Pandora

Annual Report (ESEF) • Feb 9, 2022

Untitled Pandora A/S Havneholmen 17-19 1561 Copenhagen V Denmark CVR no.: 28505116 ANNUAL REPORT 2021 CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT 2021 Pandora is the world’s largest jewellery brand. Known by more consumers and crafting more jewellery than any other brand in the industry, we provide affordable luxury to consumers in more than 100 countries. Made from high-quality materials and with endless possibilities for personalisation, millions of people around the world cherish and collect Pandora to express who they are and what matters to them. OUR PURPOSE WE GIVE A VOICE TO PEOPLE’S LOVES CHAPTER TITLE CONTENTS THE BIG PICTURE 5 At a glance 6 Letter to the shareholders 7 Executive summary 9 Highlights 2021 11 Five-year summary 12 Financial guidance 2022 4 15 OUR BUSINESS 16 Our business model 17 Our Phoenix strategy 21 Industry trends 24 People and sustainability 29 Managing risks 33 CORPORATE GOVERNANCE 34 Corporate governance 38 Board of Directors 40 Executive Leadership Team 42 Shareholder information 49 FINANCIAL STATEMENTS 50 Consolidated nancial statements 94 Management statement 95 Independent auditor's report 44 FINANCIAL REVIEW 45 Group performance 47 Group protability 48 Balance sheet and cash ow Annual Report Our Annual Report is our detailed annual disclosure relating to company performance, strategy, corporate governance and financial results. The consolidated financial statements represent an extract of Pandora’s complete Annual Report. The financial statements of the Parent Company is an integrated part of the full Annual Report and available at pandoragroup.com/investor/ news-and-reports/annual-reports and at cvr.dk following approv- al at the Annual General Meeting. Sustainability Report Our Sustainability Report provides detailed information and data on sustainability and our responsible business behaviour. The Sustainability Report serves as our annual Communication on Progress to the United Nations Global Compact and as such is our disclosure in accordance with sections 99(a), 99(b) and 107(d) of the Danish Financial Statements Act. The report is available at pandoragroup.com/sustainability/resources/sustainability-reports. Remuneration Report Our Remuneration Report includes full disclosure of Board and Executive Management remuneration. The report is available at pandoragroup.com/investor/corporate-governance/remunera- tion-reports. 49 FINANCIAL STATEMENTS 50 Consolidated nancial statements 94 Management statement 95 Independent auditor's report 99 Parent Company nancial statements Annual Report Our Annual Report is our detailed annual disclosure relating to company performance, strategy, corporate governance and financial results. THE BIG PICTURE 5 At a glance 6 Letter to the shareholders 7 Executive summary 9 Highlights 2021 11 Five-year summary 12 Financial guidance 2022 ANNUAL REPORT 2021 AT A GLANCE NO. 1 JEWELLERY BRAND IN THE WORLD 102 million pieces of jewellery sold recycled silver and gold 54% online share of revenue 26% million visits to our physical and online stores 670+ employees on average 27,000 DKK billion revenue 23.4 points of sale in more than 100 countries 6,800 @PandoraJewelry @theocialpandora Pandora-a-s @theocialpandora @Pandora_Corp @theocialpandora pandoragroup.com ANNUAL REPORT 2021 THE BIG PICTURE  We now have a high-performing online business, our product portfolio is slimmer and more productive, we have increased the use of data and analyses across the business, and our organisation is stronger, flatter and faster. Pandora is now ready to embark on the third chapter: a chapter of growth. Our new Phoenix strategy is designed to drive sustainable top and bottom-line growth by leveraging our key assets: strong brand awareness, a global distribution network and industry-leading manufacturing capabilities. We see significant, untapped growth potential within our core business. We have defined four pillars that will be driving our growth. The pillars are rooted in a deep understanding of who we want to interact with, what matters to them and then developing inspiring solutions for all touchpoints. We have set an ambitious plan for our company. We want Pandora to become the largest and most desirable brand in the affordable jewellery market. And we want to lead on sustainability in our industry to become a low-carbon and circular business that is also inclusive, diverse and fair. We are proud of our achievements in 2021 – not least considering the challenging circumstances during the pandemic – and would like to thank all Pandora’s employees for their commitment. Our combined efforts have changed the company’s course and positioned us well as we enter this new chapter of growth. We would also like to thank our loyal customers and shareholders for their continued trust in Pandora. LETTER TO THE SHAREHOLDERS A NEW CHAPTER OF GROWTH PETER A. RUZICKA Chair of the Board of Directors ALEXANDER LACIK President & CEO 2021 was a landmark year for Pandora. We completed our two-year turnaround, laid out a path for the future with a new growth strategy and ended the year with record-high revenue. We are now ready to write a new chapter in the story of Pandora. In the first chapter of Pandora’s story, our founders introduced our original charms and bracelet concept, Moments, and focused strongly on product and manufacturing capabilities. In the second chapter, Pandora built an extensive and profitable global retail network and became the world’s largest jewellery maker. Towards the end of the second chapter, growth started to decline and in late 2018 we initiated Programme NOW – a comprehensive two-year turnaround programme that has revitalised the brand and fundament ally changed how we operate Pandora. ANNUAL REPORT 2021 THE BIG PICTURE  Style and Upstream Innovation Read more about segment and revenue information in note 2.1 2021 was a milestone year for Pandora – another year where we took significant steps forward. We successfully completed our two-year turnaround, called Programme NOW. And we launched our new strategy, Phoenix, charting a new chapter of sustainable growth in the years ahead. In 2021, Pandora delivered its highest ever revenue at DKK 23.4 billion. This corresponds to organic revenue growth of 23% compared to 2020. Exiting 2021, we saw broad-based growth across markets in Q4 and total sell-out reached the highest level ever. Throughout 2021, growth was supported by an extraordinarily strong year in our largest market, the US; growth in our core product platform, Moments; and con- tinued solid performance in our online channel. Furthermore, despite COVID-19 and owing to significant mitigating actions, our production in Thailand and our ability to meet demand were not significantly impacted by the pandemic. EXECUTIVE SUMMARY BACK ON A GROWTH TRACK Growing the core and fuelling with more In 2021, our Global Business Unit, Moments and Collabs rep- resented 71% of total revenue and delivered sell-out growth of 20%. Growing Pandora Moments is a key pillar in the Phoenix strategy. The performance of Moments was supported by the launch of Wearing Occasions, such as bag holders and key rings. Our second-largest platform, Pandora Timeless, represented 17% of total revenue in 2021, delivering sell-out growth of 19%. Timeless is part of Pandora’s Global Business Unit Style and Upstream Innovation. In order to drive incremental revenue growth, "fuel with more", Pandora is launching new product platforms that are within or close to the existing core business. In 2021, we launched OUR CHANNELS Revenue, DKK, and share of revenue, % Pandora physical stores 9,945m 42% share of revenue Wholesale and third-party distribution 7,472m 32% share of revenue 71% 29% Pandora Brilliance, our first collection of lab-created diamond jewellery, as a pilot in the UK. The aim is to make Brilliance a new platform alongside Pandora Moments and Pandora Timeless by democratising diamonds. Pandora Brilliance will be sequentially rolled out globally from 2022. At the end of September, we relaunched Pandora ME, which targets a Generation Z mindset. The relaunch saw significant engagement on social media. Pandora ME accounted for 4% of revenue in Q4 2021. Digital investments continue to generate encouraging results Our online channel continued to deliver very strong results and almost doubled compared to 2019. Online sales account- ed for 26% of total revenue in 2021. Digital plays a key role in our new strategy, both as a foundation and a growth pillar. In most countries, our online store is the largest portal to our brand. Our new digital organisation delivers constant improve- ments to the customer experience. Tangibly, we note that on- line conversion continues to improve. We continue to expand our omnichannel features. There is strong consumer interest in Click & Collect in the US, which accounted for 11% of our US online sales in 2021. We recently rolled out Click & Collect in France, Italy, Germany, New Zealand, Canada and Australia. Read more about our new strategy, Phoenix, on page 17. Moments and Collabs Pandora online stores 5,977m 26% share of revenue OUR GLOBAL BUSINESS UNITS Share of revenue, % of total ANNUAL REPORT 2021 THE BIG PICTURE  Strong and broad-based underlying growth Our largest market, the US, saw extraordinary growth in 2021. Organic growth compared to 2020 was 58%. There were two principal drivers of growth. Firstly, the entire jewellery segment grew, aided by the stimulus packages introduced to support the economy during the COVID-19 pandemic and the reallocation of consumer spending away from travel and services towards gifting and discretionary goods. Secondly, Pandora outperformed the market, driven by a range of initiatives across online, stores, omnichannel and media. Pandora continues to see ample growth opportunities in the US in the mid-term, for example through higher brand awareness and network expansion, as presented at the Capital Markets Day. Our key markets in Europe were impacted by temporary store closures during the early part of 2021 due to COVID-19. As stores reopened, Pandora saw a strong rebound in these markets and delivered encouraging and positive growth in both Q3 and Q4. Performance in China, Australia and other Asian markets was significantly impacted by COVID-19. Like our key European markets, performance in Australia was positive when stores were open, indicating a healthy underlying business. Due to the continued and widespread COVID-19 restrictions during the second half of 2021, Pandora postponed its planned investment to transform its business in China. On average, the share of Pandora stores temporarily closed due to COVID-19 was 30% in Q1, 15% in Q2, 5% in Q3 and 3% in Q4. In addition to the temporary store closures, revenue was impacted by other types of COVID-19 restrictions im- posed by governments during the year, not least in China. Brand momentum remains strong Our strong brand momentum continued in 2021and Pandora maintained a leading brand position. Pandora’s global unaided brand awareness remained well ahead of the closest competi- tor, and we ranked number one in five out of seven key markets. Financial performance Total revenue reached DKK 23.4 billion, corresponding to revenue growth of 24% in local currency. The revenue growth was reflected in an increase in the EBIT margin from 20.4% in 2020 to 25.0%, demonstrating the operating leverage in our business model. In 2020, Pandora cautiously paused cash distribution to share- holders due to the pandemic. In 2021, Pandora resumed cash distributions. The distributions announced in 2021, including both dividends and share buybacks, totalled DKK 5.5 billion and were distributed to shareholders from May 2021 to February 2022. For 2022, the Board proposes a dividend of DKK 16 per share and a new share buyback programme of DKK 3.3 billion. Read more about our financial performance in our Financial review on page 44. US DKK 7,026m 30% 2020: DKK 4,506m 24% Italy DKK 2,443m 10% 2020: DKK 2,021m 11% Australia DKK 1,131m 5% 2020: DKK 1,120m 6% China DKK 1,126m 5% 2020: DKK 1,261m 7% Germany DKK 1,191m 5% 2020: DKK 1,014m 5% UK DKK 3,314m 14% 2020: DKK 2,960m 16% France DKK 1,122m 5% 2020: DKK 1,154m 6% OUR KEY MARKETS Share of revenue, % and DKK ANNUAL REPORT 2021 THE BIG PICTURE  Cutting emissions In September 2021, we announced that we will halve our greenhouse gas emissions across our own operations and entire value chain of suppliers and business partners by 2030. The target has been approved by the Science Based Targets initiative and is based on an extensive decarbonisation plan across Pandora’s business to align with the Paris Agreement and what climate science says is necessary to limit global warming to 1.5C. Pandora has also committed to net zero emissions across its entire value chain by 2040. Read more about our sustainability efforts on page 26. Towards growth Following a successful turnaround, we launched our new growth strategy, Phoenix, in May 2021. The strategy targets the significant untapped potential to grow Pandora’s existing business and attract new consumers to the brand. Phoenix is based on four growth pillars: brand, design, personalisation and core markets, and aims at delivering sustainable and profitable revenue growth. The revenue growth target for 2021-2023 is 6-8% per annum and an EBIT margin of 25-27% in 2023. Diamonds are for everyone With the goal of making diamond jewellery accessible to a wider audience, we launched Pandora Brilliance, a collection of sustainably lab-created diamond jewellery. Pandora’s diamonds are CarbonNeutral® certified and created using more than 60% renewable energy on average. We also announced that we will no longer use mined diamonds in our products. Lab-created diamonds are identical to mined diamonds, but created in a laboratory rather than extracted from a mine. The collection was initially test launched in the UK, with a sequential global roll-out to begin from 2022. Read more on page 20. New sustainability-linked loan In April 2021, we secured a new EUR 950 million credit facility with an interest rate linked to two of our 2025 sustainability goals: becoming carbon neutral in own operations and using only recycled silver and gold. The new loan is part of our liquidity reserve and connects our capital structure to our sustainability agenda. HIGHLIGHTS  ANNUAL REPORT 2021 THE BIG PICTURE  Pandora ME relaunch Pandora initially launched Pandora ME in late 2019. The collection has since been refined to specifically target Generation Z, and in October 2021 a relaunch was initiated with the aim to establish Pandora ME as a new platform. We have combined Generation Z’s love of music and fashion to inspire our fans, and the new collection includes many options for customisation, such as a variety of new metals, colours, mini dangles, link chain bracelets and necklaces. Pandora ME accounted for 4% of revenue in Q4 2021. Diversifying our global supply network To meet expected future demand and diversify our geographical footprint, Pandora announced plans to invest DKK 1 billion in new manufacturing capacity. We will build a new facility in Vietnam, capable of crafting 60 million pieces of jewellery annually. Additional capacity of around 20 million pieces will also be added close to one of our existing production sites in Thailand. This represents a total expansion of our capacity by around 60%. The new crafting facilities are expected to open by the end of 2023 in Thailand and by the end of 2024 in Vietnam. Plastic out Switching to low-carbon packaging is important to reduce our greenhouse gas emissions, and in 2021 we introduced new and improved bags and boxes across our stores and online. Without compromising on quality, the new packaging cuts emissions by more than 60%, and because it is made with fewer materials, it is also easier to recycle. Our carrier bags will no longer contain any plastic, and plastic content in jewellery boxes will be reduced by more than 75%. The new designs are ex- pected to reduce Pandora’s carbon footprint by 3,600 tCO 2 e per year, equivalent to the annual emissions of 800 cars or around 1% of Pandora’s total emissions. HIGHLIGHTS  THE BIG PICTURE  DKK million 2021 2020 2019 2018 2017 ,  Key nancial highlights Organic growth, % 23% 11% 8% 2% 11% Organic growth, % vs 2019 3 9% na na na na Sell-out growth, incl. temporarily closed stores, % 20% 12% 8% 4% 0% Sell-out growth, incl. temporarily closed stores, % vs 2019 3 7% na na na na Gross margin, % 4 761% 765% 774% 743% 745% EBIT margin, % 4 250% 204% 268% 282% 342% Consolidated income statement (reported) Revenue 23394 19009 21868 22806 22781 Earnings before interest, tax, depreciation and amortisation (EBITDA) 7838 4999 6148 7421 8505 Operating prot (EBIT) 5839 2684 3829 6431 7784 Net nancials 461 190 1 151 117 Net prot for the period 4160 1938 2945 5045 5768 Financial ratios Revenue growth, DKK, % 23% 13% 4% 0% 12% Revenue growth, local currency, % 24% 11% 6% 3% 15% Gross margin, % 761% 756% 727% 743% 745% EBITDA margin, % 335% 263% 281% 325% 373% EBIT margin, % 250% 141% 175% 282% 342% Eective tax rate, % 226% 223% 231% 234% 248% Equity ratio, % 38% 37% 24% 33% 37% NIBD to EBITDA excl. restructuring costs, x 04 05 11 08 06 Return on invested capital (ROIC), % 59% 25% 27% 53% 68% Cash conversion incl. lease payments, % 88% 183% 133% 86% 68% Net working capital, % of last 12 months revenue 50% 76% 13% 67% 88% DKK million 2021 2020 2019 2018 2017 ,  Stock ratios Total payout ratio (incl. share buyback), % 6 115% 65% 147% 104% 99% Dividend per share, proposed for the year, DKK 160  90 90 90 Dividend per share, paid, DKK 150  90 90 270 Earnings per share, basic, DKK 421 200 303 472 520 Earnings per share, diluted, DKK 417 199 301 470 518 Consolidated balance sheet Total assets 18542 19984 21571 19244 17428 Invested capital 9884 10540 14268 12071 11369 Net working capital 1181 1447 293 1536 2008 Net interest-bearing debt (NIBD) 2882 3151 9019 5652 4855 Equity 7001 7389 5249 6419 6514 Consolidated statement of cash ow Cash ow from operating activities 6228 5975 6775 6624 6606 Capital expenditure – total 641 491 822 1129 1388 Capital expenditure – property, plant and equipment 341 369 556 753 946 Free cash ow incl. lease payments 5137 4908 5075 5558 5294 Sustainability Scope 1, 2 and 3 emissions, mtCO 2 e 277450 266075 296777 na na Recycled silver and gold, total, % 8 54% 57% 60% na na Leadership gender ratio, female/male, % 9 2377 na na na na FIVE-YEAR SUMMARY 1 Figures have been restated to reect the adoption of IFRS 15. 2 Comparative gures have not been restated following the adoption of IFRS 16 Leases. 3 Revenue performance compared with 2020 was heavily distorted by COVID-19, as both years were impacted by store closures. Pandora has therefore added two supplementary growth KPIs vs 2019 to provide a cleaner view on the performance: Organic growth vs 2019 and Sell-out growth vs 2019. These two KPI's will be removed from 2022 onwards. 4 2019 and 2020 gures exclude Programme NOW restructuring costs. 5 For 2017, Invested capital and NIBD have been restated due to immaterial reclassications. Consequently, NIBD to EBITDA and ROIC have been recalculated. 6 Excluding sale of treasury shares amounting to DKK 1.8 billion in Q2 2020. 7 Within limited assurance scope, measured in mtCO 2 e (metric tons of carbon dioxide equivalent). The Scope 2 emissions are calculated as market-based emissions. 8 Within limited assurance scope. As a requirement of our sustainabili ty-linked credit facility, we have decided to report the actual percentage of our recycled silver and gold total. 9 Leaders from Vice President positions and up, incl. the Board. ANNUAL REPORT 2021 THE BIG PICTURE  FINANCIAL GUIDANCE 2022 10-20%, following the very strong growth in 2021. Pandora expects to continue outperforming the general US market – as has been the case for the last several quarters – and deliver organic growth in 2022 between high single-digit negative and slightly positive. It should be noted that if Pandora's US revenue declines by a high single-digit percentage in 2022, it still equals an organic growth CAGR in the low teens compared to 2019. Additionally, the low end of the 2022 guidance range assumes that COVID-19 will continue to impact performance negatively and mainly in Q1 (high single-digit percentage negative impact in Q1 2022, corresponding to a low single-digit percentage negative impact for the full year). This is obviously associated with uncertainty. As a global brand, Pandora’s financial performance is subject to changes in the macroeconomic environment, consumer behaviour as well as geopolitical unrest. Pandora sees greater uncertainty than usual around these factors in 2022. In addi- tion, the guidance for 2022 does not assume further material COVID-19 outbreaks later in 2022 or major disruptions in the supply chain. Sustainable and profitable growth to continue The Phoenix strategy aims to deliver sustainable and profit- able growth. And in 2021 Pandora delivered on that promise. In 2022 Pandora expects to continue the journey and deliver solid organic revenue growth – confirming that the company is back on the growth track. Pandora targets an organic growth of 3-6% and an EBIT margin of 25.0-25.5% in 2022. This includes expected headwinds when comparing to the unusually high US growth in 2021 and expect- ed negative impact from COVID-19, especially in Q1 2022. Given that the US constituted 30% of revenue in 2021 and given the unusually high growth in 2021, the guidance is based on certain assumptions about the growth in the over- all US jewellery market. The guidance is also based on certain assumptions about the COVID-19 impact in 2022. The key assumptions behind the organic growth is illustrated to the right. Revenue guidance Pandora’s guidance for 2022 is best understood by looking at the US and Rest of world separately. In 2022, Pandora assumes that the general US jewellery market will decline ORGANIC GROWTH GUIDANCE %-points approximations 2021 Actuals US Rest of world 2-4% sell-out growth, other and COVID-19 Network expansion 2022 Guidance Forward integra- tion Local currency growth Foreign exchange rates 2022 Revenue 23.4 DKK billion DKK billion 1-2% 3-6% 1% 4-7% 3% 25.0-25.7  ORGANIC GROWTH ASSUMPTIONS Directional and indicative 3% 6% COVID-19 Low single-digit negative impact No to very limited negative impact Pandora US Negative mid- to high single-digit Flat to slightly positive Pandora Rest of world Positive high single-digit Positive high single-digit ANNUAL REPORT 2021 THE BIG PICTURE  FOREIGN EXCHANGE AND COMMODITY ASSUMPTIONS AND IMPLICATIONS Average 2021 Average 2022 Financial impact 2022 Y-Y USD/DKK 629 667 THB/DKK 020 020 GBP/DKK 839 895 CNY/DKK 098 105 AUD/DKK 472 470 Silver/USD (per ounce) 211 249 Revenue (DKK million) Approx 700 EBIT (DKK million) Approx 100 EBIT margin (FX) Approx 05% EBIT margin (Commodities) Approx 10% EBIT MARGIN GUIDANCE BRIDGE %-points approximations Write-o IT & larger bonus pool Government support & rent concession 2021 Actuals 25.0% -0.9% 0.4% 2021 Actuals adjusted 24.5% Operating leverage 1.0-1.5% Foreign exchange 0.5% Commodities -1.0% 2022 Guidance 25.0-25.5% Profitability guidance Pandora aims to continue to expand its EBIT margin and targets an EBIT margin of 25.0-25.5% in 2022. The building blocks in the guidance are illustrated in the bridge. In 2021, a number of non-recurring factors positively impacted the EBIT margin by 0.5%. Pandora received DKK 152 million in government support and DKK 56 million in rent concessions, positively impacting the EBIT margin by 0.9%. This was partly offset by non-recurring costs of around DKK 100 million related to write-off of IT assets and a larger bonus pool in Q4 2021 dragging down the EBIT margin by 0.4%. Adjusting for these non-recurring impacts, the underlying EBIT margin in 2021 was 24.5%. The margin expansion in 2022 is driven by operating leverage. Where Pandora will land within the 25.0-25.5% range, will depend primarily on the revenue performance. As in prior years and in line with normal seasonality, Q4 is expected to be the most profitable quarter of the year by far. Current foreign exchange rates, if unchanged, are estimated to favourably impact the EBIT margin in 2022 by approximately 0.5% compared to 2021. This is offset by a negative impact from commodities, mainly silver prices, of approximately -1.0%. 2022 Guidance – other parameters CAPEX for 2022 is expected to be around 6% of revenue (2021 actual: 3% of revenue). The increase is among others due to opening of new stores and expansion of manufac- turing capacity. The guidance for the store network devel- opment is net 50-100 concept store openings (2021 actual: 71 net closures) while other points of sale is expected to increase by net 50-75. The effective tax rate is expected to be 23-24%, up from 22-23% in prior years. The increase is related to among others increased withholding taxes on dividends upstreamed to the Parent Company and non-deductible expenses related to China and Panama. 2023 targets Pandora reconfirms its targets communicated at the Capital Markets Day in September 2021. Pandora targets organic growth of 5-7% CAGR from 2021 to 2023 and 25-27% EBIT margin in 2023. As a consequence, the absolute revenue target in 2023 is raised from DKK 24.8-26.2 billion to DKK 27.0-28.1 billion. Capital structure policy and cash distribution At the end of December 2021 and following another year of strong cash generation, Pandora’s leverage was only 0.4x NIBD to EBITDA, below our capital structure policy of 0.5-1.5x. Dur- ing 2021, Pandora paid extraordinary dividends of total DKK 15 per share. In addition, from 5 May 2021 to 4 February 2022, Pandora bought back 4.8 million shares at an average price of around DKK 829 equivalent to a total value of DKK 4.0 billion. Based on the strong results for 2021, Pandora continues distributions to shareholders with a proposed dividend of DKK 16 per share and a new share buyback programme of DKK 3.3 billion. Cash distribution to the shareholders is, by law, limited to the amount of the free reserves in the Parent Company. As of 31 December 2021, free reserves in the Parent Company amounted to DKK 7.5 billion. Disclaimer: the guidance contains forward-looking statements, which include esti- mates of nancial performance and targets. These statements are not guarantees of future performance and involve certain risks and uncertainties. Therefore, actual future results and trends may dier materially from what is forecast in this report due to a variety of factors, please also refer to the full disclaimer on page 93. ANNUAL REPORT 2021 THE BIG PICTURE  CUSTOMER The Pandora brand is accessible to people at all stages of life, and there is a fairly even split across age groups. In the coming years, Generation Z and Millennials are expected to be key growth drivers representing more than 60% of personal luxury goods consumption by 2026, so Pandora is increasing its investments in this target group. We already enjoy a fairly strong position among women in the 18-34 age bracket, who represent 44% of Pandora owners today. Throughout history, humankind has shared feelings of happiness, love, pride and belonging. This need for self- expression lies at the heart of connecting with our partners, friends, family and many others, and it is the essence of our jewellery. That is why Pandora is a story about touching the lives of hundreds of millions of people. Every day, people express who they are and what matters to them with their Pandora jewellery. People of all backgrounds buy Pandora jewellery. In fact, it is not possible to define a typical customer by age, income bracket or other demographics, but rather a desire to express emotions for passions, places and people through their jewellery. If we look at our key markets, a Pandora customer generally owns more than ten pieces of Pandora jewellery. Most Pandora wearers are women, but more than half of our customers are in fact men who buy jewellery as gifts for their loved ones. Research shows that women often influence the choice of gifts. Around half of presents are bought after a ‘hint’ from a woman. THE PANDORA "I am wearing jewellery that represents me and what I want to give to the world. My beloved Queen Bee charm symbolises being the queen in my own life and standing tall in who I am." "I treasure how I can express myself through Pandora. It symbolises me. My ‘Wonder Woman’ engraving makes me feel strong and reminds me to keep dreaming big and stay true to myself." DESTINEE Pandora wearer for 3 years REBEKAH Pandora wearer for 18 years STORY ANNUAL REPORT 2021 STORY OUR BUSINESS 16 Our business model 17 Our Phoenix strategy 21 Industry trends 24 People and sustainability 29 Managing risks ANNUAL REPORT 2021 OUR BUSINESS MODEL Natural resources: Raw materials and energy Community: Employees and stakeholder engagement Innovation: Data and design Manufacturing: Crafting facilities Supply chain: Supplier partnering Financial: Cash flow Natural resources: Recycling, emissions and waste Community: Job creation and tax contribution Innovation: Relevant and personalised products Manufacturing: Crafting at scale Supply chain: Sustainable supply chain Financial: Shareholder returns INPUT BUSINESS ACTIVITIES OUTPUT Crafting at scale Strong marketing and brand Omnichannel retail operations Data-driven design Responsible sourcing Ecient distribution OUTCOME Affordable luxury with sustainability integrated from source to sale Industry-leading profitable growth Every day, millions of people express who they are and what matters to them with their Pandora jewellery. Whether it is a display of friendship or romance, or a love for art, gardening or our planet. Our jewellery is a way to show these loves. That is our purpose: We give a voice to people’s loves. ANNUAL REPORT 2021 OUR BUSINESS  In May 2021, Pandora completed its two-year turnaround programme, Programme NOW, and introduced a new growth strategy, Phoenix. Programme NOW has stabilised Pandora’s top line while maintaining our industry-leading profitability. The programme has strengthened the foundation of Pandora and continues to do so. Phoenix builds on our strong foundation and centers on the significant untapped opportunities in Pandora’s core busi- ness. The gross list of opportunities is rich and we have delib- erately prioritised the most important ones to stay focused. The strategy has four pillars aiming at delivering sustainable and profitable revenue growth: brand, design, personalisa- tion and core markets. Strong foundation To succeed with our strategy, we rely on our strong foundation: People — We work as a world-class team leveraging our global presence. Our operating model enables us to deliver a strong and consistent customer shopping experience while we constantly refine our ability to work as one global company with one brand expression, shared processes and clear roles. We strive to create a healthy performance culture powered by innovative digital solutions. Read more about people on page 24. Digitalisation — The solid digital foundation we are building will enable us to deliver on our strategy. This includes our new digital powerhouse in Copenhagen, more use of data and advanced analytics in everything we do, modern IT solutions, and many other aspects of digitalising our business. Sustainability — We believe high-quality jewellery, strong business performance and high ethical standards go hand in hand, and we craft our jewellery with respect for resources, environment and people. Our ambition is to be an industry leader in sustainability as we strive to become a low-carbon and circular business that is also inclusive, diverse and fair with a positive impact across our entire supply chain. Read more about sustainability on page 26. Phoenix builds on our strong foundation and is focused on the significant untapped opportunities in Pandora’s core business. OUR PHOENIX STRATEGY ANNUAL REPORT 2021 OUR BUSINESS  Excellence — We will continue to improve our operational excellence, leveraging our profitable store network while at the same time continuing the cost-conscious mindset which we demonstrated through Programme NOW. Scale — Pandora is the largest jewellery manufacturer in the world, and we will continue to strengthen this part of our organisation to benefit from our scale. Through an integrated and sustainable supply base we will enable consumer-centric, innovative products while at the same time driving continu- ous optimisation of cost, quality and service. Growth pillar 1: Brand Pandora is a global affordable luxury brand that enjoys a high level of consumer awareness, strong brand equity, and a loyal customer base. Our global brand tracker surveys show that consumer perception mirrors our brand promise, and Pandora scores higher than category average on key attributes that drive brand desire, such as “help me to express my personality”. To ensure that Pandora also wins the hearts of the new generations, we will continue our efforts to increase brand desirability. We use behavioural science, data analytics and social listening to understand our consumers, as we aim to create engaging, authentic and culturally relevant brand experiences across all touchpoints, including products, campaigns, stores, selling ceremony, online and more. We have increased our media investments significantly in the last three years, and we will continue to invest at a competitive level to maintain brand awareness leadership in today’s complex and fragmented media landscape. Moments and Collabs Pandora Moments, home of our iconic snake chain bracelet and more than 12 different jewellery themes, is the core of our business and allows for self-expression, modern story- telling and collectability. We also collaborate with well-known brands to create jewellery with characters and icons from universes like Harry Potter, Star Wars (TM) and Disney. In total, Moments and Collabs accounts for 71% of revenue. Style and Upstream Innovation To fuel our brand with incremental growth, we offer our consumers additional collections. The Pandora product universe The elegant designs from Pandora Timeless (17% of revenue) have a modern twist and include Pandora Timeless Wish with its wishbone motifs, and the distinct mesh bracelets from Pandora Reflexions. Another collection is Pandora Signature (9% of revenue), character- ised by the Pandora logo, pavé, heart motifs and geometric linear beauty. Pandora ME (3% of revenue) pays tribute to a Generation Z mindset in a uniquely bold and customisable link chain design and styling accents to reflect every side of your personality. Pandora Brilliance (0.2% of revenue) seeks to democratise diamonds by using sustainably lab-created diamonds elevated in designs of floating and unique shapes lending a stand-alone luxurious expression. ANNUAL REPORT 2021 OUR BUSINESS  testing a new store concept to support further personalisation. The first three stores under the new concept were launched for testing in the UK, Italy and China in late 2021. Read more about our omnichannel efforts on page 32. Growth pillar 4: Core markets Pandora sees ample opportunities to grow its core markets. The highest potential for growth is in the US and China, where the network footprint is underpenetrated. Additionally, Growth pillar 2: Design Pandora has three clear design priorities: drive the core (Moments), fuel the brand with more platforms, and establish dedicated support models for each platform. Pandora’s original charms and bracelet offering, Moments, has formed the basis for the company’s success over the past two decades, and today Moments and Collabs jewellery accounts for 71% of total revenue. Pandora sees an opportunity to con- tinue growing the Moments business by ensuring a strong pipe- line of innovation behind charms and charms carriers, person- alisation and collaborations. Combined with commercial focus and visibility this will ensure we build on our core strength. To fuel the brand with more, Pandora will add new product platforms to its assortment, such as Pandora ME and Pandora Brilliance. These new brand universes will be designed to target specific consumer segments, and we view them as low- risk opportunities. For all new platforms, the aim is to drive incremental growth and reach at least 5% of revenue. When going to market, Pandora will introduce new platforms in steps to test, learn and adjust before potentially scaling up. Both our core business and our new platforms will have dedicat- ed support along the full value chain, from creation to purchase. Rather than leaving new products a few weeks after launch, we will continue to leverage their potential across the year. Growth pillar 3: Personalisation One of our key strengths at Pandora is our direct relationship to millions of consumers. This connection provides rich insights that can help the company offer a better and more personalised service throughout the whole customer journey. The aim is to provide a more relevant and customised omnichannel shopping experience across stores and online. The company is currently OUR GLOBAL BUSINESS UNITS the Pandora brand is not as strong as in the UK, Italy and Australia, and we see potential to drive revenue growth through higher brand awareness. The long-term ambition is to double revenue in the US and triple revenue in China using 2019 as a baseline. Markets like France and Germany also represent opportunities for growth, as brand awareness is also lower in these markets than in the UK, Italy and Australia. Read more about our focus on the US and China on page 23. Style and Upstream Innovation Share of revenue 2020: 29% 29% Moments and Collabs Share of revenue 2020: 71% 71% ANNUAL REPORT 2021 OUR BUSINESS  They have the same optical, chemical, thermal and physical characteristics and are graded by the same standards known as the 4Cs – cut, colour, clarity and carat – before being set within the Pandora Brilliance collection. Pandora Brilliance was initially launched in the UK in order to test and learn. The test proved to be important and resulted in a range of adjustments to the go-to-market model for Pandora Brilliance. In November 2021 it was decided to initiate a step-wise global launch from 2022. The aim is to reach minimum 5% of global revenue and establish Pandora Brilliance as a new collection for the company alongside Pandora Moments, Pandora Timeless, Pandora Signature and Pandora ME. Pandora’s diamonds are CarbonNeutral® certified and created using more than 60% renewable energy on average. We aim to reach 100% when we begin to sequentially roll out globally from 2022. piece collection, including rings, pendant and necklaces, bracelets, open bangles and earrings of the energy used to create the lab-created diamonds on average comes from renewable sources 36 +60% NOT JUST FOREVER BUT FOR EVERYONE DIAMONDS ARE In 2021, Pandora introduced Pandora Brilliance, a jewellery collection featuring lab-created diamonds. The 36-piece collection includes rings, pendant and necklaces, bracelets, open bangles and earrings, each carrying a solitaire lab- created diamond hand-set within sterling silver, solid 14K yellow gold or solid 14K white gold. With Pandora Brilliance, Pandora aims to make diamond jewellery accessible to a wider audience by offering affordable, sustainably created products. “The use of lab-created diamonds is new territory for Pandora. They are as much symbols of innovation and progress as enduring beauty, and the collection is testament to our ongoing and ambitious sustainability agenda. Diamonds are not only forever, but for everyone,” says Stephen Fairchild, Chief Product Officer. Lab-created diamonds are identical to mined diamonds but created in a laboratory rather than extracted from a mine. STORY ANNUAL REPORT 2021 STORY In the last decade, the global jewellery market has grown 4% per annum 1 to a total forecasted value of more than DKK 2,000 billion in 2021. The market remains highly fragmented, and although global brands are grow- ing faster than the overall market, they still make up a relatively small share. The business landscape is currently undergoing dramatic changes, some of which have been accelerated by COVID-19. Four major industry trends are of particular relevance to our Phoenix strategy. 1 Euromonitor data 2009-2019 – weighted market development with Pandora sales for top-10 markets. INDUSTRY TRENDS IN TIMES OF CHANGE TREND Data-driven personalisation One of the fundamental shifts in consumer behaviour is the demand for personalised products, services and interactions. As an example, 70% of consumers expect companies to deliver personalised interactions. In recent years, global brands have implemented more personalisation at consumer touchpoints across physical and online channels. Investments in machine learning and data analytics to increase the relevance of cus- tomer interactions are paying off. PANDORA’S RESPONSE Pandora wants to create a highly personalised experience for shoppers across channels. One important ingredient to be able to do that is data. In 2020, we ran a first pilot on personalised newsletters and banners to analyse the impact on our customers. In 2021, we scaled our personalised newsletter to eight key markets (the US, Australia, France, Germany, Italy, the UK, the Netherlands and Poland), and we started onboarding Spain in Q4 2021. In 2021, we sent 65 million emails with personalised product recommendations. The click- to-open rate increased by 50% compared to our standardised newsletters. PANDORA’S RESPONSE We have invested significantly in digital capabilities in recent years. We have established a strong Digital Hub with talent from around the world, and we are moving our online stores to a new and unified architecture and code base, which will make them easier to upgrade. Many of the digital initiatives we developed in response to COVID-19 have proven successful and will become permanent features. In 2021, visitors to pandora.net were 47% more likely to buy, if they used the Virtual Try-On feature. Pandora will continue to enhance the digital experience with new features such as an upgraded gift finder, a Pandora ME bracelet builder, online engraving, and continued roll-out of Click & Collect. TREND Acceleration of e-commerce COVID-19 has accelerated the ongoing shift to digital as more consumers choose to shop from home. In 2021, online jewellery retail sales increased by 9% globally. Brands responded with digital innovations to bring the in-store experience online, such as virtual fitting rooms aided by augmented reality and online shopping events. It is believed this trend will continue: 50% of customers prefer flexible shipping and fulfilment options such as Click & Collect. Four major industry trends are of particular relevance to our Phoenix strategy. ANNUAL REPORT 2021 OUR BUSINESS  TREND Running the business, sustainably Consumers are increasingly willing to change their purchasing habits to reduce environmental impact, and brands must embrace sustainability to win the trust of younger consumers. Purchases of fine jewellery influenced by sustainability considerations are expected to increase significantly over the coming years. The COVID-19 pandemic has arguably generated even greater interest in social responsibility initiatives, notably related to safeguarding the health and safety of customers, employees and local communities. PANDORA’S RESPONSE Pandora has taken an industry lead by demonstrating how sustainability can be integrated across all activities, from source to sale. We have set ambitious targets to become a low-carbon and circular business that is also inclusive, diverse and fair. We also continue our partnership with UNICEF to support their work with children, especially girls, around the world through learning and skills development, rights awareness and gender equality activities. In 2021, we received the highest ranking in MSCI's annual sustainability rating for the sixth consecutive year. Read more about our sustainability efforts on page 26. PANDORA’S RESPONSE Pandora has more than 27 million store transactions yearly, and physical retail remains central to meet our customers’ shopping preferences. In 2021, we redeveloped our selling ceremony to focus not only on the physical store, but also online. In addition, we trained our teams to support new collections such as Pandora ME and, in the UK, Pandora Brilliance. We have launched new and advanced in-store tech, providing store colleagues with more mobile points of sale, including digital queuing management systems to benefit an efficient customer journey. To further drive traffic and conversion, we are developing a new store concept, and late 2021 we started testing a pilot in Italy, the UK and China. We have also installed engraving machines in most of our stores in North America to enable even more personalised jewellery. Read more about our omnichannel initiatives on page 32. TREND Repurposing store space The high street environment continues to change and has also had to adapt to social distancing and safety guidelines due to COVID-19. Customers have become more purposeful when visiting stores, leading to a decrease in shopping traffic, less patience for queues, and higher demand for an efficient experience. While there has been a notable shift to online shopping due to COVID-19, physical retail is expected to continue to play a significant role in the way consumers shop, and the pandemic could be a catalyst for change. For example, brands experiment with creating modular spaces that can be used for retail as well as events. ANNUAL REPORT 2021 OUR BUSINESS  CORE MARKETS To grow Pandora in China, the world’s largest jewellery market, we have a comprehensive two-phase plan. First, Pandora will solidify the brand by establishing the core proposition of collectability, affordability and self- expression. This work involves many areas of the business, including a redesign of our marketing communication to make it more relevant, a transformation of our customer experience online and offline to make it more meaningful, and an optimisation of our product assortment and commercial calendar to better engage Chinese consumers. As the first phase gains traction, we will launch the second phase of growing our store network. Both the US and China plans have a common, key element: our people. Having the right teams in our markets and supporting functions is critical to fuel our ambitions. We have therefore been investing in recruitment and internal development to bring on board and retain world-class talent. The Phoenix strategy identifies significant growth opportu- nities for Pandora. We are focused on the core markets and our long-term ambition is to double the business in the US and triple the business in China versus 2019. Pandora’s position in these two markets is very different, and we have a tailored plan for each market. To unlock our full potential in the US, we will fuel brand momentum, enhance product offering, drive strategic network expansion, and build out a superior omnichannel journey and fulfilment through a more cohesive presence. We want to create longer-lasting relationships with both existing and new customers, with particular focus on Generation Z. Pandora is also investing in the product offering, optimising assortment to be relevant to the US consumer. We are expanding our store network in areas where our presence and awareness are low. Lastly, advancing and enhancing our new omnichannel features continues to be a priority in the US. GROWING STORY ANNUAL REPORT 2021 STORY PEOPLE AND SUSTAINABILITY Innovative & agile organisation Since 2020, we have redefined the way Pandora operates and built an organisation that balances art and science with the capabilities to deliver results. As the glue across our value chain, we have set up two Global Business Units responsi- ble for developing and marketing our products. This helps us base product decisions on consumer insights and data. To bring leadership closer to customers and ensure strong execution, we have flattened our organisation and connected our Global Office directly to each of our nine trading clusters. We have also transformed our supply organisation to align with the new Global Business Units and increase speed and agility. To accelerate our digitalisation journey, we have es- tablished a powerful Digital Hub. Building an agile organisation, cultivating top talent and a healthy performance culture and creating an industry-leading sustainability position all help drive future growth. World-class talent The talent we put into the organisation is just as important as the structure. This is why we want to drive world-class talents to perform and grow their careers and future-proof our performance. Over the past two years, we have undertaken a massive retooling of Pandora and successfully attracted talent from across the global jewellery industry and leading global com- panies. We welcomed more than 700 new office colleagues in 2021. We also enrolled 170 top leaders on our new Chief Talent Officer Programme to strengthen their development and create a solid succession pipeline for the years to come. office hires in 2021 top leaders enrolled on our new Chief Talent Officer Programme 700+ 170 Leveraging synergies across a combined people and sustainability agenda, our work is focused on five key areas, underpinned by an advanced digital platform. FIVE INTEGRATED PEOPLE AND SUSTAINABILITY PRIORITIES Innovative & agile organisation World-class talent Healthy performance culture Empowering & transformational leadership Sustainability leader Digital platform ANNUAL REPORT 2021 OUR BUSINESS  Empowering & transformational leadership To drive transformational and courageous global leaders who inspire and empower their colleagues, we have profes- sionalised our leadership standards. Based on this, we will launch our first global leadership development programme in early 2022. To track and guide leadership development, we have in- troduced Leadership Effectiveness Score as another core company KPI. In 2021, we scored 8 out of 10, which is an especially strong result considering the significant changes to the company’s leadership over the past two years. An employee survey also showed a strong understanding of the new long-term direction for Pandora, scoring 8 out of 10 on whether the new strategy and values have been ’well communicated to me’. in employee understanding of new strategy 8/10 Employee Net Promoter Score 38% Leadership Effectiveness Score 8/10 Healthy performance culture To foster a healthy working environment that empowers our people to deliver, we have redefined our way of working globally. In 2021, we launched a new set of growth-oriented company values: We Dream, We Dare, We Care, We Deliver. We have introduced a consistent approach to goal-setting and performance evaluation that aligns with our new strat- egy and values. Combined with incentive programmes that drive shareholder value, we now have a complete framework for a healthy performance culture. To track how this translates into employee advocacy, we have set Employee Net Promoter Score, a measure of employee sentiment, as a core KPI for the company. In 2021, our Em- ployee Net Promoter Score averaged 38%, which is satisfac- tory given the many changes and transformation initiatives during the year. GLOBAL PEOPLE FOOTPRINT JOB TYPE 45% Manufacturing 45% Retail 9% Office 1% Distribution GENDER 76% Female 24% Male TENURE 36% 0–1 yrs 13% 1–3 yrs 22% 3–5 yrs 29% +5 yrs ANNUAL REPORT 2021 OUR BUSINESS  Sustainability leader As part of our Phoenix growth strategy, we have set out to take industry leadership in sustainability and be a positive force for change. Our work is based on recognised inter- national standards and tools, such as the United Nations Sustainable Development Goals, the United Nations Guiding Principles on Business and Human Rights, and the Paris Agreement on Climate Change. We work on three strategic priorities within sustainability, and in 2021 we set new and increased ambitions for each area. SUSTAINABILITY PILLAR 1: LOWCARBON BUSINESS Transitioning to a low-carbon economy is now a major, global driver of change in society and business, and in 2020, Pandora committed to become carbon neutral in its own operations by 2025. In 2021, Pandora increased this ambition and announced a commitment to cut its emissions by 50% across its own operations and entire value chain of suppliers and business partners by 2030 and be net zero by 2040. The new target to halve our emissions, one of the most ambitious in the jewellery industry, has been approved by the Science Based Targets initiative and aligns with the Paris Agreement and what climate science says is necessary to limit global warming to 1.5  C. TOPIC TARGET PROGRESS TO DATE STATUS Low-carbon business Use 100% renewable energy at our crafting facilities. Achieved via the purchase of Renewable Energy Certificates and onsite solar generation. Achieved Set a science-based 1.5°C aligned target to reduce carbon emissions across our full value chain by 2021. Target was approved by the Science Based Targets initiative in 2021. Achieved Reduce our greenhouse gas emissions by 50% by 2030 from a 2019 baseline (Scopes 1 , 2 and 3). To achieve this, we will: • become carbon neutral in our own operations by 2025, reducing emissions by at least 90% from a 2019 baseline (Scopes 1 and 2). Carbon removal mechanisms and off- sets will balance out any remaining emissions; • reduce value chain emissions by 42% by 2030 from a 2019 baseline (Scope 3). In 2021, we continued to purchase Renewable Energy Certificates, reducing the Scope 2 market- based emissions of our crafting facilities and part of our retail operations by 58% since our baseline year of 2019. Informed suppliers about upcoming Supplier Engagement Programme on climate change. On track Achieve net zero emissions by 2040. Roadmap under development. Target set Circular innovation Use only recycled silver and gold in our jewellery by 2025. In 2021, 54% of silver and gold in our products came from recycled sources. Secured increased certified volumes and began piloting a third-party audit mechanism for end-to-end traceability. On track Inclusive, diverse and fair Create an inclusive workplace and increase the share of underrepresented groups by 2025. Roadmap under development. Target set Achieve gender parity in leadership by 2030. Roadmap under development. Target set Reflect societal diversity in our market communications by 2025. Roadmap under development. Target set Top sustainability targets across Pandora’s strategic priorities Read our full sustainability disclosure, cf. section 99(a), 99(b) and 107(d) of the Danish Financial Statements Act, in our Sustainability Report 2021 available at our website: pandoragroup.com/sustainability/resources/sustainabil- ity-reports. ANNUAL REPORT 2021 OUR BUSINESS  In 2021, we increased the use of low-carbon materials in our products and implemented new types of packaging materi- als. Our new carrier bags do not contain plastic, and plastic content in new jewellery boxes has been reduced by more than 75%. The jewellery box improvements have brought greenhouse gas emissions savings of over 60% compared to the retail boxes previously used, as they are made with fewer materials, increasing their recyclability. OUR COMMITMENT Reduce our greenhouse gas emissions by 50% by 2030 from a 2019 baseline, across our own operations and entire value chain of suppliers and business partners (Scopes 1, 2 and 3). To achieve this target we will: • Become carbon neutral in our own operations by 2025, reducing emissions by at least 90% from a 2019 baseline (Scopes 1 and 2). Carbon removal mechanisms and offsets will balance any remaining emissions. –We will shift to renewable energy and carry out energy optimisation projects. We will increase on-site genera- tion of renewable energy by installing solar panels at our crafting facilities, and we will purchase Renewable Energy Certificates. – In 2021, for the second year in a row, we powered our craft- ing facilities with 100% renewable energy. 2% was supplied by existing solar panels, and the remaining 98% through the purchase of Renewable Energy Certificates. We are working to secure Power Purchasing Agreements in Thailand to eliminate the need for certificates. –We plan to purchase green power for our more than 1,400 owned and operated stores and distribution centres. • Reduce value chain emissions by 42% by 2030 from a 2019 baseline (Scope 3). – Shift to low-carbon materials, including recycled and man-made materials – Improve production and logistics efficiency – Implement a sustainable packaging strategy – Develop a dedicated supplier engagement programme on climate Scope 3 92% 26% 18% 12% 11% 7%7%9% 2% GREENHOUSE GAS EMISSIONS % 1 % Scope 1 Emissions from refrigerants and fossil fuels used at Pandora’s facilities. 7% Scope 2 (market-based) Emissions from electricity and heating used at Pandora’s facilities. 92% Scope 3 Emissions from other sources outside of Pandora’s own operations: 26% Crafting materials Raw materials such as gold, silver, cubic zirco- nia, and other metal alloys as well as produc- tion materials like gypsum and enamel. 18% Media & marketing Media spend across all channels ranging from TV campaigns to digital ads and email marketing. 12% Other Fuel- and energy-related activities, business travel, employee commuting, water supply, waste generated in operations, consultancy services, and facilities management. 11% Transportation Transportation and distribution of Pandora jewellery, including inbound logistics, out- bound logistics and third-party distribution. 9% Franchises Pandora franchises, wholesalers, and other points of sale which are not directly owned by Pandora. 7% IT Outsourcing services, hardware, telecom data, and IT consultants. 7% Packaging & point-of-sale materials Bags, boxes, printed materials, campaign items, displays and trays, and other types of packaging. 2% Capital goods Various machines, crafting equipment and furniture in stores. We are committed to transparent climate reporting and submit an annual survey response to CDP (formerly known as Carbon Disclosure Project), which monitors and compares corporate climate performance. We report according to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Read more in our Sustainability Report 2021. SUSTAINABILITY PILLAR : CIRCULAR INNOVATION The main components in Pandora’s products are silver, gold, copper, palladium and man-made stones, and, in significantly smaller volumes, leather, polyester and glass. Mining for precious metals and gemstones is an energy- intensive process and may also be linked to human rights risks. In 2021, Pandora stopped buying mined diamonds and switched to lab-created diamonds which are created using mainly renewable energy. Pandora is committed to both reducing its carbon footprint related to materials sourcing and mitigating the risk of causing, contributing or being linked to adverse human rights impacts. Recycled metals have a much lower carbon footprint than newly mined metals. For example, the emissions for recycled silver are one third compared to mined silver. Scope 2 (market-based) 7% Scope 1 1% ANNUAL REPORT 2021 OUR BUSINESS  OUR COMMITMENT Use only recycled silver and gold in our jewellery by 2025 This shift will allow Pandora to save 37,000 tCO 2 e a year. In 2021, we saw a small decrease in the share of recycled silver and gold used from 57% in 2020 to 54%. As our production volumes grew by 17%, lead-times required for sourcing recycled metals were unable to keep pace with our increased demand. We are still on track to reach our target of using only recycled silver and gold by 2025. We will use the Responsible Jewellery Council Chain of Custody standard to source recycled silver and gold. The standard adheres to a strict definition of what recycled means. In 2021, we began piloting an audit mechanism with third-party auditors to ensure our suppliers meet our strict requirements and to establish end-to-end traceability. SUSTAINABILITY PILLAR : INCLUSIVE, DIVERSE AND FAIR Ensuring an inclusive, diverse and fair culture is a key pillar of our sustainability programme. We respect the human rights of everyone whose lives we touch directly or indirectly, including employees, franchisees, consumers, suppliers and their workers and local communities. Our commitment to equal rights and opportunities for all is reflected in our policies and programmes. In 2021, we updated our Human Rights Policy, Supplier Code of Conduct and Responsible Sourcing Policy. We also made progress on laying the foundations for a human rights programme across our business, which includes a commit- ment to conduct proactive due diligence in line with the United Nations Guiding Principles on Business and Human Rights. This is also instrumental in preparing Pandora for the upcoming EU legislation on mandatory due diligence. We aim to secure an inclusive workplace for all employees, achieve gender parity in our leadership, and reflect societal diversity in our consumer engagement. OUR COMMITMENT 1/3 women in leadership by 2025 and full gender parity no later than 2030, and a workforce with a proportionate share of underrepresented groups. 23% of our leaders (Vice President and above) are women. This is on par with the average for companies in Denmark. As we work towards gender parity, we will ensure that all hires and promo- tions at top leadership levels will happen with gender balance. Three out of seven members on our Board of Directors are women. This is above average for large publicly listed Danish companies. On our Executive Leadership Team, one out of eight members is a woman. For underrepresented groups, work still remains on establish- ing a baseline as there are regulatory challenges in obtaining relevant data in several geographies. 30% of branding content budget spent with producers owned by women or underrepresented groups. Roadmap is under development and will be finalised in 2022. 30% of our brand ambassadors in our global communication are from underrepresented groups. Roadmap is under development and will be finalised in 2022. Providing children and young people across the globe with opportunities to learn, express themselves and find work in the future is another important aspect of our work as an in- clusive and fair company. In 2021, we donated USD 2.4 million to UNICEF as part of our ongoing partnership. We raised the funds primarily through two campaigns under the concept of ‘Charms for change’ where a portion of the purchase price of each charm sold is donated to UNICEF. Since 2019, Pandora has donated a total of USD 5.8 million to UNICEF. Pandora supports UNICEF’s programmes to fund learning and skills development, rights awareness and gender equality activities in Burundi, China, Nepal, Guatemala and Serbia. In addition, 50% of our donation is allocated to support UNICEF’s ongoing work with children exposed to conflict, diseases, natural disasters and other situations that threaten their safety and well-being. Certified responsible in our business operations In 2021, Pandora was successfully recertified under the Responsible Jewellery Council’s Code of Practice. The certification requires documentation of good business practices and covers: responsible supply chain, human rights and due diligence; • labour rights and working conditions; • health, safety and environment – including water and waste management; • product quality, safety, traceability and disclosure; • responsible mining. Pandora supports and aligns its approach with the OECD Due Dil- igence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. All silver and gold used to craft our jewellery comes from certified responsible sources according to the Responsible Jewellery Council Code of Practice or London Bullion Market Association Good Delivery Rules. In addition, Pandora works with areas such as responsible marketing and consumer privacy in order to be recognised as a responsible company. of branding content budget spent with producers owned by women or underrepresented groups. 30% EUR 950m revolving credit facility with borrow- ing costs linked to progress on becom- ing carbon neutral in own operations and using only recycled silver and gold by 2025. ANNUAL REPORT 2021 OUR BUSINESS  MANAGING RISKS Pandora carefully monitors and assesses potential risks to the company on an ongoing basis. Our approach to risk management Pandora’s enterprise risk management is focused on identi- fying risks early, assessing them candidly, and taking actions to mitigate them so they will not prevent the company from achieving its business objectives. We see a well-functioning risk management process as key to maintaining and building Pandora’s position as the world’s largest jewellery brand. Pandora’s Chief Financial Officer heads up the company’s Risk Management Board, which consists of senior manage- ment representatives from across our value chain. All areas of our business are required to report their most significant risks to the Global Insurance & Risk Office, along with assess- ments of those risks and an overview of implemented mitiga- tions and next milestones. To read more about our enterprise risk management efforts, please visit pandoragroup.com. Our key risks The Board of Directors reviews and discusses the key risks that could threaten our business model or the future per- formance, solvency or liquidity of Pandora. The key risks and our responses to them are further described on the following pages. The key risks do not represent all the risks associated with our business. Other risks not presently identified or those currently deemed to be less material may also have an adverse effect on our business. Facing up to environmental risks It is widely acknowledged that climate change and associated impacts, both social and environ- mental, are some of the most pressing societal issues of our time. We understand the need to prepare for the risks that will arise from chang- ing weather patterns, rising sea levels and other climate impacts. We have taken initial steps and will expand on these in the future. As recommended by the Task Force on Climate- related Financial Disclosures, we will conduct a climate change scenario analysis in 2022 to identify short-, medium- and long-term risks in our production and supply chain so that we can ensure a steady supply of our products. AREA DESCRIPTION RISK MITIGATION Brand and product relevance As a large, global brand, the strength and integrity of our brand is a fundamental asset. It is important that our product oerings remain relevant to our customers. A lack of brand or product relevance constitutes a signicant business risk that could result in lower trac to our stores and online shopping sites and reduce revenue. • Create consumer-centric innovation, fuelled by consumer insights and rigorous testing • Build brand awareness through competitive media investments • Strengthen capabilities within data analytics and technology • Deliver 360 degree brand experience across all consumer touchpoints online and oine • Continue monitoring trademarks and patents and ghting infringements. Brand access We sell our products globally and rely on a strong channel network and solid insights to engage with consumers in their preferred marketplace. A personalised and unique shopping experience is important for developing customer loyalty. Not being able to engage consumers and provide them with a relevant omnichannel shopping experience can result in a decline in revenue. • Engage store associates by redeveloping the selling ceremony and focusing on training programmes • Strengthen focus on personalisation of shopping experiences across channels • Invest in improving digital and omnichannel customer experiences • Continuously optimise the store network by relocating, opening and closing stores • Develop and test new store concept. ANNUAL REPORT 2021 OUR BUSINESS  AREA DESCRIPTION RISK MITIGATION Pandemics, including COVID-19 Continued COVID-19 outbreaks or new pandemics may have an eect on the economy in general, consumer behaviour and demand. It may also require signicant investments in and changes to Pandora’s operating model etc. Pandemics can result in both lower revenue and higher costs through temporary store and crafting facility closures, labour shortages, decreases in productivity, supply chain disruptions, and changes in the macroeco- nomic environment and consumer behaviour. • Planned investment in new factory in Vietnam, rst unit to be produced end 2024 • Expansion of online distribution capacity • Increased inventories • Making shopping safer for customers through initiatives such as curbside pickup, pop-up stores, and Click & Collect • Review of supply chain, including dependency on individual suppliers and own production facilities and distribution centres • Increased focus on business continuity plans. Supply disruptions Pandora operates a fully integrated value chain and most production is in-house. Procurement of raw materials and the ability to produce and distribute nished products are critical for meeting customer demand. Lockdowns, breakdowns, political unrest, re, natural catastrophes etc. at Pandora’s or key suppliers’ sites may result in disruption of our supply chain and have a signicant impact on our nancial performance. Having crafting facilities located exclusively in Thailand elevates the risk of supply disruption. • Dual sourcing where feasible • Buers of production components and nished goods • Crafting at two separate locations in Thailand • Planned investment in additional production capacity at existing locations and an additional crafting site in Vietnam • Engagement of external manufacturers to provide exibility • Ramped up B2B and B2C distribution capacity through additional warehouses. IT security breaches Reliable IT systems and infrastructure are critical to the company’s ability to operate eectively. We also have a duty to safeguard the data of our customers and partners as well as our own data. Breaches of IT security, caused by malware attacks for example, could have a severe impact on Pandora’s ability to maintain operations for a period of time and, hence, its nancial performance. The disclosure of condential information could compromise the privacy of customers or other individuals. • Comprehensive cyber security programme to upgrade existing capabilities • Ongoing security monitoring supported by incident-response teams • Third-party vulnerability and security maturity assessments • Cyber and information security awareness training and phishing tests to monitor response. Breakdown of IT systems Operating a global company with a fully integrated value chain is heavily depend- ent on stable and ecient IT systems. Pandora operates a number of legacy IT systems, including ERP. Should Pandora fail or otherwise be unable to upgrade its IT systems in a timely, precise and ecient manner, this could have a material negative eect on Pandora's operations and nancial results. Further, a lack of interoperability and an obsolescence of core IT systems could have signicant consequences in terms of operational eciency and business continuity. • Signicant investment in technology upgrades, including planned upgrade of ERP platform • Cross-functional alignment and project groups to ensure timely implementation of technology upgrades • Ongoing standardisation and consolidation of IT systems across geographies • Increased focus on business continuity plans. ANNUAL REPORT 2021 OUR BUSINESS  AREA DESCRIPTION RISK MITIGATION Talent attraction and succession Pandora needs highly talented and capable people across all key functions and markets to drive growth and sustainable performance to deliver our strategy. Failure to attract, develop and retain the right talent as well as maintaining a strong succession pipeline for leadership and critical roles could be a signicant risk to delivery on our strategy. • Frequent employee advocacy surveys to measure employee engagement and leadership eectiveness • Chief Talent Ocer Programme to get to know our talent, develop them for future roles and build succession depth • Enhanced focus on employer branding through targeted Employee Value Proposition for new hires linked to our new corporate values • Launch of new Inclusion & Diversity goals as part of our strategic priorities within sustainability. Responsible business behaviour Pandora has a reputation for responsible business behaviour. This reputation benets the company in several ways, from attracting new employees to meeting consumer expectations. If Pandora violates legislation, disregards principles of good corporate citizenship or fails to adhere to social or environmental standards, it could damage our brand, reputation and nancial position. • Launch of a new Global Code of Conduct • Mandatory ethics and compliance training • Upgrading external access to our whistleblower hotline • Responsible Supplier Programme, including training and vendor audits • Recurring Responsible Jewellery Council certication • Environmental, social and governance reporting to ensure transparency • Renewed commitment to more ambitious climate targets and other focused sustainability initiatives • Pandora’s tax strategy aims at paying fair taxes in all markets where Pandora operates. Macroeconomic factors As a global jewellery brand that relies heavily on discretionary consumer spending, Pandora is particularly exposed to a weak macroeconomic environment and general changes in consumer behaviour. Adverse macroeconomic conditions and general changes in consumer behaviour may result in lower demand for our products, impacting our revenue and earnings. • Continuous monitoring of the macroeconomic landscape • Continuous monitoring of consumer behaviour and trends • Pursue exibility in cost base, including frequent break options in store leases • Continued pursuit of cost savings • Geographical diversication of revenue streams • Introduction of buy now, pay later payment models. Market uctuations Our products are made of precious metals, mainly silver and gold. As a global business, Pandora has signicant revenue in USD, USD-related currencies and GBP. Our crafting facilities are based in Thailand and consequently we have signicant net cost in THB. Pandora is exposed to a weakening of the USD, USD-related currencies and GBP and a strengthening of the THB and precious metal prices. Currency uctuations and increases in the price of precious metals can have a signicant impact on the company’s nancial performance and cash ow. • Hedging at least 50% of the combined annual commodity, exchange rate and interest rate risk. However, at least 70% of the annual commodity exposure must be hedged • Ongoing review of sales prices. ANNUAL REPORT 2021 OUR BUSINESS  EXPERIENCE We also offer Endless Aisle, where the sales assistant can find the product online and have it shipped to the customer’s home if not available in-store. In most markets, we also offer other digital features that support an omnichannel experi- ence, like Virtual Try-On. Our physical store is the key touchpoint in the omnichannel journey. We are testing a new store concept called Evoke, which will provide a more convenient and personalised shopping experience while providing a strong link to our online universe. The opportunity to create unique, personalised jewellery with engravings is now possible in many US stores and a few in Can- ada, and we successfully tested online engraving in Italy. Finally, our store staff play a key role in bringing personali- sation to life. We are redesigning our customer experience with an omnichannel mindset, and we are investing in training and technology to empower sales associates to connect with customers in increasingly personalised ways. One of the pillars of our Phoenix strategy is personalisation: to create a jewellery experience as unique as our customers. Customers should have a seamless online and offline journey, to easily discover, explore and purchase our products wherever and whenever they want. During 2021, we had more than 670 million visits to our various channels, including 90 million visits to concept stores. “Customers today demand a personalised omnichannel experience. They move fluidly across different channels and might discover Pandora in a store in a mall, explore the brand on Instagram, buy online and pick up in-store. That is why it is important for us to be where the customer is, offering a true omnichannel experience throughout the entire shopping jour- ney,” says Chief Commercial Officer Martino Pessina. In 2021, we advanced our personalisation goals with several initiatives. Click & Collect is now available in the majority of our owned concept stores in key markets, generating 6% of online revenue in 2021. A TRUE OMNICHANNEL "It is important for us to be where the customer is, oering a true omnichannel experience throughout the entire shopping journey." MARTINO PESSINA Chief Commercial Ocer STORY ANNUAL REPORT 2021 STORY 34 Corporate governance 38 Board of Directors 40 Executive Leadership Team 42 Shareholder information CORPORATE GOVERNANCE ANNUAL REPORT 2021 CORPORATE GOVERNANCE Board of Directors Composition The Board currently has seven members elected by the General Meeting for a term of one year. All Board members are independent. The composition of the Board is intended to ensure complementary competencies and diversity to effectively support Pandora’s strategy and ensure that all decisions are well considered. Board evaluation Every year the Board conducts an internal self-evaluation focusing on the effectiveness of the Board and the skills of the Board. The ideal mix of skills and experiences needed of the Board members include: Board experience Executive management Sectoral experience Digitalisation Sustainability Retail Marketing and brand Finance Leadership structure Corporate authority is divided between the Board of Directors (“the Board”) and Executive Management. The Board outlines the overall vision, strategy and objectives of Pandora’s busi- ness activities and supervises the performance of Executive Management. The Board has established Audit, Remuneration and Nomination Committees and appoints members and Chairs to these committees from within the Board. The committees’ terms of reference are available at pandoragroup.com. Members of Executive Management are appointed by the Board. Executive Management is responsible for the day-to- day management and for the execution of Pandora’s strategy. The Group also has an Executive Leadership Team, which is responsible for the day-to-day operations of their respec- tive business areas while at the same time being part of the overall leadership of Pandora. GOVERNANCE STRUCTURE A CONNECTED ORGANISATION Fast execution and collaboration across clusters and global functions. The nine clusters report to the Chief Commercial Officer. The Board supervises Executive Management’s work and is responsible for Pandora’s general and strategic direction. Clusters • North America • Latin America • Pacific/Greater Asia • Western Europe • Greater China • Southern Europe & MEA • Eastern Europe • Northern Europe • British Isles Executive Leadership Team Executive Management Board of Directors Annual General Meeting ANNUAL REPORT 2021 CORPORATE GOVERNANCE  An external assessment of the Board skills and effectiveness is conducted every three years to ensure objectivity and benchmarking. In 2021, an internal Board effectiveness self-evaluation was conducted, including a 360 degree peer review using an online survey across seven areas: value creation and strategy, Board agenda and meetings (including committees), talent and culture, Board composition, Directors’ contribution, Chairs’ effectiveness, and reporting/risk management. The conclusions were shared with the Chair, the Board members and Executive Management, followed by a thorough discus- sion. The assessment identified that the Board continues to consist of individuals who possess relevant skills and expe- rience and are engaged and well-prepared. The Board struc- ture and committee work are effective and well-functioning, including interactions with Executive Management. Board activities in 2021 The Board held 13 meetings in 2021. Its primary focus was to oversee the successful completion of Programme NOW and the development of Pandora’s new Phoenix strategy leading up to its full announcement at Pandora’s Capital Markets Day on 14 September. Furthermore, the Board spent considerable time handling and steering through the continued global COVID-19 pandemic together with Executive Management, including securing the safety and well being of Pandora’s employees and customers and protecting the business during the pandemic. Audit Committee The Audit Committee currently has three members appointed for a term of one year at a time. The Audit Committee's responsibilities include assistsing the Board in monitoring the effectiveness of the internal control and risk management systems and reviewing Pandora’s financial reporting and audit process. The Audit Committee conducts its work according to its Terms of Reference. In 2021, the Audit Committee met six times. Its main activities were to: • review key accounting principles, significant accounting estimates, key financial risks and compliance with tax regulations; • monitor the external financial reporting process; • monitor the effectiveness of Pandora’s internal control and risk management systems, including internal audit; • monitor the external audit and their independence • review Pandora’s whistleblower reporting system and whistleblower cases; • review Pandora’s funding strategy; • review Pandora’s tax policy. Independent auditor Pandora’s independent auditors are appointed for a term of one year at the Annual General Meeting following a proposal from the Board, which is based on a recommendation from the Audit Committee. The framework for the auditors’ duties, including their remuneration, audit and non-audit services, is agreed annually between the Board and the auditors following the recommendation of the Audit Committee. Remuneration Committee The Remuneration Committee currently has three members appointed for a term of one year at a time. The Remuneration Committee assists the Board in ensuring that Pandora’s remuneration policies strike an appropriate balance between the interests of Pandora’s shareholders and a rewarding and motivating remuneration of Executive Management and senior employees. AUDIT COMMITTEE Committee meetings attended Heine Dalsgaard 1 Joined on 11 March 2021 Birgitta Stymne Göransson Catherine Spindler Andrea Dawn Alvey Left on 11 March 2021 Isabelle Parize Left on 4 November 2021 1 Chair Meeting attended Not a Committee member at the time Board meetings in 2021 Audit Committe meetings in 2021 Remuneration Committee meetings in 2021 Nomination Committee meetings in 2021 13 6 6 3 BOARD MEMBERS Board meetings attended Peter A. Ruzicka 1 Christian Frigast 2 Heine Dalsgaard Joined on 11 March 2021 Birgitta Stymne Göransson Marianne Kirkegaard Catherine Spindler Jan Zijderveld Joined on 11 March 2021 Andrea Dawn Alvey Left on 11 March 2021 Isabelle Parize Left on 4 November 2021 Ronica Wang Left on 11 March 2021 1 Chair 2 Deputy Chair Meeting attended Meeting not attended Not a Board member at the time ANNUAL REPORT 2021 CORPORATE GOVERNANCE  In 2021, the Remuneration Committee met six times. Its main activities are described in the Remuneration Report available at our Investor website: pandoragroup.com/inves- tor/corporate-governance/remuneration-reports. Nomination Committee The Nomination Committee currently has four members appointed for a term of one year at a time. The Nomination Committee works according to its Terms of Reference and its main responsibilities are: • assessment and evaluation of the Board and Executive Management, including performance, skills and experience; • nomination of candidates to the Board and Executive Management; • monitoring talent and succession policy and ensuring com- pliance when making Board, Executive Management and Executive Leadership Team appointments; • succession planning for Executive Management positions; • reviewing and monitoring diversity policy to ensure compliance. In 2021, the Nomination Committee met three times and had a few additional ad hoc exchanges relating to the Board’s self-evaluation. Its main activities were to: • prepare and conduct the Board assessment in accordance with the Danish Corporate Governance Recommendations; • nominate candidates to the Board; • assess performance of Executive Management and the co- operation between the Board and Executive Management. Additional information The Corporate Governance Statement for 2021, cf. section 107(b) of the Danish Financial Statements Act, is available at our Investor website: pandoragroup.com/investor/corpo- rate-governance/governance-statement. Pandora’s Global Data Ethics Policy for 2021, cf. section 99(d) of the Danish Financial Statements Act, is available at: pandoragroup.com/investor/corporate-governance/ data-ethics. Internal controls and risk management systems in relation to the financial reporting process The Board and Executive Management are responsible for Pandora’s internal control and risk management systems in relation to the financial reporting process. Control environment The Group’s internal control framework identifies key processes, inherent risks and control procedures to reduce and mitigate financial risks and ensure reliable financial reporting. The Audit Committee assists the Board in supervising the financial reporting process and monitoring the effectiveness of the internal control and risk management systems. Executive Management is responsible for maintaining and strengthening the overall control environment, identifying weaknesses and ensuring necessary steps are taken to mitigate financial risks through standardisation and process optimisation. A central Internal Audit and Compliance Controlling (IACC) function has been established to help Pandora accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of internal controls, compliance and governance processes. The IACC function reports to Pandora’s Group Finance function. See Pandora’s Global Data Ethics Policy for 2021 NOMINATION COMMITTEE Committee meetings attended Christian Frigast 1 Birgitta Stymne Göransson Marianne Kirkegaard Peter A. Ruzicka 1 Chair Meeting attended Meeting not attended REMUNERATION COMMITTEE Committee meetings attended Peter A. Ruzicka 1 Christian Frigast Jan Zijderveld Joined on 11 March 2021 Andrea Dawn Alvey Left on 11 March 2021 Ronica Wang Left on 11 March 2021 1 Chair Meeting attended Not a Committee member at the time ANNUAL REPORT 2021 CORPORATE GOVERNANCE  Control activities The financial information reported by Pandora A/S and its subsidiaries follows a formalised and structured process and is controlled by local controllers with local market knowledge as well as the controlling function within Group Finance. The Group controlling function is continuously trained in new accounting and reporting requirements and monitors com- pliance with relevant legislation on an ongoing basis. The financial reporting process is dependent on the Group’s IT systems. Any weaknesses in system controls and related risks to the financial reporting are mitigated by manual controls. The Board and Executive Management assess risks on an ongoing basis. Risk assessment The Board and Executive Management assess risks on an ongoing basis, including risks related to the financial report- ing, and assess measures to manage, reduce or eliminate identified risks. The IACC function assists Pandora’s Executive Management and the Audit Committee in identifying and mitigating finan- cial risks in the financial reporting process. The Audit Committee reviews selected high-risk areas on a frequent basis, including significant accounting estimates and material changes to accounting policies. Each entity assesses its control environment through a self- assessment of the effectiveness of the implemented controls. The IACC function evaluates the effectiveness of the Group's control environment on an ongoing basis and reports its findings to the Audit Committee. Monitoring Pandora’s internal control procedures and risk management systems, including the whistleblower function, are continuously monitored, tested and documented. The Audit Committee monitors internal controls and the risk management process to ensure that identified risks are mitigated. In addition to monitoring of procedures and systems, financial risks are reviewed through monthly performance reviews and audits performed by the IACC function. Information and communication Group entities are assigned dedicated controllers within Group Finance to ensure a direct line of communication. The Group Finance function reports to the Chief Financial Officer (CFO). In addition, the IACC function is present at all Audit Committee meetings and provides regular status updates on the control en- vironment. Furthermore, the head of IACC has regular meetings with the CFO. This set-up ensures transparency and that commu- nication is shared with the Audit Committee on a timely basis. The Board has adopted an Investor Relations Policy that requires all communication to stakeholders, including financial reporting, to be conducted adequately, timely and openly – both internally and externally – and to be conducted factually and truthfully and in compliance with laws and applicable regulations. ANNUAL REPORT 2021 CORPORATE GOVERNANCE  Heine Dalsgaard Marianne Kirkegaard BOARD OF DIRECTORS Peter A. Ruzicka Christian Frigast Birgitta Stymne Göransson Catherine Spindler Jan Zijderveld ANNUAL REPORT 2021 CORPORATE GOVERNANCE  Year of birth: 1964 Member since: 2019 Professional position: Non-executive Board member. Non-executive functions: Chair of Ventotene Holding AS and member of the Boards of Royal Unibrew A/S, Aspelin Ramm Gruppen AS, AKA AS and Axfood AB. Skills and experience: Vast operational experience with strategy execution and transformation as well as retail and brand optimisation at executive level. Furthermore, Peter A. Ruzicka contributes with experience from other Board positions and insight into capital markets. Year of birth: 1951 Member since: 2010 Professional position: Executive Chair of Axcel Management A/S. Non-executive functions: Chair of Aktive Ejere (Active Owners Denmark), EKF Danmarks Eksportkredit (Denmark’s Export Credit Agency) and Danmarks Skibskredit Holding A/S and member of the Board of its subsidiary; Vice Chair of PostNord and Axcel Advisory Board; member of the Boards of Frigast A/S and Nissens A/S; adjunct profes- sor at Copenhagen Business School. Skills and experience: Experience within areas such as general management, capital markets, consumer sales and retail execution. Year of birth: 1968 Member since: 2020 Professional position: CEO of Brill Bakery Solutions LLC. Non-executive functions: Member of the Boards of Faerch Group, Salling Group A/S, BioMar and AKK AB. Skills and experience: In-depth international insight into the consumer market, experience advancing the social sustainabil- ity agenda and her experience of the complete value chain within large corporate multinationals. Year of birth: 1977 Member since: 2020 Professional position: Chief Brand Officer of Lacoste. Non-executive functions: None. Skills and experience: Experience within international brand strategy, digital transformation and vast experience in beauty and cosmetics, high-growth pureplay digital environments and lifestyle apparel retail. Year of birth: 1964 Member since: 2021 Professional position: Non-executive Board member. Non-executive functions: Member of the Board of Ahold Delhaize N.V. and Senior Advisor to a number of private equity firms. Skills and experience: International consumer market insight, extensive experience advancing environmental and social sustainability, and exposure to the full value chain. Year of birth: 1971 Member since: 2021 Professional position: Chief Financial Officer of Carlsberg A/S. Non-executive functions: Member of the Boards of Novozymes A/S, Carlsberg Integrated Information Technology A/S, Carlsberg Shared Services Sp.z.o.o., Udviklingsselskabet Carlsberg Byen P/S, Carlsberg Breweries A/S, Carlsberg Byen Komplementar ApS, and Carlsberg Ejendomme Holding A/S. Skills and experience: Experience within areas such as international financial and executive management from large corporate multinationals. Heine Dalsgaard Jan Zijderveld Christian Frigast Deputy Chair Catherine Spindler Marianne Kirkegaard BOARD OF DIRECTORS Year of birth: 1957 Member since: 2016 Professional position: Non-executive Board member. Non-executive functions: Chair of Industrifonden and Min Doktor AB and member of the Boards of Asker AB, Elekta AB, Enea AB and LEO Pharma A/S. Skills and experience: Experience within areas such as consumer goods, retail execution, IT, digital, financial insights and capital markets. Birgitta Stymne Göransson Peter A. Ruzicka Chair The Board members’ full CVs are available at pandoragroup.com. ANNUAL REPORT 2021 CORPORATE GOVERNANCE  EXECUTIVE LEADERSHIP TEAM Alexander Lacik Anders Boyer Stephen Fairchild Carla Liuni Martino Pessina Jeerasage Puranasamriddhi David Walmsley Erik Schmidt ANNUAL REPORT 2021 CORPORATE GOVERNANCE  President & Chief Executive Officer (CEO) Year of birth: 1965 Member since: 2019 Registered Executive Management. Alexander Lacik has more than 25 years’ experience from large global consumer goods companies. In addition, Alexander is a Board member of Swedish Match. Before joining Pandora, he was CEO of Britax Ltd., a British manu- facturer of childcare products. He has also held CEO and senior management positions at Kasthall Golv & Mattor, Procter & Gamble and Reckitt Benckiser, where he held a number of positions, including head of Reckitt Benckiser North America. He has a Bachelor’s degree in Business Administration from the University of Växjö, Sweden. Executive Vice President & Chief Financial Officer (CFO) Year of birth: 1970 Member since: 2018 Registered Executive Management. Anders Boyer has more than 20 years’ experience in finance, business management and turnarounds. Prior to joining Pandora, Anders held positions as Chief Financial Officer at Hempel and GN Store Nord, and Finance Director and subse- quently Regional Director of ISS. Anders started his career at A.P. Moller-Maersk, where he worked for ten years. He has an MSc in Finance and Accounting from Copenhagen Business School, Denmark. Chief Commercial Officer Member since: 2020 Chief Supply Officer Member since: 2020 Chief Digital & Technology Officer Member since: 2019 Chief HR Officer Member since: 2019 Chief Product Officer Member since: 2011 Stephen Fairchild Erik Schmidt Anders Boyer David Walmsley Martino Pessina Jeerasage Puranasamriddhi EXECUTIVE LEADERSHIP TEAM Chief Marketing Officer Member since: 2020 Carla Liuni Alexander Lacik The Executive Leadership Team members’ full CVs are available at pandoragroup.com. ANNUAL REPORT 2021 CORPORATE GOVERNANCE  600 400 700 800 Jan Feb Mar May Jun Jul Aug Sep Oct Nov DecApr 1,000 900 500 SHAREHOLDER INFORMATION and preserve a stable financial structure based on a strong balance sheet. Pandora’s capital structure policy is to maintain NIBD to EBITDA between 0.5 and 1.5. By the end of 2021, Pandora’s leverage ra- tio was only 0.4x EBITDA and thereby slightly below the capital structure policy range. During the last couple of years, Pandora has successfully decreased net working capital by DKK 3 billion. At the same time, capitalised lease liabilities have decreased by more than DKK 1 billion. Combined, these two factors have decreased leverage by around 0.5x. As cash distributions to shareholders are limited to the amount of free reserves in the Parent Company, the lower net working capital and lease liabil- ities also currently impact the ability to reach the upper part of the leverage range. As of 31 December 2021, free reserves in the Parent Company amounted to DKK 7.5 billion. Proposed distributions Pandora continues to be highly cash generative and has ample liquidity to continue cash distribution to shareholders. For 2022, the Board proposes a dividend of DKK 16 per share and a new share buyback of DKK 3.3 billion. The Board already has the authority to initiate a share buyback at any point in time. Pandora shares have been listed on the Nasdaq OMX Copenhagen stock exchange since 2010. Pandora is included in the blue chip OMX C25 index and has around 36,000 registered shareholders. In addition to being listed in Copenhagen, Pandora has a spon- sored level 1 American Depository Receipt (ADR) programme. The ADRs are traded in the US over-the-counter under the symbol PANDY. Further information regarding the ADR programme can be found at the Pandora Group website. In 2021, the Pandora share price increased by 20% and ended the year with a closing price of DKK 815. The total return to shareholders was further fuelled by cash distributions in the calendar year of DKK 4.8 billion. In 2021, the total shareholder return was 22%. The Pandora share’s liquidity remains strong with a free float of 100% of total shares outstanding and around 119 million shares traded in 2021. The trading volume averaged around 474,000 shares per day. Capital structure and cash allocation Pandora’s capital structure serves to ensure that the company has sufficient financial flexibility to pursue its strategic goals SHARE PRICE DEVELOPMENT  DKK ANNUAL DISTRIBUTIONS DKK billion FY 2022 Proposed FY 2021 Actual FY 2020 Actual FY 2019 Actual FY 2018 Actual Dividend (ordinary + interim) 16 15 08 18 19 Nominal dividend per share, DKK 160 150 90 180 180 Share buyback programme 37 1 33  22 40 Total cash return 53 48 08 40 59 1 Includes DKK 0.7 billion from already announced share buyback running until 4 February 2022 and DKK 3.0 billion of new share buyback expected to be paid out in calendar year 2022. total shareholder return in 2021 22% ANNUAL REPORT 2021 CORPORATE GOVERNANCE  Financial calendar 2022 09 Feb Annual Report 2021 10 Mar Annual General Meeting 04 May Interim Report Q1 2022 16 Aug Interim Report Q2 2022 08 Nov Interim Report Q3 2022 Share information Exchange Nasdaq Copenhagen Trading symbols PANDORA Identication number/ ISIN DK0060252690 Number of shares 100,000,000 of DKK 1, each with one vote Share classes 1 GICS 25203010 Sector Apparel, Accessories & Luxury Goods Segment Large ADR information ADR trading symbol PANDY Programme type Sponsored level 1 programme (J.P. Morgan) Ratio (ADR:ORD) 4 ADRs : 1 ordinary share (4:1) ADR ISIN US 698 341 2031 Review of 2021 share buyback and dividends In 2021, Pandora paid out an extraordinary dividend of DKK 15 per share. The total amount paid was around DKK 1.5 billion. In addition, The Board of Directors initiated share buyback programmes under which Pandora will buy back own shares to a maximum consideration of up to DKK 4 billion by 4 February 2022. Pandora repurchased shares for a value of DKK 3.3 billion in 2021. Shareholders As of 31 December 2021, Pandora had two major share- holders. BlackRock has disclosed holding rights to shares corresponding to 9.9% of the total outstanding voting rights and voting rights attached to financial instruments of 2.7%, while Parvus has disclosed holding rights to shares amounting to 5.1%. As of 31 December 2021, the geographical split of institu- tional investors was (% of share capital): • UK 26% • US 19% • Denmark 11%. As of 31 December 2021, Pandora’s Board of Directors and Executive Management held a total of 82,380 and 266,748 Pandora shares respectively, corresponding to 0.35% of the total share capital. Investor Relations The Executive Management is responsible for the existence of an Investor Relations (IR) function, which is responsible for ensuring compliance with Pandora’s Investor Relations Policy. IR reports directly to the Chief Financial Officer. The purpose of Pandora’s IR activities is to ensure that relevant, accurate and timely information is made available to the capital markets to serve as a basis for regular trading and a fair pricing of the share. Prior to the announcement of interim and annual reports, a four-week silent period is in place. In addition, members of the Board of Directors and Executive Management are only allowed to trade shares in a four-week trading window following the announcement of interim and annual reports. Pandora will ensure that the company is perceived as visible, accessible, reliable and pro- fessional by the capital markets and that Pandora is regarded among the best relative to peers. This will be achieved by complying with the rules and legislation for listed companies on Nasdaq OMX as well as Pandora’s internal policies. Company website The Pandora Group website (pandoragroup.com ) provides comprehensive information about the company, its activities, share performance and shareholders. Additionally, all company announcements, including interim and annual reports, as well as investor presentations, webcasts and conference call transcripts are made available on the website in due time. Furthermore, the website contains a constantly updated financial and event calendar showing events and actions related to investors. A comprehensive list of the 23 analysts covering the Pandora share is maintained, including names, institutions and contact details. Pandora will ensure that the company is perceived as visible, accessible, reliable and professional. ANNUAL REPORT 2021 CORPORATE GOVERNANCE  FINANCIAL REVIEW 45 Group performance 47 Group protability 48 Balance sheet and cash ow ANNUAL REPORT 2021 11.9 4.1 5.8 7.4 7.8 6.4 3.9 19.0 23.4 21.9 22.8 20.3 16.7 2008 1.7 0.6 3.5 1.4 6.7 6.7 2.4 2.1 1.5 9.0 2.7 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 5.9 5.8 6.7 22.8 GROUP PERFORMANCE 2021 was a record-breaking year for Pandora. Revenue was at all-time high, and Pandora outperformed its guidance on both organic growth and EBIT margin. 2021 was also the year Pandora released its long-term growth strategy Phoenix, charting a new chapter of sustainable growth for the years ahead. COVID-19 continued to impact the business in 2021, but in spite of lockdowns and restrictions Pandora ended the year with strong results. Organic growth was 23% compared to 2020 and 9% compared to 2019. The high growth was supported by a continued strong brand momentum, and investments in digital and commercial initiatives during the last couple of years paid off. Pandora continues to see strong traction on its personalised marketing initiatives and omnichannel features such as Click & Collect. Personalising the consumer journey is a key growth pillar in the Phoenix strategy. The year was furthermore marked by two developments in par- ticular, which impacted performance in opposite directions: On the one hand, the pandemic forced Pandora to tempo- rarily close many of its stores, mostly in the first half of the year. Around 30% of stores were closed in Q1 and around 15% were closed in Q2. The pandemic also had a significant impact on store traffic in China, where footfall decreased up to 70% compared to 2019. The negative impact in China was visible throughout 2021, but especially prevalent in the second half of the year. On the other hand, Pandora was positively impacted by unusually strong performance in the US. The market deliv- ers strong growth throughout the year. While the growth was partly fuelled by government stimulus packages, data indicates that Pandora outperformed the market notably. The US recorded 58% organic growth compared to 2020. Record-breaking revenue in 2021 Pandora delivered a strong underlying performance in most of its key markets, and - as mentioned above - not least in the strategi- cally important US market. It is Pandora’s long-term ambition to double US revenue compared to 2019. THE JOURNEY OF PANDORA  DKK billion Revenue EBIT 2 1 Presented on the basis of the applicable accounting standards at the time. 2 2019 and 2020 gures exclude Programme NOW restructuring costs. ANNUAL REPORT 2021 FINANCIAL REVIEW  STORE NETWORK Number of points of sale 2021 2020 Growth Concept stores 2619 2690 71 - of which Pandora owned 1423 1382 41 - of which franchise owned 700 797 97 - of which third-party distribution 496 511 15 Other points of sale 4154 4402 248 The UK, Pandora’s second largest market, also delivered solid growth. The online store in particular performed strongly, generating 53% share of revenue compared with 55% in 2020 and 25% in 2019. Italy and Germany both delivered solid double digit organic growth compared with 2020. The growth in both markets was driven by continued strong demand for the Pandora Moments platform. France was slightly down following COVID-19 store closures and restrictions, but ended the year with positive growth in Q4. As expected, China was a drag on 2021 performance, but remains a high priority for Pandora. It is Pandora’s long- term ambition to triple the revenue in China compared to 2019. The first steps in Pandora’s turnaround in China were planned for the second half of 2021, but due to the continued significant impact of COVID-19 in China, Pandora postponed the investments to 2022. Moments delivering solid results Pandora’s Global Business Units, Moments and Collabs and Style and Upstream Innovation, both delivered strong growth in 2021 and generated sell-out growth of 20% and 19%, respectively. The share of business for Moments and Collabs was 71%, unchanged from 2020. Pandora is very pleased with the development in both business units. Pandora’s first priority is to continue to grow its Moments platform while simultaneously investing in new designs and developing the product offering. In 2021, Pandora test launched Pandora Brilliance in the UK and relaunched Pandora ME. In 2022, Pandora will do a sequential global roll-out of Brilliance, and Pandora will also introduce a new collaboration. REVENUE BY GLOBAL BUSINESS UNIT DKK million 2021 2020 Sell-out growth Growth in local currency Share of revenue FY 2021 Share of revenue FY 2020 Moments and Collabs 16610 13562 20% 23% 71% 71% - Moments 14699 11660 22% 27% 63% 61% - Collabs 1911 1902 3% 0% 8% 10% Style and Upstream Innovation 6784 5447 19% 25% 29% 29% - Timeless 4091 3318 19% 24% 17% 17% - Signature 1990 1739 12% 14% 9% 9% - Me 656 390 42% 67% 3% 2% - Brilliance 48  na na 0%  Total revenue 23394 19009 20% 24% 100% 100% REVENUE BY CHANNEL DKK million 2021 2020 Organic growth Growth in local currency Share of revenue FY 2021 Share of revenue FY 2020 Pandora owned retail 15922 13426 16% 18% 68% 71% - of which concept stores 9133 7321 20% 25% 39% 39% - of which online stores 5977 5483 8% 8% 26% 29% - of which other points of sale 812 622 30% 30% 3% 3% Wholesale 6705 4949 41% 37% 29% 26% - of which concept stores 3737 2714 47% 39% 16% 14% - of which other points of sale 2968 2235 35% 35% 13% 12% Third-party distribution 767 634 24% 24% 3% 3% Total revenue 23394 19009 23% 24% 100% 100% Store network development In 2021, Pandora closed net 71 concept stores due to a general pruning of the network. The closed stores were performing unsatisfactorily, even before the lockdowns. Some store open- ings were delayed or put on hold due to COVID-19, particularly in Latin America and China. Pandora see ample opportunities to grow the store network in the years to come. Pandora expects to open net 50-100 concept stores in 2022. ANNUAL REPORT 2021 FINANCIAL REVIEW  GROUP PROFITABILITY COST OF SALES AND GROSS PROFIT DKK million 2021 2020 Growth Share of revenue 2021 Share of revenue 2020 Revenue 23394 19009 23% 1000% 1000% Cost of sales 5590 4475 25% 239% 235% Gross prot excl. restructuring costs 17803 14534 22% 761% 765% Restructuring costs  159 100%  08% Gross prot incl. restructuring costs 17803 14375 24% 761% 756% OPERATING EXPENSES DKK million 2021 2020 Growth Share of revenue 2021 Share of revenue 2020 Sales and distribution expenses 6352 6234 2% 272% 328% Marketing expenses 3587 2717 32% 153% 143% Administrative expenses 2026 1702 19% 87% 90% Total operating expenses excl. restructuring costs 11965 10652 12% 511% 560% Restructuring costs  1038 100%  55% Total operating expenses incl. restructuring costs 11965 11691 2% 511% 615% Operating prot (EBIT) 5839 2684 118% 250% 141% Operating prot (EBIT) excl. restructuring costs 5839 3881 50% 250% 204% Profitability continues to be strong Pandora’s Global Business Unit Moments and Collabs gener- ated a gross margin of 75.3% (2020: 76.1% excluding restruc- turing costs) while Style and Upstream Innovation generated a gross margin of 78.1% (2020: 77.4% excluding restructuring costs). Overall, gross margin was slightly down compared to 2020 (-0.4pp excluding restructuring costs) mainly following negative impacts from higher silver prices, but also various COVID-19 precautionary measures impacting gross margin negatively. Production in Thailand has been running through- out the year despite severe COVID-19 outbreaks in Thailand. OPEX excluding restructuring costs increased by 13% in constant foreign exchange rates compared to 2020. The increase is significantly lower than the growth in revenue and mainly stems from higher marketing expenses, as Pandora has continued to invest in the brand. Marketing expenses increased by DKK 0.9 billion and ended at 15.3% of revenue (up 1pp compared to 2020). In 2021, Pandora received DKK 152 million in government subsidies, impacting sales and distribution expenses. The EBIT margin ended at 25.0%, up 4.6pp compared to 2020 (excluding restructuring costs), equal to a 50% growth in absolute EBIT and a testimony to the operating leverage in Pandora’s business model. ANNUAL REPORT 2021 FINANCIAL REVIEW  NET WORKING CAPITAL Share of preceeding 12 months' revenue 2021 2020 2019 2018 2017 Inventories 128% 103% 98% 138% 120% Trade receivables 43% 46% 75% 72% 86% Trade payables 140% 169% 142% 99% 74% Other net working capital elements 82% 56% 45% 45% 43% Total 50% 76% 13% 67% 88% Solid capital position Net working capital ended at a -5% of revenue in 2021, a very strong level and a result of the many improvements Pandora has carried out during the last couple of years. Through- out 2021, Pandora has deliberately increased inventory by around DKK 1 billion compared with 2020 to mitigate risk of stock-outs and disruptions in the supply chain. Furthermore, the lapse of Programme NOW restructuring costs in 2020 have decreased Trade payables. Free cash flow remained strong and ended the year at DKK 5.1 billion despite a DKK 1 billion inventory build-up. In 2021, ROIC was 59% compared with 25% in 2020. This is the highest ROIC since 2017 where it was 69%. The improved underlying performance combined with the lapse of Pro- gramme NOW one-off restructuring costs as well as lower invested capital are all positively impacting ROIC. The high ROIC is evidence of Pandora’s attractive business model. Balance Sheet Total non-current assets decreased to DKK 12.6 billion at the end of 2021 (2020: DKK 13.0 billion), mainly due to amortisation and depreciation. BALANCE SHEET AND CASH FLOW Net interest-bearing debt amounted to DKK 2.9 billion at the end of 2021 (2020: DKK 3.2 billion), corresponding to a financial leverage of 0.4x (2020: 0.5x). The decrease in net interest-bearing debt was driven by a strong cash conversion, ending 2021 with a financial leverage slightly below the capital structure policy range of NIBD to EBITDA between 0.5 and 1.5x. By the end of 2021, equity in Pandora amounted to DKK 7.0 billion, compared to DKK 7.4 billion in 2020. The decrease was primarily driven by payout of DKK 4.8 billion to its shareholder through a combination of extraordinary dividends and share buybacks, partly offset by profit for the year. Pandora paid out DKK 1.5 billion in extraordinary dividends in 2021 and bought back own shares for a total of DKK 3.3 billion. Read more about cash distribution in 2022 on page 42. ANNUAL REPORT 2021 FINANCIAL REVIEW  50 Consolidated nancial statements 94 Management statement 95 Independent auditor’s report 50 Consolidated nancial statements 94 Management statement 95 Independent auditor’s report 99 Parent Company nancial statements FINANCIAL STATEMENTS FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED  DECEMBER CONSOLIDATED INCOME STATEMENT DKK million Notes 2021 2020 Revenue 21 23,394 19,009 Cost of sales 23 31 32 -5,590 -4,634 Gross prot 17,803 14,375 Sales, distribution and marketing expenses 23 31 32 -9,939 -9,155 Administrative expenses 23 31 32 -2,026 -2,536 Operating prot 21 5,839 2,684 Finance income 46 152 316 Finance costs 46 -613 -507 Prot before tax 5,378 2,494 Income tax expense 25 -1,218 -556 Net prot for the year 4,160 1,938 Earnings per share, basic (DKK) 42 42.1 20.0 Earnings per share, diluted (DKK) 42 41.7 19.9 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME DKK million Notes 2021 2020 Net prot for the year 4,160 1,938 Other comprehensive income: Items that may be reclassied to prot/loss for the year Exchange rate adjustments of investments in subsidiaries 370 -609 Commodity hedging instruments: - Realised in net cost of sales -4 11 - Realised in net nancials -16 -31 - Realised in inventories -141 -234 - Fair value adjustments -219 490 Foreign exchange hedging instruments: - Realised in net nancials 249 -49 - Fair value adjustments -287 21 Tax on other comprehensive income, income/expense 25 83 -13 Items that may be reclassied to prot/loss for the year, net of tax 36 -416 Items not to be reclassied to prot/loss for the year Actuarial gain/loss on dened benet plans, net of tax 23 10 6 Items not to be reclassied to prot/loss for the year, net of tax 10 6 Other comprehensive income, net of tax 46 -410 Total comprehensive income for the year 4,206 1,528 ANNUAL REPORT 2021 FINANCIAL STATEMENTS  ASSETS DKK million Notes 2021 2020 Goodwill 4,418 4,247 Brand 1,057 1,057 Distribution 1,080 1,110 Other intangible assets 538 529 Total intangible assets 31 7,094 6,943 Property, plant and equipment 32 1,816 2,054 Right-of-use assets 33 2,532 3,007 Deferred tax assets 25 891 764 Other nancial assets 222 244 Total non-current assets 12,555 13,012 Inventories 35 2,991 1,949 Trade receivables 36 1,009 870 Right-of-return assets 38 70 62 Derivative nancial instruments 44 45 69 351 Income tax receivable 25 68 83 Other receivables 738 745 Cash 1,043 2,912 Total current assets 5,988 6,972 Total assets 18,542 19,984 EQUITY AND LIABILITIES DKK million Notes 2021 2020 Share capital 41 100 100 Treasury shares 41 -3,416 -93 Reserves 795 750 Retained earnings 9,523 6,632 Total equity 7,001 7,389 Provisions 37 416 370 Loans and borrowings 43 44 2,765 2,066 Deferred tax liabilities 25 113 368 Total non-current liabilities 3,295 2,804 Provisions 37 26 29 Refund liabilities 38 724 654 Contract liabilities 38 163 82 Loans and borrowings 43 44 1,161 3,996 Derivative nancial instruments 44 45 209 119 Trade payables 39 44 3,267 3,211 Income tax payable 25 1,003 382 Other payables 44 1,694 1,317 Total current liabilities 8,246 9,790 Total liabilities 11,541 12,595 Total equity and liabilities 18,542 19,984 CONSOLIDATED BALANCE SHEET AT  DECEMBER ANNUAL REPORT 2021 FINANCIAL STATEMENTS  DKK million Notes Share capital Treasury shares Translation reserve Hedging reserve Dividend proposed Retained earnings Total equity 2021 Equity at 1 January 100 -93 535 215 - 6,632 7,389 Net prot for the year - - - - - 4,160 4,160 Other comprehensive income, net of tax - - 370 -325 - 1 46 Total comprehensive income for the year - - 370 -325 - 4,161 4,206 Share-based payments 23 24 - 1 - - - 209 210 Purchase of treasury shares 41 - -3,325 - - - - -3,325 Dividend paid 42 - - - - -1,481 2 -1,479 Dividend proposed 42 - - - - 1,481 -1,481 - Equity at 31 December 100 -3,416 905 -110 - 9,523 7,001 The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 16 per share, corresponding to DKK 1.6 billion (2020: DKK 0 million), be distributed for 2021. In 2021, an extraordinary dividend of DKK 15 per share was paid, corresponding to DKK 1.5 billion. In 2021, Pandora initiated share buyback programmes, which resulted in repurchases of 3,943,797 treasury shares, corresponding to DKK 3.3 billion. For further shareholder information on dividend payments, see page 42. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED  DECEMBER 2020 Equity at 1 January 100 -1,964 1,112 54 836 5,110 5,249 Net prot for the year - - - - - 1,938 1,938 Other comprehensive income, net of tax - - -577 161 - 6 -410 Total comprehensive income for the year - - -577 161 - 1,944 1,528 Share-based payments 23 24 - 14 - - - 76 90 Purchase of treasury shares 41 - -431 - - - - -431 Sale of treasury shares 1 41 - 2,288 - - - -509 1,779 Dividend paid 42 - - - - -836 11 -825 Dividend proposed 42 - - - - - - - Equity at 31 December 100 -93 535 215 - 6,632 7,389  On 5 May 2020, Pandora initiated an accelerated bookbuild for the sale of 8 million treasury shares, which was completed on the same day, generating approximately DKK 1.8 billion in net proceeds. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  DKK million Notes 2021 2020 Operating prot 5,839 2,684 Depreciation and amortisation 1,999 2,315 Share-based payments 24 166 70 Change in inventories -799 -96 Change in receivables -77 869 Change in payables and other liabilities 327 724 Other non-cash adjustments 47 70 -155 Interest etc. received 3 3 Interest etc. paid -468 -247 Income tax paid 25 -832 -192 Cash ows from operating activities, net 6,228 5,975 Acquisition of subsidiaries and activities, net of cash acquired 34 -66 -12 Purchase of intangible assets -289 -130 Purchase of property, plant and equipment -296 -374 Change in other non-current assets 17 19 Proceeds from sale of property, plant and equipment 2 13 Cash ows from investing activities, net -631 -484 Acquisition of non-controlling interests - -42 Dividend paid 42 -1,479 -825 Purchase of treasury shares 41 -3,325 -431 Sale of treasury shares 41 - 1,778 Proceeds from loans and borrowings 43 1,315 5,861 Repayment of loans and borrowings 43 -3,004 -9,073 Repayment of lease commitments 43 -991 -839 Cash ows from nancing activities, net -7,484 -3,571 Net increase/decrease in cash -1,887 1,920 DKK million Notes 2021 2020 Cash at 1 January 1 2,912 1,054 Exchange gains/losses on cash 18 -62 Net increase/decrease in cash -1,887 1,920 Cash at 31 December 1 1,043 2,912 Cash ows from operating activities, net 6228 5975 - Interest etc. received 3 3 - Interest etc. paid 468 247 Cash ows from investing activities, net 631 484 - Acquisition of subsidiaries and activities, net of cash acquired 66 12 Free cash ow excl. lease payments 6128 5747 Free cash ow incl. lease payments 5137 4908 Unutilised committed credit facilities 44 6023 6998 1 Cash comprises cash at bank and in hand. The above cannot be derived directly from the income statement and the balance sheet. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED  DECEMBER ACCOUNTING POLICIES Cash flows from operating activities are presented using the indirect method. Cash flows in currencies other than the functional currency are translated at the average exchange rates for the month in question, unless these differ significantly from the rates at the transaction dates. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Notes The notes are grouped into five sections related to key figures. The notes contain the relevant financial information as well as a description of accounting policies applied for the topics of the individual notes. SECTION  BASIS OF PREPARATION  1.1 Principal accounting policies 56 1.2 New accounting policies and disclosures 57 1.3 Management’s judgements and estimates under IFRS 58 SECTION  RESULTS FOR THE YEAR  2.1 Segment and revenue information 60 2.2 Government grants 62 2.3 Sta costs 63 2.4 Share-based payments 64 2.5 Taxation 66 SECTION  INVESTED CAPITAL AND WORKING CAPITAL ITEMS  3.1 Intangible assets 71 3.2 Property, plant and equipment 74 3.3 Leases 75 3.4 Business combinations 77 3.5 Inventories 78 3.6 Trade receivables 78 3.7 Provisions 79 3.8 Contract assets and liabilities 79 3.9 Trade payables 80 SECTION  CAPITAL STRUCTURE AND NET FINANCIALS  4.1 Share capital 82 4.2 Earnings per share and dividend 83 4.3 Net interest-bearing debt 84 4.4 Financial risks 85 4.5 Derivative nancial instruments 88 4.6 Net nancials 89 4.7 Other non-cash adjustments 89 SECTION  OTHER DISCLOSURES  5.1 Contingent liabilities 91 5.2 Related parties 91 5.3 Fees to independent auditor 91 5.4 Events occurring after the reporting period 91 5.5 Companies in the Pandora Group 92 5.6 Financial denitions 93 CONTENTS ANNUAL REPORT 2021 FINANCIAL STATEMENTS  This section introduces Pandora’s accounting policies and signicant accounting estimates. A more detailed description of accounting policies and signicant estimates related to specic reported amounts is presented in the respective notes. The purpose is to provide transparency on the disclosed amounts and to describe the relevant accounting policy, signicant estimates and numerical disclosure for each note. BASIS OF PREPARATION SECTION  ANNUAL REPORT 2021 FINANCIAL STATEMENTS ANNUAL REPORT  Pandora A/S is a public limited company with its registered office in Denmark. The Annual Report for the period 1 January – 31 December 2021 comprises the consolidated financial statements of Pandora A/S and its subsidiaries (the Group). The Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional requirements of the Danish Financial Statements Act. The Annual Report has been prepared on a historical cost basis, except for derivative financial instruments, which have been measured at fair value. The Annual Report is presented in Danish kroner (DKK) and all amounts are in millions unless otherwise stated. Due to round- ing, numbers presented throughout this report may not add up precisely to the totals, and percentages may not precisely reflect the absolute figures. Apart from changes due to the implementation of new or amended standards and interpretations as described in note 1.2 New accounting policies and disclosures , accounting policies are unchanged from last year. iXBRL reporting Pandora A/S has filed the Annual Report in 2021 in the new European Single Electronic Format (ESEF), XHTML format that NOTE . PRINCIPAL ACCOUNTING POLICIES can be displayed in a standard browser. The primary state- ments in the consolidated financial statements are tagged using eXtensible Business Reporting Language (iXBRL), which comply with the ESEF taxonomy included in the ESEF Regu- lation. The Annual Report submitted to the Danish Financial Supervisory Authority consists of the XHTML document to- gether with certain technical files, all included in a file named PAND-2021-12-31.zip. Alternative performance measures Pandora presents financial measures in the Annual Report that are not defined according to IFRS. Pandora believes these non-GAAP measures provide valuable information to investors and Pandora’s management when evaluating performance. Since other companies may calculate these differently from Pandora, they may not be comparable to the measures used by other companies. These financial measures should there- fore not be considered to be a replacement for measures de- fined under IFRS. For definitions of the performance measures used by Pandora, see note 5.6 Financial definitions. ACCOUNTING POLICIES The overall accounting policies applied to the Annual Report as a whole are described below. The accounting policies related to specific line items are described in the notes to which they relate. The description of accounting policies in the notes forms part of the overall description of Pandora’s accounting policies. Consolidated financial statements The consolidated financial statements comprise the financial statements of the Parent Company and its subsidiaries. Sub- sidiaries are fully consoli dated from the date of acquisition, being the date on which Pandora obtains control, until the date that such control ceases. All intercompany balances, income and expenses, unrealised gains and losses and dividends re- sulting from intercompany transactions are eliminated in full. Functional and presentation currency The consolidated financial statements are presented in DKK, which is also the functional currency of the Parent Company. Each subsidiary determines its own functional currency, and items recognised in the financial statements of each entity are measured using that functional currency. Transactions and balances Transactions in foreign currencies are initially recognised in the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchange ruling at the reporting date. All adjustments are recognised in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are trans- Notes 2.1 Segment and revenue information 2.2 Government grants 2.3 Staff costs 2.4 Share-based payments 2.5 Taxation 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Leases 3.4 Business combinations 3.5 Inventories 3.6 Trade receivables 3.7 Provisions 3.8 Contract assets and liabilities 4.2 Earnings per share and dividend 4.3 Net interest- bearing debt 4.5 Derivative financial instruments 4.6 Net financials The Annual Report for the period 1 January – 31 December 2021 comprises the consolidated financial statements of Pandora A/S and its subsidiaries (the Group) as well as separate financial statements for the Parent Company, Pandora A/S. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  lated using the exchange rates at the date when the fair value is determined. Group companies with another functional currency than DKK The assets and liabilities of foreign subsidiaries are translat- ed into DKK at the rate of exchange prevailing at the report- ing date, and their income statements are translated at the exchange rates prevailing at the dates of the transactions. Exchange rate adjustments arising on translation are rec- ognised in other comprehensive income. On disposal of a foreign subsidiary, the component of other comprehensive income relating to that particular foreign operation is rec- ognised in the income statement. Consolidated income statement The consolidated income statement is presented based on costs classified by function. Cost of sales comprises direct and indirect expenses incurred to generate revenue for the year, comprising raw materials, consumables, production staff, depreciation, amortisation and impairment losses in respect of production equipment. Sales, distribution and marketing expenses comprise ex- penses related to the distribution of goods sold and sales campaigns, including packaging materials, brochures, wages and salaries and other expenses related to sales and distribu- NOTE . PRINCIPAL ACCOUNTING POLICIES CONTINUED NOTE . NEW ACCOUNTING POLICIES AND DISCLOSURES Implementation of new or amended standards and interpretations Pandora has adopted all new or amended standards (IFRS) and interpretations (IFRIC) as adopted by the EU and which are effective for the financial year 1 January – 31 December 2021. The implementation of these new or amended stan- dards and interpretations had no material impact on the financial statements for the year apart from the amendment in IFRS 16. Amendment to IFRS 16 Leases In March 2021, the IASB issued COVID-19-Related Rent Concessions beyond 30 June 2021, an amendment to IFRS 16 Leases. The IASB extended the period of relief for leases arising as a direct consequence of the COVID-19 pandemic from 30 June 2021 to 30 June 2022. As a practical expedient, a lessee may elect not to assess whether a COVID-19 pandemic-related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 pandemic-related rent concession the same way it would account for the change under IFRS 16 if the change was not a lease modification. The extension of the practical expedient applies only to rent concessions occur- ring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: • the change in lease payments results in revised consider- ation for the lease that is substantially the same as, or less tion staff as well as depreciation, amortisation and impair- ment losses in respect of distribution equipment. Administrative expenses comprise expenses incurred in the year to manage Pandora, including expenses related to admin- istrative staff and depreciation, amortisation and impairment losses in respect of assets used in the administration. The allocation of amortisation and impairment losses from in- tangible assets is presented in note 3.1 and the allocation of depreciation and impairment losses from property, plant and equipment in note 3.2. Financial statements of the Parent Company Under section 149 of the Danish Financial Statements Act, these consolidated financial statements represent an ex- tract of Pandora’s complete Annual Report. In order to focus on the overall, consolidated results for Pandora, we publish Group consolidated financial statements without the financial statements of the Parent Company, Pandora A/S. The Annual Report of the Parent Company is an integrated part of the full Annual Report and available at cvr.dk following approval at the Annual General Meeting. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . MANAGEMENT’S JUDGEMENTS AND ESTIMATES UNDER IFRS SIGNIFICANT ACCOUNTING ESTIMATES In preparing the consolidated financial statements, manage- ment makes various accounting estimates and assumptions that form the basis of the presentation, recognition and measure- ment of Pandora’s assets and liabilities. Determining the carrying amounts of some assets and liabil- ities requires estimates and assumptions concerning future events. Estimates and assumptions are based on historical experience and other factors, which management assesses to be reasonable, but which by their nature involve uncertainty and unpredictability. These assumptions may have to be revised, and unexpected events or circumstances may occur. Pandora is subject to risks and uncertainties that may lead to actual results differing from these estimates, both positively and negatively. Climate change In preparing the Consolidated Financial Statements, manage- ment has considered the impact of climate change, particularly in the context of sustainability targets. These considerations did not have a material impact on management’s judgements and estimates, consistent with the assessment that climate change is not expected to have a significant impact on the Group’s future cash flow or going concern assessment. In addition, consideration has been given to the potential financial impacts of climate-related risks on the carrying value of goodwill through qualitative review of the Group’s climate change risk assessment. This review did not identify any material reporting impacts. COVID-19 COVID-19 continues to affect the global economy, and Pandora continues to assess the value of intangible assets and property, plant and equipment, and internal forecasts have considered the ongoing impacts of the pandemic on income and expenses. Changes in selling prices and direct costs are based on past experience and management’s expectation of future changes in the markets where the Group operates. Specific risks for Pandora are discussed in the relevant sections of the Management’s review and in the notes. The areas that involve a high degree of judgement and estima- tion and are material to the financial statements are described in more detail in the related notes. NOTE . NEW ACCOUNTING POLICIES AND DISCLOSURES CONTINUED than, the consideration for the lease immediately preceding the change; • any reduction in lease payments affects only payments originally due on or before 30 June 2022 (for example, a rent concession would meet this condition if it results in reduced lease payments before 30 June 2022 and increased lease payments that extend beyond 30 June 2022); • there is no substantive change to other terms and conditions of the lease. Pandora decided to apply the practical expedient issued by IASB for all contracts with rent concessions occurring as a direct consequence of COVID-19 and where it meets all conditions of the practical expedient. The effect of the amendment and its impact on financial statements are presented in note 3.3 Leases. Notes 2.1 Segment and revenue information 2.5 Taxation 3.3 Leases 3.5 Inventories 3.8 Contract assets and liabilities 5.1 Contingent liabilities ANNUAL REPORT 2021 FINANCIAL STATEMENTS  This section comprises notes related to the results for the year, including reporting segment disclosures, and provides additional information related to two of Pandora’s performance measures: revenue and EBIT. A detailed description of the results for the year is given in the Financial review section of the Management’s review. RESULTS FOR THE YEAR SECTION  Net prot DKK million 2020: 1,938 4,160 Eective tax rate 2020: 22.3% 22.6% EBIT margin 2020: 20.4% excl. restructuring costs 25.0% Revenue DKK million 2020: 19,009 23,394 ANNUAL REPORT 2021 FINANCIAL STATEMENTS ANNUAL REPORT  NOTE . SEGMENT AND REVENUE INFORMATION Pandora’s activities are segmented into two reportable seg- ments (Global Business Units), each responsible for the end- to-end performance of products. One Global Business Unit is responsible for Moments and Collabs, while the other drives the newer collections and innovations. The two operating segments include all channels relating to the distribution and sale of Pandora products. Management monitors the profitability of operating seg- ments separately for the purpose of making decisions about resource allocation and performance management. Segment results are measured as gross profit. As Programme NOW restructuring costs for 2020 cannot be meaningfully allocated to segments, segment performance for 2020 was measured and reported excluding restructuring costs. Segment information is recognised and measured in accordance with IFRS. INCOME STATEMENT BY GLOBAL BUSINESS UNIT DKK million Moments and Collabs Style and Upstream Innovation Group 2021 Revenue 16610 6784 23394 Cost of sales 4106 1485 5590 Gross prot 12504 5300 17803 Operating expenses 11965 Consolidated operating prot (EBIT) 5839 Prot margin (EBIT margin) 250% 2020 Revenue 13562 5447 19009 Cost of sales 3359 1275 4634 Gross prot 10204 4172 14375 Operating expenses 11691 Consolidated operating prot (EBIT) 2684 Prot margin (EBIT margin) 141% Restructuring costs 1197 Prot margin (EBIT margin) excl. restructuring costs 204% 1 The ‘Garden’ collection was reallocated from Style and Upstream Innovation to Moments and Collabs in Q2 2021. Comparative gures for 2020 were restated accordingly. 2 Programme NOW was completed in 2020, thus no restructuring cost was recorded in 2021. Restructuring costs in 2020 amounted to DKK 1.2 billion, comprising mainly cost of sales (DKK 0.2 billion, primarily related to optimisation in production) and operating expenses (DKK 1.0 billion, primarily related to organisational restructuring, IT transformation and consultancy expenses). Restructuring costs impacted marketing expenses by DKK 0.1 billion, sales and distribution expenses by DKK 0.1 billion and administrative expenses by DKK 0.8 billion. REVENUE BY GLOBAL BUSINESS UNIT DKK million 2021 2020 Moments and Collabs 16610 13562 - Moments 14699 11660 - Collabs 1911 1902 Style and Upstream Innovation 6784 5447 - Timeless 4091 3318 - Signature 1990 1739 - Me 656 390 - Brilliance 48  Total revenue 23394 19009 Goods transferred at a point in time 23321 18939 Services transferred over time 73 70 Total revenue 23394 19009 The use of sales channels for the distribution of Pandora jewellery depends on the underlying market maturity and varies within markets but is consistent when viewed between segments. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  GEOGRAPHIC INFORMATION, REVENUE DKK million 2021 2020 UK 3314 2960 Italy 2443 2021 France 1122 1154 Germany 1191 1014 Denmark 32 30 US 7026 4505 Australia 1131 1120 China 1126 1261 Other 6009 4943 Total revenue 23394 19009 GEOGRAPHIC INFORMATION, ASSETS DKK million 2021 2020 Germany 602 645 Denmark 1983 1952 US 1754 1701 Australia 453 443 Thailand 516 535 Other 1785 1669 Total intangible assets 1 7,094 6,943 Property, plant and equipment 2 1816 2054 Right-of-use assets 3 2532 3007 Deferred tax assets 891 764 Other non-current nancial assets 222 244 Current assets 5988 6972 Total consolidated assets 18542 19984 1 The allocation of intangible assets in the table above reects the country in which the assets were acquired, including goodwill, in the functional currency in which it is denominated. This is dierent from the presentation in note 3.1 Intangible assets, where goodwill is allocated in accordance with management reporting and monitoring. 2 The crafting facilities in Thailand accounted for DKK 1,025 million (2020: DKK 1,130 million), corresponding to 56.4% of property, plant and equipment (2020: 55.0%). 3 Right-of-use assets mainly relate to stores and oces. REVENUE BY SALES CHANNEL DKK million 2021 2020 Pandora physical stores 9945 7943 Pandora online stores 5977 5483 Wholesale and third-party distribution 7472 5583 Total revenue 23394 19009 NOTE . SEGMENT AND REVENUE INFORMATION CONTINUED SIGNIFICANT ACCOUNTING ESTIMATES Recognition and measurement of revenue is based on estimates and judgements relating to expected sales returns allowed to customers in most countries. These judgements can have a material impact on the timing and measurement of recognised revenue as well as the level of the refund liability. Reductions in revenue from expected sales returns is calculated based on histori- cal return patterns and on a case-by-case basis for commercial reasons. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . SEGMENT AND REVENUE INFORMATION CONTINUED ACCOUNTING POLICIES Retail sales – products Revenue from the sale of products through Pandora owned and operated stores is recognised when a store sells a product to the customer. Payment is usually due when the customer picks up the prod- uct in the store or the product is delivered from an online store. However, in some instances collection is delayed and a receivable recognised, see note 3.6 Trade receivables. A refund liability and a right-of-return asset are recog- nised for products expected to be returned, see note 3.8 Contract assets and liabilities. The estimate for returned products is based on historical experience and expectations. Based on knowledge of the nature of returns, it is considered highly probable that a significant reversal of cumulative revenue recognised will not occur. Rebates and discounts granted to cus- tomers are recognised as a reduction in revenue. The Group’s obligation to repair or replace faulty products is part of the standard terms and is there- fore recognised as a contract liability, see note 3.8 Contract assets and liabilities. Revenue is further measured excluding sales taxes and duties when these are passed on to customers. Sales taxes and duties incurred on sales that are not recoverable from the local taxation authorities are reported gross as part of revenue and cost of sales. Wholesale and third-party distributors – products Pandora manufactures and sells jewellery to wholesalers and third-party distributors. Revenue is recognised when control of the products has been transferred to the wholesaler or third-party distrib- utor. Change of control of the products occurs when the products have been delivered to the wholesaler or distributor and no further obligation exists that can affect the transfer of control. Delivery has taken place when the products have been shipped to the location of the wholesaler or distributor and control of the goods has been transferred to the buyer. Revenue from the sale is recognised based on the price specified in the contract. Revenue is only recognised to the extent it is highly probable that a significant reversal will not occur. A refund liability and a right-of-return asset are recognised for products expected to be returned, see note 3.8 Contract assets and liabilities. The estimate for returned products is based on historical experience and expectations. Based on knowledge of the nature of returns in the wholesale and distributor channels, it is considered highly probable that a significant reversal of cumulative revenue recognised will not occur. Provisions for rebates and discounts granted to wholesalers and franchisees are recognised as a reduction in revenue. The Group’s obligation to repair or replace faulty products is recognised on a gross basis in the income statement as both a reduction in revenue and a decrease in cost of goods sold. This is due to the handling of warranty claims, which leads to replacements instead of repairs. Revenue is further measured excluding sales taxes and duties when these are passed on to customers. Sales taxes and duties incurred on sales that are not recoverable from the local taxation authorities are reported gross as part of revenue and cost of sales. When control has been transferred, a receivable is recognised as the consideration to be paid is condi- tional only on the passage of time. The price speci- fied in the contract is not adjusted for any financing element as payment terms never exceed 12 months. Pandora received government subsidies of DKK 152 million (2020: DKK 225 million) as a result of the COVID-19 pan- demic for operations mainly in Europe. The majority of the subsidies were related to employee retention and facility cost and included the government programmes “Coronavirus Job Retention Scheme” and “Business Rates Relief” in the UK, “Unemployment Benefits” and “Tax Credit Rental” in Italy, and “Short-Time Work Subsidy” in Germany. There are no unfulfilled conditions or other contingencies attached to the subsidies recognised. During the pandemic, Pandora has re- tained all staff, including store staff while stores were closed. The government subsidies partially fund the associated cost, and relate mainly to sales and distribution. NOTE . GOVERNMENT GRANTS ACCOUNTING POLICIES Government grants are recognised where there is rea- sonable assurance that the grant will be received and all attached conditions complied with. Income from government subsidies as a result of the COVID-19 pandemic has been recognised as a deduc- tion in the expense item the subsidies are intended to compensate. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  The Group’s pension plans are primarily defined contribution plans. Pandora has defined benefit plans relating to employees in Thailand. The defined benefit plans are recognised at the present value of the actuarially measured obligations. In 2021, these obligations amounted to DKK 81 million (2020: DKK 74 million). In 2021, the actuarial gain was DKK 10 million (2020: gain of DKK 6 million) recognised in other comprehensive income. DKK million 2021 2020 Total remuneration to Board of Directors 76 78 Board members receive a fixed travel fee when attending Board meetings abroad. Total travel fee for 2021 amounted to DKK 0.4 million (2020: DKK 1.0 million). For further details, see the Remuneration Report available at pandoragroup.com. NOTE . STAFF COSTS DKK million 2021 2020 Wages and salaries 4041 3581 Pensions 177 178 Share-based payments 166 70 Social security costs 256 177 Other sta costs 395 472 Total sta costs 5034 4478 Sta costs have been recognised in the consolidated income statement: Cost of sales 1063 913 Sales, distribution and marketing expenses 3010 2572 Administrative expenses 961 993 Total sta costs 5034 4478 Average number of full-time employees during the year 22,441 22,336 DKK million Base pay Bonus Shares Benets Other Total  Total remuneration to Executive Management 162 166 266 24  619  Total remuneration to Executive Management 140 157 131 17  445 ACCOUNTING POLICIES Wages and salaries, social security contributions, leave and sick leave, bonuses and non-monetary benefits are recog- nised in the financial year in which services are rendered by employees of Pandora. Whenever Pandora provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees. Termination benefits are recognised at the time an agree- ment between Pandora and the employee is made and no future service is rendered by the employee in exchange for the benefits. The 2020 remuneration includes DKK 1.2 million cost of bonus and DKK 1.0 million cost of shares related to the former Executive Management. The 2021 remuneration includes DKK 1.2 million cost of shares related to the former Executive Management. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Decisions to grant share-based incentive programmes are made by the Board of Directors in accordance with general guidelines on incentive pay for Pandora. The total cost related to share-based payments was DKK 166 million (2020: net cost of DKK 70 million). The programmes for 2021 and for 2020 were recorded at the maximum level as the maximum performance is expected to be met. The cost of share-based payments is included in staff costs. In the remaining vesting periods, an amount of DKK 174 mil- lion (2020: DKK 95 million) is expected to be recognised in respect of the current programmes. The weighted average remaining contractual life of the shares at the end of the period was 1.5 years (2020: 2.9 years). For shares exercised in 2021, the average share price at the time of exercise was DKK 637. Long-term incentive programmes Pandora is launching annual incentive programmes targeting Executive Management and other employees. The calculat- ed value of each programme is recognised over the vesting period (three years) based on the likelihood that programme targets will be met. For Executive Management, a further two-year holding period applies. NOTE . SHAREBASED PAYMENTS SHARES OUTSTANDING Executive Management Other employees Total Average exercise price per performance share, DKK  Shares outstanding at 1 January 229018 707613 936631 11 Shares granted during the year 50288 205415 255703  Shares exercised during the year  4754 4754  Shares lapsed during the year  38676 38676 08 Shares outstanding at 31 December 279306 869598 1148904 09  Shares outstanding at 1 January 188413 502386 690799 42 Shares granted during the year 115491 446854 562345  Shares exercised during the year 32061 19079 51140 41 Shares lapsed during the year 42825 222548 265373 62 Shares outstanding at 31 December 229018 707613 936631 11 ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . SHAREBASED PAYMENTS CONTINUED NUMBER OF SHARES IN PANDORA A/S Expiry date Exercise price, DKK Shares 31 December 2021 Expected volatility Risk-free interest rate Maximum market value at launch (DKK million) Accumulated cost recognised (DKK million) Remaining value to be expensed (DKK million) Programme start date November 2018 1,2 2023 265 7865 43% 01% 2 2  March 2019 1,3 2022 265 249135 43% 06% 93 57  March 2019 1,2 2024 265 105662 43% 05% 27 16  July 2020 2023 000 419864 42% 06% 152 104 45 July 2020 2025 000 115491 42% 06% 36 25 10 April 2021 2024 000 200599 50% 05% 154 53 102 April 2021 2026 000 50288 50% 05% 26 9 17 Total number of shares outstanding 1148904 490 265 174 1 Although technically structured as options for legacy Danish tax treatment reasons, the awards have the characteristics of Performance Share Units because the option exercise price is 1% of the share price. 2 Programme related to Executive Management. 3 Programme related to other employees. Assumptions The volatility of the shares is based on the historical volatility of the price of Pandora A/S shares. The risk-free interest rate is based on a Danish government bond with similar maturity. The dividend yield applied is equal to 2.2% for the 2021 pro- gramme and is based on the assumed future dividend over the vesting period and the share price on the date of the grant. Actual paid dividends may differ from the assumptions applied in the valuation of the market value. Given that the exercise price for one performance share equals up to 1% of the market price of one share at grant date, the fair value al- most equals the market value of one share at grant date. The assumptions in the table therefore have very limited impact on the estimated fair value of the shares granted. ACCOUNTING POLICIES Selected Pandora employees receive remuneration in the form of share-based payment transactions, whereby programme participants render services as consideration for equity instru- ments (“equity-settled transactions”). Equity-settled transactions The cost of equity-settled transactions with employees is measured by reference to the fair value at the grant date. The calculated fair values are based on either the Black-Scholes model or the Monte Carlo model according to the performance conditions of each programme. The cost of equity-settled transactions is recognised as staff costs together with a corresponding increase in equity over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transac- tions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and manage- ment’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or income for a period represents the movement in cumulative expenses recognised at the beginning and end of that period. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  INCOME TAX EXPENSE DKK million 2021 2020 Current income tax charge for the year 1500 604 Change in deferred tax for the year 201 66 Impact of change in tax rates 1 2 Adjustment to current tax for prior years 42 52 Adjustment to deferred tax for prior years 40 68 Total income tax expense 1218 556 Deferred tax on other comprehensive income 92 45 Income tax on other comprehensive income 9 32 Total tax on other comprehensive income 83 13 Income taxes Income tax expense Income tax expense was DKK 1,218 million in 2021, corresponding to an effective tax rate of 22.6% (2020: DKK 556 million, 22.3%) for the Group. The tax rate of 22.6% was negatively impacted by non-capitalised tax assets, paid withholding taxes on dividend and other payments, and non-deductible expenses from limitation in deduction for marketing expenses in China and other expenses with no tax deduction. The effective tax rate was reduced by non-taxable income in Thailand as part of the investment agreement with the Thai government, Board of Investment, and further reduced by adjustments to tax for prior years.  The corporate income tax rate in Pandora’s key markets is higher than the Danish tax rate of 22%, except for the UK and Thailand. RECONCILIATION OF EFFECTIVE TAX RATE AND TAX 2021 2020 % (DKK million) % (DKK million) Prot before tax 5378 2494 Corporate tax rate in Denmark, 22% 220% 1183 220% 549 Deviation in foreign subsidiaries’ tax rates compared with the Danish rate 03% 17 02% 5 Deferred tax impact of change in tax rates 00% 1 01% 2 Non-deductible expenses 31% 166 27% 68 Tax incentives 29% 157 39% 98 Adjustment to tax for prior years 16% 82 07% 16 Non-capitalised tax assets, net 06% 30 01% 2 Withholding taxes/other taxes 11% 60 07% 17 Eective income tax rate/income tax expense 226% 1218 223% 556 NOTE . TAXATION SIGNIFICANT ACCOUNTING ESTIMATES Pandora is subject to income tax in the countries in which the Group operates, comprising various tax rates world- wide. Significant judgements are required in determining the accrual for income taxes, deferred tax assets and liabil- ities, and provision for uncertain tax positions. Provision for uncertain tax positions is measured according to IFRIC 23. As part of Pandora conducting business globally, tax and transfer pricing disputes with tax authorities may occur. Any unresolved disputes with local tax authorities are recognised as income tax payable/receivable based on the expected value method or the most likely amount. Man- agement believes that the provision made for uncertain tax positions is adequate. However, the actual obligation may deviate from this and is dependent on the result of litiga- tions and settlements with the relevant tax authorities. ACCOUNTING POLICIES Income tax expense for the year comprises current tax and changes in deferred tax, including changes in tax rate, adjustment to prior years and changes in provision for uncertain tax positions. Tax is recognised in the income statement, except to the extent that it is related to items recognised in equity or othercomprehensive income. The tax rates and tax laws used to compute the amounts are those enacted or substantively enacted, by the report- ing date, in the countries in which Pandora operates and generates taxable income. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . TAXATION CONTINUED Deferred tax At the end of 2021, deferred tax assets amounted to DKK 891 million (2020: DKK 764 million) and deferred tax liabilities amounted to DKK 113 million (2020: DKK 368 million). Net deferred tax assets amounted to DKK 778 million (2020: DKK 396 million). Of the total deferred tax assets recognised, DKK 23 million (2020: DKK 14 million) related to tax loss carryforwards, the utilisation of which depends on future positive taxable income exceeding realised deferred tax liabilities. It is management’s opinion that these tax loss carryforwards can be utilised. Tax assets not recognised were DKK 62 million (2020: DKK 33 million), of which DKK 36 million (2020: DKK 28 million) relate to tax loss carryforwards that are not expected to be utilised in the foreseeable future. Tax losses that can expire amount- ed to DKK 18 million (2020: DKK 14 million). No deferred tax has been recognised in respect of entities’ earnings that are intended for distribution in the short term, as no material tax expense will be payable on distribution. Only insignificant latent tax liabilities remained at 31 Decem- ber 2021. These liabilities are not recognised as the Group is able to control this liability and it is considered probable that the liability will not crystallise in the foreseeable future. DEFERRED TAX DKK million 2021 2020 Deferred tax at 1 January 396 440 Exchange rate adjustments 6 15 Recognised in the income statement 241 2 Recognised in other comprehensive income 92 45 Recognised in equity, share-based payments 44 20 Impact of change in tax rates 1 2 Deferred tax at 31 December 778 396 Deferred tax assets 891 764 Deferred tax liabilities 113 368 Deferred tax, net 778 396 BREAKDOWN OF DEFERRED TAX DKK million 2021 2020 Intangible assets 633 612 Property, plant and equipment 7 6 Right-of-use assets 16 11 Current assets 999 792 Non-current assets and liabilities 366 197 Tax loss carryforwards 23 14 Deferred tax, net 778 396 ACCOUNTING POLICIES Deferred tax on all temporary differences between the carrying amounts for financial reporting purposes and the tax base of assets and liabilities is measured using the balance sheet liability method. No deferred tax is recognised on temporary differences that arise from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss. The recognition of deferred tax assets includes the expected tax value of tax loss carryforwards to the extent that these tax assets can be offset against positive taxable income in the foreseeable future. The same applies to deferred tax assets related to investments in subsidiaries. Management has considered future taxable income and applied judgements to determine whether deferred tax assets should be recognised. Deferred tax assets and liabilities are measured according to current tax rules and at the tax rates expected to be effective on elimination of the temporary differences. Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax relates to the same taxable entity and the same tax authority. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . TAXATION CONTINUED Our approach to taxes and taxes paid Sustainability and responsible business practices have been part of Pandora’s way of doing business since the very begin- ning. Our sustainability strategy is reflected in our approach to taxes and we aim to pay a fair tax in all markets where we operate. Pandora is committed to ensure compliance with the letter and spirit of tax law in the markets where we oper- ate, while striving to maximise shareholder value in a respon- sible way. The Group tax policy, which has been approved by the Board of Directors of Pandora, is available at pandora- group.com/investor/corporate-governance/tax-information and includes more information on our approach to taxes. Pandora A/S is the principal value driver and also assumes the majority of business risks. Pandora allocates a profit margin, based on benchmark studies, to all entities in the Group, and the residual profit (or loss) in the value chain remains with Pandora A/S. With a principal tax model, Pandora by nature has a significant number of intercompany transactions. In- tercompany transactions are based on arm’s length standard and therefore priced on a basis consistent with the way unre- lated parties would have priced such transactions. This im- pacts the taxes we pay in the countries in which we do busi- ness. Pandora understands the need for more transparency by both taxpayers and tax administrations, and the need to provide more clarity about Pandora’s position on tax. In doing so we provide insight in accordance with the EU Directive to be adopted, which introduces public country-by-country reporting for our key markets. The full country-by-country report for all markets is available at pandoragroup.com/in- vestor/corporate-governance/tax-information. In 2021, we paid corporate taxes in the amount of DKK 832 million (2020: DKK 192 million). The increased tax payments mainly relate to Denmark and the US as the profit in these markets has increased significantly and as last year was im- pacted by tax refunds in both markets. The major part of the taxes paid is attributable to Pandora’s key markets and most of the tax payments relate to the current year. COUNTRYBYCOUNTRY OVERVIEW FOR KEY MARKETS 1 DKK million Business activities Total revenue incl. related party 2 Third-party revenue in P&L Prot before tax Tax paid Current income tax charge for the year Employees (FTE) Accumulated earnings UK 3583 3314 198 10 42 887 172 Italy 2639 2443 108 14 32 758 93 France 1237 1122 64 22 44 509 119 Germany 1601 1191 88 14 26 908 99 Denmark 14729 32 6282 480 1011 823 11018 USA 14091 7026 348 153 148 1497 275 Australia 1370 1131 212 58 74 271 36 China 1140 1126 18 19 35 1228 46 Thailand 6010  918 20 28 11767 448 Rest of world 6394 6009 233 41 81 3793 1367 IFRS eliminations 604  3093  22  1293 Total Group  23394 5378 832 1500 22441 12378 1 The country-by country overview for key markets is based on IFRS principles. 2 Total revenue includes third-party revenue, related party revenue, other income and nancial income. Headquarters Production DistributionWarehouse CASH INCOME TAX PAID DKK million 2021 2020 Income tax expense in income statement 1218 556 Tax on other comprehensive income 9 32 Adjustments regarding deferred taxes 240 4 Movement in income tax receivable/payable 635 328 Income tax paid in the year 832 192 - of which relates to prior years 9 81 - of which relates to current year 841 273 Income tax paid in the year 832 192 ANNUAL REPORT 2021 FINANCIAL STATEMENTS  9 42 NOTE . TAXATION CONTINUED Paid income tax Income tax paid reflects the cash tax payments made in the year and relates to taxes on account for the current year as well as payments regarding prior years. For the majority of the countries, the final taxes are paid in the year following the financial year, creating a timing difference in cash tax payments. At the beginning of the year, net income tax payable by Pandora amounted to DKK 299 million. The net income tax payable increased to DKK 934 million during the year, as shown in the bridge “Movement in net tax payable”. The increase reflects the higher profit before tax in 2021 compared to 2020, which is due for payment in 2022. The difference between income tax expense in the income statement and income tax paid is explained in the bridge “From income tax expense to tax paid”. The income tax expense in the income statement for 2021 has been calcu- lated at DKK 1,218 million. The income tax expense includes taxes on other income posted on equity and adjustments to taxes for timing differences. Adding the tax payable from 2020 of DKK 299 million, we have a total tax payable of DKK 1,766 million. Of this amount DKK 934 million is due to be paid in 2022 or later, and the remaining DKK 832 million were settled as cash tax payments in 2021. FROM INCOME TAX EXPENSE TO TAX PAID DKK million Income tax expense in income statement Income tax on comprehensive income Adjustments regarding deferred taxes Net tax payable, start of year Net tax payable, year-end 1,218 9 240 299 934 832 MOVEMENT IN NET TAX PAYABLE DKK million Net tax payable, start of year Current income tax charge for the year Income tax on comprehensive income Adjustments to current tax in prior years Income tax paid in the year as reected in our cash ow Net tax payable, year-end 299 1,500 832 934 Income tax paid in the year as reected in our cash ow ANNUAL REPORT 2021 FINANCIAL STATEMENTS  The notes in this section describe the assets that form the basis for the activities of Pandora and the related liabilities. Financial risks are described in note 4.4. INVESTED CAPITAL DKK million Notes 2021 2020 Intangible assets 31 7094 6943 Property, plant and equipment 32 1816 2054 Right-of-use assets 33 2532 3007 Other non-current nancial assets 222 244 Non-current provisions 37 416 370 Net working capital 1181 1447 Deferred tax, net 25 778 396 Currency derivatives, net 27 12 Income tax receivables/payable, net 935 299 Invested capital 9884 10540 WORKING CAPITAL DKK million Notes 2021 2020 Inventories 35 2991 1949 Trade receivables 36 1009 870 Trade payables 39 3267 3211 Operating working capital 732 391 Other receivables 808 807 Current provisions 37 38 750 683 Commodity derivatives, net 113 221 Contract liabilities 163 82 Other payables 1694 1317 Net working capital 1181 1447 INVESTED CAPITAL AND WORKING CAPITAL ITEMS SECTION  Invested capital DKK million 2020: 10,540 Net working capital/ revenue 2020: -7.6% CAPEX DKK million 2020: 491 9,884-5.0%641 ANNUAL REPORT 2021 FINANCIAL STATEMENTS ANNUAL REPORT  DKK million Goodwill Brand Distri- bution Other intangible assets Total  Cost at 1 January 4247 1057 1601 1747 8652 Acquisition of subsidiaries and activities 12  13  25 Additions    300 300 Disposals    6 6 Exchange rate adjustments 161  5 18 173 Cost at 31 December 4418 1057 1609 2059 9143 Amortisation and impairment losses at 1 January   491 1218 1708 Amortisation for the year   33 219 251 Impairment loss for the year    85 85 Disposals    5 5 Exchange rate adjustments 1  5 4 8 Amortisation and impairment losses at 31 December 1  528 1521 2049 Carrying amount at 31 December 4418 1057 1080 538 7094 The majority of the intangible assets have been acquired through business combinations.  The impairment loss of DKK 85 million relates to write-down of software applications. The loss is mainly recognised as sales, distribution and marketing expenses in the income statement. NOTE . INTANGIBLE ASSETS DKK million Goodwill Brand Distri- bution Other intangible assets Total  Cost at 1 January 4416 1057 1881 1705 9060 Acquisition of subsidiaries and activities 2    2 Additions    122 122 Disposals   274 17 291 Exchange rate adjustments 170  6 64 240 Cost at 31 December 4247 1057 1601 1747 8652 Amortisation and impairment losses at 1 January   741 874 1615 Amortisation for the year   30 296 326 Impairment loss for the year    82 82 Disposals   274 5 281 Exchange rate adjustments   6 28 33 Amortisation and impairment losses at 31 December   491 1218 1708 Carrying amount at 31 December 4247 1057 1110 529 6943  The impairment loss of DKK 82 million relates to scrapped software applications and design rights, the value in use of which has been estimated to be lower than the carrying amount. The loss is mainly recognised as cost of sales in the income statement. DKK million 2021 2020 Amortisation and impairment losses have been recognised in the income statement as follows: Cost of sales 46 105 Sales, distribution and marketing expenses 146 104 Administrative expenses 144 199 Total 337 408 ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Goodwill Additions in 2021 relate to acquisitions of activities. Note 3.4 Business combinations includes an overview of acquired goodwill for the year. Brand The ‘Pandora’ brand is the only brand of the Group that is capitalised in the financial statements. It comprises a group of complementary intangible assets relating to the brand, domain name, products, image and customer experience related to products sold under the Pandora brand. The brand was acquired as part of the Pandora core business in 2008. Distribution Distribution includes distribution network and distribution rights. The distribution network covers Pandora’s relations with its distributors. The main part of the distribution network was acquired with the Pandora core business in 2008. Distribution rights mainly relate to the distribution rights for Pandora products in North America. These were acquired with the American distributor in 2008 and the carrying amount at 31 December 2021 was DKK 1,034 million (2020: DKK 1,034 million). Other intangible assets Other intangible assets mainly comprise software. NOTE . INTANGIBLE ASSETS CONTINUED ACCOUNTING POLICIES All intangible assets are tested for impairment if there is any indication of impairment. Intangible assets with indefinite useful life are tested at least annually. Goodwill Goodwill is initially recognised at the amount by which the purchase price for a business combination exceeds the recognised value of the identifiable assets and liabilities acquired. Goodwill comprises future growth expectations, buyer-specific synergies, the workforce in place and know-how. Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised, but is tested for impairment annually or if impairment indication arises. Impairment losses charged in previous years cannot be reversed. Brand Brand is initially recognised at cost based on the “Relief from Royalty” method, which is considered to have an indefinite useful life and is impairment tested annually. Distribution The distribution network is initially recognised at fair val- ue based on an estimation of the costs the entity avoids by owning the intangible assets and therefore does not need to rebuild the network (the cost approach). The distribution network is amortised over an expect- ed useful life of 15 years. The distribution rights for Pandora products in the North American market are measured based on a residual model, since the distribution agreement underlying the distribution rights is non- terminable. Consequently, the distribution rights are considered to have an indefinite usefullife. Other acquired distribution rights are initially recognised at cost based on the “Multi-period Excess Earnings” model and amortised over their expected useful lives. Other intangible assets Software is initially recognised at cost and amortised over 2-5 years. Amortisation is allocated to segments on a pro rata basis based on the standard cost per segment. Impairment At each reporting date, Pandora assesses whether there is any indication that an asset may be impaired. If any such indication exists, or when annual impair- ment testing of an asset is required, Pandora esti- mates the recoverable amount of the asset. The recoverable amount of an asset is the higher of the fair value of the asset or cash-generating unit (CGU) less costs to sell and its value in use. The recoverable amount is determined for the smallest group of assets that is independent from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. The most significant factors when assessing the po- tential need for impairment are: — decreasing revenue; — decreasing brand value; — changes to the product mix. The indicators above should be viewed in the context of Pandora’s relatively high margins and low asset base. The brand is applied and supported globally in all of the Group’s entities. The brand is maintained and preserved through common strategy and product development at Group level and marketing in the indi- vidual sales entities. The brand is consequently tested for impairment at Group level. Like the brand described above, goodwill is reported and managed internally at Group level. Due to the con- straint in IAS 36, goodwill is allocated to the grouped CGUs in the two operating segments for impairment testing purposes. It is management’s opinion that this best reflects Pandora’s value creation. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . INTANGIBLE ASSETS CONTINUED DISCOUNT RATES AND GROWTH RATES IN TERMINAL PERIOD Discount rate before tax Growth rate in terminal period  Moments and Collabs 117% 2% Style and Upstream Innovation 117% 2% Group 117% 2%  Moments and Collabs 112% 2% Style and Upstream Innovation 113% 2% Group 113% 2% DKK million Goodwill Brand Distribution  Moments and Collabs 3204 766 783 Style and Upstream Innovation 1214 291 298 Total 4418 1057 1080  Moments and Collabs 2981 742 779 Style and Upstream Innovation 1265 315 331 Total 4247 1057 1110  The ‘Garden’ collection was reallocated from Style and Upstream Innovation to Moments and Collabs in Q2 2021. Comparative gures for 2020 were restated accordingly. Assumptions The calculations of the recoverable amounts of CGUs or groups of CGUs are based on the following key assumptions. Discount rates reflect the current market assessment of the risks specific to each CGU or group of CGUs. The Group discount rates have been estimated based on a weighted average cost of capital for the industry. The rates have also been adjusted to reflect the market assessment of any risk specific to each group of CGUs. The EBIT figures used in the impairment test are based on the budget for next year, prepared and approved by manage- ment, and a forecast for the two subsequent years. The 2% growth rate applied is an estimate of the expected average inflation in the terminal period. As such, no real growth is applied to the terminal period when calculating the recoverable amounts. The EBIT margin in the budget of each group of CGUs is based on historical experience and expectations concerning: • revenue development taking into account development in network (stores, retail/wholesale share), product mix and market share as well as the COVID-19 impact on temporari- ly closed stores and online revenue growth; • cost of sales based on raw materials consumption affected by mix of materials (stones, gold and silver), salaries and average lagged hedge commodity prices at the time the budget is prepared; • development in operating expenses; • currency rates are based on actual rates at the time the budget is prepared. Net working capital in the budget for next year, relative to the revenue of each group of CGUs, is based on historical expe- rience and is maintained for the remainder of the expected useful economic lives. Net working capital thus increases on a linear basis as the level of activity increases. The impairment test of the brand at Group level is based on the "Relief from Royalty" method. The impairment tests did not identify any need for impair- ment losses to be recognised. Based on sensitivity analysis, it is management’s opinion that no probable change in any key assumptions would cause the carrying amounts of Global Business Units or at Group level to exceed the recoverable amounts. Even with a significant reduction in growth rate and an in- crease in discount rate, management has not identified any likely impairment. Method for impairment testing In the impairment test, the recoverable amount is compared with the carrying amount. The recoverable amount is based on a calculation of the value in use using cash flow estimates based on the budget for 2022 and a forecast for the two subsequent years. The long-term growth rate in the terminal period has been set so that it equals the expected long-term rate of inflation. ALLOCATION OF INTANGIBLE ASSETS TO CGUS ANNUAL REPORT 2021 FINANCIAL STATEMENTS  DKK million 2021 2020 Depreciation has been recognised in the income statement as follows: Cost of sales 176 241 Sales, distribution and marketing expenses 364 416 Administrative expenses 42 42 Total 582 699 NOTE . PROPERTY, PLANT AND EQUIPMENT DKK million Land and buildings Plant and equipment Assets under construction Total  Cost at 1 January 1238 3461 44 4742 Acquisition of subsidiaries and activities   11 11 Additions 11 129 199 339 Disposals 40 249  289 Transfers 14 150 164  Exchange rate adjustments 30 91 2 64 Cost at 31 December 1193 3582 91 4866 Depreciation and impairment losses at 1 January 323 2366  2689 Depreciation for the year 90 492  582 Disposals 38 242  280 Exchange rate adjustments 8 68  59 Depreciation and impairment losses at 31 December 366 2684  3050 Carrying amount at 31 December 827 898 91 1816  Cost at 1 January 1287 3591 33 4912 Acquisition of subsidiaries and activities     Additions 4 111 247 362 Disposals 34 146  180 Transfers 102 130 232  Exchange rate adjustments 121 225 5 351 Cost at 31 December 1238 3461 44 4742 Depreciation and impairment losses at 1 January 246 2081  2326 Depreciation for the year 136 563  699 Disposals 34 136  170 Exchange rate adjustments 25 142  167 Depreciation and impairment losses at 31 December 323 2366  2689 Carrying amount at 31 December 915 1095 44 2054 ACCOUNTING POLICIES Property, plant and equipment is stated at cost, net of accumulated depreciation and accumu- lated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life according to the table below. Asset Useful life Land Indenite Buildings 20-50 years Leasehold improvements Lease term Plant and equipment 3-5 years Other xtures and ttings 3-5 years ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . LEASES RIGHTOFUSE ASSETS DKK million 2021 2020 Property 2507 2975 IT 3 5 Cars 14 18 Other 8 10 Total right-of-use assets 2532 3007 Assets and liabilities related to leases. Amounts recognised in the balance sheet: Pandora leases stores, various offices, office equipment and cars. DKK million 2021 2020 Property 1 1066 1190 IT 1 1 Cars 9 11 Other 4 5 Total depreciation and impairment losses on right-of-use assets for the period 1081 1208 1 Including impairment losses of DKK 128 million in 2020 due to revaluation of right-of-use assets in connection with COVID-19. LEASE LIABILITIES DKK million 2021 2020 Non-current 1724 2066 Current 886 993 Total lease liabilities 2610 3059 Additions of right-of-use assets were DKK 690 million in 2021 (2020: DKK 817 million). Amounts recognised in the income statement: Costs recognised in the period for short-term and low-value leases were DKK 39 million (2020: DKK 33 million). Expenses are recognised on a straight-line basis. OTHER ITEMS RELATING TO LEASES DKK million 2021 2020 Interest income from subleases  1 Interest expense 99 97 Total interest for the period 99 96 COVID-19-related rent concessions of DKK 56 million (2020: DKK 112 million) were recognised within sales and distribution expenses in the income statement in 2021. In addition, repay- ment of certain fixed leases was negotiated and a cash settle- ment was agreed with landlords and deferred with immaterial effect (2020: DKK 52 million). Overall financing cash flow was positively impacted by DKK 56 million (2020: DKK 164 million) due to rent relief and rent deferrals. Total cash outflow for the year relating to leases was DKK 1,377 million (2020: DKK 1,164 million), comprising of fixed lease payments in scope of IFRS 16 of DKK 991 million (2020: DKK 839 million), variable lease payments of DKK 248 million (2020: DKK 196 million), interest paid of DKK 99 million (2020: DKK 96 million), and short-term and low-value leases of DKK 39 million (2020: DKK 33 million). Many of the Group’s property leases contain variable payment terms that are linked to the volume of sales made from leased stores according to normal market practice. In 2021, around 18% (2020: 17%) of the lease payments recognised in the in- come statement were variable rent. Pandora has estimated that a 1% increase in annual physical store revenue would conse- quently result in a 0.5% (2020: 0.7%) increase in lease payments. The average standard store leases are three to five years with a three to five-year option to extend in approximately 18% (2020: 23%) of current leases, typically with one or more break options. Approximately 27% of current leases are up for rene- gotiation in 2022. The estimated value of lease extensions that Pandora is not reasonably certain to exercise is around DKK 0.4 billion (2020: DKK 0.6 billion). RECOGNISED DEPRECIATION AND IMPAIRMENT LOSSES ON RIGHTOFUSE ASSETS CHARGED TO THE INCOME STATEMENT FOR THE PERIOD  JANUARY   DECEMBER: Lease liabilities are recognised in loans and borrowings. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . LEASES CONTINUED ACCOUNTING POLICIES Pandora applies a single recognition and measure- ment approach to all leases, except for short-term leases and low-value leases. Pandora recognises right-of-use assets at the commencement date of the lease when the asset is available for use. Right-of-use assets are measured at cost, less any accumulated depreciation and impair- ment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, lease payments made at or before the commencement date, key money, less any lease incentives received. Key money is meas- ured at cost and amortised over the term of the contract. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. At each reporting date Pandora assesses whether there is any indication that a right-of-use asset may be impaired. If any such indication exists, Pandora carries out impairment testing for the relevant CGU. Pandora recognises lease liabilities at the com- mencement date of the lease, measured at the pres- ent value of lease payments to be made over the lease term. Lease payments include fixed payments less any lease incentives receivable. Some leases are exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. Payments relating to services are not included in lease liabilities. Some property leases contain variable payment terms that are linked to sales generated from a store. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs and are not included in the lease liability. In calculating the present value of lease payments, Pandora uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or a change in the lease payments. Lease payments are classified in financial activities in the cash flow statement. Pandora applies the short-term lease recognition exemption to its short-term leases. Payments related to short-term leases and leases of low-value assets continue to be recognised on a straight-line basis as an expense in the income state- ment. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise some IT equipment and other office equipment. In March 2021, the IASB issued COVID-19-Related Rent Concessions beyond 30 June 2021 - amend- ment to IFRS 16 Leases. The IASB extended the period of the relief for lessees arising as a direct consequence of the COVID-19 pandemic from 30 June 2021 to 30 June 2022. As a practical expedient, a lessee may elect not to assess whether a COVID-19 pandemic-related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 pandemic-related rent concession the same way it would account for the change under IFRS 16, if the change was not a lease modification. Pandora applied the extension of the practical expe- dient to all contracts with rent concessions occurring as direct consequence of COVID-19 and where they meet all conditions of the practical expedient. SIGNIFICANT ACCOUNTING ESTIMATES When assessing the lifetime of leases, Pandora considers the non-cancellable lease term and options to extend the lease where Pandora is reasonably certain to extend. Leas- es in Pandora mainly comprise stores, office buildings, cars, IT and other office equipment. Most lease contracts for stores average three to five years with a three to five-year option to extend in approximately 18% of current leases, typically with one or more break options. The lease term for stores has been assessed to be up to ten years, depending on location, revenue and earnings. For office buildings, the lease term is usually five to fifteen years. For other assets, the life is equal to the non-cancellable lease term, and extensions are not considered for these. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . BUSINESS COMBINATIONS The contributions to Group revenue and net prot from acquisitions for the period 1 January - 31 December 2021 were DKK 307 million and DKK 93 million respectively. On a pro forma basis, if the acquisitions had been eective from 1 January 2021, the impact on Group revenue and net prot for the period 1 January - 31 December 2021 would have been approximately DKK 358 million and DKK 112 million respectively. Acquisitions in 2020 No acquisitions, to an extent of significance to Pandora, were completed during 2020. Acquisitions after the reporting period No acquisitions, to an extent of significance to Pandora, took place after the reporting period. ACCOUNTING POLICIES Business combinations are accounted for in accord- ance with the IFRS 3 acquisition method. The cost of an acquisition is measured as the aggregate of the consider- ation transferred, measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair val- ue or at the proportionate share of the acquiree’s identi- fiable net assets. Acquisition costs incurred are expensed. Subsequent to initial recognition, goodwill is measured at cost less any accumulated impairment losses. As goodwill is reported and managed internally at Group level, goodwill acquired should also be allocated to the Group. However, goodwill acquired is allocated to the grouped CGUs in the two operating segments for impair- ment testing purposes due to the constraint in IAS 36. If any part of the cost of an acquisition is contingent on future events or performance, the cost is recognised at fair value at the time of acquisition. Changes to the fair value of the contingent payment are recognised in net financials in the income statement. Any changes to the fair value of obligations to acquire non-controlling interests (put options) are recognised directly in equity. ACQUISITIONS DKK million 2021 2020 Distribution rights 13  Property, plant and equipment and right-of-use assets 84 4 Inventories 34 4 Assets acquired 131 8 Non-current liabilities 50 2 Other current liabilities 27 1 Liabilities assumed 77 3 Total identiable net assets acquired 54 5 Goodwill arising on acquisitions 12 2 Purchase consideration 66 7 Cash movements on acquisitions: Consideration transferred regarding previous years  5 Net cash ows on acquisitions 66 12 Acquisitions in 2021 In 2021, Pandora took over 29 concept stores in the US in two business combinations. Net assets acquired mainly consist of store properties, inventories and related liabilities. The total purchase price for the acquisitions was DKK 66 million. Based on the purchase price alloca- tions, goodwill was DKK 12 million. Goodwill from the acquisitions is mainly related to the synergies from converting the stores from wholesale to Pandora owned retail. Of the goodwill acquired, DKK 12 million is deductible for income tax purposes. Cost relating to the acquisitions was immaterial and is recognised as operating expenses in the income statement. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  DKK million 2021 2020 Raw materials and consumables 779 358 Work in progress 148 119 Finished goods 1911 1392 Point-of-sale materials 153 80 Total inventories at 31 December 2991 1949 Inventory write-downs at 1 January 740 837 Write-downs during the year 154 361 Utilised in the year 129 458 Inventory write-downs at 31 December 765 740 Write-downs Inventory write-downs primarily relate to finished goods and are recognised in cost of sales, DKK 141 million (2020: DKK 312 million), and operating expenses, DKK 13 million (2020: DKK 49 million). Write-downs include mainly the cost of remelting obsolete jewellery. Remelting of goods (realised and unrealised) negatively impacted gross profit by DKK 103 million (2020: DKK 110 million). Production overheads Production overheads are calculated using a standard cost method, which is reviewed regularly to ensure relevant assumptions concerning capacity utilisation, lead times and other relevant factors. NOTE . INVENTORIES ACCOUNTING POLICIES Inventories are valued at the lower of cost and net realis- able value. Costs are accounted for on a first-in, first-out basis (FIFO). Besides raw materials, costs include labour and a proportion of production overheads based on nor- mal operating capacity, but excluding borrowing costs. Point-of-sale materials comprise purchase costs regarding equipment, displays and packaging materials etc. and are also accounted for on a FIFO basis. SIGNIFICANT ACCOUNTING ESTIMATES Estimates relating to write-downs are impacted by fore- casting accuracy in the number of obsolete products that will need to be remelted. The impact from remelt is also influenced by fluctuations in the market prices of silver and gold. Net realisable value Net realisable value is based on the estimated selling price less estimated costs of completion and distribution. Alter- natively, for inventories that are not expected to be sold, net realisable value is based on the remelt value of the reusable raw materials (primarily silver and gold). DKK million 2021 2020 Receivables related to third-party distribution and wholesale 672 600 Receivables related to retail revenue sales 337 270 Total trade receivables at 31 December 1009 870 Ageing of trade receivables at 31 December Not past due 850 746 Up to 30 days 159 124 Between 30 and 60 days   Between 60 and 90 days   Over 90 days   Total past due, not impaired 159 124 Total trade receivables at 31 December 1009 870 Development in impairment losses on trade receivables Impairment at 1 January 121 129 Additions 12 53 Utilised 20 11 Unused amounts reversed 30 44 Exchange rate adjustments 3 5 Impairment at 31 December 86 121 NOTE . TRADE RECEIVABLES Trade receivables are amounts due from the sale of goods sold to wholesalers and distribu- tors, or due from landlords, malls or e-commerce providers responsible for the collection of cash on behalf of Pandora related to retail sales. While realised losses are immaterial and remain low, Pandora continued to apply an increased risk factor in light of COVID-19. The impairment on receivables decreased by DKK 35 million for the year. Realised losses remained within the expected range. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Management continues to assess credit risks in order to ensure credit risk never exceeds the recognised write-down on trade receivables. For a further description of credit risk, see note 4.4 Financial risks . Changes in impairment are presented in the table on the previous page. ACCOUNTING POLICIES Trade receivables are initially recognised at the amount of consideration that is unconditional unless they contain significant financing components, and consequently rec- ognised at fair value. The Group holds trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Pandora applies the simplified approach to measure expected credit losses, using a lifetime expected loss allowance. NOTE . PROVISIONS DKK million 2021 2020 Provisions at 1 January 399 332 Additions in the year 127 142 Utilised in the year 11 26 Unused provisions reversed 77 33 Exchange rate adjustments 5 16 Provisions at 31 December 442 399 Provisions are recognised in the consolidated balance sheet as follows: Current 26 29 Non-current 416 370 Provisions at 31 December 442 399 Our provisions are liabilities of uncertain timing or amount and consist of defined benefit pension plans of DKK 81 million (2020: DKK 74 million), obligations to restore leased property of DKK 132 million (2020: DKK 124 million), and other legal and constructive obligations of DKK 203 million (2020: DKK 172 million). See note 5.1 Contingent liabilities for estimates relating to litigation. ACCOUNTING POLICIES Provisions are recognised when Pandora has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic ben- efits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is recognised in the income statement net of any reimbursement. NOTE . TRADE RECEIVABLES CONTINUED NOTE . CONTRACT ASSETS AND LIABILITIES DKK million 2021 2020 Contract assets Receivables from sale of products, see note 3.6 1009 870 Right-of-return assets 70 62 Total contract assets 1078 932 Contract liabilities Prepayments from customers 11 10 Coupons, gift cards etc. 92 72 Loyalty programme 60  Refund liabilities 724 654 Total contract liabilities 887 736 SIGNIFICANT ACCOUNTING ESTIMATES In most countries, Pandora has provided return and war- ranty rights to customers. The handling of warranty claims leads to replacements instead of repairs. The recognised refund liability relating to return and warranty rights is assessed to a large extent on the basis of historical return patterns. In view of the low historical loss rates on receivables, ad- justing these rates to reect current and forward-looking information on macroeconomic factors such as GDP and the unemployment rate that aects the ability of custom- ers to settle receivables will not increase the risk of losses signicantly. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . TRADE PAYABLES ACCOUNTING POLICIES Pandora recognises a refund and warranty liability related to return rights provided to customers in most countries. A corresponding right-of-return asset is also included as part of contract assets. The value of the right-of-return asset is determined by how many of the returned products are ex- pected to be sold. Remaining products are written down to remelt value together with returns covered by warranties. The refund liability for estimated sales returns is recognised when there is historical experience or when a reasonably accurate estimate of expected future returns can other- wise be made. The income effect recognised is the gross margin of the expected returns and the potential effect of writing down parts of the returned goods to remelt value. Changes to the right-of-return asset and refund liability are recognised gross in the income statement, i.e. as both revenue and cost of sales. Refund liability to cover warranty claims is based on ex- pected replacements provided for products still covered by warranty at the end of the period. The liability is recog- nised gross in the income statement, as both a reduction in revenue and in cost of goods sold. This is due to the handling of warranty claims, which lead to replacements instead of repairs. As a common practice in Pandora, no costs to obtain contracts with customers have been capitalised in 2021 or previous years. DKK million Refund Warranty Total  Liability at 1 January 382 273 654 Performance obligations to which consideration has been received 1238 218 1456 Revenue recognised, included in the contract liability 974 171 1145 Contract liabilities reversed 189 80 269 Exchange rate adjustments 21 6 27 Refund and warranty liability at 31 December 478 246 724  Liability at 1 January 428 325 753 Performance obligations to which consideration has been received 936 281 1217 Revenue recognised, included in the contract liability 845 238 1084 Contract liabilities reversed 109 85 194 Exchange rate adjustments 27 10 38 Refund and warranty liability at 31 December 382 273 654 The Group generally accepts that vendors sell off their receivables arising from the sale of goods and services to the Group to a third party. Pandora has established a supply chain financing programme where vendors can sell off their receivables from Pandora on attractive terms, based on invoices approved by Pandora, but at the bank's sole discretion. Pandora is not directly or indirectly a party to these agreements. The amounts payable to suppliers included in the supply chain financing programme are classified as trade payables in the balance sheet as well as in the cash flow statement (working capital within cash flow from operations) and amounts to DKK 24 million at 31 December 2021 (DKK 26 million at 31 December 2020). NOTE . CONTRACT ASSETS AND LIABILITIES CONTINUED ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NET INTERESTBEARING DEBT DKK million 2021 2020 Loans and borrowings, non-current 1041  Lease liabilities, non-current 1724 2066 Loans and borrowings, current 274 3003 Lease liabilities, current 886 993 Cash 1043 2912 Net interest-bearing debt 2882 3151 CAPITAL STRUCTURE AND NET FINANCIALS SECTION  This section includes notes related to Pandora’s capital structure and net nancials, including nancial risks (see note 4.4 ). As a consequence of its operations, investments and nancing, Pandora is exposed to a number of nancial risks that are monitored and managed by Pandora’s Group Treasury. Pandora uses a number of derivative nancial instruments to hedge its expo- sures to uctuations in commodity prices and currencies. Derivative nancial instruments are described in note 4.5. Pandora’s capital structure policy is to maintain a leverage ratio (NIBD to EBITDA ratio) between 0.5 and 1.5 (excluding restructuring costs and including leases in accordance with IFRS 16). At 31 December 2021, the ratio was 0.4x, reecting Pandora’s continued strong cash generation. In 2021, cash conversion was 88% and Pandora continued to operate with negative net working capital. Undrawn committed facilities of DKK 6 billion, out of DKK 7 billion with maturity in 2026, underpin Pandora’s strong liquidity position. 6bn DKK ANNUAL REPORT 2021 FINANCIAL STATEMENTS ANNUAL REPORT  At 31 December 2021, the share capital comprised 100,000,000 shares with a par value of DKK 1. No shares have special rights. In 2021, Pandora launched two share buyback programmes under which Pandora expects to buy back own shares to a value of DKK 4.0 billion. In 2021, Pandora bought 3,943,797 treasury shares, corresponding to a total purchase price of DKK 3.3 billion. At 31 December 2021, Pandora had yet to repurchase own shares at a total purchase price of DKK 0.7 billion as part of the share buyback programmes. Own shares of DKK 0.7 billion have been repurchased after 31 December 2021. Treasury shares All treasury shares are owned by Pandora A/S. Treasury shares include hedges for share-based incentive plans granted to the Executive Management and other employees. NOTE . SHARE CAPITAL SHARE CAPITAL Number of shares Nominal value (DKK)  Balance at 1 January 100000000 100000000 Balance at 31 December 100000000 100000000  Balance at 1 January 100000000 100000000 Balance at 31 December 100000000 100000000 TREASURY SHARES Number of shares Nominal value (DKK) Purchase price % of shares  Balance at 1 January 322839 322839 92742356 03% Used to settle performance shares 4754 4754 1264761 00% Purchase of treasury shares 3943797 3943797 3324724241 39% Balance at 31 December 4261882 4261882 3416201836 43%  Balance at 1 January 7070524 7070524 1964356664 71% Used to settle performance shares 51140 51140 14363322 01% Purchase of treasury shares 1303455 1303455 430511739 13% Sale of treasury shares 8000000 8000000 2287762725 80% Balance at 31 December 322839 322839 92742356 03% ANNUAL REPORT 2021 FINANCIAL STATEMENTS  NOTE . EARNINGS PER SHARE AND DIVIDEND DKK million 2021 2020 Prot attributable to equity holders 4160 1938 Weighted average number of ordinary shares 98775946 97048768 Eect of performance shares 898708 374286 Weighted average number of ordinary shares adjusted for the eect of dilution 99674654 97423054 Basic earnings per share, DKK 421 200 Diluted earnings per share, DKK 417 199 There have been no transactions between the reporting date and the date of completion of the Annual Report involving shares that would have significantly changed the number of shares or potential shares in Pandora A/S. Dividend The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 16 per share (2020: DKK 0), corresponding to DKK 1.6 billion, be distributed for 2021. In 2021, extraordinary dividend of DKK 1.5 billion in total was paid. Dividend paid had no effect on the Group’s tax expense for the year. For further shareholder information on dividend payments, see page 42. ACCOUNTING POLICIES Dividend proposed is recognised as a liability at the date of the adoption at the Annual General Meeting (decla- ration date). Extraordinary dividend is recognised as a liability at the declaration date. Distributable reserves Cash distribution to the shareholders are, by law, limited to the amount of the free reserves of the Parent Company. As of 31 December 2021, free reserves in the Parent Company amounted to DKK 7.5 billion. When calculating the amount available for distribution of dividend and share buyback, treasury shares are deducted from distributable reserves. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  TOTAL LIABILITIES FROM FINANCING ACTIVITIES DKK million Financial liabilities 1 January Cash ows, net New leases, etc. Other Foreign exchange adjustments Financial liabilities 31 December  Non-current borrowings  1315  273  1041 Non-current lease liabilities 2066  495 899 61 1724 Current borrowings 3003 3004  274 1 274 Current lease liabilities 993 991 215 637 32 886 Total liabilities from nancing activities 6063 2680 710 262 94 3926  Non-current borrowings 5157 2182  2976   Non-current lease liabilities 2804  588 1225 101 2066 Current borrowings 1057 1028  2976 1 3003 Current lease liabilities 1012 839 261 608 49 993 Total liabilities from nancing activities 10031 4050 849 617 150 6063  Includes the eect of the reclassication of the non-current portion of interest-bearing loans and borrowings to current due to the passage of time. Further, it includes the eect of accrued but not yet paid interest on interest-bearing loans and borrowings, upfront prepayment of lease liabilities and the eect of the lease modication and reassessment. The Group classies interest paid as cash ows from operating activities. NOTE . NET INTERESTBEARING DEBT ACCOUNTING POLICIES On initial recognition, interest-bearing debt and borrowings are measured at fair value less trans- action costs. Subsequent to initial recognition, interest-bearing loans and borrowings are meas- ured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised and through the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium at inception, and fees and other costs. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  the general policy is for Group Treasury to hedge at least 70% of the Group’s expected purchases. Purchases are hedged from 1 to 12 months forward with a hedge ratio target that decreases with time to maturity as illustrated to the right. Any deviation from the policy must be approved by the Audit Committee. Commodity hedging is updated at the end of each month or in connection with revised 12-month rolling production plans. Actual production may deviate from the 12-month rolling production plan. In case of deviations, the realised commodity hedge ratio may deviate from the estimated hedge ratio. The effective portion of the realised gain or loss from commodity hedging is recognised in Group inventories and subsequently in cost of sales. For the fair value of hedging instruments, see note 4.5 Derivative financial instruments. Foreign currency risk Pandora’s presentation currency is DKK, but the majority of Pandora’s activities and investments are denominated in other currencies. Consequently, exchange rate fluctuations may have a substantial impact on Pandora’s cash flows, profit (loss) and/or financial position in DKK. As a consequence of its operations, investments and finan- cing, Pandora is exposed to a number of financial risks that are monitored and managed by Pandora’s Group Treasury. To manage financial risks, Pandora may use a number of finan- cial instruments, such as forward contracts, silver and gold swaps, currency and interest rate swaps, options and similar instruments within the framework of its current policies. Financial risks are divided into commodity price risk, foreign currency risk, credit risk, liquidity risk and interest rate risk. It is Pandora’s policy to hedge at least 50% of the combined commodity, exchange rate and interest rate risk. However, at least 70% of estimated commodity purchases for the next 12 months must be hedged. The table to the right illustrates the sensitivity on 2021 reve- nue, EBIT and EBIT margin from exchange rates and commod- ity price movements. In addition, the sensitivity of assets and liabilities as of 31 December from currency movements is illustrated on the next page. Commodity price risk Raw material risk is the risk of fluctuating commodity prices resulting in additional production costs. The most important raw materials are silver and gold, which are priced in USD. It is the policy of Pandora to ensure stable, predictable raw material prices. Based on a rolling 12-month production plan, NOTE . FINANCIAL RISKS 2021 2020 SENSITIVITY ANALYSIS ON EXCHANGE RATES AND COMMODITY PRICES 1 DKK million Change in exchange rate and commodity prices Revenue EBIT EBIT margin impact Revenue EBIT EBIT margin impact USD 10% 748 350 07% 480 138 03% CAD 10% 65 38 01% 57 36 01% AUD 10% 127 81 02% 123 83 03% GBP 10% 333 235 06% 299 209 09% EUR 1% 62 39 01% 53 30 01% CNY 10% 111 7 01% 125 30 01% THB 10%  238 10%  227 12% GOLD and SILVER 10%  182 08%  124 07% 1 Revenue and EBIT would have been impacted by the above amounts if exchange rates and commodity prices in 2021 had been higher than the realised exchange rates and commodity prices. The impact would have been the opposite if exchange rates and commodity prices had been decreasing by similar percentages. The analysis is based on the transaction currency. The analysis excludes the eects of hedging and time lag of inventory. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Min Max COMMODITY HEDGE RATIO TARGET %    %    MONTHS AHEAD   %    MONTHS AHEAD   %    MONTHS AHEAD    %    MONTHS AHEAD Exchange rate fluctuations may lead to a decrease in revenue and an increase in costs and thus declining margins. In addition, exchange rate fluctuations affect the translated value of the profits or losses of foreign subsidiaries and the translation of foreign currency assets and liabilities. It is Pandora’s policy to hedge foreign currency risks related to the risk of declining net cash flows resulting from exchange rate fluctuations. Pandora does not hedge balance sheet items or ownership interests in foreign subsidiaries. For 2021, 70% of the cash flows from the main currencies have been hedged based on a rolling 12-month liquidity forecast. Cash flows are hedged from 1 to 12 months forward with a hedge ratio that decreases with time to maturity. Foreign currency hedging is updated at the end of each month or in connection with revised 12-month rolling cash forecasts. The realised profit (loss) from exchange rate hedging is taken to financial items. The table below illustrates the currency revaluation impact in DKK million on net profit and changes in equity resulting from a change in the Group’s primary foreign currencies after the effect of hedge accounting. Credit risk Credit risk is primarily related to trade receivables, cash and unrealised gains on financial contracts. The maximum credit risk related to financial assets corresponds to the carrying amounts recognised in the consolidated balance sheet. It is Pandora’s policy for subsidiaries to be responsible for credit evaluation and credit risk on their trade receivables. Any deviations from standard agreements must be approved by Group Treasury and/or the Chief Financial Officer. Note 3.6 Trade receivables includes an overview of the credit risk related to trade receivables. Rating of trade receivables does not differ materially either by type of customer or geographic location. The risk of further impairment is considered to be limited. Credit risks related to Pandora’s other financial assets mainly include cash and unrealised gains on financial contracts. NOTE . FINANCIAL RISKS CONTINUED CURRENCY EXPOSURE FROM ASSETS AND LIABILITIES DKK million 31 December 2021 31 December 2020 Change in exchange rate Prot (loss) before tax Equity Prot (loss) before tax Equity USD 10% 38 188 118 36 CAD 10% 28 8 14 4 AUD 10% 8 43 2 35 GBP 10% 47 159 43 54 EUR 1% 3 3 2 31 THB 10% 71 170 52 121 CNY 10% 21 35 60 36  The movements in the income statement arise from monetary items (cash, borrowings, receivables and payables) where the functional currency of the entity diers from the cur- rency that the monetary items are denominated in. The movements in equity arise from monetary items and hedging instruments where the functional currency of the entity diers from the currency that the hedging instruments or monetary items are denominated in. The impact would have been the opposite if exchange rates had been decreasing by similar percentages. The analysis is based on the transaction currency. The majority of Pandora’s revenue is denominated in USD, CAD, AUD, GBP, CNY and EUR. The functional currency of subsidiar- ies is generally the local currency, and a substantial portion of Pandora’s costs relates to raw materials purchased in USD. In addition, Pandora incurs costs denominated in THB. Changes in the exchange rate of these currencies versus DKK will result in changes to the translated value of future EBIT and cash flows. Pandora finances the majority of its subsidiaries’ cash re- quirements via intercompany loans denominated in the local currency of the individual subsidiary. A devaluation of these currencies against DKK will in general result in a foreign exchange loss in the Parent Company. REVENUE BREAKDOWN BY CURRENCY % Other USD GBP EUR CAD CNY AUD  % % % % % % % % % % % % % % ANNUAL REPORT 2021 FINANCIAL STATEMENTS  LIABILITIES FALL DUE AS FOLLOWS DKK million Falling due within 1 year Falling due between 1 and 5 years Falling due after more than 5 years Total  Non-derivatives Loans and borrowings 274 1050  1324 Lease liabilities 977 1600 275 2851 Trade payables 3267   3267 Other payables 289   289 Derivatives Derivative nancial instruments 209   209 Total at 31 December 5016 2650 275 7941  1 Non-derivatives Loans and borrowings 3033   3033 Lease liabilities 1079 1863 356 3298 Trade payables 3211   3211 Other payables 293   293 Derivatives Derivative nancial instruments 119   119 Total at 31 December 7735 1863 356 9954  Items not classied as nancial instruments were excluded in 2020. NOTE . FINANCIAL RISKS CONTINUED The credit risk is related to default of the counterparty with a maximum exposure corresponding to the carrying amount of the assets. Group Treasury is responsible for managing these credit risks. Liquidity risk Pandora’s cash conversion is high and Pandora maintains an adequate level of cash and unutilised credit facilities to meet financial obligations when due. Pandora’s liquidity risk is considered to be low. Pandora has a new revolving credit facility of DKK 7,065 mil- lion committed until April 2026 1 . Pandora has uncommitted credit facilities to ensure efficient and flexible local liquidity management. The credit facilities are managed by Group Treasury. Interest rate risk Interest rate risk is the risk of interest rate fluctuations resulting in changed interest rate payments and market value of the net borrowings. At the reporting date, all inter- est-bearing loans and borrowings were based on floating interest rates. All else being equal, it is estimated that a general increase in interest rates by one percentage point would lead to a DKK 6 million decrease in profit before tax and equity, excluding tax effect (2020: no impact). Contractual maturities of nancial liabilities The table to the right breaks the Group’s financial liabilities down into relevant maturity groupings based on contractual maturities for: • all non-derivative financial liabilities; • net and gross settled derivative financial instruments for which the contractual maturities are essential for an under- standing of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is insignificant. Based on the Group’s expectations for the future operation and the Group’s current cash resources, no significant liquidi- ty risks have been identified.  Two year extension option (1+1) subject to bilateral consent between Pandora and bank group. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Pandora uses a number of derivative financial instruments to hedge its exposure to fluctua- tions in commodity prices and exchange rates. Derivative financial instruments include silver and gold swaps and foreign exchange forward contracts. DKK million Assets Liabilities Carrying amount Hedge reserve, net of tax 2021 Commodities 8 121 113 90 Foreign exchange 61 88 27 20 Total derivative nancial instruments 69 209 140 110 2020 Commodities 231 10 220 206 Foreign exchange 120 108 12 9 Total derivative nancial instruments 351 119 232 215 Classication according to the fair value hierarchy The fair value at 31 December 2021 and 2020 of Pandora’s derivative financial instruments was measured in accordance with level 2 in the fair value hierarchy (IFRS 13). Level 2 is based on non-quoted prices, observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). Pandora uses input from third-party valuation specialists to quote prices for unrealised derivative financial instruments. The value of unrealised silver and gold instruments is tested against the prices observable at London Bullion Market Association (LBMA). The value of unrealised foreign exchange instruments is tested against observable foreign exchange forward rates. The value of financial instruments recognised in other com- prehensive income is recycled from equity at the time the instrument is settled, i.e. within 12 months. NOTE . DERIVATIVE FINANCIAL INSTRUMENTS It is Pandora’s policy to hedge at least 70% of the Group’s expected gold and silver consump- tion based on a rolling 12-months production plan. The table to the right illustrates the timing of the hedges related to the purchase of silver for production, i.e. excluding the time-lag effect from inventory to cost of sales (when the product is sold). The time-lag from use in production to impact on cost of sales is usually 2-7 months. Derivative nancial instruments that qualify for cash ow hedge accounting The hedges are expected to be highly effective due to the nature of the economic relation between the exposure and the hedge. The effective portion of the unrealised gain or loss on all hedg- ing instruments is recognised directly as other comprehensive income in the equity hedging reserve. The ineffective portion is recognised in net financials. The effective portion of the realised gain or loss on a com- modity hedging transaction is recognised in Group inventories and subsequently in cost of sales whereas the ineffective portion is realised in net financials. The realised gain or loss on all foreign exchange contracts is recognised in net financials. HEDGED AND REALISED PURCHASE PRICES At use of the silver and gold for production Realised in 2021 Hedged Q1 2022 Hedged Q2 2022 Hedged Q3 2022 Hedged Q4 2022 Gold price 1785 1806 1802 1794 1807 Silver price 2372 2565 2559 2372 2344 Commodity hedge ratio, % Realised 70100% 7090% 5070% 3050% ANNUAL REPORT 2021 FINANCIAL STATEMENTS  ACCOUNTING POLICIES Derivative financial instruments are initially recognised at fair value at the date on which a contract is entered into and are subsequently measured at fair value. For derivative financial instruments not traded in an active market, the fair value is determined using appropriate valuation methods. Such methods may include comparison with recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, or discounted cash flow analysis. Pandora has designated certain derivative financial instru- ments as cash flow hedges as defined under IFRS 9. Hedge accounting is classified as a cash flow hedge when the hedges of a particular risk is associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions. Pandora designates and documents all hedging relationships between commodity contracts and purchase transactions. OTHER NONCASH ADJUSTMENTS DKK million 2021 2020 Eects from exchange rate adjustments 129 52 Eects from derivative nancial instruments  91 Eects from IFRS16 rent concessions 56 112 Other, including gains/losses from the sale of property, plant and equipment 4 4 Total other non-cash adjustments 70 155 NOTE . OTHER NONCASH ADJUSTMENTS FINANCE INCOME DKK million 2021 2020 Reclassied from equity hedge reserves 53 149 Total nance income from derivative nancial instruments 53 149 Finance income from loans and receivables measured at amortised cost: Foreign exchange gains 78 160 Interest income, bank 19 6 Interest income, loans and receivables 2 1 Total nance income from loans and receivables 99 167 Total nance income 152 316 FINANCE COSTS DKK million 2021 2020 Reclassied from equity hedge reserves 286 68 Total nance costs from derivative nancial instruments 286 68 Finance costs from nancial liabilities measured at amortised cost: Foreign exchange losses 116 186 Interest on loans and borrowings 34 61 Interest on lease liabilities 99 97 Other nance costs 78 95 Total nance costs from loans and borrowings 327 439 Total nance costs 613 507 NOTE . NET FINANCIALS ACCOUNTING POLICIES Finance income and costs comprise interest income and expenses, realised and unrealised gains and losses on pay- ables/receivables and transactions in foreign currencies. For all financial instruments measured at amortised cost, interest income or expense is recognised using the effec- tive interest rate, which is the rate that discounts the esti- mated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. The ineffectiveness impact in net financials was a gain of DKK 16 million (2020: gain of DKK 31 million). For information about risk management strategy, see note 4.4 Financial risks. NOTE . DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED ANNUAL REPORT 2021 FINANCIAL STATEMENTS  OTHER DISCLOSURES SECTION  ANNUAL REPORT 2021 FINANCIAL STATEMENTS ANNUAL REPORT  NOTE . CONTINGENT LIABILITIES Litigation Pandora is a party to various legal proceedings with current business partners, authorities and other third parties, related to copyrights, marketing conduct and pricing. None of these proceedings is expected to have a material effect on Pandora’s financial position or future earnings. Related parties with signicant interests At 31 December 2021, treasury shares accounted for 4.3% of the share capital (2020: 0.3%), see note 4.1 Share capital. Other related parties of Pandora with significant influence include the Board, Executive Management and their close family members. Related parties also include companies in which the aforementioned persons have control or signifi- cant interests. Transactions with related parties As part of the share buyback carried out in 2021, Pandora purchased own shares from major shareholders. The shares were purchased at the volume-weighted average purchase price for the shares purchased under the share buyback programme in the market on the relevant day of trading. Pandora did not enter into any significant transactions with members of the Board or the Executive Management, except for compensation and benefits received as a result of their membership of the Board, employment with Pandora or shareholdings in Pandora. See notes 2.3 Staff costs and 2.4 Share-based payments. NOTE . RELATED PARTIES SIGNIFICANT ACCOUNTING ESTIMATES The factors taken into account when estimating a potential liability in connection with litigation include the nature of the litigation or claim. Other factors taken into account are the development of the case, the judgements and recommendations of legal or other advisers, experience from similar cases, and management’s decision on how the Group will react to the litigation or claim. DKK million 2021 2020 Fee for statutory audit 10 11 Other assurance engagements 1 1 Total audit related services 11 12 Tax consultancy   Other services  1 Total non-audit services  1 Total fees to independent auditor 11 13 The costs are recognised in the consolidated income statement as administrative expenses. Pandora has implemented a policy regarding non-audit services provided by the auditor appointed at the Annual General Meeting. The policy states which services are allowed or prohibited. Other non-audit services include fees for advisory services, including Programme NOW. All non-audit services have been approved according to the policy for non-audit services. NOTE . FEES TO INDEPENDENT AUDITOR NOTE . EVENTS OCCURRING AFTER THE REPORTING PERIOD No subsequent events have occurred after the balance sheet date that required adjustment to or disclosure in the consolidated financial statements. Contractual obligations Pandora has entered into a number of long-term purchase, sales and supply contracts in the course of the Group’s ordi- nary business. Contractual obligations amounted to DKK 500 million at 31 December 2021 (2020: DKK 462 million). Apart from the liabilities already recognised in the balance sheet, no significant financial losses are expected to be incurred as a result of these contracts. ANNUAL REPORT 2021 FINANCIAL STATEMENTS  The table below shows information about the Group entities at 31 December 2021. Company Ownership Registered oce Date of consolidation OWNED BY PANDORA A/S Pandora Jewelry Argentina SRL 100% Argentina 27 September 2017 Pandora Österreich GmbH 100% Austria 23 May 2012 Pandora Jewellery Belgium NV 100% Belgium 13 April 2017 Pandora do Brasil Participações Ltda. 100% Brazil 24 October 2013 Pandora Jewelry Ltd. 100% Canada 7 March 2008 Pandora Jewelry Chile SpA 100% Chile 7 May 2017 Pandora Jewelry Colombia S.A.S 100% Colombia 17 January 2019 Pandora Int. ApS 100% Denmark 1 October 2009 Pan Me A/S 100% Denmark 16 January 2015 Pandora Jewelry Taiwan A/S 100% Denmark 18 May 2018 Pandora Jewellery DMCC 100% Dubai 8 October 2014 Pandora Jewellery UK Limited 100% England 1 December 2008 Pandora Jewelry Finland Oy 100% Finland 1 January 2012 Pandora France SAS 100% France 25 February 2011 Pandora Jewelry GmbH 100% Germany 5 January 2010 Pandora EMEA Distribution Center GmbH 100% Germany 5 December 2011 Pandora Jewelry Asia-Pacic Limited 100% Hong Kong 1 November 2009 Pandora Jewelry Limited 100% Ireland 10 January 2018 Pandora Italia SRL 100% Italy 23 May 2012 Pandora Jewelry Mexico Import, S.A. de C.V. 100% Mexico 4 April 2018 Pandora Jewelry Mexico, S.A. de C.V. 100% Mexico 8 March 2017 Pandora Jewelry Mexico Servicios, S.A. de C.V. 100% Mexico 8 March 2017 Pandora Jewelry Panama S.A. 100% Panama 5 July 2016 Pandora Jewelry Peru S.A.C 100% Peru 10July 2018 Pandora Jewelry Shared Services Sp. z.o.o. 100% Poland 7 February 2012 Pandora Jewelry CEE Sp. z.o.o. 100% Poland 1 March 2009 Pandora Jewelry Slovakia s.r.o. 100% Slovakia 6 September 2016 Pandora Jewellery South Africa Pty Ltd. 100% South Africa 31 January 2017 Pandora Jewellery Spain S.L 100% Spain 28 September 2017 Pandora Sweden AB 100% Sweden 4 November 2013 Company Ownership Registered oce Date of consolidation Pandora Schweiz AG 100% Switzerland 6 December 2011 Pandora Production Co. Ltd. 100% Thailand 7 March 2008 Pandora Services Co. Ltd. 100% Thailand 15 October 2010 Pandora Jewelry Mücevherat Anonim Şirketi 100% Turkey 4 November 2013 Pandora Jewelry Inc. 100% USA 1 July 2008 Pandora Jewelry Latam LLC 100% USA 20 October 2021 OWNED BY OTHER COMPANIES IN THE PANDORA GROUP AD Astra Holdings Pty Ltd. 100% Australia 1 July 2009 Pandora Retail Pty Ltd. 100% Australia 1 July 2009 Pandora Jewelry Pty Ltd. 100% Australia 1 July 2009 Pandora do Brasil Comércio e Importação Ltda. 100% Brazil 24 October 2013 Pandora Franchise Canada Ltd. 100% Canada 19 January 2011 Pandora Retail Canada Ltd. 100% Canada 4 February 2014 Pandora Jewelry (Shanghai) Company Ltd. 100% China 4 February 2015 Pandora Jewelry Design (Beijing) Company Ltd. 100% China 1 March 2016 Pandora Jewelry CR s.r.o. 100% Czech Republic 2 December 2009 Panmeas Jewellery LLC 100% Dubai 16 January 2015 Pandora Jewelry Hong Kong Company Ltd. 100% Hong Kong 4 February 2015 Pandora Jewelry Hungary Ltd. 100% Hungary 2 June 2010 Pandora Jewelry Japan Ltd. 100% Japan 29 October 2014 Pandora Jewelry Macau Company Ltd. 100% Macau 1 January 2016 Pandora Jewelry B.V. 100% Netherlands 20 September 2010 Pandora Norge AS 100% Norway 17 August 2010 Pandora Jewelry Romania SRL 100% Romania 18 August 2011 Pandora Jewelry Singapore Pte. Ltd.. 100% Singapore 1 January 2016 Pandora ECOMM LLC 100% USA 21 August 2014 Pandora Jewelry LLC 100% USA 7 March 2008 Pandora Franchising LLC 100% USA 1 November 2009 Pandora Ventures LLC 100% USA 10 May 2012 Pandora Group has four dormant companies, which have been omitted from the table. Pandora A/S has no dormant companies. NOTE . COMPANIES IN THE PANDORA GROUP ANNUAL REPORT 2021 FINANCIAL STATEMENTS  Forward-looking statements This Annual Report contains forward-looking statements, including, but not limited to, guidance, expectations, strategies, objectives and statements regarding future events or prospects with respect to the Company’s future nancial and operating results. Forward-look- ing statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “expect”, “estimate”, “intend”, “will be”, “will continue”, “will result”, “could”, “may”, “might” or any variations of such words or other words with similar meanings. Forward-looking statements are subject to risks and uncertain- ties that could cause the Company’s actual results to dier materially from the results discussed in such forward-looking statements. Prospective information is based on management’s then current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, may change. The Company assumes no obligation to update any such forward-looking statements to reect actual results, changes in assumptions or changes in other factors aecting such forward-looking statements. Some important risk factors that could cause the Company’s actual results to dier materially from those expressed in its forward-looking statements include, but are not limited to: economic and geopolitical uncertainty (including interest rates and exchange rates), nancial and regulatory developments, general changes in market trends and end-consumer preferences, demand for the Company’s products, competition, the availability and pricing of materials used by the Company, production- and distribution-related issues, IT failures, litigation, pandemics, and other unforeseen factors. The nature of the Company’s business means that risk factors and uncertainties may arise, and it may not be possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on the Company’s business or the extent to which any individual risk factor, or combination of factors, may cause results to dier materially from those contained in any forward-looking statement. Accordingly, forward-looking statements should not be relied on as a prediction of actual results. Key figures and financial ratios stated in the consolidated financial statements have been calculated in accordance with the CFA Society Denmark guidelines. Pandora presents the following alternative performance measures not defined according to IFRS (non-GAAP measures) in the Annual Report: Furthermore, a breakdown of ‘Operating working capital’, ‘Net working capital’ and ‘Invested capital’ is given on the section 3 divider. NOTE . FINANCIAL DEFINITIONS Revenue growth, % (The current year’s revenue - last year’s revenue) Last year’s revenue Revenue growth, local currency, % (The current year’s revenue at last year’s exchange rates - last year’s revenue) Last year’s revenue Gross margin, % Gross prot / revenue Eective tax rate, % Income tax expense / prot before tax Equity ratio, % Equity / total assets Payout ratio, % Dividends paid for the year / net prot Total payout ratio, % Dividends paid for the year plus value of share buyback / net prot EPS basic Net prot / average number of shares outstanding EPS diluted Net prot / average number of shares outstanding, including the dilutive eect of share options ‘in the money’ Total like-for-like sales-out growth, % Sell-out revenue from concept stores and eSTOREs across all channels that have been operated for more than 12 months relative to the same period last year Sell-out growth, % Like-for-like incl. temporarily closed stores Organic growth, % Growth in revenue in local currency relative to the same period last year adjusted for the acquisition/divestment of distributors and franchisee stores (the eect of converting wholesale to retail revenue and vice versa) Restructuring costs Costs related to Programme NOW includes inventory buyback, optimisation of product portfolio and product quality, brand restructuring, external consultants, IT transformation, etc. EBIT excl. restructuring costs Earnings before interest and tax (operating prot) excl. restructuring costs EBIT margin excl. restructuring costs, % EBIT excl. restructuring costs / revenue EBIT margin, % EBIT / revenue EBITDA Earnings before interest, tax, depreciation and amortisation EBITDA margin, % EBITDA / revenue Capital expenditure (CAPEX) Purchase of intangible assets and property, plant and equipment for the year, excl. acquisitions of subsidiaries Days sales outstanding (DSO) Last three months of wholesale and third-party distribution revenue relative to trade receivables from these channels and not adjusted for VAT Return on invested capital (ROIC), % EBIT / invested capital incl. goodwill NIBD Loans, borrowings, capitalised leases and other liabilities relating to obligations to acquire non-controlling interests (current and non-current) less cash NIBD to EBITDA excl. restructuring cost NIBD / EBITDA excl. restructuring cost (rolling 12 months) Cash conversion incl. lease payments, % Free cash ow before acquisitions / EBIT ANNUAL REPORT 2021 FINANCIAL STATEMENTS  The Board of Directors and the Executive Management have today discussed and approved the Annual Report of Pandora A/S for 2021. The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial State- ments Act. It is our opinion that the consolidated financial statements and the Parent Company financial statements give a true and Peter A. Ruzicka Chair Marianne Kirkegaard Christian Frigast Deputy Chair Catherine Spindler Heine Dalsgaard Jan Zijderveld Birgitta Stymne Göransson Alexander Lacik Chief Executive Officer Anders Boyer Chief Financial Officer STATEMENT BY THE EXECUTIVE MANAGEMENT AND THE BOARD OF DIRECTORS fair view of the financial position of the Group and the Par- ent Company at 31 December 2021 and of the results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January – 31 December 2021. Further, in our opinion, the Management's review gives a fair review of the development in the Group's and the Parent Company's activities and financial matters, results of oper- ations, cash flows and financial position as well as a descrip- tion of material risks and uncertainties that the Group and the Parent Company face. In our opinion, the Annual Report of Pandora A/S for the financial year 1 January to 31 December 2021 with the file name PAND-2021-12-31.zip has been prepared, in all mate- rial respects, in compliance with the ESEF Regulation. We recommend that the Annual Report be approved at the Annual General Meeting. Copenhagen, 9 February 2022 Executive Management Board of Directors ANNUAL REPORT  MANAGEMENT STATEMENT  Our opinion We have audited the consolidated financial statements and the Parent Company financial statements of Pandora A/S for the financial year 1 January – 31 December 2021, which com- prise statement of comprehensive income, balance sheet, statement of changes in equity, statement of cash flows and notes, including accounting policies, for the Group and the Parent Company. The consolidated financial statements and the Parent Company financial statements are prepared in ac- cordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the Parent Company financial statements give a true and fair view of the financial position of the Group and the Parent Com- pany at 31 December 2021 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January – 31 December 2021 in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. Our opinion is consistent with our long-form audit report to the Audit Committee and the Board of Directors. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the Inter- national Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accor- dance with these requirements and the IESBA code. To the best of our knowledge, we have not provided any prohibited non-audit services as described in article 5(1) of Regulation (EU) no. 537/2014. Appointment of auditor Subsequent to Pandora A/S being listed on Nasdaq OMX Copenhagen, EY was appointed auditors of Pandora A/S on 8 April 2011. We have been reappointed annually at the General Meeting for a total consecutive period of 11 years up to and including the financial year 2021. Subsequent to a tender process, we were re-appointed at the Annual General Meeting on 11 March 2021. Key audit matters Key audit matters are those matters that, in our profession- al judgement, were of most significance in our audit of the financial statements for the financial year 2021. These mat- ters were addressed during our audit of the financial state- ments as a whole and in forming our opinion thereon. We do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled our responsibilities described in the “Au- ditor’s responsibilities for the audit of the financial state- ments” section, including in relation to the key audit matters below. Our audit included the design and performance of procedures to respond to our assessment of the risks of ma- terial misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements. INDEPENDENT AUDITOR’S REPORT To the shareholders of Pandora A/S ANNUAL REPORT  INDEPENDENT AUDITOR’S REPORT  Our procedures in relation to revenue recognition and measure- ment of expected sales returns included considering the Group’s accounting policies for revenue recognition, including those related to expected sales returns, and assessing compliance of policies with applicable accounting standards. We identified and assessed internal controls related to the timing of revenue recognition and measure- ment of expected sales returns. We tested the effectiveness of the Group’s internal controls in relation to calculation of expected sales returns and timing of revenue recognition. On a sample basis, we tested sales transactions taking place at either side of the balance sheet date as well as credit notes issued after the balance sheet date to assess whether those transactions were recognised in the correct period. We assessed the key assumptions applied by Management regarding expected sales returns based on our knowledge of the business and by reviewing the supporting documentation prepared by Management. Furthermore, we evaluated the disclosures pro- vided by Management in the consolidated financial statements and the Parent Company financial statements to applicable accounting standards. Revenue and sales return Revenue is recognised when control of the goods has been trans- ferred to the buyer and it is measured at fair value of the expected consideration to be received, less rebates, discounts, sales taxes, duties and expected sales returns. Revenue recognition and measurement of the related expected sales returns was a matter of most significance in our audit due to the inherent risk in the es- timates and judgements which Management makes in the normal course of business as to timing of revenue and measurement of expected sales returns. Details on revenue recognition and expected sales returns are provided in sections 2.1 and 3.8 of the consolidated financial statements and in section 2.1 and 3.5 of the Parent Company financial statements, to which we refer. Taxation The Group has extensive international operations and in the normal course of business, Management makes judgements and estimates in determining the recognition of income taxes, deferred taxes and provisions for uncertain tax positions. In Thailand, the Group is subject to Board of Investment (BOI) agreements, where many, but not all, types of net income are tax-exempt, and therefore, changes in profit allocation could significantly impact the Group’s consolidated tax expense. On this basis, taxation was a matter of most significance in our audit. Additional details on income taxes are provided in section 2.5 of the consolidated finan- cial statements, to which we refer. Our procedures in relation to recognition of income taxes, de- ferred taxes and provisions for uncertain tax positions included assessing the Group’s processes for recording and continual re-as- sessment of provisions for uncertain tax positions. Our procedures also covered evaluating the assumptions applied by Management in determining the recognition and measurement of income taxes and deferred taxes while taking into account relevant corre- spondence with relevant tax authorities. Our own tax specialists performed an assessment of the Group’s recognition of income taxes and deferred taxes, including correspondence with relevant tax authorities to consider the completeness of the tax provi- sions. In addition, we assessed the assumptions used, taking into consideration our own tax specialists’ knowledge and experience. Further, we evaluated the disclosures provided by Management in the consolidated financial statements and the Parent Company financial statements to applicable accounting standards. Inventory The Group carries inventory in the balance sheet at the lower of cost and net realisable value. Significant management judgements are required with regards to valuation of inventories due to the uncertainty associated with the estimate of slow-moving items and expected value of the reusable raw materials, as well as calculations of elimination of internal gain. Given the level of significant manage- ment judgements and estimates, inventory valuation was a matter of most significance in our audit. Additional details on the valuation of inventories are provided in section 3.5 of the consolidated financial statements and in section 3.4 of the Parent Company financial state- ments, to which we refer. Our procedures in relation to inventory valuation included assess- ing the Group’s processes related to inventory valuation including on a sample basis testing of direct costs related to raw materials, labour costs and attributable overhead costs incurred in the man- ufacturing process, recording of write-downs and understanding of the process for internal gain elimination. We challenged the basis for write-downs and performed analytical procedures to assess slow-moving items. We assessed the key assumptions applied by Management regarding items life-cycle status and expected value of the reusable raw materials based on our knowledge of the busi- ness, and on a sample basis tested the supporting documentation. Further, on a sample basis we tested the calculation of elimination of internal gain at group level. Furthermore, we evaluated the disclosures provided by Management in the consolidated financial statements and the Parent Company financial statements to appli- cable accounting standards. DESCRIPTION OF MATTER CONSIDERATION OF THE MATTER IN THE AUDIT ANNUAL REPORT  INDEPENDENT AUDITOR’S REPORT  Statement on the Management’s review Management is responsible for the Management’s review. Our opinion on the financial statements does not cover the Management’s review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the Management’s review and, in doing so, consider whether the Management’s review is materially inconsistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management’s review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the Management’s review is in accordance with the financial state- ments and has been prepared in accordance with the require- ments of the Danish Financial Statements Act. We did not identify any material misstatement of the Management’s review. Management’s responsibilities for the financial statements Management is responsible for the preparation of consol- idated financial statements and Parent Company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act and for such internal control as Management determines is necessary to enable the preparation of finan- cial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, Management is re- sponsible for assessing the Group’s and the Parent Com- pany’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the financial statements unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Rea- sonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and additional requirements applicable in Denmark will always detect a material misstatement when it exists. Mis- statements can arise from fraud or error and are considered material if, individually or in the aggregate, they could rea- sonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit conducted in accordance with ISAs and additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepti- cism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and ap- propriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepre- sentations or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appro- priate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and relat- ed disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial state- ments or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the under- lying transactions and events in a manner that gives a true and fair view. ANNUAL REPORT   INDEPENDENT AUDITOR’S REPORT • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance re- garding, among other matters, the planned scope and tim- ing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a state- ment that we have complied with relevant ethical require- ments regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applica- ble, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial state- ments and the Parent Company financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on compliance with the ESEF Regulation As part of our audit of the Consolidated Financial State- ments and Parent Company Financial Statements of Pandora A/S we performed procedures to express an opinion on whether the Annual Report of Pandora A/S for the finan- cial year 1 January to 31 December 2021 with the file name PAND-2021-12-31.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the Annual Report in XHTML format and iXBRL tagging of the Consolidated Financial Statements. Management is responsible for preparing an Annual Report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the Annual Report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the an- choring thereof to elements in the taxonomy, for financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human readable format; and • For such internal control as Management determines nec- essary to enable the preparation of an Annual Report that is compliant with the ESEF Regulation. Mikkel Sthyr State Authorised Public Accountant mne26693 Jens Thordahl Nøhr State Authorised Public Accountant mne32212 Copenhagen, 9 February 2022 EY Godkendt Revisionspartnerselskab CVR no. 30 70 02 28 Our responsibility is to obtain reasonable assurance on whether the Annual Report is prepared, in all material re- spects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of proce- dures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the Annual Report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the Annual Report of Pandora A/S for the financial year 1 January to 31 December 2021 with the file namePAND-2021-12-31.zipis prepared, in all material respects, in compliance with the ESEF Regulation. ANNUAL REPORT  INDEPENDENT AUDITOR’S REPORT  ANNUAL REPORT 2021 PARENT COMPANY  PARENT COMPANY PANDORA A/S FINANCIAL REVIEW The Parent Company operates as the principal of Pandora, and all inventories are consequently traded from the crafting facilities in Thailand to wholesalers and retailers through the Parent Company. Similarly, all inventories are returned from subsidiaries through the Parent Company for the purpose of remelting any excess inventory. Gross prot is therefore impacted by realised losses from remelting activities and unrealised losses from inventory write-downs. Fluctuations in market prices of silver and gold also have a major impact on gross prot. Apart from the sale of jewellery, the Parent Company maintains and develops Group functions, including administration, distribution, business development, retail set up, product development and risk management, which all determine the activity level in the Parent Company. The risk management activities carried out by the Parent Company include hedging the Group’s risk relating to commodity prices and exchange rates. Revenue was DKK 13.6 billion (2020: DKK 9.6 billion), while net prot was DKK 5.4 billion (2020: DKK 1.6 billion). The increase in net prot was mainly related to the business recovery after COVID-19 as well as received dividends of DKK 2.8 billion (2020: DKK 0.7 billion). In 2021, Pandora A/S paid an extraordinary dividend of DKK 15 per share, corresponding to DKK 1.5 billion. Other events and impacts in 2021: • In 2021, Pandora A/S launched two share buyback programmes under which Pandora expects to buy back own shares to a value of DKK 4.0 billion. Treasury shares acquired in the year amount to 3,943,797, corresponding to a total purchase price of DKK 3.3 billion. • Pandora A/S merged with the 100% owned subsidiary Pandora Jewelry Central Western Europe A/S in 2021 with Pandora A/S as the surviving company. The merger is described in the notes 1.1 Principal accounting policies and 3.3 Investments in subsidiaries and business combinations in the Parent Company Financial Statements 2021. DKK billion revenue 2021 DKK billion net prot 2021 13.6 5.4 ANNUAL REPORT 2021 PARENT COMPANY  INCOME STATEMENT DKK million Notes 2021 2020 Revenue 21 13583 9626 Cost of sales 6440 4932 Gross prot 7143 4693 Sales, distribution and marketing expenses 22 31 2082 1160 Administrative expenses 22 31 1259 2138 Operating prot 3802 1396 Dividends from subsidiaries 33 2848 652 Impairment of investments in subsidiaries 33 135  Finance income 45 222 379 Finance costs 45 509 511 Prot before tax 6228 1915 Income tax expense 24 808 291 Net prot for the year 5420 1624 STATEMENT OF COMPREHENSIVE INCOME DKK million Notes 2021 2020 Net prot for the year 5420 1624 Other comprehensive income: Items that may be reclassied to prot/loss for the year Commodity hedging instruments: - Realised in net cost of sales 4 11 - Realised in net nancials 4 1 - Fair value adjustments 8 2 Foreign exchange hedging instruments: - Realised in net nancials 249 49 - Fair value adjustments 287 21 Tax on other comprehensive income, hedging instruments, income/expense 24 8 5 Other comprehensive income, net of tax 29 16 Total comprehensive income for the year 5391 1608 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED  DECEMBER ANNUAL REPORT 2021 PARENT COMPANY  ASSETS DKK million Notes 2021 2020 Intangible assets 31 3573 2963 Property, plant and equipment 31 51 Right-of-use assets 32 104 128 Investments in subsidiaries 33 5257 6350 Loans to subsidiaries 52 878 1010 Other nancial assets 12 12 Total non-current assets 9855 10514 Inventories 34 687 420 Trade receivables 13 4 Receivables from subsidiaries 52 6829 3700 Right-of-return assets 35 216 204 Derivative nancial instruments 43 44 69 351 Income tax receivable 27 90 Other receivables 116 308 Cash 142 2211 Total current assets 8099 7288 Total assets 17953 17802 EQUITY AND LIABILITIES DKK million Notes 2021 2020 Share capital 41 100 100 Treasury shares 3416 93 Reserves 216 207 Dividend proposed   Retained earnings 10978 6830 Total equity 7877 7044 Provisions 51 34 Loans and borrowings 42 44 1124 105 Deferred tax liabilities 24 93 318 Total non-current liabilities 1269 457 Provisions  4 Refund liabilities 35 1674 1438 Loans and borrowings 42 44 298 3003 Derivative nancial instruments 43 44 209 119 Payables to subsidiaries 44 52 4937 4361 Trade payables 36 44 831 1135 Income tax payable 488 0 Other payables 44 371 242 Total current liabilities 8807 10301 Total liabilities 10076 10758 Total equity and liabilities 17953 17802 BALANCE SHEET AT  DECEMBER ANNUAL REPORT 2021 PARENT COMPANY  DKK million Notes Share capital Treasury shares Hedging reserve Other reserves 1 Dividend proposed Retained earnings Total equity 2021 Equity at 1 January 100 93 9 198  6830 7044 Net prot for the year      5420 5420 Other comprehensive income, net of tax   29    29 Total comprehensive income for the year   29   5420 5391 Transfers    38  38  Share-based payments 23  1    202 203 Eect of merger with subsidiary 33      45 45 Purchase of treasury shares 41  3325     3325 Dividend paid     1481 2 1479 Dividend proposed     1481 1481  Equity at 31 December 100 3416 20 236  10978 7877 The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 16 per share, corresponding to DKK 1.6 million (2020: DKK 0 million), be distributed for 2021. In 2021, an extraordinary dividend of DKK 15 per share was paid, corresponding to DKK 1.5 billion. In 2021, Pandora initiated share buyback programmes, which resulted in repurchases of 3,943,797 treasury shares, a total value of DKK 3.3 billion. For further shareholder information on dividend payments, see note 4.1 Share capital to the consolidated nancial statements. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED  DECEMBER 2020 Equity at 1 January 100 1964 25 266 836 5568 4832 Net prot for the year      1624 1624 Other comprehensive income, net of tax   16    16 Total comprehensive income for the year   16   1624 1608 Transfers    68  68  Share-based payments 23  14    68 82 Purchase of treasury shares 41  431     431 Sale of treasury shares 2 41  2288    509 1779 Dividend paid     836 11 825 Dividend proposed        Equity at 31 December 100 93 9 198  6830 7044 ¹ Other reserves include non-distributable reserves under Danish legislation relating to the capitalisation of projects developed in-house. ² On 5 May 2020, Pandora initiated an accelerated bookbuild for the sale of 8 million treasury shares, which was conducted on the same day, generating approximately DKK 1.8 billion in net proceeds. ANNUAL REPORT 2021 PARENT COMPANY  DKK million Notes 2021 2020 Operating prot 3802 1396 Depreciation and amortisation 286 277 Share-based payments 23 106 43 Change in inventories 268 295 Change in intercompany receivables/payables 1629 1588 Change in receivables 171 118 Change in payables and other liabilities 97 235 Other non-cash adjustments 46 384 478 Interest etc. received 31 65 Interest etc. paid 369 120 Income tax paid 513 124 Cash ows from operating activities, net 2098 365 Acquisitions of subsidiaries and activities, net of cash acquired 33 138 24 Purchase of intangible assets 253 113 Purchase of property, plant and equipment  13 Change in other nancial non-current assets  3 Dividends received 1 858  Cash ows from investing activities, net 743 152 DKK million Notes 2021 2020 Dividend paid 1479 825 Purchase of treasury shares 41 3325 431 Sale of treasury shares 41  1778 Proceeds from loans and borrowings 42 1315 5921 Repayment of loans and borrowings 42 1412 4769 Repayment of lease commitments 42 26 22 Cash ows from nancing activities, net 4927 1651 Net increase/decrease in cash 2086 1864 Cash at 1 January 2228 347 Net increase/decrease in cash 2086 1864 Cash at 31 December 1 142 2211 Cash ows from operating activities, net 2098 365 - Interest etc. received 31 65 - Interest etc. paid 369 120 Cash ows from investing activities, net 743 152 - Acquisition of subsidiaries and activities, net of cash acquired 138 24 Free cash ow 3041 292 Unutilised committed credit facilities 2 6023 6998 1 Non-cash dividends received amounted to DKK 1,991 million (2020: DKK 652 million). 2 See note 4.4 Financial risks to the consolidated nancial statements. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED  DECEMBER The above cannot be derived directly from the income statement and the balance sheet. ANNUAL REPORT 2021 PARENT COMPANY  Notes for the Parent Company The notes are grouped into ve sections related to key gures. The notes contain the relevant nancial information as well as a description of accounting policies applied for the topics of the individual notes. For some notes, reference is made to notes in the consolidated nancial statements. BASIS OF PREPARATION 1.1 Principal accounting policies 106 1.2 New accounting policies and disclosures 106 1.3 Management’s judgements and estimates under IFRS 106 RESULTS FOR THE YEAR 2.1 Revenue from contracts with customers 107 2.2 Sta costs 107 2.3 Share-based payments 107 2.4 Taxation 108 INVESTED CAPITAL AND WORKING CAPITAL ITEMS 3.1 Intangible assets 109 3.2 Leases 109 3.3 Investments in subsidiaries and business combinations 110 3.4 Inventories 110 3.5 Contract assets and liabilities 111 3.6 Trade payables 111 CAPITAL STRUCTURE AND NET FINANCIALS 4.1 Share capital 111 4.2 Liabilities from nancing activities 111 4.3 Derivative nancial instruments 111 4.4 Financial risks 112 4.5 Net nancials 113 4.6 Other non-cash adjustments 113 OTHER DISCLOSURES 5.1 Contingent liabilities 113 5.2 Related parties 114 5.3 Fees to independent auditor 114 CONTENTS ANNUAL REPORT 2021 PARENT COMPANY  Under section 149 of the Danish Financial Statements Act, the consolidated nancial statements of Pandora (also referred to as the ‘Group’) represent an extract of Pandora’s complete Annual Report. This Annual Report of the Parent Company is an integrated part of the full Annual Report, which contains the statement by Executive Management and the Board of Direc- tors as well as the independent auditor’s report. The Parent Company nancial statements show the nancial position, results and cash ows of Pandora A/S on a non-consolidated basis for the nancial year 1 January – 31 December 2021. Parent Company nancial statements The accounting policies of the Parent Company are un- changed from last year and identical to the accounting policies in Pandora’s consolidated nancial statements, with the following exceptions: Foreign currency translation Foreign exchange adjustments of balances accounted for as part of the total net investment in entities that have a func- tional currency other than DKK are recognised in prot for the year as net nancials in the Parent Company nancial statements. Derivative nancial instruments The eective portion of realised and unrealised gains and losses on all commodity hedging instruments is recog- nised as cost of goods sold, while the ineective portion is recognised in net nancials. Derivative nancial instruments NOTE . PRINCIPAL ACCOUNTING POLICIES NOTE . NEW ACCOUNTING POLICIES AND DISCLOSURES New standards and interpretations The description in note 1.2 New accounting policies and disclosures to the consolidated nancial statements regarding new standards issued eective for the Annual Report for 2021 fully covers the Parent Company as well, except for the amendment to IFRS 16, which has not had any material impact on the Parent Company’s results as lease arrangements are limited to the headquarters in Copenhagen and leases for cars and oce equipment. are treated as economic hedging if the hedge accounting requirements in IFRS 9 are not met. Dividends from subsidiaries Dividends from investments in subsidiaries are recognised in the nancial year in which they are declared. Investments in subsidiaries Investments in subsidiaries are measured at cost. Impairment testing is carried out if there is any indication of impairment, as described in Pandora's consolidated nancial statements. The carrying amount is written down to the recoverable amount whenever the carrying amount exceeds the recovera- ble amount. If the Parent Company has a legal or constructive obligation to cover a decit in subsidiaries, a provision for this is recognised. Group internal restructuring Group internal transfer of businesses without consideration (e.g. a merger) is accounted for at booked value based on the consolidated accounts. As of the date of the transfer of the business, the investment in the subsidiary is replaced by the consolidated carrying amounts of underlying assets and liabilities. The dierence between the consolidated carrying amounts and investment in subsidiary is recognised in equity. Transfer of businesses without consideration are reected in the nancial statements of the Parent Company from the date of transfer hence comparative information for the transferred business has not been adjusted. NOTE . MANAGEMENT’S JUDGEMENTS AND ESTIMATES UNDER IFRS SIGNIFICANT ACCOUNTING ESTIMATES In the process of preparing the Parent Company financial statements, a number of accounting estimates and judge- ments have been made that affect assets and liabilities at the reporting date and income and expenses for the reporting period. Management regularly reassesses these estimates and judgements, partly on the basis of historical experience and a number of other factors in the given circumstances, see note 1.3 Management’s judgements and estimates under IFRS to the consolidated financial statements. ANNUAL REPORT 2021 PARENT COMPANY  REVENUE BY SALES CHANNEL DKK million 2021 2020 Third-party distribution 13583 9626 Total revenue 13583 9626 REVENUE BY GLOBAL BUSINESS UNIT DKK million 2021 2020 Moments and Collabs 9496 7058 - Moments 8504 5741 - Collabs 992 1317 Style and Upstream Innovation 4087 2568 - Timeless 2266 1599 - Signature 1183 810 - Me 567 159 - Brilliance 70  Total revenue 1 13583 9626 Goods transferred at a point in time 13583 9626 Total revenue 13583 9626 1 Figures include franchise fees of DKK 4 million (2020: DKK 3 million), which have been allocated to the collections. NOTE . REVENUE FROM CONTRACTS WITH CUSTOMERS ACCOUNTING POLICIES Revenue is recognised when control of the products has been transferred to the subsidiaries. Change of control of the products occurs when the products have been delivered to the subsidiary and no further obligation exists that can affect the transfer of control. The Parent Company provides return rights to subsidiaries, which cover products received in subsidiaries for both returns and warranty, based on historical return rates and current return liabilities in subsidiaries. DKK million 2021 2020 Wages and salaries 760 570 Pensions 54 40 Share-based payments 106 43 Social security costs 7 3 Other sta costs 65 118 Total sta costs 993 774 Sta costs have been recognised in the income statement: Sales, distribution and marketing expenses 497 330 Administrative expenses 496 444 Total sta costs 993 774 Average number of full-time employees during the year 797 614 The performance share programmes described in note 2.4 Share-based payments to the con- solidated nancial statements are issued by Pandora A/S. The value of shares granted to employ- ees in the Parent Company’s subsidiaries is recognised in investments in subsidiaries. As described in note 2.4 Share-based payments to the consolidated nancial statements, the costs related to share-based payments were DKK 166 million (2020: DKK 70 million), of which DKK 60 million related to subsidiaries (2020: DKK 23 million). NOTE . STAFF COSTS NOTE . SHAREBASED PAYMENTS Revenue mainly comprises sales of jewellery to subsidiaries carrying out the distribution. All sales are thus intra-group sales. Contracts are generally ve-year distribution contracts. Key management personnel at Pandora A/S represent the same persons as key management personnel of the Pandora Group. For information regarding remuneration of key management personnel of Pandora A/S, see note 2.3 Sta costs to the consolidated nancial statements. ANNUAL REPORT 2021 PARENT COMPANY  INCOME TAX EXPENSE DKK million 2021 2020 Current income tax charge for the year 1009 160 Change in deferred tax for the year 180 124 Adjustment to current tax for prior years 21 54 Adjustment to deferred tax for prior years  61 Total income tax expense 808 291 Deferred tax on other comprehensive income 8 5 Tax on other comprehensive income 8 5 2021 2020 RECONCILIATION OF EFFECTIVE TAX RATE AND TAX % DKK million % DKK million Prot before tax 6228 1915 Corporate tax rate in Denmark, 22% 220% 1370 220% 421 Non-taxable dividend income 101% 627 75% 143 Non-deductIble impairment expenses 05% 30   Non-deductible expenses and non-taxable income 01% 3 03% 7 Other adjustments including adjustment to tax for prior years 02% 14 01% 1 Withholding taxes 07% 46 03% 5 Eective income tax rate/income tax expense 130% 808 152% 291 NOTE . TAXATION ACCOUNTING POLICIES Income tax Pandora A/S is taxed jointly with its Danish subsidiaries. These subsidiaries are included in the joint taxation from the date they are recognised in the consolidated financial statements and up to the date on which they are no longer consolidated. The jointly taxed Danish companies are taxed under the on-account tax scheme. Further information is provided in note 2.5 to the consolidated financial statements. DEFERRED TAX DKK million 2021 2020 Deferred tax at 1 January 318 154 Recognised in the income statement 180 185 Recognised in other comprehensive income 8 5 Recognised in equity, share-based payments 37 16 Deferred tax at 31 December 93 318 Deferred tax liabilities 93 318 Deferred tax, net 93 318 BREAKDOWN OF DEFERRED TAX DKK million 2021 2020 Intangible assets 552 542 Property, plant and equipment 10 9 Inventories 6 39 Provisions 329 277 Other assets and liabilities 114 23 Deferred tax, net 93 318 ANNUAL REPORT 2021 PARENT COMPANY  NOTE . INTANGIBLE ASSETS LEASE LIABILITIES DKK million 2021 2020 Non-current 83 105 Current 24 27 Total lease liabilities 107 132 Additions of right-of-use assets were DKK 3 million in 2021 (2020: DKK 14 million). Lease liabilities are recognised in loans and borrowings. Depreciation on right-of-use assets charged to the income statement for the period was DKK 26 million (2020: DKK 23 million). Interest expense for the period was DKK 1 million (2020: DKK 1 million). Total cash outow relating to leases was DKK 26 million in 2021 (2020: DKK 23 million). NOTE . LEASES RIGHTOFUSE ASSETS DKK million 2021 2020 Property 98 120 Cars 6 8 Total right-of-use-assets 104 128 Assets and liabilities related to leases. Amounts recognised in the balance sheet: DKK million Goodwill Brand Distribution Other intangible assets Total  Cost at 1 January 549 1044 1541 1011 4144 Additions from merger 590    590 Additions    270 270 Disposals    8 8 Cost at 31 December 1139 1044 1541 1273 4997 Amortisation and impairment losses at 1 January   427 755 1182 Amortisation for the year   30 130 160 Impairment loss for the year 1    82 82 Disposals      Amortisation and impairment losses at 31 December   457 967 1424 Carrying amount at 31 December 1139 1044 1084 306 3573  Cost at 1 January 549 1044 1541 904 4038 Additions    114 114 Disposals    7 7 Cost at 31 December 549 1044 1541 1011 4144 Amortisation and impairment losses at 1 January   397 551 947 Amortisation for the year   30 175 205 Impairment loss for the year 2    32 32 Disposals    3 3 Amortisation and impairment losses at 31 December   427 755 1182 Carrying amount at 31 December 549 1044 1114 256 2963 1 The impairment loss of DKK 82 million relates to write-down of software applications. The loss is mainly recognised as sales, distri- bution and marketing expenses in the income statement. 2 The impairment loss of DKK 32 million relates to scrapped software applications. The loss is recognised as administrative expenses. DKK million 2021 2020 Sales, distribution and marketing expenses 125 88 Administrative expenses 117 149 Total 242 237 Amortisation and impairment losses have been recognised in the income statement as follows: ANNUAL REPORT 2021 PARENT COMPANY  NOTE . LEASES NOTE . INVESTMENTS IN SUBSIDIARIES AND BUSINESS COMBINATIONS Result of annual impairment test As at 31 December 2021, the cost price of investments in subsidiaries was tested for impairment where Pandora iden- tied an impairment indicator. The impairment test identied impairment charges for 2021 amounting to DKK 135 million (2020: DKK 0 million). The impairment was related to invest- ments in subsidiaries in Argentina, Brazil and Turkey. Key assumptions The impairment test was based on a ve-year forecast and an applied market-specic discount rate in the range of 14%-43%. The growth rate applied is an estimate of the expected growth for each market in the terminal period, including the expected average ination. Transfer of businesses without consideration Pandora A/S merged with the 100% owned subsidiary Pando- ra Jewelry Central Western Europe A/S in 2021 with Pandora A/S as the surviving company. Assets obtained through the merger consist of goodwill (DKK 590 million), cash (DKK 17 million), other current assets (DKK 1,176 million) and total liabilities (DKK 839 million). INVESTMENTS IN SUBSIDIARIES DKK million 2021 2020 Cost at 1 January 6457 6411 Additions 4 24 Disposals 1 1022  Additions relating to share-based payments 60 23 Cost at 31 December 5499 6457 Impairment at 1 January 107 107 Impairment for the year 135  Impairment at 31 December 242 107 Carrying amount at 31 December 5257 6350 1 In 2021, DKK 899 million relates to the merger of Pandora Jewelry Central Western Europe A/S into Pandora A/S, and DKK 114 million relates to the capital reduction in Pandora Jewelry Mexico. DKK million 2021 2020 Finished goods 588 340 Point-of-sale materials 99 80 Total inventories at 31 December 687 420 Inventory write-downs at 1 January 259 336 Write-downs during the year 113 328 Utilised in the year 119 405 Inventory write-downs at 31 December 253 259 NOTE . INVENTORIES Dividend received In 2021, Pandora A/S received a total of DKK 2.8 billion in div- idend, mainly from subsidiaries in Thailand (DKK 0.9 billion), the US (DKK 0.7 billion), the UK (DKK 0.4 billion) and Spain (DKK 0.3 billion). In 2020, Pandora A/S received a total of DKK 0.7 billion in dividend from subsidiaries in Thailand. Inventory write-downs are recognised in cost of sales, DKK 99 million (2020: DKK 289 million), and operating expenses, DKK 14 million (2020: DKK 39 million). ANNUAL REPORT 2021 PARENT COMPANY  NOTE . LIABILITIES FROM FINANCING ACTIVITIES TOTAL LIABILITIES FROM FINANCING ACTIVITIES DKK million Financial liabilities 1 January Cash ows, net 1 New leases Other 2 Financial liabilities 31 December  Non-current borrowings  1315  273 1041 Non-current lease liabilities 105  2 23 83 Current borrowings 2976 2975  273 274 Current lease liabilities 27 26 1 22 24 Total liabilities from nancing activities 3107 1687 3 1 1423  Non-current borrowings 5157 2182  2976  Non-current lease liabilities 119  10 25 105 Current borrowings 933 933  2976 2976 Current lease liabilities 20 22 7 22 27 Total liabilities from nancing activities 6230 3137 17 3 3107 1 Cash ows from loans and borrowings in the statement of cash ows include internal loan movements. The eect was an inow of DKK 1,564 million in 2021 (2020: inow of DKK 4,267 million). 2 The ‘Other’ column includes the eect of the reclassication of the non-current portion of interest-bearing loans and borrowings to current due to the passage of time. Further, it includes the eect of accrued but not yet paid interest on interest-bearing loans and borrowings and upfront prepayment of lease liabilities. The Group classies interest paid as cash ows from operating activities. DKK million 2021 2020 Contract assets Receivables from sale of products 5430 2403 Right-of-return assets 216 204 Total contract assets 5646 2607 Contract liabilities Refund liabilities 1674 1438 Total contract liabilities 1674 1438 Refund liabilities The Parent Company recognises a refund liability related to return rights provided to subsidiaries. A corresponding right- of-return asset is also recognised as part of contract assets. The value of the right-of-return asset is determined by how many of the returned products are expected to be sold. Remaining products are written down to remelt value. NOTE . CONTRACT ASSETS AND LIABILITIES See note 4.1 Share capital to the consolidated nancial statements. NOTE . SHARE CAPITAL NOTE . TRADE PAYABLES Pandora generally accepts that vendors sell o their re- ceivables arising from the sale of goods and services to Pandora to a third party. Pandora has established a supply chain nancing programme where vendors can sell o their receivables from Pandora on attractive terms, based on invoices approved by Pandora, but at the bank's sole dis- cretion. Pandora is not directly or indirectly a party to these agreements. The amounts payable to suppliers included in the supply chain nancing programme are classied as trade payables in the balance sheet as well as in the cash ow statement (working capital within cash ow from operations) and amounted to DKK 24 million at December 2021 (DKK 23 million at 31 December 2020). ANNUAL REPORT 2021 PARENT COMPANY  As a consequence of its operations, investments and nanc- ing, Pandora A/S is exposed to a number of nancial risks that are monitored and managed by Pandora's Group Treasury. The company’s nancial risks and the management of these are in all material respects identical to the disclosures made in note 4.4 to the con solidated nancial statements, unless otherwise stated below. Credit risk The company’s credit risk includes the risk related to receiv- ables from subsidiaries. Contractual maturities of nancial liabilities The table to the right provides a breakdown of Pandora A/S’s nancial liabilities similar to note 4.4 to the consolidated nancial statements. LIABILITIES FALL DUE AS FOLLOWS DKK million Falling due less than 1 year Falling due between 1 and 5 years Falling due after more than 5 years Total 2021 Non-derivatives Loans and borrowings 274 1050  1324 Lease liabilities 25 75 9 109 Payables to subsidiaries 4937   4937 Trade payables 831   831 Other payables 112   112 Derivatives Derivative nancial instruments 209   209 Total at 31 December 6388 1125 9 7522 2020 1 Non-derivatives Loans and borrowings 3006   3006 Lease liabilities 28 94 12 135 Payables to subsidiaries 4361   4361 Trade payables 1135   1135 Other payables 59   59 Derivatives Derivative nancial instruments 119   119 Total at 31 December 8708 94 12 8814 1 Items not classied as nancial instruments were excluded in 2020. NOTE . FINANCIAL RISKS NOTE . DERIVATIVE FINANCIAL INSTRUMENTS All hedging is carried out by the Parent Company’s Treasury department. As all instruments are also recorded in the Parent Company, all eects from nancial instruments are shown in note 4.5 to the consolidated nancial statements. ANNUAL REPORT 2021 PARENT COMPANY  NOTE . OTHER NONCASH ADJUSTMENTS OTHER NONCASH ADJUSTMENTS DKK million 2021 2020 Eects from exchange rate adjustments 5 161 Eects from derivative nancial instruments 380 318 Other, including gains/losses from sale of property, plant and equipment 0 1 Total other non-cash adjustments 384 478 Litigation Pandora is a party to various legal proceedings with current business partners, authorities and other third parties, related to copyrights, marketing conduct and pricing. None of these proceedings is expected to have a material eect on Pandora A/S’s nancial position or future earnings. Contractual obligations Pandora A/S has entered into a number of long-term pur- chase, sales and supply contracts in the course of the com- pany’s ordinary business. Contractual obligations amounted to DKK 491 million as 31 December 2021 (2020: DKK 461 million). Apart from the liabilities already recognised in the balance sheet, the company does not expect to incur any signicant nancial losses as a result of these contracts. Other contingent liabilities Pandora A/S has issued letters of support in favour of certain subsidiaries. Furthermore, the company has issued guaran- tees totalling DKK 508 million at 31 December 2021 in favour of certain subsidiaries related to securing local credit lines and rental agreements (2020: DKK 580 million). The company is jointly taxed with Danish subsidiaries. The company is jointly and severally liable with other jointly taxed Danish companies within the Group for income tax and with- holding taxes due on or after 1 July 2012 in the joint taxation. NOTE . CONTINGENT LIABILITIES FINANCE INCOME DKK million 2021 2020 Reclassied from equity hedge reserves 53 149 Total nance income from derivative nancial instruments 53 149 Finance income from loans and receivables measured at amortised cost: Interest income from subsidiaries 31 64 Foreign exchange gains 138 165 Total nance income from loans and receivables 169 230 Total nance income 222 379 FINANCE COSTS DKK million 2021 2020 Reclassied from equity hedge reserves 298 68 Total nance costs from derivative nancial instruments 298 68 Finance costs from nancial liabilities measured at amortised cost: Interest costs to subsidiaries 11 5 Foreign exchange losses 120 326 Interest on loans and borrowings 34 61 Interest on lease liabilities 1 1 Other nance costs 45 50 Total nance costs from loans and borrowings 211 443 Total nance costs 509 511 NOTE . NET FINANCIALS ANNUAL REPORT 2021 PARENT COMPANY  TRANSACTIONS ENTERED INTO WITH RELATED PARTIES DKK million 2021 2020 Income statement: Sales to subsidiaries 13577 9621 Purchases from subsidiaries 5977 4726 Recharges 589 312 Dividend 2848 652 Finance income 31 64 Finance costs 11 5 Total 9880 5294 Balance sheet: Loans to subsidiaries, non-current 878 1010 Trade receivables from subsidiaries 5418 2399 Loans to subsidiaries, current 1411 1301 Right-of-return assets, related parties 216 204 Payables to subsidiaries 4937 4361 Refund liabilities, related parties 1674 1438 Total 1312 885 Development in impairment losses on trade receivables Impairment at 1 January 24 25 Additions 15  Unused amounts reversed  1 Impairment at 31 December 39 24 NOTE . FEES TO INDEPENDENT AUDITOR NOTE . RELATED PARTIES In addition to the related parties disclosed in note 5.2 to the consolidated nancial statements, related parties of Pandora A/S include the subsidiaries listed in the Group structure in note 5.5 to the consolidated nancial statements. DKK million 2021 2020 Fee for statutory audit 3 3 Other assurance engagements 1 1 Total audit related services 4 4 Other services  0 Total non-audit services  0 Total fees to independent auditor 4 4 The costs are recognised in the income statement as administrative expenses. ANNUAL REPORT 2021 PARENT COMPANY  Pandora A/S Havneholmen 17-19 1561 Copenhagen V Denmark Phone: +45 3672 0044 CVR no.: 28505116 www.pandoragroup.com 5299007OWYZ6I1E468432021-01-012021-12-315299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember5299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember15299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember25299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember15299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember25299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember35299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember45299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember55299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember65299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember75299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember15299007OWYZ6I1E468432021-01-012021-12-31cmn:ConsolidatedMember25299007OWYZ6I1E468432020-01-012020-12-315299007OWYZ6I1E468432021-12-315299007OWYZ6I1E468432020-12-315299007OWYZ6I1E468432020-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432021-01-012021-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432021-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432020-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432021-01-012021-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432021-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432020-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432021-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432020-12-31PAN:ProposedDividendRecognisedInEquityMember5299007OWYZ6I1E468432021-01-012021-12-31PAN:ProposedDividendRecognisedInEquityMember5299007OWYZ6I1E468432021-12-31PAN:ProposedDividendRecognisedInEquityMember5299007OWYZ6I1E468432020-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432021-01-012021-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432021-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432019-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432020-01-012020-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432019-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432020-01-012020-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432019-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432020-01-012020-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432019-12-31PAN:ProposedDividendRecognisedInEquityMember5299007OWYZ6I1E468432020-01-012020-12-31PAN:ProposedDividendRecognisedInEquityMember5299007OWYZ6I1E468432019-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432020-01-012020-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432019-12-315299007OWYZ6I1E468432020-01-012020-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pureCopenhagenPandoraN/AAnnual reportAuditor's report on audited financial statementsParsePort XBRL Converter2021-01-012021-12-312020-01-012020-12-315299007OWYZ6I1E46843Reporting class D5299007OWYZ6I1E4684328505116Pandora A/SHavneholmen 17-191561 Copenhagen VOpinionBasis for Opinion