Control and Audit

Risk Management and Internal Control System

The risk management and internal control system in the Company is a set of internal activities to identify, assess risks, develop and implement risk management measures, as well as monitor and control their level.

The risk management and internal control system in the Company is governed by the following documents:

Risk Management Policy (approved on 4 May 2022)
Regulations on internal control (approved on 14 August 2013)
Foreign Exchange Risk Hedging Policy (adopted on 3 November 2015)

In 2024, management intends to update and review internal policies regulating the risk management and internal control bodies.

Internal Control and Audit Service

Participants in the risk management and internal control system and their role

Participant	Functions
Board of Directors	Oversees risk management, including making decisions and suggestions based on an assessment of the risk manager's risk reporting
Audit Committee of the Board of Directors	Studies the risk list of the Company's risk map structure, as well as the application of its internal control and risk management policies Monitores the reliability and effectiveness of risk management, internal control and corporate governance, including the performance assessment of the Company's risk management, internal control, and corporate governance practices, and the development of proposals for their improvement
Chief Executive Officer	Holds responsibility for organising a strong risk management framework to identify, assess and manage the Company's risks Approves the Company's risk map and register Approves a list of measures to manage existing risks Approves the list of risk owners
Heads of structural units	Ensure that workers in their structural units follow the rules of the risk management policy Provide information on the risks in the area of their expertise to the risk manager to update the risk map and register Ensure that risk management measures are put in place in a timely manner Allocate resources when prompt action is needed to manage risks or to mitigate the negative impact of risks that have already materialised Optimise business processes to mitigate the level and consequences of risks Consider risk information when establishing the structural unit's objectives and budget
Risk manager	Coordinates the work of the structural units in identifying and assessing risks and in planning risk management measures Ensures that the Risk Management Policy is up to date Aggregates risk information and prepares reports on the Company's risks Devises and implements measures to promote the company's risk management culture (if necessary)
Other workers	Identify the risks in their area of expertise Implement the approved risk management measures Monitor the level of risks in their area of expertise

Risk categories

Possible risk factors	Mitigation methods
Biological risks — risks related to the special features of fish rearing and health
Risk of introduction of foreign pathogens Transmission of disease from wild fish Risk of genetic variation in fish stocks	Continuous production control Analysis of reference indicators for water quality and natural waste generation Installation of an advanced cleaning system Use of special protective nets and anti‑seal ultrasonic deterrents
Pathogen risks — risks associated with epizootic outbreaks
Epizootic outbreaks	Adherence to the general recommended rearing volumes, sufficiently spaced plots, and concentration of the largest biomass in areas of greater depth Regular internal and external veterinary inspections of farms Volume and density of fish stocking is justified by scientific institutions Neighbouring farms have fish from the same generation Resting of farms after the slaughter of the latest generation of fish Insurance for fish
Natural and climatic risks — risks of abnormal weather events
Abnormal weather phenomena in winter or summer Change in oceanic currents	Risk occurrence is very low. The existing changes in climatic conditions and oceanic currents present no threat. In case of significant changes in water temperature and routes of undercurrents, the existence of not only the Company's farm but of the whole fishery industry of the region will be unlikely
Regulatory and GRGovernment Relations. risks — risks associated with the legal peculiarities and legal environment of the Company
Changes in legislation (including changes in tax rates, increases in various fees and charges)	Monitoring and active participation in discussions on legislative initiatives Increased financial safety margin
HR risks — HR‑related risks
Lack of skilled employees Poaching of key workers by competitors Work‑related injuries Risk of product theft, illegal fishing, deliberate damage to cages	Performance incentives for the most responsible and distinguished employees Extension of agreement terms and wages for proven employees Safety training for staff and monitoring of safety compliance Strict controls to ensure that only well‑trained and technologically competent workers are authorised to work on the production sites Design of production facilities with consideration for personnel safety Establishment of a security service Round‑the‑clock monitoring of all sites Installation of CCTV equipment
Operational risks — risks related to the specifics of farming and production technology
Poor planning Inadequate engineering Risk of failure to reach planned capacity and low production efficiency Risk of predation Risk of inadvertent damage or breakdown of key equipment, which can significantly affect the production process	Reflection and incorporation of past experience into planning Exploration of alternatives in planning Careful consideration of all possible project options, identification of their strengths and weaknesses Admission of the possibility of making adjustments to the project Training of staff at cage farms in Norway Focus on streamlining the work process according to best practices Rules and regulations for the main production processes Tendering procedures for all major procurements Planning of production volumes, accounting for all variables influencing the outcome, prompt revision of plans, and communication of production volume changes to customers Installation of anti‑seal equipment Permit to work to trained personnel only Equipment insurance, purchase of equipment only with a long warranty period Compulsory availability of a spare parts kit at the site, in particular for load‑bearing structure parts and fasteners
Financial and market risks — risks related to the financial position, liquidity and solvency of the Company
Changes in market conditions Sharp decrease in the selling price of products due to the prevailing position of foreign suppliers of salmon species on the Russian market Insufficient funding Currency and interest rate fluctuations Risks of cross‑border payments	Reduced dependence on foreign suppliers Vertical integration efforts and establishment of production facilities in the Russian Federation Budget planning, taking into account possible increases in the cost of basic materials as well as exchange rate forecasts Attraction of fixed‑income financing instruments
Commercial risks — risks associated with the failure of suppliers of raw materials and supplies to fulfil their obligations
Breach of or default on obligations by suppliers of raw materials and supplies	Penalty clauses in contracts with suppliers Pre‑defined alternative list of suppliers

Risk Map

The Company's Risk Map is put together by conducting polling surveys and/or one‑on‑one interviews with each risk owner. It includes a description of all potential risks, an evaluation of their severity and likelihood of occurrence, management strategies, and identification of who is in charge of mitigating the risk and/or its consequences. The risk map is updated regularly to reflect changing operations and external factors.

Plans to Improve the Risk Management and Internal Control System

To analyse the Company's current internal documents regulating the financial and economic activities of the Company in accordance with the Internal Control Regulations.
To prepare proposals for updating these documents.
To monitor the implementation of internal control procedures.

The Audit Committee of the Board regularly reviews the Company's existing risk map and conducts interviews with key risk owners.

The Audit Committee of the Board of Directors highly appreciates the work of the Company's management in risk management.

Conference hall — **Promotion of Risk Management Culture within the Company**

Independent auditors

The General Meeting of Shareholders approves independent auditing companies with no property interests in the Company, its management and shareholders in order to carry out an annual audit of the Company's RAS accounting (financial) statements and INARCTICA Group's IFRS consolidated financial statements.

Business Solutions and Technologies JSC (OGRN: 1027700425444) was approved as the auditor to audit the Company's consolidated financial statements for 2023 and the Company's RAS financial statements for 2023.

How Independent Auditors are Selected

The Company makes sure that an independent auditor is a company with impeccable professional reputation, experienced and qualified staff and high‑quality services.

Steps in the selection process for candidates among auditing organisations:

Collection of commercial proposals from auditing organisations
Preliminary review of the received proposals by the Audit Committee of the Board of Directors
Audit Committee's proposal to the Board of Directors to recommend to the General Meeting of Shareholders the selected audit companies to serve as the Company's auditors and the fees payable for their services
Decision of the Board of Directors to nominate the Company's auditor (auditing organisation) for approval by the General Meeting of Shareholders
Approval of auditor nominees by the General Meeting of Shareholders of the Company

During regular in‑person meetings, the Audit Committee of the Board of Directors reviews reports from the audit organisation on the results of its audits of the Company's IFRS financial statements.

This procedure helps the Audit Committee of the Board of Directors to form an opinion on the quality of the auditors' work.

Remuneration of independent auditors for 2023

Company	Amount of remuneration (excl. VAT), RUB
Business Solutions and Technologies Joint Stock Company		14,760,000

Internal Audit

The Internal Audit Service is a structural subdivision of INARCTICA PJSC.

Its activity is regulated by the legislation of the Russian Federation, the Company's Charter, decisions of the General Meeting of Shareholders, the Board of Directors, the Audit Committee of the Board of Directors, the Regulations on the Internal Audit Service, as well as orders, instructions and other local regulations of INARCTICA PJSC.

The Internal Audit Service reports functionally to the Board of Directors of the Company and administratively to the Chief Executive Officer of the Company. The Internal Audit Service's operations are overseen by the Head of the Internal Audit Service.

The purpose of internal audit is to provide independent and objective assurance to the Board of Directors / Audit Committee of the Board of Directors and the executive bodies of the Company that the Company has adequate internal control, risk management and corporate governance systems in place to ensure that:

Operations are efficient, cost‑effective and productive
Requirements of the legislation of the Russian Federation, as well as the decisions of the governing bodies and organisational and administrative documents of the Company are complied with
Misconduct by Company employees and third parties in relation to Company assets can be prevented
Statements of any kind are accurate, complete and timely prepared

The Internal Audit Service performs the following functions:

Planning, organising and conducting internal audits of business processes (lines of business), business functions, projects, plans, programmes, structural and separate units and other inspections of the Company
Checking compliance of the Company with legislation, industry regulations, internal guidelines, standards and other internal documents, and contractual obligations
Reviewing the efficiency, cost‑effectiveness and productivity of the Company's operations
Checking the accuracy and reliability of the accounting (financial) and management accounts
Ensuring the safeguarding of the Company's assets
Conducting audits, completing other assignments as instructed by the Board of Directors (Audit Committee) and/or the executive bodies of the Company on matters within the purview of internal audit
Communicating the results of audits to the Board of Directors (Audit Committee) and the Company's executive bodies, giving recommendations to eliminate violations and shortcomings identified during audits and proposals to upgrade the efficiency and effectiveness of internal control, risk management and corporate governance systems, as well as to improve the Company's operations
Monitoring the progress of corrective action plans to remedy breaches and deficiencies identified during audits and the application of recommendations and proposals to improve the Company's operations
Assessing whether the risk management and internal control system is effective
Assessing the quality of corporate governance in the Company

The Internal Audit Service's performance is assessed on a regular basis by the Audit Committee of the Company's Board of Directors.

Insider Information

The Company places a high priority on preventing the wrongful use of insider information.

The Regulations Insider Information in place at the Company stipulate that insider information includes information that the Company determines independently as such based on the provisions of Federal Law No. 224‑FZ on Combating Insider Information Misuse and Market Manipulation and on Amending Certain Legislative Acts of the Russian Federation dated 27 July 2010 and regulatory acts of the Bank of Russia with due regard for the specifics of the Company's operations, as well as regulate the rules for compiling lists of insiders, control measures for compliance with the insider information legislation, rules for handling insider information, insiders' transactions with the Company's financial instruments, and liability for the misuse of insider information.

The Company's Legal Department is the unit responsible for control over compliance with the requirements of Russian Federation legislation on combating misuse of insider information and market manipulation.

In accordance with the requests received from the trade organiser (Moscow Exchange), the Company sends it a list of its insiders on a monthly basis. In order to provide the trade organiser with the most up‑to‑date information on insiders, the Company regularly monitors changes that have occurred to persons/entities who have access to the Company's insider information.

Anti‑Corruption Management

The Company is committed to the principle of zero tolerance of corruption in all its forms and manifestations (including bribery, influence peddling and any other form of fraud).

This principle means that all associates of INARCTICA Group of companies are fully and unconditionally prohibited from engaging in corrupt activities, including intermediation, directly or through third parties, regardless of prevailing business practices in any given country.

For anti‑corruption purposes, the Company periodically does due diligence on its employees and counterparties as well as on individual projects, work, services, transactions and relationships.

A series of procedures are also put in place by the Company to avoid conflicts of interest. When a conflict of interest comes to light, management should decide on a precise course of action as soon as possible.

For more information on the anti‑corruption efforts, please see the Company's ESG Report 2023.

On 23 December 2022, the Board of Directors approved the Anti-Corruption Policy (Minutes No. 391 dated 26 December 2022) which aims to ensure that the Company operates in line with the requirements of anti-corruption legislation and high business standards, to build a uniform rejection of corruption in all forms and manifestations, to minimise the risks of involving Company employees in corruption activities and to identify and prevent cases of involvement of Company employees in such activities.

Hotline

The Company has an anti‑corruption hotline in place.

Any interested party may, in good faith, report any information or reasonable suspicion of an associate's involvement or attempted involvement in corrupt activities to the anti‑corruption hotline. All calls to the anti‑corruption hotline are guaranteed to be completely anonymous and confidential.

Within three working days of receipt, all incoming calls are investigated and confirmed by the Company's Security Service.

The following channels can be used to access the anti‑corruption hotline:

by email: stopcorruption@inarctica.com
by phone: 7 (495) 258-99-28.