MANAGEMENT REPORT

The types of activities performed by the Joint Stock Company “Brivais vilnis” (“the Company”) are processing and canning of fish and fish products, wholesale of food products, including fish, shellfish and mollusc, and other commercial activities classified nowhere else.

Year 2017 is the 26^th year of operation since the Company was transformed into a Joint Stock Company.

The Company is a leader in product quality, we do not use genetically modified raw materials, synthetic food additives and flavour enhancers in the production.

In 2017 the Company produced a total of 12.8 million cans of various types (159) of canned fish products, including 4.6 million cans of smoked sprats, there are also 2 types of fish preserves and 3 types of dried sprats produced. 13.1 million cans were sold for EUR 6.8 million that is 30% more compared to the previous year.

Impact on decrease of sales volumes of the Company had the economic embargo stated by the Russia, devaluation of the Ukrainian hryvnia, decline in purchasing power of the Transcaucasian and Central Asian countries, as well as was affected by the tough competition in the canned fish sales market in Europe and America.

The Company`s economic result for 2017 is a loss of EUR 1 122 260. 

The financial result of the Company in the tax year was affected by creation of doubtful account receivable in the amount of EUR 142 thousand and writhe-offs of receivables at a loss of EUR 233 thousand due to the impossibility of recovery.

Financial risks. The main financial risks related to the Company`s financial instruments are currency risk, interest rate risk, liquidity risk and credit risk.

Currency risk. Financial assets of the Company, subject to foreign currency risk include receivables. This is primarily due to the US dollar currency risk.

Interest rate risk. The Company is exposed to the interest rate risk mainly in relation to its short-term and long-term loans.

Credit risk. The Company is exposed to the credit risk through its trade receivables. The Company controls its credit risk by continuously assessing the credit history of customers and assigning credit terms on individual basis. In addition, the Company continuously controls the accounts receivables balances to minimize the possibility of bad debts.

Liquidity risk. The Company controls its liquidity risk through the bank credit granted and through the factoring.

At the end of reporting year, the Company`s liabilities exceed current assets by EUR 2 033 477, while short-term liabilities are less than the current assets by EUR 671 823. According to unaudited data, as at March 31, 2018, liabilities of the Company exceed current assets by EUR 2 191 508 and short-term liabilities are less than the current assets by EUR 628 292. As at December 31, 2017, the Company had a positive equity capital of EUR 1 619 438. Taking into account the above mentioned, the Board of the Company believes that the Company will be able to settle accounts with the short-term creditors in 2018 and there will be no liquidity problems. The Company`s goal in 2018 is to continue to work on additional sales market acquisition and to optimize the cost structure. At the same time, the Board believes that the work on acquisition in 2017 in Japan, China and Finland will allow to overcome economic and financial difficulties. The Company is also ready to increase export volumes in Ukraine and Central Asia as soon as the regions improve their economic situation and increase their purchasing power. Based on the above, the Company`s management believes that the presumption of continued operation is applicable to the preparation of this financial statement.

We are continuing to work on development of new product types, on optimization of the cost structure. We are planning to coordinate the cooperation with other canned fish producers to reduce costs related to the acquisition of external markets that until now have been significant for all fishing industry companies.

Electronic form of the Corporate Governance Report for 2017 is available on the website of “NASDAQ RIGA” www.nasdaqbaltic.com.

Arnolds Babris

Chairman of the Board