Untitled document

SIA “AGROCREDIT LATVIA”

Annual Accounts for 2023

Prepared in accordance with the

IFRS Accounting standards

as adopted by EU

Translation from Latvian

Translation note: This version of the Annual Accounts is a translation from the original, which was

prepared in Latvian and digitally signed by the Board of the Company and the person in charge of

preparation of the annual accounts on 30 April 2024. 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 Annual Accounts

takes precedence over this translation.

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TABLE OF CONTENTS

Management report

3 – 4

Statement of management responsibility

5

Information about Statement on Corporate governance

5

Financial statements

Statement of comprehensive income

6

Statement of financial position

7

Statement of changes in equity

8

Sta

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Notes to the financial statements10 – 27

Independent auditors’ report28 – 30

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Management report

Type of operations

SIA AgroCredit Latvia (hereinafter – the Company) is a specialized financial services provider, offering credit

services to farmers. Approximately half of the credit portfolio consists of short-term financing to crop farmers for

the purchase of raw materials, which is repaid after the harvest sales. Also, long-term loans secured by

mortgage and commercial pledges are offered to the farmers as well as leasing of farming machinery.

Credit policy applied by the Company is classified as a relatively conservative using basic principles

characteristic to banking practice. Taking decisions on financing, the Company considers such aspects as

experience of the potential client in agriculture, prior year’s financial results, the cropped area, cultural and

regional aspects, as well as recommendations from other companies of the industry. The amount of financing

usually covers no more than half of the average expected sales volume of harvest, which allows customers to

pay for their obligations in lower harvest years.

The funds for lending are provided by the Company’s equity and related party loans as well as funds attracted

from external sources of financing - listed bonds, bank’s credit line and other private investors.

Operating environment during the reporting year

Year 2023 was a challenging year for agriculture. Industry leaders have even called it the most unsuccessful

since the early 90s. At the beginning of the 2022/23 grain farming season, the prices of raw materials (mainly

mineral fertilizers) were still at record highs and exceeded their usual level several times – accordingly, the cost

price of this season’s production was very high. In mid-2023, global markets for mineral fertilizers and grains

returned to normal, and prices gradually began to return to the levels that existed before the start of the war in

Ukraine. As a result, grain prices (returning to normal glue) were unsymmetrically low comparing to the high

cost price of production, so farmers’ profitability indicators this season were mostly at very low (often negative)

levels. The high level of production costs contributed to anincreasein farmers’ obligations tosuppliers and other

creditors and to settle them in full at this season’s financial results was very difficult for many. High EURIBOR

rates made the situation worse, making the cost of servicing these loans significantly more expensive. In terms of

yield, the season was average – in Zemgale and part of Kurzeme the harvest was at a normal level, but in other

regions – below average. Additional losses were also caused by the ravages of large-grain hail in the summer.

The Company’s performance during the reporting year

The above-mentioned factors in various ways influenced the Company’s activities and the results achieved in

2023. During this time, the demand for the services offered by the Company increased significantly. The need for

more working capital, which was facilitated by an increase in production costs, stimulated the demand for

financing. In turn, the ECB’s monetary policy slowed down and made the supply of financing more expensive in

the market. The Company, taking advantage of the fact that the cost price of its financial resources for a large

part of the sources has a fixed price, had ability to offer customers interest rates at a similar or only slightly

higher level than before. Therefore, a good competitive advantage in the market was obtained, and it was also

possible toattract alot of new customers who had previouslyused the relatively cheaper bankloans or financing

from suppliers of raw materials and decreased during 2023. As a result, by the end of the year, the portfolio of

issued loans had increased significantly and the Company’s assets exceeded previous year volumes by 58%.

Total interest revenue grew by 24% and net profit also increased by 16%. In the Autumn season, some

customers, taking into account the specifics of the season, also had to amend the repayment schedules of

financing, but on the positive side, the financial situation did not become so difficult for any client that it would

threaten the further operation of the farm. The Company conservatively created an additional 120 thousand

EUR provisions for possible losses from receivables, which was 41% more than a year earlier. At the same

time, the Company’s management believes that its loan portfolio is of good quality and well-secured with various

types of collateral, the realizable value of which exceeds the carrying amount of the issued loans.

The Company’s exposure to risks

A Company’s underlying risks relate to the ability of its clients to settle their loans and accordingly – the

Company’s ability to settle with its creditors, who have largely provided funds for issuing loans to the Company’s

clients. In risk management, the quality of the credit decisions made and the assessment of the solvency of

customers are essential.

The ability of borrowers to repay loans is largely influenced by external factors – productivity and the price of

grain on the stock exchange. Therefore, when making credit decisions, it is important to foresee the client’s

ability to repay the loan in conditions of lower productivity and an unfavorable grain market.

Statement on internal control procedures

The Management Board certifies that the internal control procedures are effective and that risk management

and internal control have been carried out in accordance with those control procedures throughout the year.

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Management report (continued)

Future prospects

In 2024, the Company plans a time of more moderate growth. Given the tighter cash flow of customers, farming of

grain farmers is expected to be more conservative this season – with lower commodity usage and no large-scale

long-term investments. On a positive note, at the beginning of the season, the prices of raw materials had already

practically returned to their previous level and the cost price of production for this season will be significantly

lower than the previous one. Winter was also generally favorable for cereals, except for the freezing of rapeseed

in certain regions of Latgale and Vidzeme, which will need to be re-sown, and a good foundation has been laid

for the new season.

Taking into account the amount of financingandthe increase in demand, the Company willlook for opportunities to

attract additional financial resources to ensure further growth of the portfolio. Emphasis will also be placed on

further development of IT processes in order to provide efficient internal processes and convenient services for

customers and cooperation partners.

Distribution of profits recommended by the Board of Governors

The proposal of the Company’s Board of Directors to the members is to leave the profit of EUR 383 299 for the

financial year undistributed.

The Board of the Company has prepared this annual report of SIA AgroCredit Latvia, which includes a

management report, a statement on management responsibility, a statement on the corporate governance

report and financial statements for 2023, and approved it for submission to the shareholder.

Ģirts Vinters

Chairman of the Board

Jānis Kārkliņš

Member of the Board

THE DOCUMENT IS SIGNED WITH SECURE ELECTRONIC SIGNATURES AND CONTAINS A TIME STAMP

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Statement of management`s responsibility

The management of SIA AgroCredit Latvia is responsible for the preparation of the financial statements for

2023.

Based on the information available to the Board of the Company, the financial statements are prepared on the

basisof therelevant primarydocumentsandinaccordancewith IFRS asadoptedbythe EuropeanUnion,based

on a going concern basis, and present a true and fair view of the Company’s assets, liabilities and financial

position as at 31 December 2023 and its profit and cash flows for 2023.

The Company’s management confirms that appropriate and consistent accounting policies and prudent and

reasonable management estimates have been applied.

The management of the Company confirms that it is responsible for maintaining proper accounting records and for

monitoring, controlling and safeguarding the Company’s assets. The management of the Company is

responsible for detecting and preventing errors, irregularities and/or deliberate data manipulation. The

management of the Company is responsible for ensuring that the Company operates in compliance with the

laws of the Republic of Latvia.

The management report presents fairly the Company’s business development and operational performance.

Information about Statement on Corporate governance

The Statement on Corporate governance of SIA AgroCredit Latvia for 2023 has been prepared as a separate

document in accordance with Section 56.

2

Paragraph 3 of the Financial Instruments Market Law.

The StatementissubmittedtoAS Nasdaq Riga (hereinafter–the StockExchange) concurrentlywiththeaudited

financial statements SIA AgroCredit Latvia for 2023 for publishing on the website of the Stock Exchange:

http://www.nasdaqbaltic.com/ and the website of SIA AgroCredit Latvia

http://www.agrocredit.lv

.

Ģirts Vinters

Chairman of the Board

Jānis Kārkliņš

Member of the Board

THE DOCUMENT IS SIGNED WITH SECURE ELECTRONIC SIGNATURES AND CONTAINS A TIME STAMP

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Statement of comprehensive income for the year ended 31 December 2023

Notes 2023 2022

EUR EUR

Interest income

out of this, income at effective interest rate

1 2 008 185

2 008 185

1 618 041

Interest expense

2(972 536)

(723 853)

Impairment

3(120 000)

(85 000)

Administrative expense

4(372 708)

(304 333)

Other operating expense

5(134 642)

(148 915)

Profit before corporate income tax408 299355 940

Corporate income tax6(25 000)(25 000)

Current year’s profit

383 299330 940

Other comprehensive income

--

Total comprehensive income for the current year

383 299330 940

Notes on pages from 10 to 27 are integral part of these financial statements.

Ģirts Vinters

Chairman of the Board

Jānis Kārkliņš

Member of the Board

Evija Suija

Accountant

THE DOCUMENT IS SIGNED WITH SECURE ELECTRONIC SIGNATURES AND CONTAINS A TIME STAMP

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Statement of financial position as at 31 December 2023

Notes 31.12.2023.

EUR

31.12.2022.

EUR

Assets

Long term investments

Property, plant and equipment

Right-of-use assets

Loans

Total long-term investments:

7 17 623

8 80 929

9 5 553 123

5 651 675

1 637

50 640

3 104 934

3 157 211

Current assets

Loans

Other debtors

Cash and bank

Total current assets:

912 642 413

10 14 288

11 86 983

12 743 684

8 181 628

7 257

275 443

8 464 328

Total assets

18 395 35911 621 539

Liabilities and shareholder’s’ funds

Shareholders’ funds:

Share capital

121 500 000

25

1 500 000

25

Other reserves

Retained earnings:

-prior year’s retained earnings

-current year’s profit

731 800500 860

383 299330 940

Total shareholders’ funds:2 615 1242 331 825

Liabilities:

Long-term liabilities:

Borrowings

Lease liabilities

Total long-term liabilities:

13 9 440 000

8 42 614

9 482 614

7 500 000

29 608

7 529 608

Short-term liabilities:

Borrowings

Lease liabilities

Corporate income tax

Trade creditors and other liabilities

Total short-term liabilities:

Total liabilities:

13 6 230 347

8 29 744

25 000

14 12 530

6 297 621

15 780 235

1 733 764

12 872

-

13 470

1 760 106

9 289 714

Total liabilities and shareholders’ funds

18 395 35911 621 539

Notes on pages from 10 to 27 are integral part of these financial statements.

Ģirts Vinters

Chairman of the Board

Jānis Kārkliņš

Member of the Board

Evija Suija

Accountant

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Statement of changes in equity for the year ended 31 December 2023

Share capital

Other reserves

EUR

RetainedTotal

earnings

EUREUR

As at 31 December 2021

1 500 000

25600 860

2 100 885

Comprehensive income

Profit for the year

-

-330 940

330 940

Transactions with

shareholders

Dividends

-

-(100 000)

(100 000)

As at 31 December 2022

1 500 000

25831 800

2 331 825

Comprehensive income

Profit for the year

-

-383 299

383 299

Transactions with

shareholders

Dividends

-

-(100 000)

(100 000)

As at 31 December 2023

1 500 000

251 115 099

2 615 124

Notes on pages from 10 to 27 are integral part of these financial statements.

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Statement of cash flows for the year ended 31 December 2023

Notes

2023

EUR

2022

EUR

Cash flow from operating activities

Profit before corporate income tax

Depreciation of plant, property and equipment7

Depreciation of right-of-use assets8

Interest income1

Interest expense2

Impairment loss on loans 3, 9

Decrease of cash and cash equivalents from operating

activities before changes in assets and liabilities

(502 804)

(444 865)

408 299

1 112

31 728

(2 008 185)

944 242

120 000

355 940

1 534

18 017

(1 618 041)

712 685

85 000

Increase of loans issued9

Increase in trade and other debtors

Trade creditors’ increase

Decrease of cash and cash equivalents from operating

activities before corporate income tax

(7 215 057)

(2 302 039)

(6 722 527)

(7 031)

17 305

(1 864 731)

(5 542)

13 099

Interest paid13d

Interest received

Corporate income tax paid6

Net decrease of cash and cash equivalents from

operating activities

(6 445 646)

(1 553 947)

(914 083)

1 683 494

-

(717 061)

1 490 153

(25 000)

Cash flow from investing activities

Acquisition of fixed assets and intangibles7

Net decrease of cash and cash equivalents from

investing activities

(17 098)

(421)

(17 098)

(421)

Cash flow from financing activities

Dividends paid12

Loans received 13d

Repaid loans 13d

Lease payments for right-of-use assets 8 Net

increase of cash and cash equivalents from

financing activities

6 274 284

1 607 814

(100 000)

15 764 411

(9 357 987)

(32 140)

(100 000)

9 729 100

(8 005 687)

(15 599)

Net increase/(decrease) of cash and cash equivalents in

the reporting year

(188 460)53 446

Cash and cash equivalents at the beginning of the

reporting year

275 443221 997

Cash and cash equivalents at the end of reporting year1186 983275 443

Notes on pages from 10 to 27 are integral part of these financial statements.

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Notes to the financial statements

General information about the Company

Name of the Company

SIA AGROCREDIT LATVIA

Legal status of the Company

Limited liability company

Number, place and date of registration

40103479757 Commercial Registry, Riga, 11 November

2011

Type of operations

The Company specializes in providing financial services and

offering credit services to farmers. Basically, the Company

issues short-term financing to crop-farmers for the purchase

of raw materials, which is repaid after the harvest sales.

As classified by NACE classification code system:

64.91 – Financial leasing

64.92 – Other credit granting

Address

Ziedleju street 6, Mārupe, Mārupe municipality,

LV-2167, Latvia

Shareholder

AgroCredit Finance SIA (100%)

Reg. No. 42403046209

Ziedleju street 6, Mārupe, Mārupe municipality,

LV-2167, Latvia

Beneficial owners

Ģirts Vinters and Jānis Kārkliņš, each owning 50% of shares

of the Parent Company.

The Board

Ģirts Vinters – Chairman of the Board

Jānis Kārkliņš – Member of the Board

The CouncilSilva Jeromanova- Maura – Member of the Council

Edmunds Demiters – Member of the Council

Rūta Dimanta - Member of the Council

Person responsible for accounting

Evija SuiEjavi-jaacScuoijuan–tagnrtāmatvede

The Auditor

SIA Potapoviča un Andersone

Certified Auditors’ Company Licence No. 99

Ūdens Street 12-45,

Riga, LV-1007

Latvia

Responsible Certified Auditor:

Lolita Čapkeviča

Certificate No. 120

Approval of the Financial statements

These financial statements have been approved by the Board signing with electronic signatures on 30 April

2024. The Financial statements are subject to approval by the shareholder.

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Notes to the financial statements

Accounting policies

(a)Basis of preparation

These financial statements for the year ended 31 December 2023 have been prepared in accordance with the

IFRS Accounting standards (IFRS) as adopted by the European Union (EU). The accounting policies of the

Company have not changed in comparison to previous reporting period.

The financial statements cover the period from 1 January 2023 until 31 December 2023.

The financial statements are prepared on historical cost basis.

(b) Significant accounting judgements, estimates and assumptions

The Company’sfinancialstatementsandits financialresultsareinfluencedby accountingpolicies, assumptions,

estimates and management judgement, which necessarily have to be made in the course of preparation of the

financial statements. The Company makes estimates and assumptions that affect the reported amounts of

assets and liabilities within the current and next financial year. All estimates and assumptions required in

conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and

judgments are evaluated on a continuous basis, and are based on past experience and other factors, including

expectations with regard to future events. Accounting policies and management’s judgements for certain items

are especially critical for the Company’s results and financial situation due to their materiality. Any effect of

changes in estimates is reflected in the financial statements at the time of their determination. Although these

estimates are based on management’s best knowledge of current events and actions, actual results may differ.

The most significant judgments and estimates that affect the Company’s financial statements are related to the

determination of expected credit losses (ECL) for issued loans and are described in Note 9.

(c)Summary of significant accounting policies

Functional and reporting currency

Items included in the financial statements of the Company are measured using the currency of the primary

economic environment in which the entity operates (the functional currency). Items included in the financial

statements are presented in the official currency of the Republic of Latvia, the euro (EUR), which is the

Company’s reporting currency.

Foreign currency translation

All foreign currency transactions are translated into euros using the exchange rates published at the morning of

the dates of the transactions by the European Central Bank. Monetary assets and liabilities denominated in

foreign currencies on the last day of the reporting year are translated into euros at the foreign exchange rate

published by the European Central Bank ruling at the end of the reporting year.

Gains or losses arising from foreign exchange rate fluctuations are recognized in the profit or loss in the period

in which they arise.

Recognition of revenue and expenses

Interest income and expense

The Company provides lending services, and interest income is the main type of income of the Company.

Interest income and expense are recognized in the statement of profit or loss on an accrual basis using the

effective interest method. Interest income and expense are recognized in profit or loss for all interest-bearing

instruments on an accrual basis using the effective interest method. The effective interest method is a method of

calculating the amortized cost of a financial asset or a financial liability and of allocating the interest income or

interest expense over the relevant period. The effective interest rate is the rate that exactly discounts

estimated future cash payments or receipts through the expected life of the financial instrument or, when

appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When

calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the

financial instrument (for example, prepayment options), but does not consider future credit losses. The

calculation includes all fees and points paid or received between parties to the contract that are an integral part of

theeffectiveinterest rate, transactioncostsandallother premiumsor discounts. Interest incomeisrecognized

over time.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Recognition of revenue and expenses (continued)

Other income

Other income is recognized on an accrual basis when it has been earned or when there is no doubt that it will

be received in due time.

Other expenses

Expenses are recognised on an accrual basis in the period in which they are incurred, regardless of when the

invoice is received or paid.

Intangible assets and property, plant and equipment

All intangibles and property, plant and equipment are recorded at cost net of depreciation or amortisation.

Depreciation or amortisation is calculated on a straight-line basis to write down each asset to its estimated

residual value over its estimated useful life as follows:

% per annum

Intangibles20

Other fixed assets20

Corporate income tax

Corporate income tax for the reporting period is included in the financial statements based on the calculations

prepared in accordance with tax legislation of the Republic of Latvia effective at the end of reporting year.

Corporate income tax is calculated on the basis of distributed profit which is subject to the tax rate of 20 % of

their gross amount, or 20/80 of net amount. Corporate tax on distributed profit is recognized when the

shareholders of the Company make a decision about profit distribution. Corporate income tax calculated on

transactions other than profit distribution is included in the statement of profit or loss within other operating

expenses. The regulation on CIT surcharge for credit institutions and consumer credit service providers does not

apply to the Company.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, current account balances and short-term deposits with

original maturities of less than 90 days and short-term highly liquid investments that are readily convertible to

known amounts of cash and which are not subject to significant changes in value.

Financial instruments

Classification

The Company’s financial instruments consist of financial assets (financial assets at amortized cost and financial

assets at fair value through profit or loss (FVTPL) and financial liabilities (financial liabilities at amortized cost).

The classification of debt instruments depends on the business model implemented by the Company’s financial

asset management, as well as on whether the contractual cash flow characteristics consist of solely payments of

principal and interest (SPPI). Debt instruments are carried at amortized cost if both of the following criteria are

met:

- the business model objective is to hold assets to collect contractual cash flows; and

- the contractual cash flow characteristics consist of solely payments of principal and interest.

The gross carrying amount of these assets is measured using the effective interest method and adjusted for

expected credit losses. Debt instruments that meet the requirements of the SPPI and are nevertheless held in a

portfolio to both hold contractual cash flows and sell, such assets may be classified as FVTPL. Financial

assets whose cash flows do not meet the requirements of the SPPI should be valued at FVTPL (eg financial

derivatives). Embedded derivatives are not separated from financial assets, but when included in financial

assets, the requirements of SPPI are assessed.

Recognition and derecognition

Financial assets are recognized when the Company has become a party to the contractual provisions of the

instrument, i.e., on the trading date.

Financial assets are derecognised when the Company’s contractual obligations to receive cash flows from the

financial asset expire or when the Company transfers the financial asset to another party or transfers the

significant risks and rewards of ownership of the asset. Purchases and sales of financial assets in the ordinary

course of business are accounted for on the trading date, i.e., the date on which the Company decides to buy or

sell the asset.

A financial liability is derecognised when the obligation under the liability is withdrawn, cancelled or expires.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Financial instruments (continued)

Measurement

At initial recognition, the Company measures a financial asset at its fair value. For financial assets and financial

liabilities at amortized cost on initial recognition, fair value is adjusted for transaction costs that are directly

attributable to the financial instrument.

Financial assets at amortized cost

Financial assets at amortized cost are debt instruments with fixed or determinable payments that are not held for

trading and whose future cash flows consist solely of principal and interest payments. Financial assets at

amortized cost include loans, trade receivables and other receivables, and cash and cash equivalents. Financial

assets at amortized cost are classified as current assets if their maturity is one year or less. If the maturity is

longer than one year, they are presented as non-current assets. Short-term receivables are not discounted.

Financial assets at amortized cost are initially recognized at fair value and subsequently measured at amortized

cost using the effective interest method, less provision for impairment.

Impairment of financial assets at amortised cost

Expected credit losses

Measurement

Impairment is measured using the expected credit loss (ECL) model. It involves monitoring the deterioration or

improvement of the credit quality of financial instruments. The ECL model is applicable to all financial assets

that are measured at amortized cost The ECLs on financial assets measured at amortised cost are presented as

allowances, i.e., the allowance reduces the gross carrying amount. An allowance for expected credit losses due

to changes in ECL is recognized in the statement of profit or loss under “Impairment”. The assessment of credit

risk, and the estimation of ECL, shall be unbiased and probability-weighted, and shall incorporate all available

information which is relevant to the assessment, including information about past events, current conditions

and reasonable and supportable forecasts of future events and economic conditions at the reporting date. The

ECL model has a three-stage approach based on changes in the credit risk. A 12-month ECL (Stage 1) applies to

all items, unless there is a significant increase in credit risk since initial recognition. For items where there is a

significant increase in credit risk (Stage 2) or in default (Stage 3), lifetime ECL applies.

When calculating impairment losses on assets due to default on principal or interest payments or other loss-

making events, collateral, including real estate and commercial pledges, is taken into account, valued at market

value. The value of collateral is based on independent expert valuations or the Company’s assessments.

Significant increase in credit risk

At the end of each reporting period the Company performs an assessment of whether credit risk has increased

significantly since initial recognition. The assessment of whether there has been a significant change in credit

risk is based on quantitative and qualitative indicators. Both historic and forward-looking information shall be

used in the assessment. For the loans reported in the balance sheet, the primary indicator is changes in lifetime

probability of default (PD) by comparing the scenario-weighted annualized lifetime PD at the reporting date with

the scenario-weighted annualized lifetime PD at initial recognition.

Regardless of the quantitative indicator, a significant increase in credit risk is triggered if the following back-stop

indicators occur if:

- payments are past due over 30 days but less than 90 days; or

- financial assets are forborne (where due to the customer’s financial difficulties the contractual terms of the

loans have been revised and concessions given).

Back-stop indicators normally overlap with the quantitative indicator of significant increase in credit risk.

In case there has been a significant increase in credit risk since initial recognition, an allowance for lifetime ECL

shall be recognised and the financial instrument is transferred to Stage 2. In subsequent reporting periods, if the

credit quality of the financial instrument improves such that there is no longer a significant increase in credit risk

since initial recognition, the financial assets move back to Stage 1. If credit quality of financial instrument

deteriorates further, the financial instrument is transferred to Stage 3.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Financial instruments (continued)

Significant increase in credit risk (continued)

Transfer to Stage 3 is triggered if the following indications occur:

- Payments are past due more than 90 days and the value of security/collateral is lower than the amount of debt;

- Financial instrument is in default (PD = 100%).

Definition of default

Default and credit-impaired are triggered when an exposure (principal or interest payment) is more than 90 days

past due, it becomes probable that the borrower will enter bankruptcy proceedings or will undergo or has

undergone some other type of financial or legal reorganization, the borrower has been declared bankrupt or is

equivalent to bankruptcy, the transaction has been restructured for economic or legal reasons related to the

borrower’s financial difficulties, or an assessment has been made indicating that the borrower is unlikely to be

able to meet its obligations as expected.

When assessing whether a borrower is unlikely to pay its obligations, the Company takes into account both

qualitative and quantitative factors including, but not limited to the overdue status or non-payment on other

obligations of the same borrower, expected bankruptcy and breaches of financial covenants. An instrument is no

longer considered to be in default or credit impaired when all overdue amounts are repaid, there is sufficient

evidence to demonstrate that there is a significant reduction in the risk of non-payment of future cash flows and

there are no other indicators of credit-impairment.

Credit loss allowances on assessed financial assets are presented in the Company’s statement of financial

position as a reduction in the gross carrying amount of the assets. An impairment loss is recognized in a

separate allowance account and the loss is recognized in the statement of profit and loss. If, in a subsequent

period, the amount of the impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment was recognized (for example, an improvement in the debtor’s credit rating), the

reversal of the previously recognized impairment loss is recognized in profit or loss.

Modifications

The Company may renegotiate loans and modify contractual terms. In a situation where a renegotiation is

determined by the counterparty’s financial difficulties and inability to make the originally agreed payments, the

Company compares the initial and revised estimated cash flows with the assets and determines whether the

risks and rewards of the asset have changed significantly as a result of the modified contract. If the risks and

rewards do not change, the modified asset does not differ significantly from the original asset and no de-

recognition occurs due to the modification. The Company recalculates the gross carrying amount by discounting

the changed contractual cash flows at the original effective interest rate and recognizes modification gain or loss in

in the statement of profit or loss.

If the amendedtermsdiffermaterially,the righttocashflowsexpiresandthe Companyderecognisestheoriginal

financial asset and recognizes a new financial asset at its fair value. The revision date is the original date used for

the subsequent calculation of the impairment of the asset, including an assessment of whether the credit risk has

increased significantly. The Company also assesses whether the new loan or debt instrument meets the criteria

for solely principal and interest payments (SPPI). Any difference between the carrying amount of the

derecognised original asset and the fair value of the newly recognized substantially revised asset is recognized in

the statement of profit or loss, unless the nature of the change is attributable to equity transactions with

owners.

In cases where the restructuring is due to financial difficulties of the counterparties resulting in non-compliance

with the originally agreed payment schedule, the Company compares the initially planned and renewed cash

flows to assess whether the risks and rewards of the modified terms have not changed significantly. If the risks

and rewards do not change, the modified asset is not materially different from the original asset and

derecognition is not required as a result of the modification. The Company recalculates the gross carrying

amount by discounting the modified contractual cash flows using the original effective interest rate and

recognizes the gain or loss arising on the modification in the statement of profit or loss for the period.

Financial liabilities at amortized cost

The amortized cost of financial liabilities includes borrowings, including debt securities, lease liabilities, as well as

payables to suppliers and contractors and other creditors. Financial liabilities at amortized cost are initially

recognized at fair value. In subsequent periods, financial liabilities at amortized cost are carried at amortized

cost using the effective interest method. Financial liabilities at amortized cost are classified as current liabilities if

the payment term is one year or less. If the payment term is longer than one year, they are presented as long-term

liabilities.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Financial instruments (continued)

Offsetting financial assets and liabilities

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when

there is a legal right to offset transactions and an intention to settle net or realise the asset and settle the liability

simultaneously.

Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. In subsequent periods,

borrowings are stated at amortized cost using the effective interest method. The difference between the

proceeds, net of borrowing costs, and the redemption value is recognized in the income statement using the

effective interest method. This difference is recognized in finance costs.

Borrowings are classified as current liabilities unless the Company has an irrevocable right to defer settlement

of the liability for at least 12 months after the balance sheet date.

Issued debt securities

The Company recognises issued debt securities at the date when the respective funds are received. After initial

recognition when these financial liabilities are initially recognised at fair value including direct transaction costs,

those are subsequently carried at amortised cost using the effective interest method. When issued debt

securities are sold at a discount or premium, the difference is amortised applying the effective interest method

until the debt matures and charged to the statement of comprehensive income as interest expense.

Contingencies

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.

Subsequent events

The financial statements reflect events after the balance sheet date that provide additional information about the

Company’s financial position at the balance sheet date (adjusting events). If the events after the end of the

reporting year are not adjusting, they are reflected in the notes to the financial statements only if they are

significant.

Leases

Classification

At the time of concluding the agreement, the Company assesses whether the contract is a lease or contains a

lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an

identified asset for a period of time in exchange for consideration. To assess whether the contract is a lease or

contains a lease, the Company assesses whether:

- the contract provides for the use of an identified asset: the asset may be designated, directly or indirectly, and

must be physically separable or represent practically full capacity of the asset from the physically separable

asset. If the supplier has a significant right to replace the asset, the asset is not identifiable;

- the Company has the right to obtain all economic benefits from the use of the identifiable asset over its useful

life;

- the Company has the right to determine the use of the identifiable asset. The Company has the right to

determine the manner in which the asset will be used, when it can decide how and for what purpose the asset will

be used. Where the relevant decisions about how and for what purpose an asset is used are predetermined, the

Company should assess whether it uses the asset, or the Company has developed an asset in a manner that

predetermines how and for what purpose the asset will be used.

In the case of an initial measurement or reassessment of a contract that includes a lease component or multiple

lease components, the Company attributes the relative separate price to each lease component.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

The Company is a lessee

Leases are recognised as right–of–use assets and the corresponding lease liabilities at the date when leased

assets are available for use of the Company. The cost of the right–of–use an asset consists of:

- the amount of the initial measurement of the lease liability;

- any lease payments made before the commencement date less any lease incentives received;

- replacement costs associated with the dismantling and restoration of property, plant and equipment;

- any initial direct costs.

The right–of–use asset is amortised on a straight–line basis from the commencement date to the end of the

useful life of the underlying asset or from the commencement date of the lease to the end of the lease term,

unless an asset is scheduled to be redeemed. The right–of–use asset is periodically reduced for impairment

losses, if any, and adjusted for any revaluation of the lease liabilities.

Assets and liabilities arising from leases at commencement date are measured at the amount equal to the

present value of the remaining lease payments, discounted by the Company’s incremental interest rate. Lease

liabilities include the present value of the following lease payments:

- fixed lease payments (including in–substance fixed lease payments), less any lease incentives receivable;

- variable leases payments that are based on an index or a rate;

- amounts expected to be payable by the Company under residual value guarantees;

- the exercise price of a purchase option if the Company is reasonably certain to exercise that option;

- payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.

Lease liabilities are subsequently measured when there is a change in future lease payments due to changes of

an index or a rate, when the Company’s estimate of expected payments changes, or when the Company

changes its estimate of the purchase option, lease term modification due to extension or termination. When a

lease liability is subsequently measured, the corresponding adjustment is made to the carrying amount of the

right–of–use asset or recognised in the statement of comprehensive income if the carrying amount of the right–

of–use asset decreases to zero.

Each lease payment is divided between the lease liability and the interest expense on the lease. Interest

expense on lease is recognised in the statement of comprehensive income over the lease term to form a

constant periodic interest rate for the remaining lease liability for each period.

Short-term leases and leases for low-value assets

Lease payments related to short–term leases and lease for low-value assets are recognised as an expense in the

statement of profit or loss on a straight–line basis. Short–term leases are leases with a lease term of 12 months

or less at the commencement date.

The Company is a lessor - financial lease

Receivables from finance leases are recognized at the net present value of the minimum lease payments, less

any principal payments received and plus any unguaranteed residual value at the end of the lease term.

The lease payments receivedare allocated betweentherepayment ofprincipaland the finance income.Finance

income is recognized over the lease term to reflect a constant periodic rate of return on the lessor’s net

investment in the lease. Initial service charges levied at the commencement of a lease are taken into account in

calculating the effective interest rate and the lessor ’s net investment. The lessor’s direct costs associated with

the contract are included in the effective interest rate and are reported as a reduction of lease income over the

term of the lease.

Lease payments receivable from customers are recognized in the statement of financial position when the

related assets that are the subject of the contract with the customer are transferred to the customer.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Financial risk management

The activities of the Company are exposed to different financial risks: credit risk, liquidity risk, market risk, cash

flow and interest rate risk, operational risk and foreign currency risk. The Board is responsible for risk

management. The Board identifies, assesses and seeks to find solutions to avoid financial risks.

Credit risk

The credit risk is a risk that a borrower of the Company is unable or unwilling to meet its liabilities towards the

Company in full and within the established term as a part of the Company’s main activity – lending. Credit risk

also includes concentration risk in transactions groups of customers or cooperation partners.

The Company’s policies are developed in order to ensure maximum control procedures in the process of loan

issuance, timely identification of bad and doubtful debts and adequate provisioning for expected credit losses.

The Company has no concentration of credit risk related to the loan issued to any one borrower.

The Company specializes in the financing of one sector of the economy - agriculture - which increases the risks

associated with the market situation of the particular sector. However, agriculture has several sub-sectors –

namely, cereals, dairy farming, livestock agriculture, vegetable growing, etc., whose market situations develop in

an unrelated way. The Company also ensures geographical diversification by financing customers from

various regions of Latvia.

The core principle of the Company’s credit risk management is the ability of borrowers to meet their obligations to

the Company, which is ensured by evaluating business partners before the start of the transaction, as well as

through further continuous monitoring and evaluation. In order to make high-quality and balanced credit

decisions, the Company monitors local and global trends in agricultural markets, as well as the impact of each

season’s weather on the expected local harvest. It also gets to know each specific borrower, analyzes his

financial data and ability to repay the loan.

In order to maintain a sufficiently diversified loan portfolio with a low risk profile and to find a favourable balance

between risk and return, the Company constantly strives to understand customers and their market conditions.

When reviewing a loan application, the Company thoroughly analyses the cooperation partner’s ability and

willingness to repay the new as well as previous loans.

The cash flow and solvency of the business partner are the main variables when deciding on a loan, and the

Company seeks to obtain sufficient collateral. The Company issues secured loans and unsecured loans. Most

unsecured loans are seasonal financing for farmers secured by grain contracts.

Company’s exposure to credit risk (excluding available collateral or other security):

Loans with collateral

Loans without collateral

Financial lease receivables

Cash in bank

Maximum credit risk

31.12.2023

EUR

11 110 321

3 983 579

3 476 636

86 983

18 657 519

%31.12.2022%

EUR

59,5 6 240 980 53

21 2 421 755 21

19 2 878 827 24

0,5 275 443 2

100 11 817 005 100

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet the legally substantiated claims from securities

holders and other creditors or for contingent liabilities on time and in full, or will not be able to provide pre-

planned asset growth with funding sources in a timely and appropriate and reasonable manner. The purpose of

liquidity risk management is to maintain a sufficient amount and appropriate quality of liquid assets, as well as to

attract financing with an appropriate term structure, which allows to ensure timely fulfilment of liabilities, as well

as pre-planned growth of assets.

The Company complies with the prudence principle in the management of its liquidity risk and maintains

sufficient funds. The management of the Company has an oversight responsibility of the liquidity reserves and it

makes current forecasts based on anticipated cash flows. Most of the Company’s assets are short-term, while

most of the liabilities are repayable in the long term. The management believes that the Company will be able to

ensure a sufficient level of liquidity with its core business activities. Amounts are formed from undiscounted cash

flows in accordance with concluded contracts. Borrowing cash flows are determined taking into account the

effective interest rates at the end of the reporting period.

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Financial risk management (continued)

Liquidity risk (continued)

The total liabilities of the Company by term is reflected in the following table. The amounts disclosed in the table

are contractual undiscounted cash flows.

31 December 2022, EUR

Less than

3 months

3 months to

1 year

From 1 to 5

years

More than 5

years

TOTAL Net book

value

9 233 764

42 480

Borrowings

Lease liabilities

Other liabilities

11 505 2 225 793

4 129 11 319

13 469-

9 075 000

35 429

-

- 11 312 298

- 50 877

-13 469

13 469

Total

29

103

2 237 1129 110 429-11 376 644

9

289

713

31 December 2023, EUR

Less than

3 months

3 months to

1 year

From 1 to 5

years

More than 5

years

TOTAL Net book

value

Borrowings

1 097 875

6 024 453

10 863 100

-17 985 428

15 670 347

Lease liabilities

12 179

36 537

66 941

115 657

72 358

Other liabilities

37 530

-

-37 530

37 530

Total

1 147 584

6 060 990

10 930 041

18 138 615

15 780 235

Market risk

The Company is exposed to market risks, mostly related to the fluctuations of interest rates between the loans

granted and funding received, as well as demand for the Company’s services fluctuations. The Company

attempts to limit market risks, adequately planning the expected cash flows, diversifying the product range and

fixing funding resource interest rates.

Cash flow and interest rate risk

Interest rate risk is related to the possible impact of general changes in market interest rates on the Company’s

interest income and expenses. Loans issued by the Company are with a fixed interest rate, similarly as LCD

Bonds and other short-term loans received, except for a loan from a bank, which is subject to the 3-month

Euribor plus base rate. At the end of the reporting year, interest rate risk applies to the loan from bank and

finance lease liabilities with interest rates applied consisting of base rate and variable rate (6M Euribor, 3M

Euribor), however, the balance of these liabilities is less than a third compared to other liabilities, so changes in

interest rates will most likely not have a significant impact on the Company’s financial position. In addition, no

increase in interest rates is not forecasted in 2024, and a slight decrease in rates is expected. Management of the

Company monitors fluctuations of interest rates on regular basis and, if necessary, takes measures in order to

minimize negative impact of interest rate fluctuations on Company’s operations.

Operational risk

Operational risk isa loss risk due to external factors namely (natural disasters, pandemic, crimes, etc) or internal

ones (IT system crash, fraud, violation of laws or internal regulations, insufficient internal control). Operation of

the Company carries a certainoperational risk whichcanbemanagedusing severalmethods including methods

to identify, analyse, report and reduce the operational risk.

Management of the capital structure

The Company’s objectives in capital risk management are to ensure its sustainable operation while maximizing

the income of its stakeholders and to avoid violating the restrictive conditions set out in the loan agreements and

related to the capital structure. Capital management is performed by optimizing the balance of creditors and equity

(with the aim that the debt-to-equity ratio does not exceed 4) and by ensuring that the total amount of equity and

subordinated loan (see Note 13 (b)) is not less than 20% of total assets. The Company’s capital structure

consists of borrowings from related persons, third party loans and loans from credit institutions and finance

lease liabilities, cash and equity, comprising issued share capital, other reserves and retained earnings.

At year-end the ratios were as follows:

Liabilities, gross (see above)

Cash and bank

Net debts

Equity

Liabilities / equity ratio

Net liabilities / equity ratio

31.12.2023

EUR

15 780 235

86 983

15 693 252

2 615 124

6.03

6.00

31.12.2022

EUR

9 289 713

275 443

9 014 270

2 331 825

3.98

3.87

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

Financial risk management (continued)

Foreign exchange risk

The Company’s financial assets and liabilities are not exposed to foreign currency risk. All transactions are

concluded in euros.

Fair value considerations for assets and liabilities

Financial instruments by category

The Company’s principal financial instruments are issued loans, cash and cash equivalents, issued bonds and

other borrowings, payables to suppliers and other creditors. These financial instruments ensure day-to-day

operations of the Company.

31.12.2023

EUR

31.12.2022

EUR

Assets carried at amortized cost

Issued loans and other receivables (excluding prepaid expenses

and advances)

Cash and cash equivalents

Total

18 195 536

86 983

18 282 519

11 286 562

275 443

11 562 005

Liabilities at amortized cost

Issued debt securities (bonds)

Other borrowings

Lease liabilities, trade creditors and other payables

Total

7 990 000

7 680 347

109 888

15 780 235

7 500 000

1 733 764

55 950

9 289 714

Fair value hierarchy of assets and liabilities

In order to estimate the financial assets and liabilities fair value, the three-level fair value hierarchy is used.

Level 1:active market published price quotations;

Level 2:other methods that use data, all of which are directly or indirectly observable and have a

significant impact on the recognized fair value;

Level 3:other techniques which use inputs which have a significant effect on the recorded fair value

that are not based on observable market data.

No financial assets or liabilities of the Company are attributed to Level 1. Included in Level 2 are cash and cash

equivalents and debt securities (bonds). Level 3 includes issued loans and other debts, other financial assets,

payables and other liabilities.

The Company’s management has determined that the carrying amounts of the Company’s financial assets and

liabilities carriedat amortizedcost as at 31 December 2022 and 2023approximate their fair values, as explained

below:

- the amortized cost of loans granted, net of provisions for the ECL, approximates their fair value, taking into

account the short-term nature of these assets and the fact that their interest rate is similar to the average market

interest rate for similar financial assets;

- the carrying amount of the issued bonds approximates their fair value, given that the rate of return quoted on

the securities market is similar to the coupon rate of these bonds;

- the fair value of variable interest rate leases is similar to their carrying amount, as their actual variable interest

rates approximate the market price of similar financial instruments available to the Company, ie the variable

interest rate corresponds to the market price, while the added part of the interest rate corresponds to the risk

premium charged by lenders in the financial and capital markets to companies with a similar credit rating level; -

the rate applied to loans received at fixed interest rates does not differ significantly from the comparable

variable rate that the Company could receive from market lenders.

New standards and interpretations

Standards or interpretations effective for the first time for the annual periods beginning 1 January 2023

In the reporting year, the Company has applied the following new and amended standards and interpretations:

Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies, Amendments to IAS

8: Definition of Accounting Estimates, Amendments to IAS 12 Income taxes: International Tax Reform - Pillar

Two Model Rules (effective for annual periods beginning on or after 1 January 2023).

IAS 1 was amended to require companies to disclose their material accounting policy information rather than

their significant accounting policies. The amendment provided the definition of material accounting policy

information. The amendment also clarified that accounting policy information is expected to be material if,

without it, the users of the financial statements would be unable to understand other material information in the

financial statements. The amendment provided illustrative examples of accounting policy information that is

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Notes to the financial statements (continued)

Accounting policies (continued)

(c)Summary of significant accounting policies (continued)

New standards and interpretations (continued)

likely to be considered material to the entity’s financial statements. Further, the amendment to IAS 1 clarified

that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not

obscurematerial accountingpolicyinformation.Tosupport this amendment,IFRS PracticeStatement 2 “Making

Materiality Judgements” was also amended to provide guidance on how to apply the concept of materiality to

accounting policy disclosures.

The amendment to IAS 8 clarified how companies should distinguish changes in accounting policies from

changes in accounting estimates.

In May 2023 the International Accounting Standards Board IASB issued narrow-scope amendments to IAS 12

“Income Taxes”. This amendment was introduced in response to the imminent implementation of the Pillar Two

model rules released by the Organisation for Economic Co-operation and Development’s (OECD) as a result of

international tax reform. The amendments provide a temporary exception from the requirement to recognise

and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar

Two model rules. In accordance with IASB effective date, the companies may apply the exception immediately,

but disclosure requirements are required for annual periods commencing on or after 1 January 2023.

New and amended IFRS and their interpretations which have been adopted during 2023 have had no or

immaterial impacts on the Company’s financial position, operations, cash flows and disclosures in the financial

statements.

Standards issued but not yet approved

The International Accounting Standards Board (IASB) and IFRS Interpretations Committee (IFRIC) have issued

the following standards, amendments to standards and interpretations that apply in or after 2023. The IASB

permits earlier application. For Company to apply them also requires that they have been approved by the EU if

the amendments are not consistent with previous IFRS rules. Consequently, the Company has not applied the

following amendments in the financial statements for 2023.

AmendmentstoIFRS 16Leases: LeaseLiabilityinaSaleandLeaseback(effectivefor annualperiodsbeginning

on or after 1 January 2024).

The amendments relate to the sale and leaseback transactions that satisfy the requirements in IFRS 15 to be

accounted for as a sale. The amendments require the seller-lessee to subsequently measure liabilities arising

from the transaction and in a way that it does not recognise any gain or loss related to the right of use that it

retained. This means deferral of such a gain even if the obligation is to make variable payments that do not

depend on an index or a rate.

Classification of liabilities as current or non-current – Amendments to IAS 1 (effective for annual periods

beginning on or after 1 January 2024).

These amendments clarify that liabilities are classified as either current or non-current, depending on the rights

that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the

end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a

right to be unconditional. The October 2022 amendment established that loan covenants to be complied with after

the reporting date do not affect the classification of debt as current or non-current at the reporting date.

Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect

classification of liabilities. A liability is classified as current if a condition is breached at or before the reporting

date even if a waiver of that condition is obtained from the lender after the end of the reporting period.

Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In

addition, the amendments include clarifying the classification requirements for debt a company might settle by

converting it into equity. “Settlement” is defined as the extinguishment of a liability with cash, other resources

embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible

instruments that might be converted into equity, but only for those instruments where the conversion option is

classified as an equity instrument as a separate component of a compound financial instrument.

Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier

Finance Arrangements (effective for annual periods beginning on or after 1 January 2024, not yet endorsed by

the EU).

In response to concerns of the users of financial statements about inadequate or misleading disclosure of

financing arrangements, in May 2023 the IASB issued amendments to IAS 7 and IFRS 7 to require disclosure

about entity’s supplier finance arrangements (SFAs). These amendments require the disclosures of the entity’s

supplier finance arrangements that would enable the users of financial statements to assess the effects of those

arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk. The purpose of

the additional disclosure requirements is to enhance the transparency of the supplier finance arrangements. The

amendments do not affect recognition or measurement principles but only disclosure requirements. The new

disclosure requirements will be effective for the annual reporting periods beginning on or after 1 January 2024.

The Company is currently assessing the impact of the amendments listed above on its financial statements,

however it is not expected that they would significant impact the Company’s financial position, results, cash

flows or disclosures.

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Notes to the financial statements (continued)

(1)Interest income

2023 2022

EUR EUR

Interest income from issued loans

Other interest income

1 938 876

69 309

2 008 185

1 582 411

35 630

1 618 041

All interest income is recognized at the effective interest rate and includes amortized commissions (2023:

EUR 190 647 and 2022: EUR 156 322). All of the Company’s revenues are generated in Latvia.

(2)Interest expense

LCD bonds’ coupon expense

Interest on other borrowings

Interest on borrowings from Citadele Banka AS

Borrowing fees

Interest on lease liabilities

555 219 440 106

181 559 149 491

207 464 123 088

22 314 10 002

5 980 1 166

972 536723 853

(3)Impairment

Loss on impairment allowance for issued loans (see Note 9) 120 000 85 000

120 000 85 000

(4)Administrative expense

Staff costs

Legal services

Social insurance

Depreciation of right-of-use assets

Accounting services and professional fees

Office expenses

IT costs

Transportation expenses

Office rent

Insurance

Communication expenses

Depreciation of property, plant and equipment

Bank commission

Business trip expenses

Risk duty

Other administrative expenses

163 448 108 705

38 752 45 141

38 557 25 643

34 781 18 017

26 649 26 143

21 199 11 719

19 311 16 208

11 321 11 987

8 187 10 086

2 278 1 985

2 170 5 929

1 112 1 534

1 011 959

300 17 740

26 21

3 6062 516

372 708304 333

* The item Accounting and professional services costs includes audit fee to Potapoviča un Andersone SIA in the

amount of EUR 8,228 (incl. VAT) and fee for non-audit services (agreed-upon-procedures) in the amount of EUR

2,420 (incl. VAT).

(5)Other operating expenses

Marketing and advertising costs

Trademark royalties

Debt recovery costs

Sales promotion costs

Membership fees

Reimbursement of expenses

Other operating expenses

71 680 83 961

39 000 39 000

11 129 14 839

8 579 8 647

1 919 823

(2 139) (5 022)

4 474 6 667

134 642148 915

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Notes to the financial statements (continued)

(6)Corporate income tax for the reporting year

2023 2022

EUR EUR

Calculated and paid corporate income tax on distributed profit (see

Note 12) 25 000 25 000

25 000 25 000

As at 31 December 2023, the Company’s retained earnings are EUR 1 115 099, all of which have arisen after 1

January 2018. If the highest possible dividend payment were approved, the Company would incur a corporate

income tax liability in the amount of EUR 278 775.

(7)Property, plant and equipment

Other fixed assetsTotal

EUR EUR

12 97112 971

17 09817 098

30 06930 069

Cost:

31.12.2021.

Additions during 2022

31.12.2023.

Depreciation:

31.12.2021.

Charge for 2023

31.12.2023.

11 334 11 334

1 112 1 112

12 446 12 446

Net book value 31.12.2022.

Net book value 31.12.2023.

1 6371 637

17 62317 623

(8)Leases

Company as a lessee:

2023

EUR

2022

EUR

87 412

(36 772)

50 640

62 017

(12 891)

87 412

(18 755)

68 657

-

Right-of-use assets (rental of cars and premises):

1 January:

Initial recognition amount

Depreciation accrued

Net book value 1 January:

New contracts concluded during the reporting year

Book value of contracts terminated during the reporting year

Accumulated depreciation of contracts terminated during the

reporting year

Charge for the year

Net book value 31 December:

12 891

(31 728)

80 929

-

(18 017)

50 640

Lease liabilities:

Net book value 1 January:

Incl. long-term

short-term

New contracts concluded during the reporting year

Residual value of contracts terminated during the reporting year

Interest expenses on lease liabilities

Interest paid on lease liabilities

Decrease of lease liabilities

Net book value 31 December:

Incl. long-term

short-term

42 480

29 608

12 872

58 557

-

5 980

(5 980)

(28 679)

72 358

42 614

29 744

58 079

42 480

15 599

-

1 166

(1 166)

(15 599)

42 480

29 608

12 872

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Notes to the financial statements (continued)

(8)Leases (continued)

Company as a lessor (financial lease)

Undiscounted lease payments expected after reporting date and

within:

31.12.2023

EUR

31.12.2022

EUR

1 year

2-5 years

Total undiscounted lease payments receivable

Discounted unguaranteed residual value

Unearned finance income

Net investment in lease

Interest income on the net investment

2 294 627

2 345 218

4 639 845

-

(1 213 704)

3 426 141

310 939

1 044 805

1 589 960

2 634 765

-

(545 068)

2 089 697

287 743

The lessor’sportfoliomainlyincludesagriculturalmachineryand equipment. Residualvalueriskis not significant

as there is a secondary market for rental objects.

(9)Loans

Loans – long-term portion, net

Loans – short-term portion, net

Total

5 553 123

12 642 413

18 195 536

3 104 934

8 181 628

11 286 562

Including:

Loans - long-term portion, gross

Loans - short-term portion, gross

Total loans, gross

Allowance for expected credit losses

Total loans, net

5 618 123

12 952 413

18 570 536

(375 000)

18 195 536

3 134 934

8 406 628

11 541 562

(255 000)

11 286 562

Loans – movement during the year

2023

EUR

2022

EUR

Net book value as at 1 January

Loans issued

Loans repaid

Interest charge

Interest payments received

Mutual offset

Written off loans

Increase in impairment allowance

Carrying amount as at 31 December

11 286 562

16 417 669

(9 695 141)

2 008 184

(1 683 494)

(18 244)

-

(120 000)

18 195 536

9 392 223

13 321 443

(11 455 065)

1 618 041

(1 490 153)

(13 281)

(56 647)

(30 000)

11 286 562

As at 31 December 2023 the Company has no credit risk concentration for loans issued to one major customer

or group of partners.

Company’s maximum exposure to credit risk on finance leases and loans issued against the pledge is the loan/

finance lease amount decreased by the value of the pledge. Loans are usually issued in amount of 70-80% of the

pledge value.

Company’s maximum exposure to credit risk on unsecured loans is the remaining amount of the loans issued.

The risk is compensated by the concluded grain contracts.

Loan (gross) age analysis:

31.12.2023

EUR

31.12.2022

EUR

Not overdue

Overdue for 1 - 30 days

Overdue for 31 - 90 days

Overdue for 91 - 180 days

Overdue for more than 180 days

17 351 764

3 088

829 454

150 610

235 620

18 570 536

11 012 241

2 731

265 664

137 611

123 315

11 541 562

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Notes to the financial statements (continued)

(9)Loans issued (continued)

Movement of impairment allowance:

Allowance at the beginning of the year

Additional allowance

Recovered debts

Bad debts written off

Allowance at the end of the year

2023

EUR

255 000

120 000

-

375 000

2022

EUR

225 000

105 000

(20 000)

(55 000)

255 000

Total

Breakdown of loans issued according to their qualitative assessment

Stage 3

(impaired/

life-time ECL)

EUR

161 416

(129 629)

31 787

Stage 1 (12Stage 2 (lifetime

31.12.2022

month ECL) ECL)

EUREUR

Gross carrying amounts10 380 705 999 441

ECL allowances (102 508) (22 863)

Net carrying amounts10 278 197 976 578

ECL coverage ratio0,010,020,80

EUR

11 541 562

(255 000)

11 286 562

0,02

31.12.2023

159 463

(141 545)

17 918

Gross carrying amounts

ECL allowances

Net carrying amounts

ECL coverage ratio

16 259 597

(157 601)

16 101 996

0,010,04

2 151 476

(75 854)

2 075 622

0,89

18 570 536

(375 000)

18 195 536

0,02

The dynamics of the ratio of provisions for expected credit losses to the total amount of the credit portfolio

reflects management’s assumptions and judgments that, despite the complex geopolitical situation and the

uncertainty caused by it, acertain growth of the Latvian economy is predicted. In March 2024, the Bank of Latvia

revised its forecasts for GDP dynamics, forecasting GDP growth in Latvia to 1.8% in 2024 (from 2.0% in the

December 2023 forecast). GDP growth forecasts for the following years are unchanged compared to the

Decemberforecasts –3.6% in2025and 3.8%in2026,respectively,and it isexpectedthatmore growthcapacity

will be given by the increase in exports as the economic environment abroad improves. In 2024, farms will still

feel the impact of the unfavorable year 2023 for Latvian grain farmers, but favorable harvest forecasts for 2024

and normalized prices of raw materials allow us to hope for a general stabilization of the situation.

Gross carrying amounts and ECL allowances for credit-impaired loans allocated to stage 3 and the fair

value of collaterals for these assets

Stage 3

(impaired/

life-time ECL)

Gross carrying

amounts

ECL

allowances

Net carrying

amounts

Fair value of

collateral held

EUR

31.12.2022

31.12.2023

161 416

159 463

(129 629)

(141 546)

31 787

17 918

20 000

-

(10)Other debtors

31.12.2023

EUR

31.12.2022

EUR

Advance payments

Security deposit paid

Prepaid expenses

-3 400

1 9361 936

12 3521 921

14 2887 257

(11)Cash and bank

Cash at bank86 983275 443

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, since cash is held in

Baa2 and Aa3 rated banks (Moody’s rating), the identified impairment loss is immaterial and allowance was not

recognised.

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Notes to the financial statements (continued)

(12)Share capital and dividends

As at 31 December 2023 and 31 December 2022 the subscribed and fully paid share capital the Company is

EUR 1 500 000 that consists of 50 000 ordinary shares with a nominal value of EUR 30 each.

On 19 December 2023, the shareholders of the Company made a decision on the distribution of profit by

distributing accumulated prior year profit in dividends in the total amount of EUR 100 000 or EUR 2 per share.

(13)Borrowings

Note

31.12.2023

EUR

31.12.2022

EUR

Bonds issued

Other borrowings

Long-term part of borrowings

(13a) 7 990 000

(13b) 1 450 000

9 440 000

7 500 000

-

7 500 000

Bank borrowings

Other borrowings

Short-term part of borrowings

Total borrowings

(13c) 4 499 744

(13b) 1 730 603

6 230 347

15 670 347

133 764

1 600 000

1 733 764

9 233 764

(13a)Bonds issued

LCD Bonds, long-term7 990 000

7 990 000

7 500 000

The Company has issued bonds (ISIN LV0000802106, registered in Latvian Central Depository, listed in AS

Nasdaq Riga). As at the end of reporting year total amount of bonds listed in AS Nasdaq Riga is 1600 bonds, 5

000 EUR nominal value each (total nominal value 8 000 000 EUR) (31.12.2022: 1 500 bonds, 5 000 EUR

nominal value each). As at 31 December 2023 2 bonds are held by the Company itself (31.12.2022: no bonds).

The coupon rate is 7% and it is paid once a year – on December 31. The nominal value of the bonds will be

redeemed in one payment on the redemption date of the bonds. The expiry date of the bonds is 31 December

2026. Most of the holders (excluding bonds for amount of EUR 3 605 000) have an option to sell-back the bonds in

the end of each calendar year, with a prior 1-month notice. During the year 2023 no such requests have been

received.

1 450 000

-

(13b)Other borrowings

Long-term part (payable after more than 1 year and less than five

years):

SIA KEY INVESTMENT

Long-term part of other borrowings

Short-term part:

SIA KEY INVESTMENT

Andris Bišmeistars (including accrued interest)

SIA "Jāņa Kārkliņa zvērinātu advokātu birojs"

Short-term part of other borrowings

-

100 603

1 630 000

1 730 603

1 100 000

-

500 000

1 600 000

Total other borrowings

3 180 603

1 600 000

As at 31 December 2023 the Company has the following borrowings:

-unsecured loan from SIA KEY INVESTMENT according to the loan agreement from 8 December 2020 in

total amount of EUR 1 070 000 with the annual interest rate of 7% and repayment date 31 December 2023.

In 2023, two agreements were signed on increasing the loan amount to EUR 1 600 000 and extending the

repayment period until 31 December 2027. This loan in the amount of EUR 1 000 000 is subordinated to the

loan from Citadele Banka AS.

-unsecured loan from SIA "Jāņa Kārkliņa zvērinātu advokātu birojs" according to the loan agreement from 1

November 2021 in total amount of EUR 500 000 with the annual interest rate of 7%. In 2023, several

agreements were signed on increasing the borrowing limit to EUR 600 000 and extending the repayment

term until 31 March 2024. After the end of the reporting year, the loan was partially repaid and partially

extended until 31 October 2024.

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Notes to the financial statements (continued)

(13)Borrowings (continued)

(13b)Other borrowings (continued)

-unsecured loan from Andris Bišmeistars according to the loan agreement from 30 November 2023 in total

amount of EUR 100 000 with the annual interest rate of 7% and repayment date 31 March 2024. After the

end of the reporting year, the loan was repaid.

(13c) Bank borrowings

31.12.2023

EUR

31.12.2022

EUR

Citadele Banka AS – principal amount

Capitalised commission

Accrued interest

Total bank borrowings

4 494 184

(20 833)

26 393

4 499 744

157 760

(25 455)

1 459

133 764

On 26 October 2023 the Company concluded credit facility agreement with AS Citadele Banka. According to the

agreement, total limit of the credit facility is EUR 4 800 000. Annual interest rate consists of variable rate 3M

Euribor and fixed base rate. The repayment date is 31 October 2024.

The collateral of the contract is pledge on the Company’s shares, as well as the Company’s assets as a whole

at the date of pledge as well as their future components.

According to the concluded loan agreement, the maximum amount of the credit line granted to the Company

depends on the structure of its loan portfolio, as well as other requirements specified in the loan agreement

must be met.

(13d)Borrowings – movement during the year

2023 2022

EUR EUR

Net book value as at 1 January

Borrowings received

Borrowings repaid

Interest charge

Interest paid

Carrying amount as at 31 December

9 233 764

15 764 411

(9 357 987)

944 242

(914 083)

15 670 347

7 514 728

9 729 100

(8 005 687)

712 684

(717 061)

9 233 764

(14)Trade creditors and other liabilities

31.12.2023

EUR

31.12.2022

EUR

Payable to suppliers and contractors

Accrued liabilities

Other liabilities

2 456 4 744

9 628 7 463

446 1 263

12 53013 470

(15)Related party transactions

Type of transaction

Loans from

Supervisory

Council members

Loan received

Loan repaid

Transaction Outstanding

value liabilities

2023

EUR EUR

320 000 -

(320 000)-

Transaction Outstanding

value liabilities

2022

EUR EUR

400 000 -

(400 000)-

9 644-

12 911-

Interest charge

Outstanding balance as

at 31 December

--

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Notes to the financial statements (continued)

(15)Related party transactions (continued)

Type of transaction Transaction Outstanding

value liabilities

2023

EUREUR

Transaction Outstanding

value liabilities

2022

EUREUR

Loan from other

related companies

Loan received

Loan repaid

2 945 410

(1 465 410)

-

1 243 000

(1 279 000)

-

171 094

-

144 370

-

Interest charge

Outstanding balance as

at 31 December

-

3 080 000

-

1 600 000

Bonds held by

key management

personnel

-

94 500

-

94 500

-

Sold bonds

Repurchased bonds

Calculated coupon

Outstanding balance as

at 31 December

-

1 350 000

-

1 350 000

Bonds held by

other related

parties

-

63 700

-

40 000

-

63 700

-

Sold bonds

Repurchased bonds

Calculated coupon

Outstanding balance as

at 31 December

-

910 000

-

910 000

Except for the above transactions, the Company has not performed any other related party transactions during

the reporting year.

(16)Average number of the Company’s employees

20232022

Average number of employees during the reporting year:65

(17)Personnel costs

2023 2022

EUR EUR

Salary expenses

Social insurance

163 448 83 505

38 557 19 698

202 005 103 203

incl. management remuneration:

Salary expenses

Social insurance

31 200 25 200

7 360 5 945

38 56031 145

(18)Subsequent events

There are no subsequent events since the last date of the reporting year, which would have a significant effect

on the financial position of the Company as at 31 December 2023.

(19)Distribution of the profit proposed by the Board

The proposal of the Company’s Board of Directors to the members is to leave the profit of EUR 383 299 for the

reporting year undistributed.

Ģirts Vinters

Chairman of the Board

Jānis Kārkliņš

Member of the Board

Evija Suija

Accountant

THE DOCUMENT IS SIGNED WITH SECURE ELECTRONIC SIGNATURES AND CONTAINS A TIME STAMP.

ELECTRONIC SIGNATURES OF THE BOARD MEMBERS RELATE TO THE ANNUAL ACCOUNTS AS A SINGLE

DOCUMENT FROM PAGE 1 TO 27.

ELECTRONIC SIGNATURE OF THE PERSON RESPONSIBLE FOR ACCOUNTING RELATES TO FINANCIAL

STATEMENTS ON PAGES 6 TO 27.

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Independent Auditors’ Report