT UAB – 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. Consolidated annual report 2023 7 Rokiskio suris Group is guided by a 3-year strategic plan approved by the Board of Directors, the main provisions of which are presented below: MISSION: Rokiskio suris AB = Trusted Dairy Professionals VISION: In Lithuania, which has become Baltlandia, more than 1 million tons of raw milk per year are processed sustainably. OBJECTIVES: o Leadership in the dairy sector in the region. o Flexible production and sales of premium quality products that exceed consumer expectations. o To be the most attractive and reliable partner for dairy farmers. o Continuously increase shareholder value. o Achieving sustainability objectives along the entire chain. Achieving our goals: o By increasing the amount of milk bought and processed by 5% each year. o We are targeting a net annual yield of 3%. o 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 General Meeting of Shareholders of Rokiskio suris AB held on 28 April 2023: 1. Agreed with the Audit Committee's conclusion. 2. Approved the audited consolidated and Company financial statements for 2022. 3. Approved the allocation of profit/loss for 2022: thousand EUR 1. Retained earnings of the Company for the year at the beginning of the year 73,605 2. Dividend for 2022 approved by shareholders -3,501 3. Transferred from other reserves 1,197 4. Other general invome during the year -143 5. Retained earnings (losses) for the year at the beginning of the year after payment of dividends and transfer to reserves 71,158 6. Net profit/(loss) of the Company for the year under review 13,328 7. Total distributable profit of the Company 84,486 8. Share of profits allocated to the statutory reserve 0 9. Share of profit allocated to other reserves 0 10. Share of profit allocated to dividends -5,251 11. 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 30 Consolidated annual report 2023 8 12. Retained earnings (losses) at the end of the financial year to be carried forward to the following financial year 79,235 The total dividend allocation is EUR 5,251,004.40 EUR 0.15 per ordinary registered share. 4. Approved the company's remuneration report. 5. 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 Board of the Company, in accordance with the conditions set out in this Decision and the requirements of the Law on Joint Stock Companies of the Republic of Lithuania, to take decisions on the purchase of the Company's own shares, to organize 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. Selected the audit firm BDO auditas ir apskaita UAB, legal entity code 135273426, registered office at K. Barsausko st. 66 Kaunas, to carry out the audit of the annual consolidated financial statements of the Rokiskio suris AB Group and the Parent Company for the period from 2023 to 2024, as well as the assessment of the consolidated annual report for the period from 2023 to 2024. The CEO of the Company is authorised to enter into an audit services agreement whereby the services shall be paid at a price agreed between the parties, but not exceeding EUR 70,500 (seventy thousand five hundred euros) excluding VAT per year, for the audit of the annual consolidated financial statements of AB Rokiškio sūris Group and the Parent Company. On 31 August 2023, six-month results of the Rokiskio suris Group for 2023 were announced: Consolidated annual report 2023 9 Consolidated unaudited sales of Rokiskio suris AB Group for January-June 2023 amounted to EUR 148,106 thousand, i.e. 12% less than in the same period of 2022 (EUR 168,217 thousand). Rokiskio suris AB Group earned a net profit of EUR 1,794 thousand in the first 6 months of 2023. In contrast, the Group made a net profit of EUR 5,781 thousand in the first 6 months of 2022. The Group's lower operating result is due to a significant drop in demand and prices for fresh fermented cheeses, milk sugar and other whey products and fats (butter, cream) in the first half of 2023. 7. Significant events after the end of the financial year On 28 February 2024, an amendment to the Credit Agreement with SEB bankas AB was signed, granting a new business credit facility of EUR 15 million and increasing the amount of the previously granted credit limit to EUR 55,100 thousand, extending the final repayment date of the credit limit to 30 April 2025. To secure the repayment of the credit facility, the Company's assets and receivables previously pledged in favour of the Bank were extended. 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 Rokiskio suris AB as at 31 December 2023. INFORMATION ON THE COMPANY'S AND GROUP'S ACTIVITIES 8. Group operating environment Key provisions Who we are: • We process more than 500,000 tons of milk in three dairies. • We produce and sell more than 35,000 tons 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 Consolidated annual report 2023 10 According to the data of the Milk Accounting Information System (MAIS) maintained by the State Enterprise Agricultural Data Centre (hereinafter referred to as "MAEC PAIS"), in Lithuania, in January- December 2023, approved milk purchasing undertakings (hereinafter referred to as "purchasing undertakings") purchased 1,346.7 thousand tons of milk with an average fat content of 4.23 % and a protein content of 3.43 % from 12,882 milk producers. Milk purchases increased by 0.08% compared to January-December 2022. In January-August 2023, milk purchases were lower than in 2022, while in September milk purchases started to increase. In December 2023, natural milk purchases were 5.5% higher compared to December 2022. According to the EAA PAIS data, the number of producers decreased by 10.6% in January-December 2023 compared to the same period in 2022. As of 1 November 2023, the largest share of milk - 35.2% - was purchased from enterprises, the rest from milk producers. Of all milk producers, the share of young milk producers aged under 40 years was 7.3%. More than one third of the milk - 36.5% - is sold to purchasers by milk producers aged between 41 and 60 years, while 21.0% is sold by milk producers aged over 60 years. Dairy producers aged between 41 and 60 years keep the highest proportion of cows - 40.3%. Dairy farmers over 60 years of age keep 22.9% of the cows. Young dairy farmers aged under 40 keep 9.3% of the cows. Almost a quarter of the cows - 27.5% - are kept on agricultural holdings. According to the data of the MAFF PAIS, the average buying-in price of natural milk in Lithuania in December increased for the fourth month in a row and amounted to EUR 436.62/tonne, which is 4% more than in November (EUR 419.67/tonne), but 1.6% lower than in January 2023 (EUR 443.7/tonne). According to the EAA PAIS data, milk prices in Lithuania have risen much faster than the European Union average, and the price paid to Lithuanian large suppliers has been on a par with and above the European average. For large milk producers selling more than 40 t of raw milk per month, milk purchasers paid an average of €473.54/t for natural milk (4.37% fat and 3.61% protein) in December 2023. This milk price increased by 3.2% per month (November 2023: €458.96/t). In December 2022, the average price paid for natural milk (4.44% fat and 3.60% protein) was €547.96/t. Since September 2023, milk production on farms has increased in line with the increase in farm-gate milk prices in Lithuania. Consolidated annual report 2023 11 Here is a comparison of the buying-in prices for natural milk of Rokiskio suris AB for the years 2021- 2022-2023, for milk bought in from milk producers of European size, selling more than 40 t of milk per month: The chart shows that the price of raw milk in January was similar to January 2022, before dropping significantly in February and remaining similar until September. From September onwards, the farm- gate milk price started to rise and in December it was 474,97 €/t. In the second half of this year, as exports of Lithuanian dairy products recovered, higher sales abroad allowed more milk to be bought from farms and higher prices to be paid for raw materials. Production of dairy products Rokiskio suris AB 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. But also various whey products such as milk 0 100 200 300 400 500 600 700 Raw milk price, Eur/t 2021 2022 2023 Consolidated annual report 2023 12 sugar, WPC (whey protein concentrate), WPI (whey protein isolate). At the end of 2022, the production activities of the Ukmerges pienine branch of Rokiskio pieno gamyba UAB were suspended and curd production was transferred Rokiskio pieno gamyba UAB in Utena. The premises of Ukmerge pienine are used for the cutting of GRAND hard cheese by DairyHub.LT UAB. The products produced by the companies of the Rokiskio suris Group are of high quality, which is why they have earned recognition not only in the domestic but also in export markets. In total, 517,393 tons of milk were processed in the Group in 2023, an increase of 5.5% compared to 2022. The production of fermented cheeses in 2023 increases by 4.5% compared to 2022. Hard cheese production is 62% higher than in 2022. Semi-hard cheese production is 5% higher and fresh cheese production is 166% lower. The changes in the range are driven by market demand and price changes. 380 000 400 000 420 000 440 000 460 000 480 000 500 000 520 000 540 000 2019 2020 2021 2022 2023 Raw milk procesed, t Consolidated annual report 2023 13 In 2023, the production of GRAND hard cheese doubled (101.5%). 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. 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 raised the new challenges, as the increase in production volumes increases the need for maturation facilities. Therefore, an investment was planned for the construction of a new warehouse for the long maturation and storage of GRAND cheese, which was launched in 2023. Changes in production volumes of Rokiskio suris AB Group in 2019-2023: 2023 2022 2021 2020 2019 Fermented cheeses, t 39,545 37,831 35,357 32,617 31,745 Milk sugar, t 13,934 12,701 12,631 12,592 10,866 Butter and spreadable fat mixtures, t 7,432 5,816 5,451 8,333 8,143 Fresh milk products, t 41,294 42,317 45,365 46,833 47,370 WPC powder, t 2,958 2,648 2,615 2,484 2,384 Dried milk products, t 4,125 3,129 3,170 4,348 2,862 In 2023, the company will also produce 9.7% more milk sugar than in 2022. This is due to the higher volume of milk processed and the knowledge gained by the masters and technologists in improving this technology. 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 2023 2022 2021 2020 2019 Production, t Fermented cheeses, t Milk sugar, t Butter and spreadable fat mixtures, t Fresh milk products, t WPC powder, t Dried milk products, t Consolidated annual report 2023 14 Cooperation with Fonterra New Zealand, one of the world's largest dairy producers, continues with successful whey products such as WPC (whey protein concentrate); WPI (whey protein isolate). This technology is continuously improved and the IBK range is expanded. In 2023, the production of dried milk products was 31.8% higher than in 2022. The production of butter and spreadable fat mixtures in 2023 is 27.8% higher than in 2022. In 2022, Rokiskio suris launched a new product - spreadable processed cheeses with additives. In 2023, the already well-known spreadable processed cheeses with ham, chimichuri spices and chanterelles were joined by the new spreadable processed cheese 'Mozzarella'. 9. Group sales As every year, most of the company's production is exported. In 2023, Rokiskio Suris will export its production to 42 countries worldwide (2022: 42 countries). During 2023, the Group resumed sales to Slovenia, Slovakia and Finland. Sales to the UAE, South Africa and Japan have started. Discontinued sales to countries such as New Zealand, Serbia. Consolidated annual report 2023 15 In 2023, the Group's exports accounted for around 64% of total sales. The same percentage of the Group's exports were 2022. Italy remains the main and largest buyer of production. A large part of production is also exported to the Netherlands, Germany and Saudi Arabia. thousand EUR % thousand EUR % % 2023 2022 Change Lithuania 111,023 36.49 127,571 35.51 -12.97 European countries 153,359 50.40 194,933 54.26 -21.33 Middle East 23,080 7.59 16,372 4.56 40.97 Far East 5,069 1.67 9,576 2.67 -47.07 North America 5,575 1.83 3,698 1.03 50.76 Other countries 6,148 2.02 7,119 1.98 -13.64 Total: 304,254 100.00 359,269 100.00 -15.31 In 2023, the Group's sales revenue amounted to EUR 304,254 thousand. Compared to 2022 (EUR 359,269 thousand), the Group's sales revenue decreased by 15.31 %. As in all other food industries, the dairy sector sees a fall in sales of fresh cheese compared to 2022, driven by a fall in market prices. As in every year, in 2023 the company's exports were mainly to Western European countries and, compared to 2022, sales to all European countries dropped by around 21% across all product groups. Again, this was more due to the general fall in prices in the dairy sector compared to 2022. For these reasons, exports of mozzarella to P. Korea also almost doubled compared to 2022. 0 50,000 100,000 150,000 200,000 250,000 Lithuania European countries Middle East Far East North America Other countries Sales by markets 2023 2022 Consolidated annual report 2023 16 Sales to the US increase by 50% in 2023 compared to 2022, driven by a significant increase in the price of hard cheese. This is due to the fact that annual sales contracts with some US producers are concluded in advance, and in this case it was concluded at a time of high cheese prices. This is the reason for the significant increase. Compared to 2022, the company has increased butter sales to the Middle East market by 40%. This significant increase was also driven by the scarcity of milk in their country, i.e. the allocation of internal resources was not sufficient to produce enough milk for the internal butter production. The price of cream, when converted into butter per unit of fat, was lower than before, which is why the company mainly produced butter for the Middle East market instead of selling cream. As in the past, the Group continued to sell its usual products - cream, milk and buttermilk flours, and additional products from the cheese-making process such as WPC and lactose - on export markets. In the second half of 2023, the prices of whey flour concentrate recovered strongly, while demand for this product increased. In contrast, demand for lactose fell, while supply and stocks increased, leading to a significant fall in lactose prices. Due to a decrease in demand and prices for lactose on the world market, exports of lactose to India have decreased. In 2023, consumption/demand started to fall, resulting in increased lactose surpluses in Europe and the Americas, which further pushed the price down. The company also exports GRAND hard cheese to India. The main countries of export of GRAND cheese are Greece, Italy, Romania and Germany. One of the Rokiskio suris Group's main objectives remains the further penetration of hard cheeses, in particular Grand, into the European retail/Horeca market, i.e. to increase the sales of value-added cheeses, which is currently being pursued intensively and is already showing good results. 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 2023, Rokiskio Group’s consolidated sales turnover in the local market amounted to EUR 111,023 thousand, or 12.97 % less than in 2022 (2022 - EUR 127,571 thousand). The total annual volume of domestic sales in 2023 remained virtually identical to the previous year at 45,300 tons, so that the lower revenue is mainly due to the fall in output prices, which were sharply higher in 2022 (under the influence of the record high prices of raw milk, energy and many other resources). The most pronounced price decrease was seen in the Butter category, where the annual price decrease was 11%. Domestic consumption of dairy products remains stable, an everyday "conservative" category, with little exposure to high inflation or other factors. In financial terms, 2023 was a successful year on the domestic market, with the company trading profitably after a more difficult year in 2022, when the rapid increase in costs led to a noticeably slower rise in retail prices, which contributed to the loss on sales. The total product range remained stable during the year, at just over 200 products, with an increasing trend in the share of private label products owned by supermarket chains, which grew by over 10% during the year. Consolidated annual report 2023 17 In terms of product categories, in 2023, the company's portfolio showed the strongest growth in sales of sour cream, cottage cheese and hard cheese (up 15% or more), but lower sales of butter and uncured cheese, and, as part of the optimisation process, the production of cottage cheese, which is manually intensive, has been eliminated. 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 2023, the share of private labels in the company's basket reached 30%, helped by increased sales to neighbouring markets. Participation in this segment helps to make better use of the company's production capacity. 10. Products, brands and achievements Rokiskio suris is on the list of most sustainable brands for four years! Since 2011, the 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 fourth time in Lithuania. Brands are selected for the study based on their market share, turnover and awareness. Overall, the results for Lithuania show that Rokiskio suris is in the top 20 of the list of the most sustainable brands in the food and 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. Consolidated annual report 2023 18 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 15 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 under the United Nations Sustainable Development Goals. News in 2023 New for the beginning of 2023 - ROKISKIO grated cheese, 45% fat, 200 g. A combination of taste and high quality, packaged in a convenient 200 g pack. Ideal as a condiment for a variety of dishes such as soups, pasta, pizza or salads. Fixed-weight cottage cheese NAMINIS. One of the oldest and most valuable sour milk products. Its main advantages are calcium, easily absorbed proteins and milk fat. The redesigned NAMINIS line of milks and kefir was launched in mid-July 2023. Products that are not only high quality, but also have a positive impact on health. Valuable for their natural content of calcium, protein, vitamins and other nutrients. Consolidated annual report 2023 19 New products for the B2B sector - GRAND mature hard cheese chips, flour and straws; in packs from 0.5kg to 1kg. The freshest innovation for 2023 is Mozzarella, a spreadable processed cheese with a very mild taste and smooth texture. Perfect as a spread on bread or as a garnish for dishes. 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. Consolidated annual report 2023 20 The company's products have specific Halal and Kosher quality certificates. 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. Increase in the volume and range of cheaper products from other EU countries. Finding alternatives to imports. Increasing the range of products. Finding new markets. Working with business partners. Risk assessment for each client. Environmental factors Our activities consume large amounts of energy and natural Vehicle replacement, maintenance, control of operating conditions. Consolidated annual report 2023 21 resources. This poses a risk of environmental pollution directly and/or indirectly, as well as air pollution from technological installations. 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 Consolidated annual report 2023 22 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. Consolidated annual report 2023 23 The water supply and wastewater treatment services for companies in Utena and Ukmergė are provided by the urban water management companies. Food safety and quality In order to achieve one of the most important objectives of Rokiskio 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; 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 Consolidated annual report 2023 24 Stability and robustness of structures; 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. have a control system that allows it to be brought to a complete and safe stop. Emergency stop devices shall be provided for this purpose. Where there is a risk of injury to a worker as a result of mechanical contact with moving parts of the work equipment, such parts shall be covered by guards and protective devices shall be fitted to prevent access to dangerous areas. Work equipment shall bear the necessary safety and health signs to ensure the safety of workers. Workers shall receive 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 Consolidated annual report 2023 25 employees in the workplaces. Fire extinguishers and fire safety engineering systems are subject to maintenance testing. Fire extinguishing equipment is labelled. Workplaces are 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 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. Consolidated annual report 2023 26 Ergonomic factors: Use of chemicals in laboratory testing, cleaning of work equipment and facilities. Manual work exists in many workplaces High-pressure washing stations are installed to fully control the doses of chemicals needed for cleaning and disinfecting rooms and to improve staff conditions. Occupational risk assessments are carried out in workplaces where chemicals are used. Mandatory health checks. Information and training for workers. Use of personal protective equipment where hazardous chemical agents are likely. Artificial ventilation system 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. 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. Consolidated annual report 2023 27 Retaining staff and reducing turnover. 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. The Collective Agreement is updated in 2023 to include more benefits for the company's employees. Employee engagement is promoted through social actions and various events that increase the sense of community and pride in the company. 12. Ensuring business continuity of Rokiskio suris AB 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. - Ensuring uninterrupted milk processing and continuity of the production chain - 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 started 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 managemant is closely monitoring the situation in Ukraine and the sanctions imposed to ensure compliance. Further information on the Russian invasion of Ukraine is provided in note 33 to the consolidated and parent company financial statements of Rokiskio suris AB as at 31 December 2023. Consolidated annual report 2023 28 13. 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 Rokiskio suris AB as at 31 December 2023. 14. 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 Rokiskio suris 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. 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. Consolidated annual report 2023 29 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. 15. 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. Rokiskio suris AB 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 Rokiskio suris 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. Rokiskio suris AB successfully certified its food safety systems according to IFS requirements and achieved the highest Higher Level rating (> 95%). The IFS 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. Consolidated annual report 2023 30 The requirements of the food safety standards establish rules to ensure the production of stable, uniform, quality and safe products without deviating from the policies of the organisation. The system covers processes from the purchase of raw materials to the satisfaction of customer needs and is constantly reviewed and improved to maintain high product quality. In order to produce only safe and high quality products that meet customer expectations, the Food Safety, Quality and Safety systems are continuously reviewed and continuously improved. In 2023, changes related to the new IFS Version 8 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: • Rokiskio suris AB LT 73-01 P EB; • Rokiskio pieno gamyba UAB LT 82-01 P EB; • Rokiskio pieno gamyba branch Ukmerges pienine UAB LT 81-01 P EB. In 2022 Rokiskio pieno gamyba UAB, a branch of Ukmerges pienine,UAB ceased production. Part of the production activities were taken over by DairyHub.LT UAB – cutting and packaging of hard cheeses, production of glazed cottage cheese and cottage cheese. • DairyHub.LT UAB has been granted approval number LT 81-08 P EC. The laboratory of Rokiskio suris AB 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 company has specific HALAL and KOSHER quality certificates for some products (lactose, IBK, butter, skimmed-milk flour, rennet cheeses) (lactose, WPC, skimmed-milk and whole-milk flour, buttermilk flour and butter). Consolidated annual report 2023 31 To ensure the satisfaction of customers' needs and to contribute to a more sustainable world, Ukmerges pienine, a subsidiary of Rokiskio pieno gamyba UAB, was certified in accordance with the requirements of the RSPO Supply Chain Certification Systems version 2 on 22-03-2022. 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). 16. Environment Rokiskio suris AB 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). Rokiskio suris AB 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 Rokiskio pieno gamyba UAB 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. No IPPC permit is required for DairyHub.Lt UAB. Consolidated annual report 2023 32 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 2023: • Monitoring programme for the wastewater discharged by Rokiskio suris AB after treatment at the Ruopiskis (Alseta) lake in Rokiskis district; • Groundwater monitoring programme for the Rokiskio suris AB water point; • Groundwater monitoring programme for Rokiskio suris AB petrol stations in Rokiskis 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; • Environmental monitoring programme for Rokiskio suris AB farm facilities (monitoring of pollutant emissions/discharges); • Environmental monitoring programme of Rokiskio pieno gamyba UAB (monitoring of pollutants emitted/released from pollution sources). We carry out the identified tests at authorised companies Ekometrija UAB and Rokvesta UAB. 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, Rokiskio suris 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 Rokiskio pieno gamyba UAB is valid until 10 March 2027. DairyHub.Lt UAB certificate is valid until 21-02-2027, the management system is certified and independently audited by Bureau Veritas Lit UAB. No observations or non-conformities were found during the internal and external audits in 2023. Rokiskio suris AB – environmental performance in 2023: Steam condensate return system from remote plants has been extended. This reduces heat and water losses. The volume of condensate returned is increased by 46%. To save fuel, vehicle fuel rates are controlled, consumption is recorded and routes are optimised. Overall, fuel consumption was reduced by 7.7%. Fuel consumption per volume of raw material transported decreased by 11.3% to 5.45 litres per tonne of 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 2023, 21 new vehicles were purchased and 22 vehicles were written off or sold. Among the vehicles in use, 23 units (8.4%) are hybrid vehicles. The total fleet consists of 273 vehicles: 160 trucks, of which 4 petrol, 156 diesel; 6 tractors, 2 other vehicles; 105 cars, of which 36 petrol, 69 diesel. 47% of the vehicles are Euro 6 compliant. Eco-friendly packaging: in 2023, we will have used a total of 3,675.1 tonnes of packaging. The breakdown of packaging by type is given in the table below in tonnes and percentage: Consolidated annual report 2023 33 (t) % Plastics 783 21% Paper, cardboard 1,082 29% Metal 56 2% Combined 493 13% Wood 1,260 34% Total: 3,674 The share of recycled packaging is 83.0%. 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). 17. Research and development activities Rokiskio suris AB 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 2023, the Company has earmarked EUR 10.5 million for investments. To improve Grand's hard cheese technology, the construction of a cheese ripening/storage building was started. The construction work gained momentum in 2023 and the opening of the warehouse is planned for the first half of 2024. A major focus is on improving operational efficiency and developing new technologies to reduce production and operating costs. The project to digitise the paper journals continued in 2023. Digitised journals have become a convenient and time-saving tool for completing and analysing data records, and the development of this tool is foreseen for 2024. In order to increase sustainability, cost savings and process optimisation, the company has been carrying out experiments on washing acid filtration, which could potentially be developed into practical processes in the future. Optimisation of the control of the cheese drying chamber has also contributed to cost reduction. The constant goal of the companies of the Rokiskio suris 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. In order to ensure maximum food safety, the company's security post was reconstructed in 2023 and equipped with modern facilities and the necessary security equipment. Continuous quality improvement and development is an integral part of the life of the plant, which is why experiments were carried out during 2023 with pilot tools in the lactose production hall. Technologies were used to obtain a lactose product with a higher added value. This is the reason for ongoing research activities, both in-house and in collaboration with scientific institutions. Much of the research is carried out by the company's production specialists in collaboration with Prof. Angelo Frosio from Italy (collaborator and founder of Centro Latte Lodi and Scuola d'Arte Bergognone). Consolidated annual report 2023 34 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. The company works closely with brands such as LIDL, whose product quality is certified by the EN ISO 17025 Eurofins laboratory. We also work with Mars, Incorporated, IKI, MAXIMA and other confectionery companies 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, 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. The efficiency of Rokiskio suris AB production processes and laboratory activities is ensured by the laboratory information system LabdataLims implemented in 2019. 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. Rokiskio suris AB has established a new subsidiary in Ukmerge - DairyHub.Lt UAB in 2022. The company continues to specialise and develop in the packaging and retail sale of GRAND hard cheese both in Lithuania and abroad. 18. FINANCIAL PERFORMANCE Alternative performance indicators Rokiskio suris AB 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) 2023 2022 2021 2020 2019 Sales revenue 304,254 359,269 253,062 210,829 210,423 Gross profit 41,767 39,888 18,627 21,388 21,902 EBITDA 29,824 22,890 9,094 13,431 13,834 EBIT 19,356 13,042 965 4,171 4,101 Operating profit 19,356 13,042 965 4,171 4,101 Profit before tax (EBT) 17,870 12,593 596 3,972 3,914 Net profit/loss 15,073 12,514 553 4,061 4,101 Fixed assets 82,600 86,310 82,965 76,646 62,294 Short-term assets 155,064 135,340 119,902 120,424 106,774 Total assets 240,265 221,650 202,867 197,070 169,068 Consolidated annual report 2023 35 Shareholders' equity 161,241 151,449 142,480 145,428 130,771 Profitability (%) Return on assets [ROA] 8.38 6.14 0.28 2.22 2.42 Return on equity [ROE] 9.64 8.51 0.38 2.94 3.14 Gross profit margin (%) 13.73 11.10 7.36 10.14 10.41 EBITDA margin (%) 9.80 6.37 3.59 6.37 6.57 EBIT margin (%) 6.36 3.63 0.38 1.98 1.97 Return on constant capital employed [ROCE] 12.00 8.61 0.53 2.45 2.67 Profitability ratio [EBT margin] 5.87 3.51 0.24 1.88 1.86 Net profit margin 4.95 3.48 0.22 1.93 1.95 Financial structure Liabilities/equity ratio 0.49 0.46 0.42 0.36 0.29 Equity to assets ratio 0.67 0.68 0.7 0.74 0.77 Debt-to-equity ratio 0.27 0.20 0.19 0.18 0.12 Debt ratio 0.33 0.32 0.3 0.26 0.23 Gross liquidity ratio 2.29 2.35 2.77 2.7 3.18 Market value indicators Share price to earnings per share ratio [P/E ratio] 6.74 8.00 144 24.33 21 Net earnings per share 0.43 0.37 0.02 0.12 0.12 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 Consolidated annual report 2023 36 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. 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. Consolidated annual report 2023 37 Profit/(loss) statement In 2023, Rokiskio suris AB Group's sales revenues amounted to EUR 304,254 thousand, a decrease of 15.3% compared to 2022 (in 2022 the Group's sales revenues amounted to EUR 359,269 thousand). In 2023, the main share of revenues is 50.7% (53.3% in 2022) from sales of fermented cheeses. In volume terms, sales of fermented cheeses in 2023 are 8% lower than in 2022, while in value terms the decrease is around 19%. This is due to the significant fall in fresh cheese prices on world markets. In 2023, selling prices for whey products also decreased more than doubled. Exports of cream in 2023 have fallen due to a drop in demand. Sales volumes and prices were lower in 2023. The focus on butter production has increased as a result of market developments. Butter sales in volume terms increased by 26% compared to 2022, mainly driven by increased butter sales to Middle Eastern markets. In 2023, the revenue from the sale of fresh dairy products increased by €4.3 million compared to 2022. This is due to a change in the product mix. Costs: In 2023, the Rokiskio suris AB Group will incur costs of sales of products amounting to EUR 262,487 thousand (in 2022: EUR 319,381 thousand). In 2023, the cost of sales will decrease by 17.8% or EUR 56 894 thousand. This significant change is due to the decrease in the purchase price of raw milk and the decrease in the prices of energy resources (steam, electricity, gas), fuel, packaging, auxiliary materials, spare parts, services etc. The largest cost component in 2023 (EUR 215,359 thousand) was raw materials and consumables (EUR 256,045 thousand in 2022), a decrease of EUR 40,686 thousand. Sales, marketing and general administrative costs as a percentage of turnover amounted to 7.5% in 2023 (EUR 22,800 thousand) and 7.6% in 2022 (EUR 27,200 thousand). 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 2023 2022 2021 2020 2019 Fiancial indicators, (Eur thousands) Gross profit Net profit/loss EBITDA EBIT Profit before tax (EBT) Consolidated annual report 2023 38 In 2023, sales and marketing costs decreased by 6,59% The decrease in sales and marketing costs in 2023 is due to a decrease in sales volumes of cheese, related transport costs, freight and other services received. Profit: The consolidated audited net profit of the Rokiskio suris AB Group for 2023 is EUR 15,073 thousand, which is EUR 2,559 thousand higher than in 2022 (EUR 12,514 thousand). The calculation of net profit takes into account direct and indirect production costs and costs not related to direct activities. The most important factor in the increase in profit was the sales of fresh dairy products and fermented cheeses on the local market. The net profit margin of the Rokiskio suris AB Group in 2023 was 4.95% (3.48% in 2022). EBITDA in 2023 of EUR 29,824 thousand, i.e. 1.3 times higher than in 2022 (EUR 22,890 thousand). EBITDA margin in 2023: 9.80% (6.37% in 2022). 19. Disclosure of Sustainability-related information The Consolidated Social Responsibility Report and Sustainability Report of the Rokiskio suris AB Group are presented for the period from 1 January to 31 December 2023 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). 20. Group activity by segment Rokiskio suris AB 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 Consolidated annual report 2023 39 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 Information on the impact of each of the operating segments on the Group's financial performance is presented below. Sales 2023 2022 Change (%) Fresh dairy products 110,407 107,228 2.96 Cheese and other milk products 193,847 252,041 -23.09 Total sales revenue (EUR thousand) 304,254 359,269 -15.31 Gross profit Fresh dairy products 20,120 4,417 355.51 Cheese and other milk products 21,647 35,471 -38.97 Total gross profit (EUR thousand) 41,767 39,888 4.71 21. Investments In 2023, Rokiskio suris AB 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. 0 10,000 20,000 30,000 40,000 Fresh dairy products Cheese abd other milk products Gross profit by segments, EUR thousands 2023 2022 2021 2020 Consolidated annual report 2023 40 During the financial year 2023, the value of investments made by Rokiskio suris Group amounted to EUR 10.5 million. One of the major investments in Rokiškis was the purchase of equipment for the new Grand cheese ripening building (refrigeration compressor, racking system, etc.), for an investment of 1.0 million euro. Specialised vehicles were purchased - five milk trucks and five tank trailers. The purchase of the special vehicles benefited from the 2014-2020 funding Rural Development Programme support. The support received amounted to EUR 0.517 million. The value of this investment is EUR 1.1 million. Some of the investments started in 2022 and earlier were completed in 2023. These include investments related to the production service bars (reconstruction of the soft water supply line, reconstruction of the compressed air lines), part of the investments related to the ripening of cheeses, such as racks, cold room equipment, and the production of cheeses, such as the regeneration tanks, the reconstruction of the lines, and the introduction of equipment for the pasteurisation of the soft water for the cheesemakers. Part of the investment is for access control equipment and surveillance cameras. Investments related to the sustainability policy include refrigeration modules for the cheese ripening chambers and the compressor room. In the environmental field, investments have been made in odour traps and the reconstruction of the sewerage system in the milk reception area. In the subsidiary in Utena, the major investments in 2023 were the renovation of the procurement warehouses and the continuation of the investment in curd production, as well as the expansion and modernisation of the milk receiving CIP station. Dairy HUB.LT UAB acquires packaging equipment for EUR 0.5 million. 22. Group business plans and forecasts The investment objective of Rokiskio suris 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. In 2024, the main investments will be the completion of investments started in 2023 and previous years. In 2024, the construction of the Grand cheese ripening warehouse has already been completed, with new modern refrigeration equipment and a racking system. The refrigeration equipment and system will be installed in 2023. The investment value of the warehouse building is EUR 2.7 million. In 2024, the reconstruction of the ripening chambers has already been completed at a cost of EUR 0.9 million, milk scales have been installed in the milk reception area, and the reconstruction of the security post has been finished. During 2024, 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 future prospects and trends and the current situation. Consolidated annual report 2023 41 An investment in lactose production equipment is foreseen with support from the KP programme. The main areas of investment for 2024 are: • Acquisition of equipment for production workshops and ancillary bars (cheese production, curing, ripening, milk sugar, cheese melting, modernisation of existing equipment, repairs and reconstruction of workshops and buildings); • To improve the competitiveness of the company; • Saving, rational use and distribution of energy resources; • Reducing environmental impacts, developing sustainability; • Improving the working conditions of employees and the production environment; • Measures to improve sanitation and hygiene in production and service departments; • To meet customer needs for the products produced; • For sustainability purposes. The subsidiary DairyHub.Lt UAB plans to invest in an improved cheese slicing and grating technological process. The subsidiary Rokiskio pieno gamyba UAB will continue to invest in equipment to improve the technological processes of curd production. INFORMATION ON THE COMPANY'S SHAREHOLDERS 23. Information on the Company's share capital 31 December 2023 The authorised capital of Rokiskio suris AB consisted of: 24. Company contracts with brokerage firms Rokiskio suris AB has concluded an agreement with FMĮ Orion Securities UAB (A. Tumeno st. 4, LT- 01109 Vilnius, tel. (8-5) 231 38 33, info@orion.lt) for the management of accounting of the Company's securities issued by the Company as well as for provision of investment services. 25. Details of trading in the issuer's securities on regulated markets 35,867,970 ordinary registered shares of Rokiskio suris AB are listed on the Nasdaq Vilnius Baltic Official List (VVPB symbol RSU1L). Nominal value per share EUR 0.29. Number of shares Nominal value Total nominal Share of authorised capital (%) Type of shares (pcs.) (EUR) Value (EUR) Ordinary registered shares 35,867,970 0.29 10,401,711.30 100 Consolidated annual report 2023 42 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: 2019 2020 2021 2022 2023 Opening price, EUR 2.51 2.54 3 2.88 2.96 Closing price, EUR 2.52 2.92 2.88 2.96 2.93 Maximum price, EUR 2.75 2.98 3.18 3.20 3.06 Lowest price, EUR 2.2 2.1 2.6 2.50 2.78 Turnover, pcs. 159,107 161,788 218,200 196,098 86,531 Turnover, million euro 0.4 0.65 0.63 0.57 0.25 Capitalisation, million euro 90.39 104.73 103.3 106.17 104,73 Dynamics of the Company's share price and turnover during the reporting period Consolidated annual report 2023 43 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) Dynamics of the company's shares (RSU1L), OMX_Baltic_Benchmark_GI and OMX_Baltic_GI indices: Consolidated annual report 2023 44 Chart data: Source - AB Nasdaq Vilnius: Baltic Market Indices - Nasdaq Baltic Exchange (nasdaqbaltic.com) 26. Restrictions on transfer of securities There are no restrictions on holdings or requirements to obtain the approval of the company or other security holders. 27. Procedure for amending the Company's Articles of Association Consolidated annual report 2023 45 The Articles of Association of the Company shall be amended in accordance with the procedure provided for by the laws of the Republic of Lithuania and the Articles of Association of the Company. The decision to amend the Company's Articles of Association shall be taken by the General Meeting of Shareholders of the Company by a qualified majority of 2/3 of the votes cast by the shareholders present at the meeting, except for the exceptions provided for in the Law on Joint-Stock Companies of the Republic of Lithuania. 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 Rokiskio suris AB. 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. 28. Information about the Company's shareholders The total number of shareholders of Rokiskio suris on 31 December 2023 was 5 588. Shareholding held by a group of shareholders (31.12.2023): 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 % Pieno pramones investiciju valdymas UAB Company code 173748857 Pramones st. 3, Rokiskis Lithuania 9,758,312 27.21 83.19 RSU Holding Ltd SIA, reg. No 40103739795 Elizabetes iela 45/47, LV-1010 Riga 8,953,883 24.96 Antanas Trumpa Chairman of the Board of the Company 2,378,755 6.63 Andrius Trumpa 2,760,247 7.70 Consolidated annual report 2023 46 Rita Trumpaite-Vanagiene 2,399,120 6.69 Fonterra (Europe) Coöperatie U.A., CCI 50122541 Barbara Strozzilaan 356-360, EurBld2, 3e verdieping, 1083HN Amsterdam, Netherlands 3,586,797 10.00 SB Asset Management managed investment and pension funds funds UAB Gyneju st.14, Vilnius Lithuania 2,077,674 5.79 The total group of persons acting in concert comprises: Pieno pramones investiciju valdymas UAB (27.21 %), 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 share capital and votes), members of the family of Antanas Trumpa (21.02% of the Company's share capital and votes). Distribution of shareholders of AB "Rokiškio sūris" 31 December 2023 29. 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 31% 40% 29% Shareholders structure Financial institucions Other legal entities Persons 63% 25% 10% 1% 1% Shareholders structure Lithuania Latvia Netherlands Great Britain Other contries Consolidated annual report 2023 47 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. 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 471 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. 30. Details of the issuer's own share buybacks During the reporting period (1 January 2023 to 31 December 2023) Rokiskio suris AB did not acquire or dispose of any of its own shares. Based on own share repurchases in previous years 31 December 2023 Rokiskio suris 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 Rokiskio suris AB amounts to EUR 2,108,397.82. Consolidated annual report 2023 48 31. 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 Rokiskio suris AB, held on 28 April 2023, approved the audited consolidated financial statements and the Company's financial statements for 2022 and the distribution of the Company's profit for 2022. Dividends were distributed in the amount of EUR 5,251,004.40 or EUR 0.15 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 2013 1,015,578.08 0.029 2014 Dividends were not paid 0 2015 2,341,373.37 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 2022 5,251,004.40 0.15 Rokiskio suris AB 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 business day Consolidated annual report 2023 49 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 32. The governing bodies of the Company The Articles of Association of Rokiskio suris AB, registered in the Register of Legal Entities, provide for the following governing bodies of the Company: • General Meeting of Shareholders • Board • Head of the company (director). The Company does not have a Supervisory Board. Consolidated annual report 2023 50 33. Corporate governance and organisational structure of the Company Group The management structure of the Rokiskio suris AB 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 34. 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. Consolidated annual report 2023 51 The right of initiative to convene the General Meeting of Shareholders of Rokiskio suris AB shall be vested in the Management Board and the shareholders whose shares carry at least 1/10 of the total number of votes at the General Meeting of Shareholders. The notice of the General Meeting of Shareholders of the Company to be convened shall be made public in the Republic of Lithuania and in all other Member States of the European Union, as well as in the countries belonging to the European Economic Area, at least 21 days before the General Meeting of Shareholders, in accordance with the procedure established by the Securities Law. The notice of convening the General Meeting of Shareholders shall be additionally published in the electronic publication "Public Notices of Legal Entities" published by the State Enterprise Centre of Registers in the source specified in the Articles of Association. Persons who were shareholders of the company at the 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 Pramones st. 3, LT- 42150 Rokiskis, 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 Pramones st. 3, LT-42150 Rokiskis, or by e-mail at rokiskio.suris@rokiskio.com. 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. Consolidated annual report 2023 52 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 Rokiskio suris AB, Pramones st. 3, LT-42150 Rokiskis, or by e-mail to rokiskio.suris@rokiskio.com. 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 Pramones st. 3, LT-42150 Rokiskis, 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; Consolidated annual report 2023 53 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 were convened in 2023: During 2023, one General Meeting of Shareholders of Rokiskio suris AB was convened on the initiative and decision of the Board of the Company. At the General Meeting of Shareholders of the Company held on 28 April 2023, the shareholders were presented with the 2022 consolidated annual report of AB Rokiškio sūris and the auditor's report on the 2022 consolidated financial statements and the annual report, the audit committee's report was approved, the sets of consolidated and Company 2022 financial statements were approved, and 2022 financial statements of Rokiskio suris AB and Rokiskio suris AB were approved. The distribution of the Company's profits, a dividend of EUR 0.15 per ordinary registered share (total dividend of EUR 5,251,004.40) and EUR 30 thousand in bonuses to the members of the Board; a decision was taken to buy back up to 10% of the Company's shares in 2022. The audit Consolidated annual report 2023 54 firm BDO was appointed to audit and account for the audit of the annual consolidated financial statements of the Rokiskio suris AB Group and the Parent Company for 2023 and 2024. The General Meeting of Shareholders of Rokiskio suris AB held in 2023 was attended by the Chief Executive Officer of the Company, the Chairman of the Board of Directors of the Company and the CFO of the Company. 35. 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 4 meetings during 2023. (6 Board meetings in 2022). 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 2022 consolidated and Company financial statements and annual report, as well as the consolidated report and consolidated financial statements for the first half of 2023, proposed to the General Shareholders' Meeting for approval the 2022 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. 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 2023 (for the year 2022), the Company granted bonuses of EUR 17 thousand to the members of the Board. There are no other additional payments for the Chairman of the Board in relation to the incentive scheme. Members of the Board of Rokiskio suris AB : (Elected at the Extraordinary General Meeting of the Company on 10.12.2021) Antanas Trumpa - Chairman of the Board of the Company (since 13.12.2017) Consolidated annual report 2023 55 Work experience Rokiskio suris AB 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 machine" 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 Rokiskio suris AB 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 Rokiskio pienas UAB (company code 300561844, registered office address Pramones st. 8, Utena) and Rokiskio pieno gamyba UAB (company code 303055649, registered office address Pramones st. 8, Utena). A shareholder of Pieno pramones investiciju valdymas (company code 173748857, address Pramones st.3, Rokiskis), holding 7.620 units, i.e. 75,60 % of the shares and votes of UAB Pieno pramonės investi valdymas. Darius Norkus - Member of the 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 Rokiskio suris AB (company code 173057512, address Pramonss st.3, Rokiskis). Education Kaunas University of Technology, graduated engineer (1993). Baltic Management Institute, Master's degree in Business Administration (EMBA programme, 2000). Shares in Rokiskio suris AB No shares. Involvement in other companies A shareholder of Pieno pramones investiciju valdymas UAB (company code 173748857, address Pramones st. 3, Rokiskis), holding 4.07 % of the shares and votes of Pieno pramones investiciju valdymas UAB. Director of DairyHub.LT UAB (company code 305831304, address Kauno st. 65, Ukmerge). 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, Consolidated annual report 2023 56 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 Rokiskio suris AB It does not own shares in the Company. Participation in other activities Mr. Campbell is a director of a multinational joint venture in Brazil. 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 Rokiskio suris AB (company code 173057512, address Pramones st. 3, Rokiskis). From 2020 Director of Milk Purchasing for Lithuania at Rokiskio suris AB (company code 173057512, address Pramones st.3, Rokiskis). Education Lithuanian Academy of Agriculture, economics and organisation. Shares in Rokiskio suris AB No shares. Involvement in other companies Shareholder of Pieno pramones investiciju valdymas UAB, holds 4.07 % of the shares and votes of Pieno pramones investiciju valdymas UAB (company code 173748857, address: Pramones st. 3, Rokiskis); Member of the Board of the Latvian company SIA Jekabpils piena kombinats (company code 45402008851, registered office address Akmenu iela 1, Jekabpils, Latvia), no shares. Jonas Vaičaitis - Independent Member of the 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, SEB Bank AB, Senior Project Manager, Client Department. Education Higher engineering education, Kiev Polytechnic Institute. Shares in Rokiskio suris AB No shares. Involvement in other companies It is not involved in the activities of other companies. Thomas Jan de Bruijn – Member of the Board. Consolidated annual report 2023 57 (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 Rokiskio suris AB No shares. Involvement in other companies There is no information on involvement in other companies. Company 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). 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 CEO: Dalius Trumpa - Head of the Company (CEO) (Appointed by the Board of the Company as of 01.01.2018) Work experience Rokiskio suris AB (company code 173057512, address Pramones st.3, Rokiskis) has been operating since 1991. 2002-2006 Production Director of Rokiskio suris AB. 2007- 2017 Deputy Director of Rokiskio suris AB. CEO of Rokiskio suris since 01.01.2018. Since 2007.01.02 Director of the subsidiary Rokiskio pienas UAB (company code 300561844, registered office address Pramones st.8, Utena). Since 29.04.2013 Director of the subsidiary Rokiskio pieno gamyba UAB (company code 303055649, registered office address Pramones st.8, Utena). Education Kaunas University of Technology, Food Industry Machinery and Machine, Mechanical Engineer. Shares in Rokiskio suris AB Does not hold shares directly in Rokiskio suris AB. Together with related parties - 29,387,655 shares (81.93 % of the authorised capital and votes) Consolidated annual report 2023 58 Involvement in other companies Shareholder of Rokvalda UAB (company code 300059165, address Basanaviciaus st.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 Pieno pramones investiciju valdymas UAB (company code 173748857, address Pramones st.3, Rokiskis) holds 4.07 % of the shares and votes of Pieno pramones investiciju valdymas UAB. 36. Committees of the Company Audit Committee of Rokiskio suris 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 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 Rokiskio suris AB: 1. Kestutis Gataveckas - Director of Perlas Finance UAB (independent member). Does not hold any shares in Rokiskio suris AB. 2. Vilmantas Peciura - Director of Virenda UAB (independent member). Does not hold any shares in Rokiskio suris AB 3. Rasa Zukauskaite - (employee of the Finance Department of Rokiskio suris AB). Has 2 shares in Rokiskio suris AB. 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 Rokiskio suris AB, 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; Consolidated annual report 2023 59 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 3 meetings in 2023 to discuss the principles for the preparation of the 2022 consolidated financial statements and the conclusions reached, the process for the preparation of the 2023 half- year consolidated financial statements, the main risks, the impact of war 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. The audit of the 2023 financial statements of Rokiskio suris AB Group was performed by the newly appointed independent international audit firm BDO auditas ir apskaita, UAB. During a meeting with BDO auditas ir apskaita, UAB on 16 January 2024, the audit team discussed a summarised audit plan setting out the stakeholders' and BDO auditas ir apskaita, UAB's overall understanding of the current situation, a description of the main risk factors, the reporting of the ESEF 53, the audit plan of the external auditors and other issues. The Audit Committee approved the draft terms of reference for the audit services and had no comments to make. In accordance with the requirements of the Law on Audit of the Republic of Lithuania, the audit firm provided the Audit Committee with a written confirmation of the independence of the audit firm. 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. 37. Management of the Company Members of the company's management Management bonus system: Responsibilities Name, surname In office since CEO Dalius Trumpa 2018-01-01 Director of Finance Antanas Kavaliauskas 2002-05-01 Milk Purchasing Director Ramunas Vanagas 2020-01-01 Acting Director of Logistics Ramunas Kubilius 2024-02-20 Sales and Marketing Director Darius Norkus 2001-07-18 Consolidated annual report 2023 60 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. 38. Staff The average number of employees of the Rokiskio suris AB Group in 2023 is 1,205, a decrease of 6.66% or 86 employees compared to 2022 (1,291). The decrease in the number of employees is due 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 2023, 77.5% of the Company's total workforce are labourers (80.9% in 2022), 22.0% are professionals (18.5% in 2022); number of management staff 6 (8 managers in 2022). Group employees by category Functional directors are assigned to the company's senior management. As at 31 December 2023, 60.3% of the employees in the Rokiskio suris AB Group were male and 39.7% were female. (31 December 2022. 56.8 % and 43.2 % respectively). The average age of employees in the Company's group is 48 years. In 2022, the average age of employees was as follows also 48 years old. The Company has highly qualified employees, of which: 24.98% (2022: - 1.9%) with higher education 12.55%); 34.11% (50.43% in 2022); 35.93% (36.87% in 2022) with higher education; and 35.93% (36.87% in 2022) with incomplete secondary education - 4.98% (0.15% in 2022). Rokiskio suris AB Group staff education Education 2023 2022 Change, % Higher education 301 162 85.80 Higher education 452 651 -30.57 Secondary 433 476 -9.03 Unfinished secondary education 19 2 850 Employee group Average number of employees Change 2023 2022 (%) Managers 6 8 -25 Specialists 265 239 10.88 Workers 934 1,044 -10.54 Total 1,205 1,291 -6.66 Consolidated annual report 2023 61 Remuneration 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 Rokiskio suris Group by employee group The average monthly salary is calculated in accordance with Government Resolution No 496, 21.06.2017. The remuneration paid to employees of Rokiskio suris AB Group consists of: 1) the fixed remuneration you receive for the work you do - the monthly salary stipulated in your contract; 2023 2022 Change, % Managers 3,313 3,147 5.27 Specialists 2,066 1,877 10.07 Workers 1,944 1,688 15.17 Group average 2,150 1,860 15.59 6.97% 16.85% 22.74%38.67% 14.77% Age Up to 29 years 30-39 years 40-49 years 50-59 years Over 60 years 27.14% 15.02% 27.72% 18.09% 12.03% Years of servise Up to 5 years 6-10 years 11-20 years 21-30 years Over 30 years Higher education 25% Higher education 37% Secondary 36% Unfinished secondary education 2% Employee education Higher education Higher education Secondary Unfinished secondary education Consolidated annual report 2023 62 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 CEO 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. 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 December 2023, improving the existing guarantees for employees. The purpose of this Collective Agreement is to create the conditions for a harmonious collective activity, 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 foreseen for 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); In the event of the death of an employee of the Company, a one-off funeral allowance is granted to the family of the employee; • On the occasion of work anniversaries (20th, 25th, 30th, 35th, 40th, 45th, 50th), an additional allowance is paid to employees of the Company; • Support is provided to the Company's employees with serious and prolonged illnesses and injuries; • Company employees, employees' family members, employees who have worked for the Company and retired employees are granted a discount for medical treatment at the Company's preventive health centre; • Unpaid leave provided for in the LC for the marriage of an employee, for the attendance of an employee at the funeral of a deceased family member, shall be paid in accordance with the general procedure for granting leave. In addition, leave is granted for the marriage of employees' children and for the death of the parents of the employee's spouse. Consolidated annual report 2023 63 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 2023, 307 employees of the Company Group benefited from the social guarantees of the Material Incentive and Benefits Procedure in force prior to the Collective Bargaining Agreement and subsequently of the Collective Agreement. Developing competences The development of Rokiskio suris AB 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. 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 2023, distance training was provided to employees on the basic principles of sustainability. Rokiskio suris AB 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. The Human Resources Plan 2024 reflects a commitment to ensure that the company's strategy and objectives are consistently delivered through its people, who are not only the tools to achieve the objective, but also key partners and ambassadors who enhance the company's reputation in the public arena. In today's business environment, where demands and challenges are changing rapidly, a company's success depends on its ability to attract, retain and develop the highest calibre professionals. Human resources are becoming a decisive factor in the competitive marketplace and a structured approach to this area is needed. Code of Ethics The Company's activities are based on internationally recognised human and workers' rights, including the International Bill of Human Rights and the principles of fundamental rights as set out in the International Labour Organisation's Declaration on Fundamental Principles and Rights at Work, the principles of socially responsible business conduct, and the principles of transparency, reliability and honesty. These principles are set out in the company's Code of Conduct, which is communicated to every employee. For more information on social aspects, see the Sustainability Report (Social area). 39. 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 Consolidated annual report 2023 64 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 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 40. Related parties of Rokiskio suris AB Group The group of persons acting in concert consists of 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 and his family members (21.02% of the Company's share capital and votes). The group of persons acting in concert owns 83.19% of the Company's share capital and votes. The remaining 16.81% of the Company's shares and votes are held by other small Lithuanian and foreign individuals and legal entities. Pieno pramones investiciju valdymas UAB is controlled by Antanas Trumpa (as the main shareholder, holding 51.70 % of the shares and votes in Pieno pramones investiciju valdymas UAB) and Dalius Trumpa, holding 27.97 % of the shares and votes in Pieno pramones investiciju valdymas UAB. RSU Holding Ltd. is controlled by Dalius Trumpa (holding 92 % of the shares and votes of RSU Holding Ltd.). 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. 41. Related party transactions During 2023, the company did not have any transactions with related parties that meet the criteria in Article 372. All related party transactions included purchases of raw milk from related parties and sales of dairy products by related parties, see note to the Company's consolidated financial statements "Related party transactions". The transactions were at arm's length, are in the ordinary course of business and do not have a material impact on the Company. The Company considers the related parties to be the Fonterra group companies - Fonterra (Europe) Coöperatie U.A., company registration number 50122541, registered office at Barbara Strozzilaan 356- Consolidated annual report 2023 65 360, 1083 HN Amsterdam, The Netherlands and Fonterra Ingredients Limited, registered office at 109 Fanshawe Street, 1010 Auckland, New Zealand (sales of dairy products), and Dzukijos pienas KB, company registration number 300058288, registered office at Varanauskas km., Krokialaukis sen. Related party transactions are disclosed in note 31 to the Company's consolidated financial statements for 2023. 42. Information on harmful transactions entered into on behalf of the issuer During the reporting period, there were no harmful transactions that were inconsistent with the Company's objectives, were not in line with normal market conditions, were prejudicial to the interests of the shareholders or other groups of persons, and had or may in the future have an adverse effect on the Company's business or results of operations. There were also no transactions resulting from conflicts of interest between the duties of the Company's directors, controlling shareholders or other related parties to the Company and their private interests and/or duties. OTHER INFORMATION 43. Audit information The consolidated balance sheet of Rokiskio suris AB Group as at 31 December 2023 and the related consolidated statements of comprehensive income, cash flows and changes in equity for the year then ended, as well as the assessment of the annual report, have been audited and the assessment of the annual report has been carried out by BDO auditas ir apskaita UAB. 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. BDO auditas ir apskaita UAB, is the sole authorised representative of the international group of audit, accounting and consulting companies BDO International in Lithuania. BDO is a member of BDO International, one of the world's largest accounting, auditing and consulting organisations, with more than 1,700 offices in 167 countries. The Rokiskio suris AB Group will pay a fee of EUR 45,000 + VAT to the audit firm for the audit of the separate and consolidated IFRS financial statements for 2023. 44. Data on publicly available information The information on the 2023 public announcement of Rokiskio suris AB is available on the company's website www.rokiskio.com in the Investors > Material events section. Summary of information published: Consolidated annual report 2023 66 The Company publishes public information by uploading it to the Central Database of Regulated Information, publishing it on the website of Nasdaq Vilnius AB at http://www.nasdaqbaltic.com, and uploading it to the Company's website at www.rokiskio.com GOVERNANCE REPORT OF ROKISKIO SURIS AB According to the Articles of Association of Rokiskio suris AB, the organs of the Company are the General Meeting of Shareholders, the Board and the CEO. The Company does not have a Supervisory Board. The supervisory functions provided for in the Law on Joint-Stock Companies of the Republic of Lithuania are performed by the Board. The Board is composed of 6 members, two of whom are independent. The Board elects and dismisses the Company's CEO, determines his/her remuneration and follows the remuneration policy. The Company has one committee, the Audit Committee. The members of the Audit Committee are elected by the General Meeting of Shareholders on the recommendation of the Board of the Company. The Company's Audit Committee is composed of 3 members, 2 of whom are independent. The Company's governing bodies are obliged to act in the best interests of the Company and its shareholders, to comply with the laws and regulations and to be guided by the Company's Articles of Association. Rokiskio suris AB 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 Date of publication Brief description of the report 07.04.2023 Ordinary General Meeting of Shareholders of Rokiskio suris AB convened on 28 April 2023 28.04.2023 Resolutions adopted at the Ordinary General Meeting of Shareholders of Rokiskio suris AB held on 28 April 2023 28.04.2023 Rokiskio suris AB 2022 audited annual information 03.05.2023 Rokiskio suris AB ex-dividend payment day 19.05.2023 Dividend payment procedure for Rokiskio suris AB for 2022 31.08.2023 Rokiskio suris AB Group's six-month results for 2023 20.10.2023 Notification of a director transaction in the securities of the Issuer 23.10.2023 Notification of acquisition of a voting interest 05.12.2023 Notification of loss of voting rights 05.12.2023 Notification of acquisition of a voting interest Consolidated annual report 2023 67 The consolidated report for 2023, 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 Nasdaq Vilnius AB 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 2023. 4. Information on significant direct or indirect shareholdings Information on significant direct or indirect holdings is provided in paragraph 28 of the 2023 consolidated annual report. 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 2023, the company did not have any related party transactions that meet the criteria in paragraph 37 2 . For further details, please refer to paragraph 41 of the 2023 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 28 and 35 of the Company's 2023 Consolidated Annual Report. 9. Information on the powers of the members of the Board Consolidated annual report 2023 68 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 34 of the 2023 Consolidated Annual Report. 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 35 and 36 of the 2023 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 Rokiskio suris AB, the Company's CEO and the Chief Financial Officer during 2023: Members of the managemen t 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 6 114.69 19.12 14.12 5.00 0 Chief Executive Officer and Chief Financial Officer 2 74.27 37.14 37.14 0 0 Consolidated annual report 2023 69 * Two members of the Board are employees of the Company. The amounts accrued and paid for 2023 (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) On 13 October 2017, the Strategic Investment Agreement and the Shareholders' Agreement were signed between the Company's shareholders - Pieno pramones investiciju valdymas UAB, SIA RSU Holding, Antanas Trumpa and Ledina Trumpiene, Dalius Trumpa and Rasa Trumpiene, the Strategic Investor - Fonterra (Europe) Coöperatie U.A., and the Company - Rokiskio suris AB. 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. COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE Rokiskio suris AB Company (hereinafter referred to as the "Company"), pursuant to Article 12(3) of the Securities Law of the Republic of Lithuania and Section 24.5 of the Listing Rules of Nasdaq Vilnius AB, 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 2. 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 Consolidated annual report 2023 70 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. 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 Board. For very important exceptional transactions, such as the disposal of all or almost all of the Company's assets, the Consolidated annual report 2023 71 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. 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 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 Consolidated annual report 2023 72 public disclosure would be detrimental to the company or would disclose the company's business secrets. 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. 1.9 It is recommended to disclose in the notice of the draft decisions of the convened General Meeting of Yes The company shall disclose in the draft resolutions, when giving Consolidated annual report 2023 73 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). 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 Rokiskio suris AB 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 1 For the purposes of this Code, chief executives are those employees of a company who hold senior management positions. Consolidated annual report 2023 74 at the meeting would be prevented due to quarantine regime or other important circumstances). Principle 1: Supervisory Board 2.1 Functions and responsibilities of the Supervisory Board 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. 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 Rokiskio suris AB, 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 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. Consolidated annual report 2023 75 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. 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 2.1.6 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 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. 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 Not applicable See point 2.1.1 Consolidated annual report 2023 76 provided on the measures taken to ensure the impartiality of the activity. 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 fulfilling the criteria for independence, may not be considered to be independent because of particular personal or company-related circumstances. Not applicable See point 2.1.1 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 Board Consolidated annual report 2023 77 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 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 Consolidated annual report 2023 78 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 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 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, management and development in multinational companies. The other two independent board members also have extensive experience in general management, 3 Link to the OECD Good Practice Guidance on Internal Control, Ethics and Compliance: https://www.oecd.org/daf/anti- bribery/44884389.pdf Consolidated annual report 2023 79 marketing, setting up and managing international joint ventures. 3.2.2 The names of the candidates for election to the 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 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 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 No The Chairman of the Board of Directors of the company is the former CEO of the company. In appointing the former CEO as Consolidated annual report 2023 80 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. 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. 3.2.6 Each member should devote sufficient time and attention to his/her duties as a Board member. If a member of the Board has attended less than half of the meetings of the 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. Yes 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 Board will be independent in the election of the Board where no Supervisory Board is established, 4 , it should be published which members of the 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 Board have been elected to the Board of the company and meet the criteria of independence set out in the Law on Public Limited Companies. The Board of Rokiskio suris 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 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. Consolidated annual report 2023 81 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. 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 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 Board and the Supervisory Board, if established, should work closely together for the benefit of both the company and its shareholders. Good corporate No The Company does not have a Supervisory Board. The shareholders of the Company Consolidated annual report 2023 82 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. 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. 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- Not applicable The company does not have a Supervisory Board and therefore Consolidated annual report 2023 83 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. cannot comply with this provision. 5. Principle 1: Nomination, Remuneration and Audit Committees 5.1 Purpose and composition of committees 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. 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 of whom are independent members. The members of the Audit Committee 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 approach and how the chosen approach meets the objectives set for three separate committees. 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). Consolidated annual report 2023 84 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 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 Consolidated annual report 2023 85 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. 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 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. 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 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 CEO 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. Consolidated annual report 2023 86 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. 5.2.2 The CEO should be consulted on matters relating to members of the collegial body who have an employment relationship with the company and the CEO, 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 Consolidated annual report 2023 87 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. 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. Yes 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 CEO, 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 CEO 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. 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. Consolidated annual report 2023 88 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. 6. Principle 1: Avoidance and disclosure of conflicts of interest 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. 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 interest 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, 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 Consolidated annual report 2023 89 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. interest between the Company and a member of its governing body. 7. Principle 1: Company remuneration policy 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. 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 No The Company does not have a financial incentive scheme. Consolidated annual report 2023 90 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. 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 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 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 corporate governance and other important issues, participation of employees in the share capital of the company, the Consolidated annual report 2023 91 involvement of creditors in the governance of the company in cases of insolvency, etc. the Company and 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 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 Consolidated annual report 2023 92 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; 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 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 Consolidated annual report 2023 93 and by the company's manager from the company, as detailed in Principle 7. 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 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 Yes The Board of Directors of the Company proposes the Consolidated annual report 2023 94 Shareholders by the company's Supervisory Board or, if the company does not have a Supervisory Board, by the company's Management Board. 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 2023, the Audit Firm received a fee of Tk. 21 thousand. The Audit Committee received a fee of EUR 2,000 thousand for non- audit services rendered to the Company's Group. Consolidated Annual Social Responsibility and Sustainability Report 2023 2 Contents 1. Message from the CEO ................................................................................................................................................................................ 3 2. About the report .......................................................................................................................................................................................... 4 3. About the company ..................................................................................................................................................................................... 5 4. Business model ............................................................................................................................................................................................ 6 5. Subsidiaries .................................................................................................................................................................................................. 7 6. Strategy: vision, mission, values .................................................................................................................................................................. 8 7. Governance model....................................................................................................................................................................................... 9 8. Sustainability Group ................................................................................................................................................................................... 13 9. Risk management ...................................................................................................................................................................................... 14 10. Sustainability approach ......................................................................................................................................................................... 20 11. The main principles and commitments ................................................................................................................................................. 21 12. Materiality analysis ................................................................................................................................................................................ 22 13. Our goals and contributions to SDG’s .................................................................................................................................................... 26 14. Environmental factors ........................................................................................................................................................................... 30 15. Social area ............................................................................................................................................................................................. 40 16. Economic area ....................................................................................................................................................................................... 49 17. Disclosure in accordance with the EU Taxonomy Regulation ................................................................................................................ 51 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 3 1. Message from the CEO The review of annual results is a special time to take a look back at our achievements and targets when it comes to responsible business and sustainable development. There is no doubt that business has an active role to play in creating a sustainable and healthy world. Our commitment is therefore not only to achieve economic success, but also to participate in shaping social and environmental change. As defined in the Strategic Plan 2022-2024 of AB Rokiškio sūris, we aim to achieve the most sustainable milk processing at all stages, from raw milk collection to the final product. By updating our 3- year strategic plan, we will strive to step up our efforts in the environmental, social and governance (ESG) areas so that we remain a leader in the dairy industry not only in Lithuania, but also in the Baltic States in five, ten and even more years. In recent years, we have introduced new technologies that allow us to use energy more efficiently, apply circularity in our production processes, reduce waste and thus contribute to reducing GHG emissions. We also actively encourage our employees to take part in sustainability initiatives, not only at work but also in their daily lives. We are committed to creating a sustainable social environment, both within our company and in the communities where we operate: we invest in educational programmes, promote community spirit, and support a range of initiatives that increase employment and improve the quality of life of local people. Thank you for joining us on this journey towards a better world. We believe that by working together, we can ensure a fulfilling life for future generations. Dalius Trumpa CEO, AB „Rokiškio sūris“ GRI 2-22 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 4 2. About the report This consolidated Social Responsibility Report and Sustainability Report of Rokiškio sūris AB Group (the "Group") (the "Sustainability Report") is presented for the period from 1 January to 31 December 2023 and covers the activities of the entire Group. The Sustainability Report is published as part of the Company's consolidated annual report for 2023. This Sustainability Report is the Group's report in accordance with the GRI (Global Reporting Initiative) standards (2021 update) and the Bank of Lithuania's recommendations on disclosure of sustainability-related information. The report contains the best information available at the time of publication but has not been formally audited. The content of the report has been compiled on the basis of materiality and in accordance with the principles of the United Nations (UN) Global Compact. Here you can find information on the Group's ambitions to contribute to the UN Sustainable Development Goals (SDGs). The information is also in line with Nasdaq's US disclosure guidelines and describes activities and achievements in the areas of environmental, social and governance (ESG). This report meets the requirements for a corporate social responsibility report as stipulated in the legislation of the Republic of Lithuania. Previous reports and contact person The Group's previous Corporate Social Responsibility Report and Sustainability Report, published on 7 April 2023 together with the Consolidated Annual Report, as well as other information on sustainability can be found on the Group's website (www.rokiskio.com). We value the views of our stakeholders and welcome your feedback on this report and the Group's sustainability performance by email to ausra.ziboliene@rokiskio.com (contact person: Aušra Zibolienė, Head of Sustainability). GRI 2-3, GRI 2-4, GRI 2-5, Nasdaq V8, Nasdaq V9, Nasdaq V10 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 5 3. About the company Business overview/ Key facts 2023 517 393 tons of raw milk processed 42 export markets 39 545 tons of various cheese manufactured 1 205 employees GRI 2-3, GRI 2-4, GRI 2-5, Nasdaq V8, Nasdaq V9, Nasdaq V10 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 6 4. Business model Rokiskio suris, AB Group based in Lithuania (headquarter – Pramonės g. 3, Rokiškis) is a public limited liability company and consists of the parent company AB Rokiskio suris and five subsidiaries.: Rokiškio pienas, UAB; DairyHub.lt, UAB Rokiškio pieno gamyba; UAB Latvian company SIA „Jekabpils piena kombinats“ Data from Latvian subsidiary does not included, because the amounts are not material. Consolidation of Information is made in accordance with the International Financial Reporting Standards (IFRS). The main activity of the joint-stock company Rokiskio suris, AB is the activity of dairies and cheese production. The main products are cheeses, butter, dry dairy products and short shelf life dairy products. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 7 5. Subsidiaries The main activity of UAB Rokiškio Pienas is the sale of fresh dairy products and fermented cheeses. The main activity of UAB Rokiškio Pienas Gamyba is the production of fresh dairy products (milk, kefir, sour milk, butter, cottage cheese, quark, cottage cheese, sour cream, chocolate coated cheese bars, desserts) and milk flour. Jekabpils piena kombinats SIA is active in the purchase of raw milk. SIA Kaunata is active in the purchase of raw milk. DairyHub.lt UAB was established in 2021 and its main activity is the sale of dairy products. The management of Rokiškio sūris AB Group is organised according to the main functions: Raw milk purchasing Production Sales Logistics Finance Security PRODUCTION IS CARRIED OUT IN THREE SPECIALISED PLANTS Rokiškis (fermented cheese, lactose, whey protein concentrate), Utena (fresh dairy products, butter, milk and whey flour) and Ukmergė (cutting/packaging of hard cheese). Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 8 6. Strategy: vision, mission, values In order to ensure that all members of the Group's governing bodies have a clear understanding of the Group's objectives, directions and ambitions, a Group strategy is developed which sets out the long-term strategic goals and objectives. The Group's activities are guided by a 3-year strategic plan approved by the Board of Directors, which sets out the vision and mission of the company and defines its objectives. The main provisions of the strategic plan are set out below: Mission: trusted dairy professionals. Vision: processing more than 1 million tonnes of raw milk per year in Lithuania, which turns into little Baltlandia. Objectives: Sustainable milk processing; Leadership in the dairy sector in the region; Flexible production and sales of premium quality products exceeding consumer expectations; To be the most attractive and reliable partner for dairy farmers; Continuously increase shareholder value. Values and strengths: Cohesive team and good governance; Modern technology; Good workmanship; Financial stability; Speed and flexibility in decision making and in responding to external changes; Continuous improvement (The Group devotes considerable attention and financial resources to the development of its employees' professional and general competences, skills and abilities). A more detailed overview of the initiatives under the 3-year strategic plan is provided in the 2023 Consolidated Annual Report (see section "Group strategy and objectives"). Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 9 7. Governance model The Group's governing bodies are: the General Meeting of Shareholders, the Board of Directors, and the CEO. These governing bodies are obliged to act in the best interests of the Group and its shareholders, and to comply with the laws and regulations of the Republic of Lithuania and other legal acts. The highest level of the Group's management body is the General Meeting of Shareholders. The Group's Management Board is elected by the General Meeting of Shareholders for a term of 4 years. The Shareholders' Meeting shall be held at least once a year. The Group reports through the Central Regulated Information Database of the Nasdaq Vilnius Stock Exchange on significant economic, social and environmental events. In accordance with the Group's Articles of Association, the Board is composed of 6 members, 2 of whom are independent. The Chairman of the Board is not an employee of the Group. The competence of the members of the Board is regulated by the Law on Joint Stock Companies of the Republic of Lithuania (Articles 33 and 34). Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 10 In line with good corporate governance practice, the Group's Articles of Association set out the roles and responsibilities of this Board: CONSIDERED AND APPROVED BY THE BOARD: Annual report of the Group and its companies; the Group's management structure and staff positions; positions for which recruitment is by competitive recruitment; the regulations of the Group's filiates and representative offices. The Board elects and removes the Chief Executive Officer, determines his remuneration, other terms and conditions of employment, approves his terms of office, and grants incentives and penalties to him. The Board shall adopt: decisions for the company to become a founder or participant in other legal entities; decisions to establish the company's filiates and representative offices; decisions on the investment, transfer, lease (calculated separately for each type of transaction) of fixed assets with a book value exceeding 1/20 of the company's authorised capital, unless the Articles of Association specify a different value; decisions on pledges and mortgages of fixed assets with a book value exceeding 1/20 of the company's authorised capital (calculated as the total amount of the transactions), unless a different value is specified in the statutes; decisions concerning the guarantee or indemnity of other persons for the performance of obligations of more than 1/20 of the company's authorised capital, unless the statutes specify a different amount; decisions to acquire fixed assets for a price exceeding 1/20 of the company's share capital, unless the articles of association specify a different price. The Board shall be responsible for convening and holding General Meetings of Shareholders in a timely manner. The members of the Board shall be obliged to protect the Company's commercial (industrial) secrets and confidential information which they have become aware of in their capacity as members of the Board. During the reporting period, the Board did not receive any notifications of critical incidents. The Company's Audit Committee is composed of 3 members (2 men and 1 woman, 2 of whom are independent). The functions, rights and duties of the Audit Committee are regulated by the Regulations on the Establishment and Activities of the Audit Committee of Rokiškio sūris AB, approved by the General Meeting of Shareholders of the Group, and by other documents regulating the activities of the Audit Committee. Main functions of the Audit Committee: To monitor the process of preparation of the financial statements of the Group and its subsidiaries; to monitor the effectiveness of the Group's internal control, risk management and internal audit systems; to make recommendations to the Group's Board of Directors regarding the selection of the external audit firm and to monitor the process of conducting this audit; to monitor the independence and objectivity of the external auditor and the audit firm; to inform the Group's Board of Directors of material internal control weaknesses identified by the external and internal auditors in relation to the financial statements and to make recommendations for their remediation; act honestly and responsibly for the benefit and welfare of the Group and its shareholders. The Group does not currently have a Supervisory Board Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 11 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 12 The requirements for candidates for nomination to the Group's governing bodies do not discriminate on the basis of age, gender, education or professional experience. The main criterion for the election of members of the governing bodies is the competence of the candidate. The Senior Management has established, implements and monitors such policies: Each Group policy document is communicated to every employee of the Group. It is broken down into specific measurable objectives for the relevant units and/or divisions of the Group to ensure its implementation. The implementation of the objectives is reviewed at least once a year during the management review. A more detailed overview of management practices is provided in the 2023 Consolidated Annual Report (see section "Corporate governance bodies"). GRI 2-9, GRI 2-10, GRI 2-11, GRI 2-16 Anti-corruption policy Personal data protection policy Code of Ethics Equal opportunities policy Human rights policy Violence and harassment prevention policy Food safety, quality and environment policy Remuneration policy Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 13 8. Sustainability Group Sustainability is increasingly becoming an integral part of a company's operations. During 2023, the company's Sustainability Group has added new members, strengthened its activities, introduced sustainability initiatives and is increasingly spreading the idea of sustainability so that all employees apply the principles of sustainability in their work and work towards common goals, while assessing the positive impact in the social, environmental and governance fields. Currently, the group consists of 12 specialists from different areas of the company, from all the companies of the AB Rokiškio sūris Group. The Sustainability Group is structured to cover all three levels of sustainability: environmental, social and governance, and includes specialists from the environment, human resources, quality management, purchasing, energy, preparation and marketing. The members of the group hold meetings and discuss relevant topics. In 2023, each month was dedicated to a sustainability initiative to better acquaint the company's employees with sustainability ideas and their application in everyday life, so that sustainability becomes an integral part of the company's activities. It is important to realise that sustainability is not just a passing fad, that such practices need to be embedded in the strategy and mindset of the whole company, that it is up to all of us to create a future for our children and grandchildren. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 14 9. Risk management In order to achieve its strategic objectives and to respond to the dynamic operating environment, the Rokiškio sūris Group carried out a sustainability risk assessment in 2023 in relation to the Group's material sustainability themes. The ability to proactively respond to evolving risks is crucial and ensures that our management receives the most relevant information in time to make the necessary decisions. A team from the Sustainability Group has been appointed to assess sustainability topics. The Sustainability Team assesses risks against the following criteria: Residual risk: taking into account the control measures already in place at Rokiškio sūris AB to mitigate the potential impact of their materialisation. In terms of probability of occurrence (past and future). In terms of their impact on three aspects: economic, organisational and/or reputational. Material topic Description Related risks Risk management Probability of occurance/impact Environmental factors CLIMATE CHANGE Greenhouse gas calculations across the value chain, strategic reduction, energy efficiency, renewable energy. • Greenhouse gas (GHG) air pollution directly from own production facilities and indirectly in the value chain. • GHG accounting (Scope 1, 2, 3). • A plan to reduce GHG emissions is developed and regularly reviewed. • Market availability and cost of renewable energy sources. - Availability of environmentally friendly freight transport. • Installing your own green energy plants. • Boilers installed in the factory to produce hot water from energy generated by renewable sources. • Replacement of thermal energy with renewable energy is technically feasible. • Replacing car fuels with renewable sources is so far only available for light-duty vehicles. • Ensuring uninterrupted energy supply. • Technological substitutability, adoption of new technologies. • Heat pumps installed to reduce the amount of thermal energy purchased. • Medium-voltage switchgear is fed from two independent sources, which feed the power transformers. In the event of a voltage failure in one substation, the other is immediately supplied. • Replacing electricity with renewable energy. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 15 • Strict conditions for contracted heat/steam supply. • Installed steam thermal energy metering to monitor, control and automate the energy consumption and requirements of the various workshops. • Production process optimisation programmes are introduced in the relevant workshops to eliminate the "human factor" and rationalise the use of energy resources. • Self-generation of heat in two natural gas-fired boiler houses in Utena and Ukmergė. PRODUCTION WASTE Industrial waste management, strategic waste reduction, separation and management of waste streams. • Poor waste management, failure to implement circular economy principles (waste charges, loss of valuable raw materials). • Waste sorting, accounting, recycling targets (e.g. packaging waste), waste reduction targets. • Cooperation with waste managers. • Target to reduce the amount of waste going to landfill (tracking indicator). • Tracking and adapting innovations. CIRCULAR ECONOMY Applying the circular economy model to the business chain. CONSERVATI ON OF WATER RESOURCES Responsible management of water availability and qualityand rational use throughout the supply chain, wastewater management. • Water scarcity. • Overexploitation, pollution and declining availability of water resources. • Improper wastewater management. • Ensuring the rational use of water through regular accounting and monitoring, in compliance with all applicable laws. • Water reduction targets. • Industrial and surface wastewater treatment, control studies, pollutant accounting and analysis. • Reuse treated water instead of groundwater as far as possible. ANIMAL WELLBEING Ensuring responsible and caring treatment of farm animals (feeding, watering, avoiding pain or discomfort, etc.); rational use of antibiotics for the treatment of animal diseases; a responsible policy of • No sustainability risks identified: suppliers are subject to strong and effective national and EU regulation in this respect. • Ensuring animal welfare is continuously monitored through milk quality indicators. • There is constant direct contact with farms: suppliers can consult, seek advice on financing, etc. • Regular farm audits by buyers and our shareholder Fonterra. No risks identifi ed in 2023 No risks identi fied in 2023 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 16 co-operation between livestock and feed suppliers; and responsibility for the entire life cycle of animals. PRODUCT PACKAGING AND WASTE Responsible product packaging design and lifecycle responsibility, innovative packaging solutions. • Pollution from packaging waste due to inadequate waste management, lack of environmentally friendly packaging innovations for dairy products, high financial burden on the Group. • Optimal packaging design that meets the necessary quality requirements. • Ensuring proper labelling of the composition of packaging. • When choosing packaging suppliers, preference is given to manufacturers using the latest technologies. SOCIAL FACTORS FOOD SAFETY AND QUALITY Ensuring the quality and safety of dairy products for the health of consumers; ensuring a healthy and wholesome diet and the nutritional quality of products. • Products do not meet safety and quality requirements. • The Group's manufacturing companies have implemented and certified food safety systems in accordance with International Food Standards (IFS), ensuring compliance with the highest safety and quality standards. All Group factories are rated at Higher level by independent auditors. • Measurement and control of parameters during all production processes, laboratory control tests. • The ingredients used in production are purchased from a list of trusted suppliers, with proof of quality. Quality checks are carried out at the time of reception at the plants. • A portion of the production of each batch is retained on site and stored under defined storage conditions to allow for inspection during the shelf-life period (in the event of complaints from customers). HUMAN RIGHTS Protection of human rights, including all persons affected by the Group's activities. • No sustainability risks identified: the Group strictly adheres to the established and approved human rights policies. •Updating and adoption of additional documents to ensure minimum human rights violations: anti-corruption policy, code of ethics, equal opportunities policy, human rights policy, violence and harassment prevention policy. No risks identifi ed in 2023 No risks identi fied in 2023 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 17 SUPPORT FOR LOCAL COMMUNITIE S Establishing and maintaining mutually beneficial relationships with the communities in which we operate, including social and/or educational projects. • Refusal to support local communities could lead to dissatisfaction and damage the Group's reputation. • The Group aims to maintain its status as a trusted social partner by contributing to solving pressing social problems in our society and by supporting various institutions, organisations and their projects, promoting various initiatives. We also support various cultural events, sports development projects and help improve the living environment of socially vulnerable groups. GOVERNANCE / ECONOMICAL FACTORS INNOVATION Deploying innovative technologies across the business chain, using digital technologies to improve business efficiency and productivity. • The lack of speed and smoothness in the implementation process is linked to a lack of competences in certain areas. Potential risk of failure due to lack of knowledge in certain areas. • The Group is currently focusing on innovation within the production process, as they are the experts in the field and have the best knowledge of the potential and need for innovation in the production process. • Innovation selection, planning process management. The majority of innovative projects are based on the experience of Fonterra's business partners, which ensures the success and profitability of the project. • The Group aims to train an increasing percentage of its workforce in sustainability in order to be able to develop sustainable innovations covering the entire value chain up to the final product. RESPONSIBL E INVESTMENT Applying environmental, social and governance criteria to the Group's operational investments. • No assessment of environmental and social aspects has been identified in this topic. Investments are made in the context of economic-financial viability. • Financial investments are made in line with the Group's strategic objectives. Projects are evaluated against the mandatory requirements for implementation of that project. • Certain environmental and social aspects are required by national law, e.g. when constructing new buildings. • The Group also has investment management plans in place and reviews them annually. Each year, prior to the approval of the budget and investments, a list of assumptions is drawn up to guide each division in the preparation of its expected investments, and the investments are approved by the company's management. REGULATOR Y COMPLIANCE AND TAX Compliance with all dairy industry requirements and fair payment of taxes. • Violations are subject to fines, restriction or suspension of activities, and negative impact on the Group's reputation. • The Group has a Code of Ethics and 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, Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 18 suppliers and subcontractors of the Group, with the aim of preventing corruption and corruption in all its activities. • Group companies also provide periodic training for professionals and apply related control measures. SUSTAINABILI TY AND RESPONSIBIL ITY IN SUPPLY CHAIN Achieving positive environmental, social and economic impacts in the supply chain, taking into account the sustainability practices of supplier companies. • Negative environmental, social or economic impacts in the supply chain due to a lack of supplier responsibility. • There is a lack of detailed information on suppliers and their environmental and social performance. • The Group has a list of approved suppliers. Approved suppliers have implemented and certified food safety/quality management systems according to international standards. Where this is not the case, the Group's specialists carry out audits to determine whether suppliers meet the requirements. Repeated audits are carried out every 3 years for food ingredients and every 5 years for packaging. We also carry out annual assessments of suppliers against defined assessment criteria, taking into account historical data. In the event of an unsatisfactory assessment, suppliers may be removed from the list of approved suppliers. This also means that in order to resume cooperation, suppliers have to go through the supplier re-approval process. The risk management process consists of four main steps: risk identification, risk assessment, management strategy definition and monitoring. It is foreseen that new risk management measures will be planned on an annual basis, where appropriate, and new potential sources of sustainability risks will be reviewed. New sources of risk will be identified immediately, risks will be assessed, a management strategy will be defined and risk management will be monitored periodically. All sustainability topics and the wider management of their impacts are described in this report. EXPLANATION: Low risk Medium risk High risk Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 19 If the Group's activities cause or contribute to an adverse effect, it would take action in accordance with its internal procedure on Food Safety, Quality and Environmental and other crisis management. The Group's obligations to address adverse impacts are set out in its policy documents. Group companies have a complaints management system. All complaints are evaluated and addressed. Where they are substantiated, appropriate action is taken; where necessary, action is taken immediately. Complaints are analysed and preventive measures are taken to avoid a recurrence of adverse effects. The results of the analysis of complaints shall be made available to the relevant responsible persons and senior management. A procedure for the management of non-conformities in products, processes and activities is in place. In the event of emergencies, actions are foreseen in accordance with the Management Plan for Food Safety, Quality and Environmental Emergencies and Other Emergencies. An environmental monitoring programme for monitoring the environmental status of the operators is in place in agreement with the Environmental Protection Agency. A more detailed overview of risk management is provided in the 2023 Consolidated Annual Report (see section "Risk factors and risk management"). GRI 2-26, GRI 2-26 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 20 10. Sustainability approach A sustainable business is one whose development is based on a balance between economic growth, social well-being and environmental prosperity. For Rokiškio sūris AB, maintaining its leading position in the dairy sector is a challenge to find the right balance between creating sustainable value for shareholders and focusing more efforts on ESG issues. Sustainability is still more commonly understood at the corporate level as environmental protection, but on a sustainability-by-sustainability basis, it is safe to say that the company has always been committed to both social well-being and to caring for the environment in which it operates. The Group's activities are guided by a 3-year strategic plan approved by the Board of Directors, which sets out the Group's mission, vision, goals and long-term objectives. We plan to update our strategic plan to integrate sustainability and the most material sustainability areas identified (see section "Materiality assessment"). We communicate the Group's achievements to all stakeholders. We will strive to ensure that all the Group's activities are guided by the principles of sustainability. We will not limit ourselves to what has already been achieved and to best practices, but will continue to look for new ways where and how we can apply a more sustainable approach to our activities. The Group's day-to-day impact on the economy, nature and people is coordinated by the Sustainability Group, reporting directly to the Group Chief Executive. The Group is made up of senior managers and other employees who, by the nature of their work, have direct responsibility for important areas of the Group's sustainability. The disclosures in the Sustainability Report, including the most significant sustainability areas, are presented and approved at the General Meeting of Shareholders. The Sustainable Operations Group defines its mission as "to make sustainability an integral part of the way we do business across the enterprise". That is, to embed sustainability more deeply in the company's philosophy and in all business processes, to go beyond isolated investments in environmental and social projects, and to permeate all activities with the idea of sustainability. To increase the spread of sustainability awareness, the company organises external training and seminars and involves its employees in sustainability initiatives. The Group's top management has developed, implements and oversees a Food Safety, Quality and Environmental Policy that includes the promotion of sustainable practices throughout the value chain. The Quality Policy is communicated to every employee of the Group and is mapped to specific measurable objectives of the respective business units. Our sustainability initiatives include membership of Sedex, through which we work to ensure responsibility in the supply chain, and a subscription to the EcoVadis sustainability assessment. Our strategic partner in sustainability is our shareholder Fonterra, a New Zealand dairy cooperative. In addition, the company's ESG data is now uploaded and distributed through Nasdaq Genium Consolidated Feed. Rokiškio sūris AB has been certified as a Nasdaq ESG Transparency Partner, demonstrating its involvement in ensuring market transparency and raising environmental standards. GRI 2-12, GRI 2-13, GRI 2-14, GRI 2-17, GRI 2-18, GRI 2-22, GRI 2-23, GRI 2-24, GRI 2-28, Nasdaq G9 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 21 11. The main principles and commitments The Group's strategic direction is based on the principles that guide our day-to-day activities: we take into account the environmental, social and economic aspects of our operations to create value in a comprehensive and sustainable way, which is also reflected in our financial performance; we aim to contribute to the Sustainable Development Goals (SDGs) in areas where our activities have a significant impact on sustainability (see "Our ambition in the global context of sustainable development"); contributing to the European Green Deal and the Paris Agreement on climate change, and committing to becoming a climate-neutral market participant (net-zero emissions) by 2050); promoting the circular economy and finding innovative solutions for product packaging, using natural resources rationally and sustainably; when deciding on actions related to the sustainable development of the Group, we aim to involve, engage ethically, transparently and fairly with all stakeholders; promoting the circular economy and finding innovative solutions for product packaging, using natural resources rationally and sustainably; when deciding on actions related to the sustainable development of the Group, we aim to involve, engage ethically, transparently and fairly with all stakeholders; We support the United Nations Global Compact and the Group's work is guided by the 10 universally accepted Principles for Responsible Business in the areas of human rights, workers' rights, the environment and anti-corruption. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 22 12. Materiality analysis In 2021, we carried out the first materiality analysis of the Group's sustainability aspects in line with the GRI guidelines. This assessment identified priority sustainability themes to guide our sustainability strategy and the content of our sustainability report. As there have been no material changes in the company's operations, we plan to carry out another materiality assessment should the situation change. The materiality assessment consists of the following steps: We have looked at the most relevant sustainability topics for market players in our sector and compiled a list of environmental, social and governance (economic) topics. We have also included specific recommendations for the dairy industry published by the Dairy Sustainability Framework (DSF), the Sustainability Accounting Standards Board (SASB) and MSCI organisations. We have analysed our stakeholders and carried out a survey to find out what is most important to them in terms of sustainability. The questionnaire was completed by 393 respondents from each of our stakeholder groups. The consumer group for our products was represented by the Lithuanian Consumer Alliance. We have assessed each topic according to its actual or potential impact on society and the environment, taking into account the topic's relevance to the Group's strategy. Based on the results, we developed a materiality matrix of sustainability topics, which was reviewed and approved by management. GRI 3-1 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 23 STAKEHOLDER ENGAGEMENT Our stakeholders are those individuals or organisations who are highly relevant and/or have a significant impact on our activities and those who can significantly influence the implementation of our strategy. We have an interest and responsibility to ensure ongoing meaningful engagement with our stakeholders, to enable all stakeholders to access information about the Group and to make suggestions for improving our performance. We identify the following key stakeholder groups and the issues of mutual concern to us and them: GRI 2-29 Shareholders and other investors Conducting profitable and sustainable operations in compliance with the law and the Group's Articles of Association Customers (wholesale buyers) Long-term business-to-business (B2B) cooperation Employees (including employee organisations) Creating the right working conditions, ensuring safety, developing competences and improving process efficiency Consumers Responding to market needs as well as possible, developing safe, quality products Raw milk suppliers Seeking long-term partnerships and creating mutual value by continuously improving environmental and animal welfare conditions Suppliers of other raw materials and services Selecting suppliers in accordance with ethical business and environmental requirements Government organisations To comply with the laws of the Republic of Lithuania in good faith and to obtain advisory assistance or financial support for the Group's ongoing investment projects Media Provide transparent and reliable information to the public Local communities and non- governmental organisations (NGOs) Fostering community by supporting various initiatives and contributing to the well-being of our employees Academic community Collaborate on research into new product development, packaging and process improvement; develop the younger generation. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 24 Materiality matrix Importance to stakeholders Impact on society and the environment The following matrix outlines the social, environmental and governance/economic themes that are most relevant to the sustainability of our business. All of these topics are important, but in order to prioritise sustainability, they are ranked in order of importance to stakeholders and impact on society and the environment. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 25 Our assessment identified 14 key sustainability themes for the Group: PRODUCT SAFETY AND QUALITY: Ensuring the quality and safety of dairy products for the health of consumers, ensuring a healthy and wholesome diet, and the nutritional quality of products. GRI 416 WORKING CONDITIONS AND WORKER WELFARE: Ensuring a suitable working environment and safe working conditions, including work organisation and work activities, training, health, safety, fiscal and emotional well-being, working time and work-life balance. GRI 401; GRI 403 CLIMATE CHANGE: greenhouse gas accounting across the value chain, strategic reduction, energy efficiency, renewable energy. GRI 302; GRI 305 MANUFACTURING WASTE: industrial waste management, strategic waste reduction, separation and management of waste streams. GRI 306 WATER RESOURCE MANAGEMENT: responsible management and rational use of water availability and quality throughout the supply chain GRI 303 HUMAN RIGHTS: Protecting human rights, including all people affected by our business activities. GRI 403; GRI 406 SUPPORTING LOCAL COMMUNITIES: establishing and maintaining mutually beneficial relationships with the communities in which we operate, including social and/or educational projects. GRI 413 INNOVATION: deploying innovative technologies throughout the business chain, applying digital technologies to improve business efficiency and productivity. ANIMAL WELFARE: responsible and caring treatment of farm animals (to ensure that they are fed, watered, not subjected to pain or discomfort, etc.); rational use of antibiotics for the treatment of animal diseases; a responsible policy of co-operation between livestock and feed suppliers; and responsibility for the entire life cycle of animals. PRODUCT PACKAGING & PRODUCTS: responsible product packaging design and responsibility for the entire packaging life cycle, innovative packaging solutions. RESPONSIBLE INVESTMENT: applying environmental, social and governance criteria to the Group's operational investments. REGULATORY COMPLIANCE AND TAXATION: Compliance with all requirements applicable to the dairy industry and fair payment of taxes. GRI 207 SUSTAINABILITY AND RESPONSIBILITY IN THE SUPPLY CHAIN: Achieving a positive environmental, social and economic impact in the supply chain, taking into account the sustainability practices of supplier companies. GRI 308; GRI 414 THE CIRCULAR ECONOMY: applying the circular economy model to the business chain. GRI 306 GRI 3-2; GRI 3-3 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 26 13. Our goals and contributions to SDG’s In 2015, the United Nations agreed to pursue sustainable international development and to achieve 17 Sustainable Development Goals (SDGs) by 2030. These goals set a universally accepted direction for sustainable development, which we are committed to. Our activities contribute most to the 10 SDGs listed in the table below. Material topics Most relevant SDG’s Most relevant SDG targets Our long-term sustainability direction Our goals for 2024 Environment Climate change 7.2 7.3 13.1 13.2 Join the climate change initiative to keep the temperature rise below 1.5 (2)°C, set science-based targets, and reduce our carbon footprint as much as possible or even become CO2 neutral. In the short term, pursue a policy of reducing the use of fuel, energy, water and other materials per unit of output. By 2050, move towards 100% renewable energy. By 2025, 50% of energy consumption must come from renewable sources. Reduce GHG emissions by 25% by 2025 and achieve appropriate relative targets across all major business units. Become a climate-neutral market player by 2050. Reduction of the Group's fuel consumption by 1% compared to 2023. Reduce energy consumption. Deployment of renewable energy sources and implementation of the action plan. Conservation of water resources 6.4 Control water consumption, increase the use of recycled water and continuously seek process improvements. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 27 Sustainability and responsibility in the supply chain 12.2 12.6 Reduce environmental impacts throughout the supply chain. Encourage suppliers to adopt environmentally friendly practices in their operations and supply chain that also benefit the local community. Work with suppliers towards the common goal of producing sustainable food products. To work with suppliers who apply good agricultural practices and monitor the safety of their products. To continuously improve our audit programme to achieve better results over time. Act ethically and in compliance with applicable laws. Circular economy 12.4 12.5 Develop a packaging strategy to reduce the use of plastics and make as much packaging as possible recyclable Production waste 12.4 12.5 Improve the sorting of waste generated and require sustainable waste management from service providers. Join the zero waste to landfill initiative. Product packaging and waste 12.4 12.5 Reducing the amount of packaging put on the market. Seek environmentally friendly packaging that is easily recyclable, safe and made from recycled materials. Ensure that it does not contain hazardous or toxic chemicals. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 28 Animal wellbeing 12.4 12.5 Increase the quantity of milk purchased with a somatic cell count lower than the previous year's average and decrease the quantity of milk purchased with a somatic cell count higher than the targets. Continue to actively engage with dairy farms, recommending investment in new buildings to improve housing conditions, increase herd size, and continue farm evaluations Social area Human rights 8.8 Continue to ensure equal working conditions for all workers, and opportunities for up-skilling, vocational training, retraining and practical work experience. Provide equal pay regardless of a worker's gender, race, nationality, language, origin, social status, religion, beliefs or opinions, age, sexual orientation, disability, ethnicity, religion. Continue to promote and respect international human rights and ensure their protection in our activities, and prevent any violation of human rights Continue to actively pursue compliance with all codes of conduct (in particular the Supplier Code of Conduct) and policies in force within the Group. Regularly update employees' knowledge and consistently adhere to and develop the social policy model across the Group. Actively work with raw milk suppliers to promote sustainability initiatives that help reduce GHG emissions. Continue independent sustainability assessment through the EcoVadis system. The most recent assessment was carried out on 19 March 2023, in which the Group's sustainability performance was Food safety and quality 12.4 Produce products from the highest quality raw materials. Expanding the range of healthier products, e.g. reduced-sugar, protein-enriched, organic, reduced-fat, etc. Pay special attention to products whose end consumer is infants. Working conditions and employee welfare 10.2 10.3 Continue to create healthy and safe working conditions throughout the value chain, a welcoming atmosphere where employees feel comfortable, can develop their skills and knowledge. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 29 Support for local communities 11.a Focus on projects that create long-term value, educate the community and increase economic potential. To continue to maintain close relations with local communities, to contribute to better living and leisure conditions for community members, and in particular to promote employment for children and young people. assessed with a score of 62 (out of 100), representing the 79th percentile of all organisations assessed. Governance Innovation 9.4 Responsibly deploying innovative technologies to increase the Group's productivity, reduce environmental impact and improve working conditions. Set environmental, social and economic criteria for investments in the Group's activities. We will ensure and continue to comply with all legislation and adhere to the approved tax strategy. We will implement the Group's approved policies (Food Safety, Quality and Environmental Policy, Sustainable Purchasing Policy, Ethical Employer Policy, Business Ethics Policy). Responsible invetment 16.5 Ensuring that the Group's investments help us achieve our strategic goals and have a positive impact on nature, people and the economy. Regualtory compliance and tax 16.5 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 30 14. Environmental factors ANIMAL WELFARE The Group's main raw material is cow's milk, purchased from farms in Lithuania, Latvia and Estonia. We buy milk only after concluding detailed milk purchase and sale agreements, which also include animal welfare requirements. By signing the contract, the seller confirms that the milk sold comes from cows kept in herds that are part of the EU competent authorities' agricultural surveillance system and comply with EU rules. The Group's farms and those of its partners are regularly inspected to ensure compliance with the highest ethical standards of animal welfare.2 times a year, according to pre- determined schedules, we carry out a self-monitoring programme: visits to dairy farms to assess compliance with farm animal welfare requirements. In rare cases of non- compliance, more frequent audits may be carried out and the business partnership may be terminated. In addition to on-farm monitoring by the company's specialists, periodic on-farm audits are carried out by an international audit team approved by Fonterra. The audit criteria include: acceptability of the raw milk farm, milk testing, farm infrastructure, on-farm quality management, animal health and morbidity management, safety and sustainability. We only buy raw milk from EU-compliant farms that ensure the welfare of their cows in line with the Five Freedoms: - Freedom from hunger and thirst, a nutritious diet and free access to water; - Freedom from discomfort; - Freedom from pain, injury or illness; - Freedom to express normal behaviour; - Freedom from fear and suffering. We work closely with UAB Pieno tyrimai, a Lithuanian accredited laboratory, which provides up-to-date information on issues of relevance to both the company and the dairy farms themselves. UAB Pieno tyrimai provides seminars for farmers, runs a programme to monitor animal performance, feed quality testing, and a PCR testing programme to identify the causative agents of mastitis in cows. Through these measures, we help dairy farms to implement sustainable practices and grow steadily. Although Rokiškio sūris can only partially influence the introduction and improvement of sustainability practices on farms, these aspects are strongly controlled by public bodies. The Group in turn supports farms implementing modern practices, organises training, and helps to implement various on-farm maintenance systems, which have a direct impact on the company itself, its efficiency and the quality of its products. We work with farmers to help them calculate their CO 2 emissions and set ways and targets to reduce them. Only good quality milk can produce quality dairy products, and good quality milk can only come from healthy animals (milk is only bought from farms with healthy herd status). We monitor the somatic cell count (SCC) of all milk delivered from farms. Over the last five years, according to statistics provided by UAB Pieno tyrimai, the number of somatic cells in the milk purchased by AB Rokiškio sūris has decreased by about 2% compared to the previous year. This is due to our choice to buy more raw milk from large farms that are strictly supervised, adhere to high standards of sustainability, supply animals with balanced and consistent feed, have modern facilities and highly qualified staff. Somatic cell count is an indicator of milk quality. The lower the number, the higher the milk quality. 170 180 190 200 210 220 2018 2019 2020 2021 2022 2023 Mean value of somatic cell count, thousands/ml Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 31 CLIMATE CHANGE While direct greenhouse gas (GHG) emissions from our production facilities are relatively low, a significant proportion of emissions come from energy consumption, mobile sources and, most notably, from processed milk. Greenhouse gases are gases that absorb some of the infrared radiation that enters the atmosphere, causing the Earth's surface temperature to rise as they accumulate. In addition to the most well-known carbon dioxide (CO₂), there are two other GHGs that are often produced in the dairy industry: nitrous oxide (N₂O) and methane (CH₄). To calculate the GHG emissions (carbon footprint) resulting from our activities, we express the different greenhouse gases in terms of their impact on global warming in terms of carbon dioxide equivalent (CO₂e). To manage environmental risks and improve performance, Rokiškio sūris AB voluntarily implemented the ISO 14001 Environmental Management System standard in 2001 (subsidiaries - 2002 and 2003). The management system has been certified and independently audited by UAB Bureau Veritas Lit. No observations or non-conformities were identified during the internal and external audits in 2023. Internal environmental procedures govern the organisation's environmental and energy performance accounting activities. In accordance with these procedures, the data are analysed and presented to the management. Proposals are made to achieve objectives and improve processes, improvement plans are drawn up and investments are made to implement the plans. We are committed to the Paris Agreement to keep temperature rise below 2˚C and to work towards keeping global warming below 1.5˚C. This is a science-based long-term goal. Volumes 1, 2 and 3 The calculations are based on the Greenhouse Gas Protocol (GHG) standard and the Intergovernmental Panel on Climate Change (IPCC) guidelines. All direct Scope 1 emissions are related to the Group's controlled activities, e.g. emissions from the Group's vehicles and other direct emissions from production facilities (Scope 2) emissions are indirect operational emissions generated by our energy suppliers (electricity and heat). We have included CO2, CH4, N₂O and fluorinated greenhouse gases (HFCs and PFCs) in the calculations, expressed as carbon dioxide equivalent. "Scope 2 Scope 3: We assessed the areas most relevant to our activities: 1. Purchased goods and services, 2. Major equipment, 3. Fuel and energy activities, 4. Upstream transport and distribution, 5. Waste generated in operations, 9. Transportation and downstream distribution. By extending the calculations for Scope 3, 2. Major equipment, the calculations are also made for the earlier period 2022. The GHG emissions of a group of companies include: AB Rokiškio sūris, UAB Rokiškio pieno gamyba, UAB Dairy Hub, SIA Jekabpils piena kombinats, milk buying points, rented warehouses. Emissions, t CO e 2 2022 2023 Scope 1 17 146,4 14 499,5 Scope 2 17 653,3 24 762,6 Scope 3 667 153,2 700 803,4 Total: 701 952,8 740 065,4 Calculated using the "market based method", based on actual electricity purchases. Calculated using the "location based method", based on the country-specific nature of energy production, the Scope 2 Group's emissions in 2023 would be 11,997.8 tCO₂e . Under the GHG Protocol, the Group discloses its biogenic CO₂ emissions separately. In 2023, "Scope 1" of these emissions amounted to 9.3 tCO₂e and "Scope 2" to 56 289.2 CO₂e. The largest share of biogenic emissions is due to the purchase of heat from renewable energy sources. GRI 306-3, GRI 306-4, GRI 305-1, GRI 305-2; Nasdaq E1, Nasdaq E7 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 32 GHG EMISSION INTENSITY The emission intensity indicator is calculated by dividing the annual GHG emissions by the units of economic activity, in this case revenue, number of employees, output (t) and milk volume (t), using the relative milk unit (milk output is converted to 4% fat and 3.3% protein corrected milk; FPCM "Fat and protein corrected milk"). It shows the amount of CO 2 emissions resulting from the Group's activities, calculated over the selected activity units. The emission intensity per tonne of milk and per tonne of production in 2023 has increased slightly due to the increased processing of milk, which accounts for 95% of the CO₂e. emissions. Other indicators are affected by a reduction in the number of employees and a decrease in turnover. 2022 2023 t CO2e / €1 million revenue 1 970,29 2 432,39 t CO2e / 1 employee 543,73 614,16 t CO2e / 1 t of production 6,896 6,960 t CO2e / 1 t FPCM milk 1,404 1,405 - output is converted to 4% fat and 3.3% protein corrected milk (FPCM). We have included Scope 1, Scope 2 and Scope 3 emissions in the calculation of GHG emissions intensity. GRI 305-4, Nasdaq E2 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 33 ENERGY In 2023, the Group purchased 695,292.5 gigajoules (GJ) of energy in the course of its operations, a decrease of 2.1% compared to 2022. Most of the energy consumed was electricity, heat and fuel for transport. In 2023, 48% of the energy consumed came from renewable sources (excluding the share of biofuels in transport fuels). We remain committed to actively seeking ways to save energy and improve energy efficiency. 2022 2023 GJ Thermal energy 349 003,0 355 127,1 GJ Electricity 186 573,3 180 051,8 GJ Fuel for transport 193 563,6 178 755,5 ENERGY INTENSITY The energy intensity indicator is calculated by dividing the annual energy consumption by the selected economic activity units corresponding to the organisation's activities: turnover, number of employees, and converting the output into 4% fat and 3.3% protein corrected milk (FPCM - Fat and Protein corrected milk). We calculate the energy intensity from the last financial year. The energy types included are fuel, electricity and heating. 2022 2023 GJ / €1 million revenue 2 029,5 2 396,5 GJ / 1 employee 564,8 605,1 GJ / 1 t of production 7,1585 6,8573 GJ / 1 t FPCM milk 1,4401 1,3662 2022 2023 Revenue EUR million. 356,269 304,254 Number of employees 1 291 1 205 Output in t. 101 795 106 331 FPCM* milk content t. 499 845 526 716 * production is converted to 4% fat and 3.3% protein corrected milk (FPCM). GRI 302-1, Nasdaq E3, Nasdaq E5 GRI 302-3, Nasdaq E4 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 34 CONSERVATION OF WATER RESOURCES The production of dairy products requires sanitary and hygienic conditions, which is why the Group consumes a relatively large amount of groundwater. We aim to conserve water resources as much as possible and, as far as possible, reuse treated water instead of groundwater. The Group has its own waterworks in Rokiškis, where it extracts and treats water for internal use. 39% of the water consumed is produced from its own waterworks, while the remaining 61% is supplied by the towns' centralised water production companies. The Group's waterworks are operated in compliance with all statutory regulations and the amount of groundwater used does not pose a risk to the local ecosystem. The water point is registered and the water resources are approved. The Lithuanian Geological Survey (LGS) keeps records and controls the resources used, and submits reports in accordance with established procedures. The extraction and proper use of groundwater resources is regulated by the Ministry of the Environment and supervised through a system of permits, reports and fees. To conserve groundwater, we use treated water for some processes, which accounts for 7.6% of our water consumption (140 292 m3). In order to effectively manage water consumption and use efficiency, we comply with the rules of the Lithuanian Geological Survey. The water captation sites are well maintained and water consumption is accounted for. The Group has implemented a number of measures to reduce water consumption, such as high-pressure washing stations, regularly maintained and leak-proof pipelines, automated washing systems. Our food safety, quality and environmental policy is committed to meeting customer needs, protecting the environment, conserving resources, complying with legal requirements, and continuously improving processes to ensure sustainable operations. Water consumption 2022 2023 m 3 1 632 543 1 847 063 litres 1 632 543 000 1 847 063 000 megaliths 1 632,542 1 847,063 2022 2023 Water consumption in litres 1 627 071 000 1 847 063 000 Total production tonnes 101 795 106 331 Litres of water used per tonne of production 16 038 17 371 The Group measures water consumption in m³ according to established internal procedures. Note: Water consumption on dairy farms is not included in the calculations. Water consumption is measured using tested measuring devices. GRI 303-5, Nasdaq E6 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 35 PRODUCT PACKAGING AND WASTE The packaging of food products must first and foremost be safe and ensure the quality and safety of the product throughout its shelf life. Dairy products are very sensitive to environmental influences, so the functionality and design of the packaging is essential to ensure product safety. Ever-increasing consumption around the world has led to environmental problems, diminishing resources and waste accumulation. We are aware of the public's concern about the health and environmental impact of packaging, and we aim to choose packaging producers who share this concern. When selecting packaging suppliers, we give preference to manufacturers who use the latest technologies, avoid waste and do not use harmful substances in their operations. The main types of packaging we use are plastic, wooden, cardboard, metal and composite. The environmental impact of packaging is linked to the extraction of raw materials, production and waste management, so we strive to use resources rationally by using as little packaging as possible, and we are constantly looking for modern packaging solutions. The Group accounts for and manages its packaging waste in accordance with the Law on Packaging and Packaging Waste Management. In accordance with this law, the accounting of packaging and packaging waste and the payment of taxes for environmental pollution by packaging waste are ensured. The management of packaging waste is entrusted to a licensed packaging waste management organisation in Lithuania, Žaliasis taškas. Since the beginning of this year, Lithuania has applied differentiated rates of environmental pollution tax for recyclable and non-recyclable packaging, with non-recyclable packaging subject to a higher tax. One of the priorities is to explore new opportunities and maximise the use of recyclable packaging. However, we face another challenge: the extremely high requirements for primary packaging in contact with food. In order to use only the necessary quantities and the best solutions to ensure product quality and safety, we continue to use proven practices such as reduced weight (due to design decisions) carton packaging, flattened wrapping film and no cartons, the use of recyclable wooden and plastic pallets, reduced weight triple-layer packaging for bulk products, and the use of a single large package per pallet. The 2023 results for packaging used in the Group: 83% of packaging used is recycled, 17% is non-recycled. We are pleased that the new product "Spreadable Cheese" is packaged in 100% recyclable packaging. Polypropylene is used to produce the packaging. If properly collected and returned, it can be recycled an unlimited number of times. The in-mould label is made of the same recyclable polypropylene. Therefore, it does not need to be separated during sorting, which makes the recycling process even easier. Each package is labelled with a special recyclable product mark. This distinguishes polypropylene from other plastics and helps the consumer to sort their waste. The Group's sales company in the local and Baltic markets, UAB Rokiškio pienas, actively contributes to sustainability in the Baltic supply chains by using part of its recyclable plastic packaging instead of cardboard boxes. On average, around 200 000 pieces of plastic circulation boxes are used per month. Although plastic boxes weigh more, they have a long life cycle of 5-7 years and are fully recyclable. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 36 Waste hierarchy The reusable plastic box system reduces waste and the use of resources needed to produce packaging, compared to disposable cartons. With an average carton weight of 150 gr., it can be estimated that the use of plastic cartons eliminates around 30 000 kg of cardboard waste per month. This reuse model is a key aspect of the circular economy, helping to reduce the environmental footprint and promote sustainable production and consumption practices. Of course, it has to be taken into account that plastic recyclable containers weigh more, require transport to the washing plant and the washing process itself leaves a CO2 footprint. The European Waste Directive makes it clear that the priority is to 'reuse' before recycling. By implementing these sustainability strategies, Rokiškio pienas demonstrates a responsible approach to environmental protection and waste management, setting an example both in the Baltic countries and in the wider business community. Such actions not only reduce the environmental impact of production and consumption, but also help to build a sustainable future based on responsible use of resources and innovative packaging management practices. AB Rokiškio sūris, in cooperation with an important Italian customer, has started to use reusable plastic pallets instead of wooden pallets, which were previously not returnable. Plastic pallets are used to sell 10 % of the cheese produced and save 119 000 kg of wooden pallets. Food safety, quality and environmental policy We are committed to meeting our customers' needs, protecting the environment, conserving resources, complying with legal requirements, and continuously improving our processes to ensure sustainable operations. Prevention Preparing for re-use Recycling Recovery Disposal Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 37 INDUSTRIAL WASTE We aim to use raw materials as efficiently as possible to save costs, protect the environment and ensure a circular economy. 91% of our production waste is used for: biomass production, composting, fertiliser or electricity generation, animal feed and other approved treatment options. All other waste generated is sorted and sent to waste managers. All our production waste is managed in an environmentally sound way. Contracts are in place with waste handlers, waste records are kept, waste management procedures are in place in the organisation's departments, and responsible persons are appointed. Our main objective in this area is to avoid waste and to make the most efficient use of available raw materials. For example, by improving our production processes, we have achieved that 100% of whey is recycled into other products. All waste generated is accounted for in the government's electronic system, the Unified Product, Packaging and Waste Accounting Information System (GPAIS), with annual reporting. We analyse the data on waste generated, compare it with previous periods and look for ways to improve processes. The contract for the collection and management of packaging waste generated during production is concluded with the waste handlers UAB Ekonovus and UAB Ekobazė. Biodegradable waste has increased due to a change in the way dairy waste is managed. Our food safety, quality and environmental policy is committed to meeting our customers' needs, protecting the environment, conserving resources, complying with legal requirements, and continuously improving our processes to ensure sustainable operations. Waste type (t) 2022 2023 Biodegradable 6 111,1 8 104,3 Dangerous 22,7 15,1 Packaging waste 128,8 319,8 Other 592,1 460,5 Total: 6 854,7 8 899,7 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 38 SUSTAINABILITY AND RESPONSIBILITY IN THE SUPPLY CHAIN We assess all suppliers against social, economic and environmental sustainability criteria. We understand the risks that can arise in the supply chain, so we make responsible purchases with a focus on security of supply. 100% of new suppliers are screened against environmental and social criteria. For environmental validation, suppliers are required to provide ISO 14001 Environmental Management System certification. Social criteria are included in the contracts with suppliers, which are signed before the purchase is made. A periodic evaluation of suppliers is carried out once a year in December. The Company publishes Supplier Guidelines. To ensure that the needs of our customers are met and to contribute to a more sustainable world, UAB DairyHub.LT uses RSPO SG and Rainforest Alliance MB-certified glaze in the production of its glazed cottage cheeses. The company has been certified according to the requirements of RSPO (Roundtable on sustainable palm oil) Supply Chain Certification Systems version 2 since 2022-03-22. RSPO is a global initiative to make sustainable palm oil the standard. RSPO is a non-profit organisation of palm oil producers, processors, retailers, environmental and social NGOs working to develop and implement global standards for sustainable palm oil. Palm oil is used as an ingredient in the production of glazed cottage cheese. GRI 308-1, GRI 414-1 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 39 CIRCULAR ECONOMY To use our resources as efficiently as possible, we follow a number of principles: using milk as rationally as possible for the production of our products, fully recycling the whey produced, and producing products with higher added value. In 2023, our operations generated a total of 8,899.8 tonnes of waste. Waste that is not suitable for the production of products is used for biomass, composting or in bio-power plants to generate electricity. This creates a circular chain in which 91.1% of our waste is used. Although we do not carry out the biotransformation processes ourselves, the waste is passed on to other legal handlers, with whose help we ensure that the waste is properly used. For example, we work with farmers and agricultural companies who use the sludge from our wastewater treatment to fertilise their fields, and we use modern technology to recycle whey into water for sanitary use. All the hazardous and non-hazardous waste generated is handed over to specialised waste management organisations, which ensure that the waste is properly handled. In 2023, 7,637.1 tonnes of dairy waste was converted into biogas and compost, and a further 467.2 tonnes was used as fertiliser in agriculture. Our food safety, quality and environmental policy is committed to meeting our customers' needs, protecting the environment, conserving resources, complying with legal requirements, and continuously improving our processes to ensure sustainable operations. GRI 306-4 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 40 15. Social area Respect and care for people, their rights and their well-being is at the heart of the Group's culture. We will continue to create healthy and safe working conditions throughout the value chain, fostering a welcoming atmosphere for our employees to feel good, to develop their skills and knowledge. In 2023, the average number of employees in the Rokiškio sūris Group was 1,205 (2022: 1,291) (727 men, 478 women; 763 in Rokiškis, 322 in Utena, 120 elsewhere). Number of employees by type of contract in 2023 Part-time Full-time Fixed-term contract Open-ended contract Women 62 416 32 446 Men 10 717 56 671 Total: 72 1133 88 1117 The Group's workforce increases slightly during the summer season (only about 10%), when the volume of raw milk purchased is at its peak and production is higher. Number of non-Group employees: 25. Type of work: safety, cleaning services, maintenance of cleaning equipment; repair, installation work; maintenance of air-conditioning systems; maintenance of electrical systems. Nasdaq S5, GRI 2-7, GRI 2-8 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 41 EQUAL OPPORTUNITIES We apply the principles of equality, fairness and transparency to all candidates. Our Equal Opportunities Policy emphasises zero tolerance of discriminatory behaviour on the grounds of race, sex, nationality, political or religious beliefs, health or disability. Recruitment and recruitment progress are determined solely on the basis of a person's personal qualities and criteria relevant to the job in question. Age of employees Age of employees Average number of employees 1205 (%) Women 478 (39,67%) Men 727 (60,33%) Up to 30 m. 27 (2,24%) 57 (4,73%) 30-50 m. 178 ( 14,77%) 299 (24,81%) More than 50 years. 273 (22,66%) 371 (30,79%) In all cases, the focus is on the ability to do the job well. Proportion of board members by diversity category: 6 Board members: Gender: 100% male Age: 0 to 30 years; 16.67% 30-50 years; 83.33% over 50 years GRI 405-1, Nasdaq S4, Nasdaq S5 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 42 NEW STAFF AND STAFF TURNOVER Age of employees Total recruitment 202 Women 70 (34,65%) Men 132 (65,35%) Up to 30 m. 24 (34,28%) 68 (51,52%) 30-50 m. 38 (54,29%) 43 (32,57%) More than 50 years. 8 (11,43%) 21 (15,91%) Staff turnover (number and share) by age, sex and location during the reference period. Nasdaq S3 0 10 20 30 40 50 60 70 80 90 Rokiškis Utena Ukmergė Jakabpils Total new staff 2023 Moterys Vyrai Iki 30 metų 30-50 metų Virš 50 metų Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 43 WAGES AND THEIR DISTRIBUTION Employees are the Group's most important asset and we want them to feel valued and motivated. Remuneration arrangements are governed by the Group's Remuneration Policy, which covers all forms of remuneration, including fixed remuneration, performance-related benefits, pension modules and severance payments. The Remuneration Policy is approved by the General Meeting of Shareholders. Salary ratio 2023 Company Ratio of the highest earner's salary to the median annual salary of all employees AB "Rokiškio sūris" 1:0,37 (2022: 1:0,38) UAB "Rokiškio pienas" 1:0,56 (2022: 1:0,54) UAB "Rokiškio pieno gamyba" 1:0,36 (2022: 1:0,35) Company Ratio between median salaries for men and women AB "Rokiškio sūris" 1:0,86 (2022: 1:0,86) UAB "Rokiškio pienas" 1:0,70 (2022: 1:0,75) UAB "Rokiškio pieno gamyba" 1:0,94 (2022: 1:0,99) The Group's remuneration system is based on the principle of gender equality: equal pay for equal work. Over 2023, salaries for employees have increased by around 15%. GRI 2-19, GRI 2-20, GRI 2-21, Nasdaq S1, Nasdaq S2 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 44 ADDITIONAL FINANCIAL INCENTIVES FOR STAFF In the Collective Agreement signed in December 2023, the Group defined additional financial incentives for employees. The purpose of this collective agreement is to create conditions for harmonious collective activity, to guarantee a level of work, remuneration, safety and health and other working conditions for various categories of employees that is better than that provided for by the laws, governmental decrees and regulations of the Republic of Lithuania. The Group aims to provide the best possible employment and social guarantees for the Company's employees. The following additional financial incentives are available to Group employees: a worker with a disabled child receives a material allowance of 1 MMA once a year; employees receive a funeral allowance in the event of the death of a family member (spouse, parent, child); in the event of the death of a Group employee, a one- off funeral allowance is granted to the family; on work anniversaries (20, 25, 30, 35, 40, 45, 50), an additional allowance is paid to Group staff; support for workers with serious and prolonged illnesses and injuries; Employees, family members of employees, employees who have worked for the Group and retired employees are entitled to a discount on treatment at the Group's preventive health centre; unpaid leave provided for in the LC for the marriage of an employee, or for the attendance of an employee at the funeral of a deceased family member, is paid in accordance with the general procedure for granting leave. Leave shall also be granted to employees for the marriage of their children. A gift is given when the staff member's child starts primary school, i.e. the first year of school; a material allowance for the birth of a child; a material allowance is granted to an employee on the occasion of a marriage. In 2023, 307 employees of the Group benefited from the social guarantees of the collective agreement (2022: 258). GRI 2-30, Nasdaq G4 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 45 HUMAN RIGHTS The Group is fully aware of its responsibility to its customers, employees, partners, the environment and society and therefore adheres to the principles of human rights protection and respects and promotes international human rights protection in its operations. The Group has no adverse human rights impacts in its chain of activities. The Group's human rights position is enshrined in the Human Rights Policy and is communicated to every employee of the Group. The Human Rights Policy also contains principles on zero tolerance of forced labour of children and others, based on international law. Any breach or suspected breach of the Policy shall be reported to the Head or may be communicated confidentially through the channels specified in the Policy. The Company undertakes not to disclose the identity of the person making the report. Reports received shall be dealt with in accordance with the procedures adopted by the Group. Employees can express their views and make suggestions anonymously or by contacting their head of department or the company director directly. From 2018. The Group has an elected 11-member Working Council (last re-elected on 26 May 2021). The Council is set up for a term of three years, starting from the beginning of its mandate. Employees of Group companies are guaranteed the right to participate in trade union activities. The companies have a trade union committee which defends the labour, economic and social rights and interests of its members, defends the right to employment and social security of its members, promotes the development of professional qualifications, develops professional ethics, and seeks to increase the wages and other incomes of workers in the food industry. NON-DISCRIMINATION We are pleased that there were no cases of discrimination against employees in 2023. This confirms that the Group's policies and instruments are effective and that the work ethics of employees and management are in line with the Group's non-discrimination principles. The Equal Opportunities Legal Policy adopted by the Board is drawn up in accordance with the laws in force in the Republic of Lithuania and the most important international human rights principles. The policy emphasises intolerance of discriminatory treatment on the grounds of race, sex, nationality, political or religious beliefs, health or disability. WORKING CONDITIONS AND EMPLOYEE WELFARE It is essential that the Group's employees feel safe in their working environment - this is a priority for the Group. We continuously review our work processes and implement various preventive measures to avoid factors that could adversely affect the health and safety of our employees. GRI 406-1, Nasdaq S6, Nasdaq S9, Nasdaq S10 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 46 OCCUPATIONAL HEALTH AND SAFETY All workers, including new employees, must comply with the established safety requirements in the workplace and regularly update their knowledge. The Group's occupational health and safety management system is implemented in accordance with the Occupational Safety and Health Law of the Republic of Lithuania and the standards applied in the Group's companies: - the social responsibility standard SA 8000:2014 (implemented only in UAB Rokiškio pieno gamyba); - International Food Safety Standard (IFS) Food Version 8 (Group-wide); - ISO 14001:2015 environmental standard (Group-wide). The occupational safety and health management system applies to all activities. ACCIDENTS AT WORK In 2023, there were 5 mild and 1 serious accident in the Group's companies (serious accident in AB Rokiškio sūris, the injured employee had a sick leave of 44 working days, after which he returned to work; the conclusion of the VDI assessment was a fall due to other causes). The workers sustained mild injuries - muscle contusions, ligament sprains - in minor accidents and recovered quickly. To prevent similar accidents in the future, we have provided additional on-the-job training. Accidents at work are recorded in the "Accident Logbook". The risk assessment of potential injuries or damage to health in hazardous situations is carried out in accordance with the Regulations on Occupational Risk Assessment, approved by Order of the Minister of Social Security and Labour of the Republic of Lithuania (LR). In accordance with the Occupational Safety and Health Act of the Republic of Lithuania, in order to ensure the safe work of contractors, the company has adopted requirements for contractors carrying out work in the company's territory, production and other premises. These requirements are communicated to the contractors' responsible persons by the Group's corporate coordinator who supervises the work carried out by the contractors. Occupational health and safety training is also provided to department managers. Employees have access to the company's on-site preventive health clinic. Employees are given priority for treatment at this facility and discounts on treatment tickets. With a doctor's referral, staff can have one type of procedure free of charge once a year, e.g. procedures related to mobility problems. Staff can also register for a psychological consultation. ADDITIONAL BENEFITS Employees have access to the Group's preventive therapy and psychological counselling. Further information can be found in the Collective Agreement, which defines the additional benefits for each employee beyond those provided for by the laws of the Republic of Lithuania, government decrees and other legal acts. GRI 403-1; GRI 403-2; GRI 403-5; 403-6; 403-9, Nasdaq S7, Nasdaq S8 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 47 DEVELOPING COMPETENCES Staff development and 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 and service. Training plans are drawn up annually, taking into account the Company's strategic objectives and the adequacy of the staff's competences to meet these objectives. The Group's employees are provided with opportunities to enhance their knowledge and improve their 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. 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 2023, employees participated in both internal and external training, which has increased in particular due to the possibility of remote access. 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 the dairy farm. A modern dairy farm, milk quality and herd health are key to the success of a dairy business. The Human Resources Plan 2024 reflects a commitment to ensure that the company's strategy and objectives are consistently delivered through its people, who are not only the tools to achieve the objective, but also key partners and ambassadors who enhance the company's reputation in the public arena. In today's business environment, where demands and challenges are changing rapidly, a company's success depends on its ability to attract, retain and develop the highest calibre professionals. Human resources are becoming a decisive factor in the competitive marketplace and a structured approach to this area is needed. PRODUCT SAFETY AND QUALITY Product safety and quality are our top priority. The Group's senior management has developed, implements and maintains a Food Safety, Quality and Environmental Policy, last updated on 14 January 2022 (available at www.rokiskio.com). In 2023, all (100%) of our products have been assessed for health and safety impacts. The Group has a process in place to identify key customer requirements and needs and uses the information gathered to continuously improve performance. During the reporting period, the Group received 26 complaints about product safety and quality (6 in Rokiškis, 17 in Utena and 3 in Ukmergė). There were no cases of non- compliance with the law or internal policies. The Group has a system in place for managing complaints and written reports received from competent authorities, including the actions that the Group would take in the event of non-compliance or non- compliance with rules. The results of the analysis of complaints shall be made available to those responsible for the relevant area and to senior management. In-house staff are trained to carry out inspections of the food safety and quality system. From time to time, audits are carried out by Food Safety System Certification audit companies and by major buyers of our products. The State Inspection Authority (State Food and Veterinary Service) carried out checks on compliance with the law. No deficiencies were found during the 2023 inspections. The Group's food safety and quality systems are audited by independent audit companies assessing compliance with food safety standards (according to the IFS), and internal audits are carried out. The Group's companies have the highest IFS scores. GRI 2-17; GRI 2-30; GRI 416-1; GRI 416-2 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 48 SUPPORT FOR LOCAL COMMUNITIES The Group aims to maintain its status as a trusted social partner by contributing to solving pressing social problems in our society and by supporting various institutions, organisations and their projects and initiatives. We support various cultural events and the local community, sports development projects and help improve the living environment of socially vulnerable groups. The group is the most active and maintains close relations with the communities where it operates - in Rokiškis, Utena, Ukmergė. Traditionally, we have been supporting the following events in Rokiškis for many years in a row: the Lithuanian Professional Theatre Festival "Vaidiname žemdirbiams", the International Amateur Theatre Festival "Interrampa", the Rokiškis Classical Music Festival, and many other cultural and sports events. We often support local community events and initiatives with our products. We also work with local farmers to help them build modern, cost-effective and sustainable farms. We follow the Lithuanian Government's policy to implement sustainability principles, strategies and recommendations in agriculture, and to create competitive dairy farms in the global market. To improve the competitiveness of dairy farms, we first help farmers to develop the right approach to sustainable development: to ensure good quality of raw milk, to minimise waste, and to use the least possible resources. Potential negative impacts (e.g. noise and odour) at the Rokiškis and Utena plants are managed in accordance with Directive 2010/75/EC of the European Parliament and of the Council on the prevention and control of industrial emissions (integrated pollution prevention and control; IPPC). Rokiškio sūris AB and Rokiškio pieno gamyba UAB are classified as installations for which an IPPC permit is required. All AB Rokiškio sūris Group have implemented Best Available Techniques (BAT; BREF), resource consumption and emission levels are in line with those achieved in the European Union (according to the "IPPC Reference Document on the Best Available Techniques in the Food, Drink and Milk Industries"). IMPACT OF THE WAR IN UKRAINE In the opinion of the Group's management, the war against Ukraine caused by Russia does not have a material direct or indirect impact on the Group's operations, financial position, results of operations, markets or supply chains. For its part, the company supports initiatives to support Ukraine and has donated various products worth €10,822.80 in 2023. The donation was made through the Saulės smiltys Charity and Support Foundation. Since the outbreak of the war, the company has been using its guesthouse facilities to accommodate Ukrainian refugee families. GRI 413-2 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 49 16. Economic area INNOVATION Our sustainability depends to a large extent on the use of modern technologies. We can only achieve some of our sustainability goals, such as reducing CO2 emissions, using resources more efficiently, creating better working conditions and increasing operational productivity, through innovation. Therefore, our investment in innovative solutions in our operations and supply chain can have a significant positive impact. Where manual work is replaced by robotic systems, we avoid negative impacts on workers by enabling them to change qualifications, job roles, learn new skills and use their abilities. Each innovative project is evaluated for its effectiveness and impact on the Group's sustainability. The implementation of innovative technologies covers a wide range of areas that are essential for the company's development, for the penetration of new markets with improved product quality, for the improvement of existing production processes, for the protection of the environment, for the improvement of people's working and leisure conditions, and for the saving of energy resources. The company's main cooperation in this area is with its strategic investor, Fonterra, which gives it the opportunity to learn from experience and best practice. RESPONSIBLE INVESTMENT The Group invests heavily to meet its strategic objectives. The value of investments made by the Group during the financial year 2023 amounted to EUR 10.504 million (2022: EUR 13.818 million). In order for these investments to provide a long-term financial return and thus contribute to our sustainability, we need to take environmental, social and economic criteria (impact) into account when making investment decisions. REGULATORY COMPLIANCE AND TAX Compliance with all legal requirements applicable to the dairy industry and the fair payment of taxes are essential for the sustainability of our operations. Our commitment to compliance, fair and ethical business practices is enshrined in our internal policies (Food Safety, Quality and Environment, Remuneration, Anti-Corruption Policy, Code of Ethics). Processes are in place to monitor, disseminate and evaluate legislation. There were no significant cases of non-compliance with laws and regulations during the reporting period. The Group's tax strategy is to correctly calculate, fairly declare and pay all taxes due in accordance with the laws in force in the Republic of Lithuania. The Chief Financial Officer of the Company takes responsibility for monitoring and controlling the fair payment of taxes. Compliance with the legal framework is ensured by an independent audit of the financial statements. The annual accounts are audited and reported on by an independent international auditor elected by the General Meeting of Shareholders. The Group's separate and consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union. GRI 2-27; GRI 207-1 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 50 BUSINESS ETHICS AND ANTI-CORRUPTION The Group does not tolerate corruption in any form. The Group has 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, suppliers and subcontractors of the Group, with the aim of preventing it in all its activities. We support the UN Global Compact and adhere to the principle of fighting corruption and bribery. The Group's shareholder structure is not linked to the government. Financial support received from the government in 2023: Under the De Minimis programme, the Group benefited from €49,078.01 in 2023 (2022: €35,435). AB Rokiškio sūris receives a real estate tax credit of EUR 17 350 in 2023 (2022: EUR 6 390). During the annual audit, the potential risk of conflicts of interest is assessed and the auditor expresses his/her opinion by stating that "During the reporting period, there were no damaging transactions that were inconsistent with the Company's objectives and normal market conditions, that violated the interests of shareholders or other groups of persons, and that have had, or may have in the future, a negative impact on the Company's operations or performance. Nor have there been any 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". The annual audited consolidated financial statements and the consolidated annual report are available to all interested parties. DATA PRIVACY The Group complies with the Personal Data Protection Policy, which sets out the requirements for the processing and protection of personal data, the purposes, principles, grounds, rules, procedures, rights of data subjects and the procedures for their exercise, technical and organisational measures for data protection. The Group's processing of personal data is guided by the following fundamental principles: integrity; legality and transparency; limiting the purpose; data reduction; limiting the duration of storage; integrity and confidentiality. In order to implement the above data protection processing principles, the Group ensures that data is collected and processed fairly and lawfully. All reasonable steps are taken to ensure that personal data is kept up to date, accurate and retained only for the period of time specified. Depending on the category to which the data subject belongs, the data collected shall only be used on a fair and lawful basis: The policy is communicated to employees and/or published on the Group's website www.rokiskio.com, giving them the opportunity to consult it and to raise concerns about violations or suspected violations of working conditions or rights directly with the union, the HR department, anonymously by email, by telephone, and through suggestion boxes within the Group. During the reporting period, there were no complaints about breaches of personal data privacy or loss of personal data. GRI 201-4, GRI 2-15 Nasdaq G-7 Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 51 17. Disclosure in accordance with the EU Taxonomy Regulation The EU Taxonomy Regulation is a piece of legislation that establishes a framework for classifying sustainable economic activities and common terms to describe activities that contribute to the achievement of environmental sustainability objectives. The EU Taxonomy Regulation (EU) 2020/852 defines the criteria for determining whether an economic activity qualifies as environmentally sustainable in order to assess the degree of environmental sustainability of an investment. For the purposes of this Regulation, the following shall be considered environmental objectives: -climate change mitigation -adaptation to climate change -sustainable use and protection of water and marine resources -moving towards a circular economy -pollution prevention and control -protecting and restoring biodiversity and ecosystems Article 3 of the Regulation sets out the criteria for environmentally sustainable economic activities, according to which an economic activity is considered environmentally sustainable when: -those economic activities in accordance with Articles 10 to 16 contribute significantly to one or more of the environmental objectives set out in Article 9; -the economic activity does not significantly harm any of the environmental objectives set out in Article 9 in accordance with Article 17; -that economic activity is carried out in compliance with the minimum safeguards laid down in Article 18; and -that economic activity meets the technical analysis criteria established by the Commission pursuant to Articles 10(3), 11(3), 12(2), 13(2), 14(2) or 15(2). Pursuant to EC Delegated Regulation (EU) 2021/2178 of 6 July 2021, AB Rokiškio sūris, as a non-financial undertaking, is obliged to disclose its key performance indicators (KPIs) - the percentage of turnover, capital and operating expenses that are accounted for by its taxonomic activities. Taxonomy-eligible economic activities are defined as activities described in EC delegated acts, regardless of whether they meet any or all of the technical analysis criteria set out in the delegated act on the EU taxonomy for climate objectives. Therefore, the fact that an economic activity is taxonomic does not automatically imply that it is environmentally efficient and sustainable. Taxonomic activities are grouped according to the groups of activities defined in Article 16 and Article 10(2) of the Taxonomy Regulation, which are the conditions that make up the economic activities and the transition economic activities. Transitional activity - an activity that does not yet have low-carbon alternatives and whose greenhouse gas emissions are consistent with the best performance in the sector or industry concerned. The activity meets the following two conditions: (a) the activity does not impede the development and deployment of low-carbon alternatives and (b) it does not create a carbon intensity constraint on the assets in relation to the economic lifetime of those assets. Enabling economic activity (Enabling activity) - an activity that directly enables a significant contribution to environmental objectives. Taxonomy-aligned - defined as an activity that makes a significant contribution to one or more of the environmental objectives set out in the delegated act, without significant harm to any of them, and is carried out in compliance with the minimum safeguards set out, and meets the technical analysis criteria set out. Taxonomy-non-aligned economic activities - defined as activities that are not included and described in the EC delegated acts on EU taxonomy. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 52 AB Rokiškio sūris has assessed the activities carried out at the Group level in accordance with the descriptions of the taxonomic activities provided in the ESC Taxonomy Regulations, the taxonomic activities identified are presented in the table below. Code Taxonomic activities Code Taxonomic activities KKŠ 4.1. PKK 4.1. ŽE 1.2. Generating electricity using photovoltaic solar technology KKŠ 5.5. PKK 5.5. ŽE 2.3. Collection and transport of non-hazardous waste separated on site * KKŠ 4.16. PKK 4.16. ŽE 1.2. Installation and operation of electric heat pumps KKŠ 6.5. PKK 6.5. Collection and transport of non-hazardous waste separated on site * KKŠ 4.25. PKK 4.25 Production of heat or cooling using waste heat * KKŠ 6.5. PKK 6.5. Carriage by motorcycles, passenger cars and light commercial vehicles KKŠ 5.1 PKK 5.1. VND 2.1. Construction, extension and operation of water collection, treatment and supply systems * KKŠ 7.3. PKK 7.3. Road freight transport services KKŠ 5.2. PKK 5.2 VND 2.1 Upgrading water collection, treatment and supply systems * KKŠ 7.7. PKK 7.7 ŽE 3.1. Installation, maintenance and repair of energy efficiency equipment KKŠ 5.3. PKK 5.3. TPK 2.1. Construction, extension and operation of wastewater collection and treatment systems KKŠ 8.1. PKK 8.1. Acquisition and ownership of buildings KKŠ 5.4. PKK 5.4. TPK 2.1. Upgrading wastewater collection and treatment systems NOTE: * We have not been able to estimate these activities for 2023 due to the lack of an adapted accounting system and high administrative costs, but we are committed to do so next year. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 53 AB Rokiškio sūris, by assessing its activities in accordance with the provisions of the EU Taxonomy Regulation, has identified the environmental impact of its activities, which aspects of sustainability are already integrated and where there is room for improvement. The regulation can also help identify investment opportunities that are not only profitable but also contribute to the company's sustainability objectives and overall environmental well-being. Once the taxonomic activities have been identified, the technical analysis criteria for these activities have been analysed and an assessment has been made as to whether the Group-wide processes comply with them. Compliance was also assessed through a minimum safeguards review, i.e. a review not only of the technical analysis criteria, but also of whether the activities violate the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. If, after taking all these aspects into account, the taxonomic activity did not meet any of the criteria for significant contribution or significant absence of harm, it was recognised as a taxonomic activity, but did not meet the criteria. Accounting policy. In accordance with the provisions of the EU Commission Delegated Regulation (EU) 2021/2178, the disclosure of the accounting policy must explain how the KPIs (turnover, capital expenditure and operating expenditure) have been determined and attributed to the numerator of the indicator, and the basis on which KPIs were calculated. Although the obligation to provide the information already existed in 2022, given that we do not have sufficiently precise information on the compliance of the activities carried out in the previous reporting period with the technical analysis criteria and that the existing accounting systems are not adapted to the calculation of the KPIs, this would be an excessive administrative burden. In view of this, the information provided for the comparative year 2022 is not complete. The reported KPIs for the activities carried out have been calculated on the basis of the methodology set out in Annex I "KPIs of non-financial corporations" of the EU Commission's Delegated Regulation (EU) 2021/2178 and the interpretation of the Communications and Q&A documents published by the EU Commission. Given that these interpretations are not exhaustive, internal assumptions have been made in attributing operating expenses to certain taxonomic activities and the calculation of the operating expenses presented in the financial statements does not correspond to the calculation of the expenses attributed to the operating expense indicator under the Taxonomy Regulation. It should be noted that the Group's 2023 disclosed operating expense ratio totalled EUR 262.49 million and the total operating expense ratio calculated in accordance with the Taxonomy Regulation is EUR 6.31 million. The difference is due to the fact that the operating expenses indicator under the Taxonomy Regulation only includes necessary repairs and maintenance, short-term rentals and IT maintenance costs and excludes wages and other costs. Please also note that although activities under EU Delegated Regulation (EU) 2023/2486 have been considered and identified/listed, compliance with the technical analysis criteria and KPIs have not been calculated as there is a transition period and mandatory disclosures will only be made from 2024. The basic principles for the calculation of the KPIs have not changed. KPIs for taxonomic/qualifying activities are calculated by linking each indicator to a specific taxonomic/qualifying activity and dividing it by the Group's total KPI. The turnover and capital expenditure KPIs are directly linked to the indicators used in the Group's annual accounts, while the operating expenditure KPIs have been calculated in accordance with the methodology set out in Annex I of the EU Commission Delegated Regulation (EU) 2021/2178, i.e. including only default costs. Double counting. In order to avoid double counting in the accounting system, each activity is distinguished and only the amounts attributed to it are used for the calculation of the KPIs. Intra-group transactions have not been included. If a taxonomic activity contributes to more than one environmental objective, then an assessment was made as to which environmental objective has the greatest impact, and the costs incurred were attributed accordingly to the selected environmental objective. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 54 Calculation of the turnover rate. Taking into account that the Group's main activity was still not defined as a taxonomic activity, only a very marginal part of the revenue related to the generation of electricity using solar photovoltaic technology was identified as a taxonomic, qualifying activity and accounted for 0.004% of the Group's total revenue in the reporting period (also 0.004% for 2022). Road freight transport services were classified as a taxonomic, non-qualifying activity and accounted for 0.185% of the Group's total revenue in the reporting period (compared to 0.163% in 2022). Calculation of the capital expenditure ratio. In accordance with Delegated Regulation (EU) 2021/2178, the calculation of the capital expenditure ratio for taxonomic activities includes the amounts of additions to tangible and intangible assets before depreciation, amortisation and any remeasurement, and excludes changes in fair value. The performance indicator relating to capital expenditure was calculated in accordance with the provisions of point 1.1.2 of Annex I to the above-mentioned Delegated Regulation. In 2023, the capital expenditure for environmentally sustainable taxonomic activities (eligible) was for two activities: Renewal of wastewater collection and treatment systems - 2.53% (2022: 0.00%. Explanation: we did not exclude the expenditure as the lack of an adapted metering system would make it too complex to do so) and Installation, maintenance and repair of energy efficiency equipment - 0.11% (2022: 1.97%). The activities that do not meet the taxonomic criteria, i.e. transport by motorcycles, passenger cars and light commercial vehicles, accounted for 4.42% (2.54% in 2022) and Road Freight Transport Services accounted for 12.44% (18.06% in 2022). Calculation of the operating expenditure indicator. In accordance with Delegated Regulation (EU) 2021/2178, the operating cost indicator for taxonomic activities is calculated as the ratio of the share related to the assets and processes associated with the taxonomic activities to the total operating costs calculated in accordance with the Taxonomy Regulation. In accordance with the provisions of point 1.1.3 of Annex I of the EU Commission Delegated Regulation, the denominator of operating costs shall include only direct non-capitalised costs relating to research and development, building renovation measures, short-term rentals, maintenance and repairs, and all other direct costs which are related to the day- to-day maintenance of property, plant and equipment by the enterprise or a third party hired for that purpose and which are necessary to ensure the continuous and efficient use of such assets. Consequently, for the purpose of calculating the operating expenses ratio in accordance with the provisions of Delegated Regulation (EU) 2021/2178, its denominator does not include all operating expenses recognised in the Group's financial accounts. In 2023, the operating expenses of environmentally sustainable (qualifying) activities represented 9.66% of the total operating expenses calculated in accordance with the requirements of EU Delegated Regulation (EU) 2021/2178 (2022: 10.63%). The turnover of taxonomic activities that do not meet the criteria amounted to 0.9% (2022: 1.1%). As the accounting system did not have clear taxonomic criteria (specific markers) to distinguish between the direct non-capitalised necessary costs for the individual taxonomic activities in 2022 and 2023, we were not able to disclose all potentially eligible operating costs and compare them with the previous reporting period. We have planned to adapt the accounting system we use in 2024 and we expect that in the future we will be able to include all related operating expenses for all taxonomic activities, both qualifying and non-qualifying. Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 55 The percentage of turnover derived from products or services related to a qualifying taxonomic economic activity. Disclosures for the year 2023 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Turnover (3) Percentage of turnover, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) Text Eur % Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) Generating electricity using photovoltaic solar technology CCM 4.1. CCA4.1. CE 1.2. 12,317 0.004% Y Y N/EL N/EL Y N/EL Y Y Y Y Y Y Y 0.004% E Installation and operation of electric heat pumps CCM 4.16. CCA 4.16. CE 1.2. 0 0 Y Y N/EL N/EL Y N/EL Y Y Y Y Y Y Y % E Construction, extension and operation of wastewater collection and treatment systems CCM 5.3. CCA 5.3. PPC 2.1. 0 0 Y Y N/EL Y N/EL N/EL Y Y Y Y Y Y Y % T Upgrading wastewater collection and treatment systems CCM 5.4. CCA 5.4. PPC 2.1. 0 0 Y Y N/EL Y N/EL N/EL Y Y Y Y Y Y Y % T Installation, maintenance and repair of energy efficiency equipment CCM7.3. CCA 7.3. 0 0 Y Y N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y % T Turnover of environmentally sustainable activities (qualifying taxonomic activities) (A.1) 12,317 0.004% % % % % % % Y Y Y Y Y Y Y 0.004% 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Turnover (3) Percentage of turnover, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 56 Of which enabling 12,317 0.004% % % % % % % Y Y Y Y Y Y Y 0.004% E Of which tran- sitional % % Y Y Y Y Y Y Y % T A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) ( g ) EL; N/ EL EL; N/ EL EL; N/ EL EL; N/ EL EL; N/ EL EL; N/ EL Carriage by motorcycles, passenger cars and light commercial vehicles CCM 6.5. CCA 6.5. 0 0 EL EL N/EL N/EL N/EL N/EL T % P Road freight transport services CCM 6.5. CCA 6.5. 564,195 0.185% EL EL N/EL N/EL N/EL N/EL T 0.163% P Acquisition and ownership of buildings CCM 7.7. CCA 7.7. 0 0 EL EL N/EL N/EL EL N/EL T % S Turnover of taxonomic but environmentally unsustainable activities (taxonomic activities not meeting the criteria) (A.2) 564,195 0.185% % % % % % % T 0.163% 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Turnover (3) Percentage of turnover, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) A. Turnover of Taxonomy- eligible activities (A.1+A.2) 576,512 0.189% % % % % % % 0.169% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy- non- eligible activities 303,677,488 99.811% TOTAL 304,254,000 100 % The percentage of capital expenditure that is earned on products or services related to a qualifying taxonomic economic activity. Disclosures for 2023 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Capital expenditure (3) Percentage of capital expenditure, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) Tekstas Eur % Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 57 A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) Generating electricity using photovoltaic solar technology CCM 4.1. CCA4.1. CE 1.2. 0 0 Y Y N/EL N/EL Y N/EL T T T T T T T % E Installation and operation of electric heat pumps CCM 4.16. CCA 4.16. CE 1.2. 0 0 Y Y N/EL N/EL Y N/EL T T T T T T T % E Construction, extension and operation of wastewater collection and treatment systems CCM 5.3. CCA 5.3. PPC 2.1. 0 0 Y Y N/EL Y N/EL N/EL T T T T T T T % T Upgrading wastewater collection and treatment systems CCM 5.4. CCA 5.4. PPC 2.1. 265,600 2.529% Y Y N/EL Y N/EL N/EL T T T T T T T % T Installation, maintenance and repair of energy efficiency equipment CCM7.3. CCA 7.3. 12,016 0.114% Y Y N/EL N/EL N/EL N/EL T T T T T T T 1.965% T CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) 277,616 2.643% % % % % % % T T T T T T T 1.965% 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Capital expenditure (3) Percentage of capital expenditure, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) Of which enabling 0 0.00% % % % % % % Y Y Y Y Y Y Y 0.00% E Of which tran- sitional 277,616 0.114% % Y Y Y Y Y Y Y 1.965% T A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) ( g ) EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL Carriage by motorcycles, passenger cars and light CCM 6.5. CCA 6.5. 464,110 4.418% EL EL N/EL N/EL N/EL N/EL % T 2.540% P Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 58 commercial vehicles Road freight transport services CCM 6.5. CCA 6.5. 1,306,654 12.440% EL EL N/EL N/EL N/EL N/EL T 18.060% P Acquisition and ownership of buildings CCM 7.7. CCA 7.7. 0 0 EL EL N/EL N/EL EL N/EL T % S CapEx of Taxonomy- eligible but not environ- mentally sustainable activities (A.2) 1,770,764 16.858% % % % % % % % T 20.600% 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Capital expenditure (3) Percentage of capital expenditure, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) A. CapEx of Taxonomy- eligible activities (A.1+A.2) 2,048,380 19.501 % % % % % % 22.565% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES CapEx of Taxonomy- non-eligible activities 8,455,620 80.499 TOTAL 10,504,000 100 % The percentage of operating expenditure that is earned on products or services related to a qualifying taxonomic economic activity. Disclosures for the year 2023 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Capital expenditure (3) Percentage of capital expenditure, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) Tekstas Eur % Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y; N; N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (Taxonomy-aligned) Generating electricity using photovoltaic solar technology CCM 4.1. CCA4.1. CE 1.2. 0 0 Y Y N/EL N/EL Y N/EL Y Y Y Y Y Y Y % E Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 59 Installation and operation of electric heat pumps CCM 4.16. CCA 4.16. CE 1.2. 7,036 0.111% Y Y N/EL N/EL Y N/EL Y Y Y Y Y Y Y 0.054% E Construction, extension and operation of wastewater collection and treatment systems CCM 5.3. CCA 5.3. PPC 2.1. 587,520 9.306% Y Y N/EL Y N/EL N/EL Y Y Y Y Y Y Y 10.500% T Upgrading wastewater collection and treatment systems CCM 5.4. CCA 5.4. PPC 2.1. 0 0 Y Y N/EL Y N/EL N/EL Y Y Y Y Y Y Y % T Installation, maintenance and repair of energy efficiency equipment CCM7.3. CCA 7.3. 15,464 0.245% Y Y N/EL N/EL N/EL N/EL Y Y Y Y Y Y Y 0.080% T OpEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) 610,020 9.663% % % % % % % Y Y Y Y Y Y Y 10.634% 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Operating costs (3) Percentage of operating expenditure, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) Of which enabling 7,036 0.111% % % % % % % Y Y Y Y Y Y Y 0.054% E Of which tran sitional 602,984 9.551% % Y Y Y Y Y Y Y 10.580% T A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) ( g ) EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL EL; N/EL Carriage by motorcycles, passenger cars and light commercial vehicles CCM 6.5. CCA 6.5. 10,290 0.163% EL EL N/EL N/EL N/EL N/EL % T 0.320% P Road freight transport services CCM 6.5. CCA 6.5. 0 0 EL EL N/EL N/EL N/EL N/EL T % P Acquisition and ownership of buildings CCM 7.7. CCA 7.7. 46,647 0.739% EL EL N/EL N/EL EL N/EL T 0.780% S Consolidated Social Responsibility and Sustainability Report of Rokiskio suris, AB 2023 60 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 56,937 0.902% % % % % % % % T 1.100% 2023 Year Criteria for significant contribution Criteria for no significant harm ( h ) Economic activities (1) Code ( a )(2) Operating costs (3) Percentage of operating expenditure, year N (4) Climate change mitigation (5) Adaptation to climate change (6) Water (7) Tarsha (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adaptation to climate change (12) Water (13) Tarsha (14) Circular economy (15) Biodiversity (16) Minimum protection measures (17) Percentage of turnover of taxonomic activities (A.1.) or taxon-mini activities (A.2.) meeting the criteria, N - 1 year (18) Category (enabling activities) (19) Category (transition activities) (20) A. OpEx of Taxo- nomy eligible activities (A.1+A.2) 666,957 10.565% % % % % % % 11.734% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES OpEx of Taxonomy- non- eligible activities 5,646,160 89.435% TOTAL 6,313,117 1 0 0 % 1 Rokiškio sūris, AB REMUNERATION REPORT FOR THE YEAR 2023 (appendix to the consolidated annual report for 2023) AB Rokiškio sūris (hereinafter - the Company) Remuneration Report for 2023 (hereinafter - the Report) was prepared and approved in accordance with the procedure provided for in the Law on Companies of the Republic of Lithuania and the provisions of Article 23 3 of the Law on Financial Statements of Companies of the Republic of Lithuania. The remuneration policy was approved by the Company's General Meeting of Shareholders on April 30, 2020. The Company's remuneration policy applies to the Company's management (the Company's director and members of the Board). The 2023 Report provides information on the remuneration paid to the Company's CEO and members of the Company's Board. Director Dalius Trumpa Members of the Board Antanas Trumpa Darius Norkus Paul M Campbell Ramūnas Vanagas Jonas Vaičaitis Thomas Jan de Bruijn Report on the remuneration paid to the Company's manager in 2023 The remuneration paid to the head (director) of the Company consists of one or more parts belonging to the financial and non-financial performance - the basic salary, the additional variable part of the salary (incentive fund), bonuses and material benefits. Remuneration paid to the Company's manager during 2023: Salary components (EUR) Basic-fixed salary Variable part of the salary - incentive fund Bonuses Financial allowance Head of the company 22,744 9,102 - - As provided in the Company's Remuneration Policy, the amount of the Director's basic monthly salary may not exceed five average monthly salaries of the Company's employees for the previous financial year. The incentive fund directly depends on the Company's financial performance. Its amount may not exceed 100% of the basic 2 monthly salary. The amount of bonuses may not exceed the average bonuses per board member awarded for the previous year. No agreements on supplementary pensions or early retirement conditions have been concluded with the Company's manager, the conditions of termination of the employment contract have not been changed, and the payments related to the termination of the employment contract do not differ from those provided for in the applicable legal acts. The head of the Company did not receive any indirect benefit from the Company and was not granted stock options of the Company. No deferral of remuneration was applied to the head of the company and the opportunity to recover the variable part of the remuneration was not used. Information on the remuneration paid to the Company's manager in 2023 from companies that belong to a group of companies, as defined in the Law on Consolidated Financial Statements of Groups of Companies of the Republic of Lithuania: Salary components (EUR) Basic-fixed salary Variable part of the salary - incentive fund Bonuses Financial allowance Head of the company 10,950 6,192 - - The remuneration paid to the Company's manager in 2023 complied with the approved provisions of the Remuneration Policy. Report on the remuneration paid to the members of the Board of the Company in 2023 No agreements have been concluded with the members of the Board of the Company on the basis of which they perform their duties. The members of the Board of the Company are paid only bonuses, which are granted in accordance with the procedure established by legal acts by the decision of the General Meeting of Shareholders of the Company, and the allocation of which is disclosed in the consolidated annual report of the Company. Bonuses are awarded and paid to the members of the Board for successful performance of the Company. The share of the Company's profit allocated for the payment of bonuses may not exceed 1/3 of the Company's share of the profit intended for the payment of dividends. The General Meeting of Shareholders held on 28 April 2023, when distributing the company's profit for 2022, granted the members of the Board of Directors tantjemes amounting to EUR 30 thousand No variable remuneration or bonus was paid to the members of the Board of the Company. Remuneration was not paid to the members of the Board when granting the Company's shares. No remuneration was paid to the members of the Board of the Company from companies that belong to a group of companies as defined in the Law on Consolidated Financial Statements of Groups of Companies of the Republic of Lithuania. Information on changes in the results of AB Rokiškio sūris group and the calculated average remuneration for the employees of the company group, who are not members of the management bodies, during the last 5 financial years: 3 Year Net profit (kEur) Average monthly salary (Eur) 2023 15 073 2 150 (change %) 20.45 15.59 2022 12,514 1,860 (change %) 2.162,93 35.57 2021 553 1,372 (change %) -86,38 6,36 2020 4,061 1,290 (change %) -0.98 6.17 2019 4,101 1,215 (change %) 113.82 2.27