JOINT STOCK COMPANY

AMBER LATVIJAS BALZAMS

CORPORATE GOVERNANCE STATEMENT

FOR YEAR 2023

RIGA, 2024

I PREPARATION OF THE STATEMENT

LEGAL BASIS

The Corporate Governance Statement for 2023 (hereinafter referred to as - the Report) of the joint stock company Amber Latvijas balzams (hereinafter referred to as - the Company or ALB) is prepared upon fulfilling the requirements of Section 56.2 of Financial Instrument Market Lawand on the basis of the Corporate Governance Code, issued by the Advisory Corporate Governance Council of the Ministry of Justice of the Republic of Latvia, developed in 2020. The Corporate Governance Code is available on the website of the Ministry of Justice of the Republic of Latvia, www.tm.gov.lv.

The Report of 2023 is prepared by the Management Board of the joint stock company Amber Latvijas balzams (hereinafter referred to as - the Board). The Report is submitted to Nasdaq Riga together with the audited Annual Report of 2023, as well as being submitted on the website of the Company, www.amberlb.lv,in section 'Corporate Governance' along with other reports.

MANAGEMENT REPORT

Constant growth and financial indicators of JSC Amber Latvijas balzams confirm that its corporate governance is effective and achieves the targets proposed. The Management Board of the JSC Amber Latvijas balzams has assessed the compliance of the capital company with the principles set forth in the Corporate Governance Code. Having assessed the governance system of the joint stock company as well as the adherence of principles in 2023, the Management Board considers that in 2023, the JSC Amber Latvijas balzams has complied with the majority of the principles of corporate governance, as well as explains the reasons in the case if any of the principles are not complied with or are partially complied with.

Corporate Governance Statement of the JSC Amber Latvijas balzams for 2023 has been approved by the Management Board in Riga on 30 April 2024.

The Management Board of the JSC Amber Latvijas balzams

____________________

____________________

Intars Geidāns

Guntars Betlers

Chairman of the

Member of the Management

Management Board

Board

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  1. PRINCIPLES OF GOOD CORPORATE GOVERNANCE

STRATEGY OF THE COMPANY

The strategy of the Company is a significant tool by which targets of the company as well as progress to long-term success and value increase are determined.

Principle No.1

The Company has established a current strategy, determining corporate targets and progress towards the long-term value increase.

Criteria:

  1. The company has a current strategy, the draft of which is developed by the Board.
  2. The Supervisory Council is involved in the development process of the strategy and approves the strategy during the meeting of the Supervisory Council.
  3. The Supervisory Council monitors the implementation of the strategy.
  4. The Management Board of the Company implements the strategy and regularly reports to the Supervisory Council on the course of its implementation.

ALB partially complies with the principle because the Supervisory Council is involved in the development process of the strategy; however, so far, a separate meeting of the Supervisory Council has not taken place, during which the strategy of the Company would also be approved. Current strategy is provided for the time period

from 2021 to 2025.

INTERNAL CULTURE AND ETHICAL CONDUCT

The core principles of the internal culture and ethical conduct of the Company and the values that they are based on are preconditions for the successful long-term development of the Company.

Principle No.2

The Company develops the Code of Internal Culture and Ethical Conduct, which shall serve as a standard of conduct for management and employees of the Company.

Criteria:

  1. The Supervisory Council defines the core values of the Company.
  2. The Code of Internal Culture and Ethical Conduct is prepared by the Management Board and approved by the Supervisory Council.
  3. The Management Board ensures compliance with the Code of Internal Culture and Ethical Conduct during the daily activities of the Company and responds in case of establishment of a violation of the Code of Ethical Conduct.

ALB partially ensures compliance with this principle. The Company operates in accordance with several internal policies and procedures: Corporate Social Responsibility Policy, Corporate Procurement Procedure, Collective Employment Agreement, Quality Management Manual, Code of Ethical Marketing Communication, Anti-Corruption Policy, Date Protection Policy, Risk Management, Remote Work

Policy and other internal documents.

The Company has defined its mission, vision, and basic values. The mission of ALB is: "Deliver excellence whatever we do!". The vision of ALB is "The leader in beverages producer and exporter in Baltic States with well-recognizedbrands and the most professional team." Core values of ALB are: Tenacity, Entrepreneurship, Fun, Excellence, Speed, Teamwork.

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INTERNAL CONTROL SYSTEM, RISK MANAGEMENT AND INTERNAL AUDIT

The purpose of the internal control system is to provide effective, sustainable, and successful operation of the company, truth and compliance of the provided information with the relevant regulatory enactments and principles of operation.

The purpose of risk management is to identify, assess, manage, and control potential events or situations in order to ensure assurance of the achievement of the strategic targets of the company.

The internal audit helps the company achieve its objectives by implementing systematic processes in order to assess and improve the efficiency of risk management, internal control, and governance processes.

Principle No.3

The Company has internal control system, the efficiency of which is supervised by the Supervisory Council.

Criteria:

  1. The Company has documented internal control system, the establishment of which is under the responsibility of the Management Board.
  2. The internal audit conducts the efficiency assessment of the internal control system at least once per year, considering the pre-defined criteria, and reports the results of the assessment to the Supervisory Council.
  3. The Supervisory Council evaluates the assessment provided on the efficiency of the internal control system at least once a year.

ALB complies with this principle. The internal control processes of the Company are determined by several internal documents, including Quality Management Manual, Production Self-Control System in accordance with HACCP principles, Financial Management Manual and other; as well as the Company adheres to the control

mechanisms and processes determined by the Parent company, Amber Beverage Group.

Principle No.4

The Company identifies, assesses and supervises the risks related to its operation.

Criteria:

  1. The Risk Management Policy of the Company is developed by the Management Board and approved by the Supervisory Council.
  2. On the basis of the assessment of identified risks, the Management Board implements the risk management measures.
  3. At least once a year the Supervisory Council reviews the management reports on risk management measures and implementation of the risk management policy.

ALB complies with this principle. Jointly working with the Supervisory Council of ALB, the Company has developed the Risk Management Policy that is used by the Company in order to implement risk management measures.

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Principle No.5

The Company has established an internal audit company department, which is independently and objectively assessing the activities of the Company.

Criteria:

  1. The Company has an internal auditor, who is functionally independent from the Management Board and reports to the Supervisory Council.
  2. The internal auditor is appointed by the Supervisory Council.
  3. The internal auditor develops an internal audit plan based on risks, which is approved by the Supervisory Council.
  4. The internal auditor informs the Management Board and the Supervisory Council on the fulfilment of the internal audit plan, audit results and recommended activities for elimination of shortages, if any are established.

ALB does not comply with this principle; however, an independent Audit Committee, elected by the Meeting of Shareholders, is operating in the Company. There were three members of the Audit Committee during the reporting period: Anita Zīle, Rolands Gulbis, and Jeļena Skobeļeva.

EXTERNAL AUDITOR

The external auditor provides an independent report on the financial position of the Company, credibility and compliance of financial statements with the requirements of regulatory enactments to the Management Board and Supervisory Council, all shareholders and investors, creditors, and other stakeholders.

Principle No.6

The Company has an independent external auditor.

Criteria:

  1. The Supervisory Council and Audit Committee, if any is established, determine the criteria for selection of the external auditor.
  2. The Company has an independent external auditor with the relevant qualification.
  3. Period of authority of one external auditor does not exceed five years.

ALB partially complies with this principle. The Meeting of Shareholders has approved an independent external auditor with the relevant qualification, SIA PricewaterhouseCoopers, which is one of the leading auditor companies in Latvia and provides involvement of an independent sworn auditor in accordance with the

procedure provided by regulatory enactments.

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ELECTION OF MEMBERS OF THE SUPERVISORY BOARD

Competent and experienced Supervisory Council is a pre-condition for efficient operation of the Company and decision making, facilitating the long-term value increase of the Company The Supervisory Council works in the interests of all shareholders and the Company.

Principle No.7

The Company ensures transparent procedure for election and revocation of members of the Supervisory Council.

Criteria:

  1. The Company has approved the procedure for selection and revocation of members of the Supervisory Council.
  2. The Company provides timely and sufficient information to shareholders of the Company on members of the Supervisory Council, who are proposed for election or re-election.
  3. The size of the Supervisory Council corresponds to work specifics of the Company.
  4. A member of the Supervisory Council is elected for a time period not longer than 5 years.

ALB complies with this principle. Candidates for the membership in the Supervisory Council are selected on the basis of professionalism and competence criteria. Members of the Supervisory Council are appointed and revoked by the Meeting of Shareholders. The election of the Supervisory Board members was not on the agenda

of the Meeting of Shareholders in 2023. The Shareholders Meeting, as of 30 September 2021, elected Rolands Gulbis, Valizhan Abidov, Velga Celmiņa, Guntars Reidzāns, and Boriss Ņešatajevs to the office of members of the Supervisory Council for the next five years.

Principle No.8

Members of the Supervisory Council has relevant experience and competence.

Criteria:

  1. The Supervisory Council in general has a set of skills, experience, and knowledge, including about the relevant field, in order to be able to fully perform their duties.
  2. When establishing the composition of the Supervisory Council, the principles of diversity are obeyed.
  3. Both genders are represented in the Supervisory Council.
  4. The Management Board develops the introductory training programme and provides introductory trainings to the new members of the Supervisory Council.

ALB partially ensures compliance with this principle. Principles of diversity are complied with, which is proved by the experience of members of the Supervisory Council in different fields; all members of the Supervisory Council are professionals of the highest level. More detailed information on members of the Supervisory

Council is available on the website of the Company, in the section 'For Investors'. Both genders are represented in the Supervisory Council. An introductory session with the commercial activity of the Company, the most important risks, and their restrictive control mechanisms, which are not formalized in a separate training programme document, is organized for the new members of the Supervisory Council upon commencement of operation in the composition of the Supervisory Council.

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Principle No.9

The Supervisory Council of the Company has independent members of the Supervisory Council.

Criteria:

  1. The Company assesses and shareholders determine the proportion of independent members of the Supervisory Council.
  2. At least half of the members of the Supervisory Council are independent.
  3. Candidates for independent members of the Supervisory Council submit a certificate of compliance with the criteria of independence.
  4. Before the election of the Supervisory Council, the Company performs an independence assessment of the members of the Supervisory Council in accordance with the available information.

ALB complies with this principle. Four independent members operate in the Supervisory Council of the Company during the reporting period. Members of the Supervisory Council have confirmed their compliance with the independence criterion. CVs of candidates of the members of the Supervisory Council were published before

the relevant Meeting of Shareholders of ALB and are available on the website of the Company.

PRINCIPLE FOR DETERMINATION OF REMUNERATION OF THE SUPERVISORY COUNCIL AND MANAGEMENT BOARD

Clearly defined principles for remuneration of members of the Supervisory Council and Members of the Board promote transparency of use of funds and effective risk management.

Principle No. 10

Remuneration policy is introduced in the Company.

Criteria:

  1. The Company has introduced its remuneration policy, which is developed by the Management Board, reviewed by the Supervisory Board, and approved by the Meeting of Shareholders.
  2. Once a year, the Supervisory Council determines the financial and non-financial targets to be achieved by the Management Board, their impact on the variable part of the remuneration, and controls their fulfilment.
  3. The variable part of the remuneration is not determined, and no compensation is paid to members of the Supervisory Council in case of revocation from the office or discharge from the office.
  4. Once a year, the report on remuneration granted to each current and former member of the Management Board and Supervisory Council is prepared.

ALB fully complies with this principle. The Company has introduced its remuneration policy, which was reviewed by the Supervisory Council and approved by the Meeting of Shareholders. Remuneration for the performance of the duties of the member of the Management Board is determined by the decision of the Supervisory Council.

Once a year, a report on the pay-out of remuneration is prepared.

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WORK ORGANIZATION AND DECISION MAKING OF THE SUPERVISORY COUNCIL Certain and comprehensive work organization of the Supervisory Council and availability of timely, high-quality and relevant information facilitate effective fulfilment of tasks of the Supervisory Council and full involvement of members of the Supervisory Council in decision- making.

Principle No.11

The Company has a certain and understandable work organization of the Supervisory Council.

Criteria:

  1. The Supervisory Council organizes its work in accordance with the regulations and work calendar of the Supervisory Council.
  2. The Supervisory Council holds at least one separate meeting of the Supervisory Council during a year for discussion of the strategy of the Company and its fulfilment thereof.
  3. The budget of the Company provides for funding necessary for the provision of operations by the Supervisory Council.
  4. Once a year, the Supervisory Council conducts a self-assessment of the work of the Supervisory Council, and its results are reviewed during the meeting of the Supervisory Council.
  5. The Supervisory Council has assessed the need to establish committees (if a committee is established, see the principle 12.1).

ALB partially complies with this principle. The rights and obligations of the Supervisory Council of ALB are determined in the Charter of ALB, Commercial Law, as well as included in the decisions of the Meeting of Shareholders, the Supervisory Council, and other documents. The charter of ALB is available in the office of ALB,

in the Register of Enterprises of the Republic of Latvia, and on the website of ALB.

In 2023, the Supervisory Council of ALB regularly contacted the Management Board in order to discuss the most important issues related to the operation and development strategy, business activities, and risk management of ALB. In cases where the Supervisory Council needed to perform its functions, electronic communication was also used.

Principle No.12

The Supervisory Council adopts well-informed and considered decisions.

Criteria:

  1. Information prepared by the Management Board for decision-making is available to the Supervisory Council in a timely manner and in sufficient amount.
  2. The Supervisory Council determines the procedure for information circulation as well as the rights of the Supervisory Council to request information from the Management Board, which is required for the Supervisory Council for decision-making.
  3. A member of the Supervisory Council analyses information and prepares recommendations for decision-making by the Supervisory Council.
  4. When making decisions, the Supervisory Council assesses risks and their short-term and long-term impact on the value, sustainability, and responsible development of the Company.

ALB complies with this principle. All necessary information for operation of the Supervisory Council is prepared in a timely manner. Information includes both a summary of the current situation and an estimate of how the particular issue could affect the operation of the Company.

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Principle No.12.1

The Committee prepares recommendations for decision-making by the Supervisory Council.

Criteria:

  1. The Supervisory Council determines the tasks and procedures for organization of the operation of the Committee.
  2. The Supervisory Council establishes a Committee composed of at least three members of the Supervisory Council with the relevant experience and knowledge in a certain area of operation of the Committee (remuneration, nomination, audit, or any other area).
  3. The Committee analyses information and prepares recommendations for decision-making by the Supervisory Council, as well as informs the Supervisory Council on the work of the Committee.

ALB fails to comply with this criterion. The Supervisory Council of ALB consists of five members of the Supervisory Council and having assessed the necessity for the establishment of commissions, it was concluded that such a number of people is optimal, without establishing separate committees for the Supervisory Council.

PREVENTION OF THE CONFLICT OF INTEREST

Gathering information and managing possible situations of conflict of interest reduces the financial and reputational risks of the Company.

Principle No.13

Members of the Management Board and Supervisory Council are clearly aware of the forms of conflict of interest and are informed on the necessary behaviour in cases of conflict of interest.

Criteria:

  1. The Supervisory Council defines the signs indicating conflict of interest and determines the procedure for prevention and management of conflict of interest.
  2. Members of the Supervisory Council or Management Board do not participate in decision- making on issues where the interests of the Company conflict with the interests of members of the Supervisory Council, Management Board, or persons related to them.
  3. Persons subject to the obligation to prevent conflict of interest shall regularly participate in trainings on how to act in situations of conflict of interest.

ALB complies with this principle. The Company has defined procedures for the identification, prevention, and management of conflicts of interest. Members of the Supervisory Council or Management Board do not participate in decision-making on issues where the interests of the Company conflict with the interests of members of

the Supervisory Council, Management Board or persons related to them. Trainings for members of the Management Board and Supervisory Council are held periodically; in 2023, such trainings were not planned.

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Amber Latvijas Balzams AS published this content on 30 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 April 2024 17:48:20 UTC.