ANNUAL REPORT 2020

MANAGEMENT REVIEW

TO OUR SHAREHOLDERS

Letter from the Chair & the CEO ......... 3

IN BRIEF

Strategic priorities	5
Financial achievements	7
Our regions	8
Our brands 10
Key figures 11

REVIEW AND EXPECTATIONS

COVID -19 12
Group 15
Western Europe 18
Asia 21
Eastern Europe24
Capital allocation 26
2021 earnings expectations27

STRATEGIC REVIEW

Purpose and ambition28
Business model29
Our strategy 30
Measuring our progress35
Addressing climate risks 36
Managing risks37

GOVERNANCE

Corporate governance40
Supervisory Board46
Executive Committee49
Share information 51

Forward -looking statements and ESEF.............................................................52

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

Statements 54
Notes58

PARENT COMPANY FINANCIAL

STATEMENTS
Statements 127
Notes130

REPORTS

Management statement137
Auditor's reports 138

OUR ANNUAL REPORTING

Our annual reporting suite comprises three reports: Annual Report, Sustainability Report and Remuneration Report. Each includes content tailored to its specific audience, and cross -references to the other reports where relevant. The Sustainability Report carries an assurance statement by PwC on selected indicators. It serves as our annual Communication on Progress to the United Nations Global Compact and is, as such, our disclosure in accordance with section 99a of the Danish Financial Statements Act. It can be downloaded at this link: www.carlsberggroup.com/reports downloads/carlsberg -group -2020 sustainability -report/

Front page: Read more about 1664 Blanc on page 14 .

CARLSBERG GROUP ANNUAL REPORT 2020 TO OUR SHAREHOLDERS

LETTER FROM THE CHAIR & THE CEO

COMMITMENT AND RESILIENCE

2020 was a challenging year, significantly impacted by COVID-19. During the year, the health and wellbeing of our people was our first priority, followed by protecting the health of our business.

Flemming Besenbacher, Chair

Cees 't Hart Flemming Besenbacher

COVID-19 presented significant challenges for our customers, people and business. We are proud of the great commitment of all our employees, which contributed to the resilience of the Group.

During the year, our top priority was the health and wellbeing of our employees, while at the same time taking the required actions to protect the health of our business.

Throughout the year, our on-trade customers in particular were severely impacted by the pandemic. We were impressed by the tremendous resilience and flexibility of our people, which allowed us to stabilise the business, support our customers and help societies. Read more about our wider response to the COVID-19 challenges on pages 12-14, including our specific actions in relation to societies and customers.

A RESILIENT COMPANY

The significantly strengthened performance of the Group in recent years was a key prerequisite for the high degree of resilience – in terms of our organisation and people, our financial position and our portfolio – which helped us navigate through the uncharted waters of the pandemic.

ORGANISATION & PEOPLE RESILIENCE

Early on, we were able to build on and adapt the way we work as a company.

From the central office, we provided clear direction to the regions and markets with three priorities: protecting the health and safety of employees and maintaining service to customers; protecting operating profit and cash; and ensuring our readiness for better times. Subsequently, we empowered our country management teams to

translate these priorities into local action plans – recognising that while the pandemic was global, government and consumer responses were very local.

Across the Group, our employees showed a high degree of flexibility and engagement, quickly adapting to the changing market environment and operating conditions, and finding safe and efficient ways of working. Be it in markets or functions, everyone went the extra mile, despite working under very difficult circumstances.

We are confident that being a purpose-driven company with a high level of employee satisfaction and engagement was crucial for our ability to navigate through these uncharted waters.

FINANCIAL RESILIENCE

As early as the beginning of the year, when COVID-19 hit China, we turned the focus onto reducing costs and preserving our top line.

Regarding costs, we were able to leverage OCM, our well-established cost management system, to identify and execute cost savings.

In terms of top line, our on-trade customers suffered and we saw a major channel shift – from on-trade to off-trade and e-commerce. Due to the lower volumes and the negative price/mix, revenue declined organically by 8.4%. Thanks to our cost reduction efforts, the organic decline in operating profit was confined to 3.1%, while reported operating margin increased by 70bp to 16.6%.

In April, we suspended our full-year guidance for organic growth in operating profit due to the high level of volatility and uncertainty. In August, we issued a new guidance and, thanks to the resilience and strong performance of our global organisation, subsequently upgraded our guidance twice – in September and October.

We entered the crisis with a strong balance sheet and an organisation skilled in proactive cash management. By maintaining focus on all elements of working capital and reducing nonessential CapEx, and supported by

good earnings, we delivered a solid free cash flow of DKK 5.1bn.

Our strong financial position enabled us to carry out inorganic transactions, including the acquisitions of Marston's brewing activities in the UK, Wernesgrüner Brewery in Germany and the purchase of the Brooklyn brand rights in our markets. We also merged our businesses in China, see page 23.

Furthermore, we made significant cash returns to our shareholders. In March, we paid a total dividend of DKK 3.1bn, and from January to mid-August our share buy-backs amounted to DKK 2.9bn. On 5 February 2021, we initiated a 3 month share buy-back programme of DKK 750m. Read more about the share buy-back programmes on page 26.

At the Annual General Meeting on 15 March 2021, the Supervisory Board will propose a 5% increase in the dividend to DKK 22.0 per share and that 2.9m treasury shares be cancelled.

PORTFOLIO RESILIENCE

In recent years, our SAIL'22 choices have improved the strategic health of the Group and made our markets and product portfolio more resilient. We have rationalised and strengthened our brand portfolio, and today we have an attractive portfolio of categories and brands, as showcased on page 10. In particular, our investments in and focus on building the craft & speciality and alcohol-free brew categories have delivered strong growth.

Craft & speciality grew by 1%, despite the category being more skewed towards the severely impacted on-trade channel. Alcoholfree brews grew by 11%, supported by increased awareness of health and wellbeing among consumers, possibly fuelled by the pandemic.

RESPOND AND RESET

Our strategic priorities (see pages 30-34) remain valid and will be instrumental for our growth aspirations, although we expect the challenges and uncertainty of 2020 to continue for some time to come. Consequently, we are taking steps to reorient the company for the sustained uncertainty.

There are two elements to this. Respond is focused on being ready for and responsive to changes in consumer and customer demands. Reset addresses our cost base to align it with the changed market environment. Unfortunately, as part of this we have had to depart with good colleagues. Read more about Respond and Reset on pages 13-14.

ADVANCING SUSTAINABILITY

We are continuing to drive progress towards our ambitious targets in our sustainability programme Together Towards ZERO. To ensure the right focus for our activities, in 2020 we updated our materiality assessment and carried out a comprehensive water risk assessment in partnership with WWF.

Recognising the impact of climate change on our business, we have become a supporter of the Task Force on Climate-related Financial Disclosures (TCFD). In this report, we take the first steps in disclosing climate-related risk to our business, using the TCFD framework.

As part of our annual reporting suite, along with the Annual Report and the Remuneration Report, our Sustainability Report contains a wealth of data, insights into our achievements to date and our future plans, a summary of which can be found in this report on pages 6 and 33-35.

CHANGES TO THE SUPERVISORY BOARD

At the Annual General Meeting, the Supervisory Board will propose Henrik Poulsen, former CEO of Ørsted, as a new member. The Supervisory Board will also propose that Henrik Poulsen become Deputy Chairman of the Supervisory Board,

replacing Lars Fruergaard Jørgensen. Lars Fruergaard Jørgensen will remain as a member of the Supervisory Board. In addition, Domitille Doat-Le Bigot has notified the Supervisory Board that she is not standing for re-election at the Annual General Meeting.

THANK YOU

We will remember 2020 for the significant challenges presented to everybody by COVID-19. We are deeply impressed by the high level of engagement and commitment of our colleagues during the year. We want to take this opportunity to say thank you to each and every one – current employees and those who unfortunately had to leave the Group.

We would also like to acknowledge our shareholders for their support and trust during the year.

Finally, we would like to thank all our suppliers and customers – not least our highly-challenged on-trade customers – for their cooperation during the difficult times in 2020. We will continue to support our on-trade customers the best way we can and we hope for a brighter and more cheerful 2021.

Flemming	Cees
Besenbacher	't Hart
Chair	CEO

STRATEGIC PRIORITIES

2020 HIGHLIGHTS

COVID-19 was a stress test for our SAIL'22 strategy. Notwithstanding the immense hardship posed by the pandemic for many people, including our on-trade customers, our strategic priorities proved resilient.

RESILIENCE OF OUR GROWTH PRIORITIES

Our alcohol-free brew and craft & speciality portfolios demonstrated their strength during the year, delivering growth of 11% and 1% respectively. Our international speciality brand 1664 Blanc saw impressive growth of 8%, while Grimbergen declined by 2%, impacted by challenges in France. Our international cider brand, Somersby, grew by 2%.

POSITION FOR GROWTH POSITION FOR GROWTH

GROWING IN CHINA

For a number of years, our Chinese business has delivered consistently strong results. Despite the significant nationwide lockdown at the beginning of 2020 and subsequent local lockdowns during the remainder of the year, volumes and revenue/hl grew. Key drivers were the premium brands, our big city strategy, and strong performance in e-commerce and modern off-trade.

STRENGTHEN THE CORE

SUPPORTING THE ON-TRADE

Across our markets, we developed innovative ways to support our on-trade customers during the challenging period of COVID-19, including digital solutions enabling them to leverage online channels such as online delivery platforms, launch their own website for takeaway, and navigate the world of digital and social marketing. Another initiative was Adopt a Keg, which rewarded consumers buying Carlsberg for home consumption with free draught beer that could be redeemed at local on-trade outlets.

FUNDING THE JOURNEY CULTURE

Our Funding the Journey culture, with its focus on efficiencies and costs, was the most important driver of our financial performance in 2020. Read more on pages 13 and 31.

CREATE A WINNING CULTURE

SUPPORTING OUR COMMUNITIES

Our purpose of brewing for a better today and tomorrow is deeply rooted in our culture. We took pride in being able to assist local communities in the fight against COVID-19. Our many initiatives included the production of hand sanitiser, donations of protective and testing equipment and alcoholfree beverages to healthcare workers, and financial donations to local organisations.

STRATEGIC PRIORITIES

TOGETHER TOWARDS ZERO

We believe sustainability and profitability can work together in harmony. Our aim is to create sustainable value growth by optimising the balance between our financial performance and sustainability progress.

-12% ZERO CARBON FOOTPRINT

By 2030, we aim to eliminate carbon emissions at our breweries and cut our beer-in-hand carbon footprint by 30% compared with 2015. In 2020, we reduced relative carbon emissions by 12%, and from 2015 to 2019 we reduced our beer-in-hand footprint by 7%.

TOGETHER TOWARDS ZERO

We are committed to eliminating water waste from brewing and to safeguarding shared water resources in high-risk areas. By 2030, we aim to reduce our water consumption by 50% compared with 2015. In 2020, we reduced our water consumption by 7%, and since 2015 we have reduced it by 18%.

100% ZERO

We are proud of our great beer brands, which for many people are at the heart of social occasions, and we want everyone to enjoy our products responsibly. All our beers and ciders carry messages or icons advising consumers not to drink-drive and not to drink when underage or pregnant.

IRRESPONSIBLE DRINKING

-19% ZERO

Safeguarding the health and safety of everyone working for Carlsberg is key to how we do business, and our 2030 target is to have zero losttime accidents. In 2020, the lost-time accident rate went down by 19% to 3.0 from 3.7 in 2019.

TOGETHER TOWARDS ZERO

ACCIDENTS CULTURE

FINANCIAL ACHIEVEMENTS

RESILIENCE, COST CONTROL AND CASH DELIVERY

While results in 2020 were impacted by COVID-19, the Group showed a high degree of financial resilience thanks to our Funding the Journey culture and discipline.

The market decline and prolonged on-trade closures in many markets impacted our top line negatively. However, our well-embedded Funding the Journey culture, with its relentless focus on costs and early intervention, enabled us to partly offset this headwind, limiting the decline in operating profit. The operating margin and ROIC improved, free cash flow was solid and financial leverage of 1.51x was well within our target of below 2x NIBD/EBITDA. Read about the results on pages 15-17 and in the consolidated financial statements.

We also continued to return cash to shareholders by delivering on our dividend policy and conducting share buy-backs. Total cash return to shareholders in 2020 amounted to DKK 6bn. Read more on page 26.

TOP- AND BOTTOM-LINE GROWTH, STRONG CASH FLOW AND IMPROVING RETURNS, ALBEIT RESULTS IN 2020 IMPACTED BY COVID-19 CHALLENGES

¹ Comparative figures for 2016-2018 and 2016 have not been restated to include IFRS 16 and IFRS 15 respectively .

OUR REGIONS

THREE REGIONS 24 NO. 1 OR 2 POSITIONS

75% of our volumes are sold in these 24 markets. The strength of our geographic exposure was evident during the COVID-19 pandemic, when the different timing of government actions and the impact and scale of market consequences provided early, valuable learnings, helping us navigate the uncharted waters.

WESTERN EUROPE

54%

SHARE OF GROUP REVENUE

SHARE OF GROUP OPERATING PROFIT

Our beer markets in Western Europe are generally flat in volume terms. Our agenda in the region is to improve margins by premiumising our portfolio, executing value management, improving efficiencies and reducing cost.

EASTERN EUROPE

17%

SHARE OF GROUP REVENUE

18%

SHARE OF GROUP OPERATING PROFIT

We have strong market positions in Eastern Europe. In 2020, we strengthened our market share in Russia by taking appropriate actions in response to a highly promotional market environment.

ASIA

29%

SHARE OF GROUP REVENUE

36%

SHARE OF GROUP OPERATING PROFIT

Our Asia footprint comprises diverse but complementary markets. It is our growth region, and our focus is on growing volumes, expanding our international brands and premiumising local brands while being cost-efficient.

OUR REGIONS

NEW REGIONAL STRUCTURE

Denmark, Finland, France, Germany, Norway, Poland, Portugal, Sweden, Switzerland, UK.

REVENUE SHARE OF GROUP

OPERATING PROFIT

As of 1 January 2021, we have changed our regional structure to optimise regional management and ensure a better balance between our European regions. The new regions and share of Group are shown here.

Cambodia, China, Hong Kong SAR, India, Laos, Malaysia, Myanmar, Nepal, Singapore, Vietnam.

WESTERN EUROPE ASIA CENTRAL & EASTERN EUROPE

Former Eastern Europe: Azerbaijan, Belarus, Kazakhstan, Russia, Ukraine. Former Western Europe: Baltics, Bulgaria, Croatia, Greece, Italy, Serbia, Export & License.

SEE PAGES 121-122 FOR RESTATED FIGURES.

OUR BRANDS

AN ATTRACTIVE BEER PORTFOLIO

Our beer portfolio spans our core beer brands, craft & speciality brands and alcohol-free brews.

CORE BEER

Our local power brands each have a long history in their markets, enjoying high levels of consumer loyalty.

The importance of core beer was evidenced even further during the COVID crisis, as consumers turned to these well-known brands – often in multipacks – when doing their offor online shopping.

Our core international brands were impacted by COVID-19 government measures in significant markets. Tuborg volumes grew by 15% in Russia and increased slightly in China, but this was offset by challenges in other large markets, such as India and Nepal, and total brand volumes declined by 9%. Carlsberg volumes were down 10%, impacted by the market declines in India, Malaysia and Denmark and the closure of the night entertainment channel in China.

CRAFT & SPECIALITY (C&S)

Our C&S portfolio includes our international speciality brands, local craft brands and the international cider brand Somersby. This attractive portfolio has delivered strong growth in recent years, supporting the continued margin progression of the Group.

Despite severe restrictions imposed on the on-trade in 2020, our C&S volumes grew by 1%, with particularly strong growth in markets such as Poland, Norway, Switzerland, Russia and China.

ALCOHOL-FREE BREWS (AFB)

AFB was positively impacted by an acceleration in consumer awareness of health and wellbeing, as the pandemic took its toll across the world.

Driven by good results for the AFB offerings of our local power brands in Western Europe and Eastern Europe, our AFB volumes continued the positive trajectory, growing by 11%.

LOCAL POWER BRANDS ALCOHOL-FREE BREWS

CORE BEER GROWTH CATEGORIES

KEY FIGURES

FIVE-YEAR SUMMARY

	2020	2019	2018¹	2017¹	2016¹			2020	2019	2018¹	2017¹	2016¹
Volumes (million hl)						Investments
Beer	110.1	113.0	112.3	107.1	116.9	Acquisition of property, plant and
Non-beer	20.0	21.9	20.8	19.2	21.9	equipment and intangible assets, net³		-4,396	-4,592	-4,027	-4,053	-3,840
						Acquisition and disposal of subsidiaries,
DKK million						net		-2,409	-	-974	268	1,969
Income statement
Revenue	58,541	65,902	62,503	60,655	62,614	Financial ratios
Gross profit	28,361	32,638	31,220	30,208	31,419	Gross margin	%	48.4	49.5	50.0	49.8	50.2
EBITDA	14,085	15,007	13,420	13,583	13,006	EBITDA margin	%	24.1	22.8	21.5	22.4	20.8
Operating profit before special items	9,699	10,465	9,329	8,876	8,245	Operating margin	%	16.6	15.9	14.9	14.6	13.2
Special items, net	-247	501	-88	-4,565	251	Effective tax rate	%	24.7	26.9	28.0	41.4	33.0
Financial items, net	-411	-738	-722	-788	-1,247	Return on invested capital (ROIC)	%	8.9	8.8	8.1	6.9	5.9
Profit before tax	9,041	10,228	8,519	3,523	7,249	ROIC excl. goodwill	%	23.2	22.4	20.9	15.7	12.7
Income tax	-2,233	-2,751	-2,386	-1,458	-2,392	Equity ratio	%	33.1	35.3	38.5	41.1	40.0
Consolidated profit	6,808	7,477	6,133	2,065	4,857	NIBD/equity ratio	x	0.49	0.41	0.36	0.40	0.48
						NIBD/EBITDA	x	1.51	1.25	1.29	1.45	1.96
Attributable to						Interest cover	x	23.59	14.17	12.92	11.26	6.61
Non-controlling interests	778	908	824	806	371
Shareholders in Carlsberg A/S (net profit)	6,030	6,569	5,309	1,259	4,486	Stock market ratios
Shareholders in Carlsberg A/S, adjusted²	6,363	6,160	5,359	4,925	3,881	Earnings per share (EPS)	DKK	41.3	43.7	34.8	8.3	29.4
						Earnings per share, adjusted (EPS-A)²	DKK	43.6	41.0	35.2	32.3	25.4
Statement of financial position						Free cash flow per share (FCFPS)	DKK	34.5	65.9	40.2	56.9	56.5
Total assets	118,816	123,063	117,700	114,251	126,906	Dividend per share (proposed)	DKK	22.0	21.0	18.0	16.0	10.0
Invested capital	81,541	86,162	82,721	84,488	96,089	Payout ratio	%	55	49	52	194	34
Invested capital excl. goodwill	31,049	33,032	31,792	33,991	43,225	Payout ratio, adjusted4	%	50	50	51	50	39
Net interest-bearing debt (NIBD)	21,263	18,776	17,313	19,638	25,503	Share price (B shares)	DKK	975.2	993.8	692.6	745.0	609.5
Equity, shareholders in Carlsberg A/S	39,308	43,449	45,302	46,930	50,811	Market capitalisation	DKKm	142,676	145,805	104,830	112,116	92,896
						Number of issued shares at year-end	1,000	148,157	152,557	152,557	152,557	152,557
Statement of cash flows						Number of shares at year-end, excl.
Cash flow from operating activities	10,928	12,239	12,047	11,834	9,329	treasury shares	1,000	145,102	147,996	152,457	152,390	152,552
Cash flow from investing activities	-5,871	-2,277	-5,891	-3,154	-713	Average number of shares, excl. treasury
Free cash flow	5,057	9,962	6,156	8,680	8,616	shares	1,000	146,104	150,411	152,428	152,496	152,552

¹ Comparative figures for 2016-2018 and 2016 have not been restated to include IFRS 16 and IFRS 15 respectively. ² Adjusted for special items after tax.

³ Includes the acquisition of the Brooklyn brand rights, DKK 0.8bn in 2020.

⁴ Proposed dividend on number of shares at year-end as a percentage of net profit adjusted for special items after tax.

Please refer to section 9.2 General accounting policies in the consolidated financial statements for a definition and calculation of key figures and financial ratios.

COVID-19

NAVIGATING UNCHARTED WATERS

The COVID-19 pandemic affected lives worldwide. From the beginning, we had three priorities: protecting our people, protecting earnings and cash, and preparing for the rebound.

Below, we summarise the impact of COVID-19 on our business and our mitigating actions – in light of our three priorities – during the year.

MARKET IMPACT

Beer is most often enjoyed in social settings, and markets across our regions were therefore impacted by restrictions and lockdowns, which prevented consumers from engaging in social activities. Some markets benefited from populations not being able to travel, while others suffered from lack of tourism or temporary ruralisation, as migrant workers left the cities.

ON-TRADE

For the Group, the on-trade channel accounts for around 25% of volumes (2019 figures). Exposure is at the

same level in Western Europe, above average in Asia and very small in Eastern Europe. Across our markets, the on-trade in particular was affected by a range of government interventions, including lockdowns, restrictions on people gathering etc., although the length and severity of these measures differed between markets.

In local markets, we found ways to support our on-trade customers. These included support for developing on-line delivery and take-away platforms, and encouraging consumers to return to their on-trade outlet by donating free draught beer.

OFF-TRADE

The impact on the off-trade varied significantly between markets, depending on government actions and their influence on consumer behaviour. In some markets, offtrade volumes grew by double-digit percentages, while other markets saw double-digit-percentage decline.

Overall, off-trade volumes increased, though not enough to offset the volume decline in the on-trade.

E-COMMERCE

During the year, we saw rapid acceleration on e-commerce and digital platforms. Our third-party e-commerce sales were up by approximately 60%, with particularly strong growth in Asia.

SUPPORTING OUR PEOPLE

During the year, our people worked under very difficult circumstances, whether at our breweries, in sales or from home. A total of 1,756 COVID-19 cases were recorded among our 40,000 or so employees. Very sadly, five employees died from the infection.

Our first priority was to protect the physical health of our people. In order to minimise the risk of infection, we implemented several initiatives. At the breweries, these included working in shifts and expanding the use of protective equipment. At our offices, we put in place rigorous procedures to minimise the risk of infection, and many employees worked from home.

Our second priority was to strengthen communication and safeguard the mental wellbeing of our people. We strengthened and increased our overall communication, including

within the leadership team, setting priorities and aligning objectives across markets and functions. For the many employees required to work remotely, we offered virtual training and tools to help them cope with the new challenges.

We intensified the top management communication by introducing regular CEO video messages on the intranet, virtual townhalls and fireside chat with the Executive Committee.

SUPPORTING COMMUNITIES

During the crisis, it was very important for us to support and contribute to the communities as best as we could. In local markets, our businesses engaged in the production of hand sanitiser, donated protective and testing equipment and alcohol-free beverages to healthcare workers, and made financial donations to local organisations.

In addition, our largest shareholder, the Carlsberg Foundation, made donations amounting to more than DKK 100m to support COVID-19 related research, culture and civil society.

SECURING THE FINANCIAL HEALTH OF THE BUSINESS

Group volumes were down organically by 3.8% and revenue/hl was -5%. The former was due to

declines in Western Europe and Asia, while the latter was impacted by channel mix due to the decline in the on-trade as well as channel shift within the off-trade, increased demand for multipacks and mainstream brands, and country mix characterised by growth in markets with lower-than-average price levels.

Responding to the impact of COVID-19 on revenue, significant changes were implemented to safeguard the financial health of our company, both in terms of protecting the year's results and cash, and ensuring that we will be able to capture long-term growth opportunities.

SAFEGUARDING OPERATING PROFIT

As early as January, we started taking steps to reduce costs.

In the supply chain, we reduced the production planning cycle from one month to 1-2 weeks and the number of SKUs to increase flexibility in the light of unpredictable supply and demand. This led to sharper focus, less complexity and larger batch sizes.

We reinforced our Funding the Journey culture, accelerated efficiencies and initiated further cost reductions. A key enabler was our well-embedded Operating Cost Management (OCM) toolkit, with 15 specific cost groups for which we rigorously initiated actions and

monitored savings and gap-closing progress. Our early actions led to significant cost reductions during the year, with savings achieved in almost all cost groups, including professional services, travel, entertainment, people and marketing spend. Some savings will be permanent, while others, including marketing, will not. Our many actions limited the organic decline in operating profit to 3.1%.

Notwithstanding COVID-19, our long-term strategic priorities and ambitions remain intact, and we continued to support and invest in our brands and activities to safeguard the long-term health of the Group and our growth opportunities.

PROTECTING CASH AND LIQUIDITY

To protect cash flow and secure strong liquidity and financial flexibility, the Group implemented several initiatives, such as further stepping up our trade working capital management and reducing or deferring capital expenditures.

In March, we established a new short-term bank credit facility, and in March and June respectively we issued two bonds at very attractive rates. Read about our financial performance, cash and liquidity on pages 15-17.

Our strong balance sheet, combined with the measures taken to protect

cash and liquidity during the crisis, meant that the Group's financial position remained very strong throughout the year and that we were able to engage in M&A transactions despite the COVID-19 headwind.

PREPARING FOR THE REBOUND

The future remains uncertain, including the longer-term impact on the global economy and consumer spending. For the beer industry, the longer-term impact on the on-trade is uncertain, as are longer-term changes in consumer preferences in terms of channels, brands and price points.

While our SAIL'22 strategy (see pages 30-35) remains unchanged, we reshaped and reoriented our organisation and plans to allow us to meet the known and unknown challenges we will face going forward.

RESPOND FOR TOP-LINE GROWTH

We will respond to the challenges ahead of us by sharpening our focus and building increased flexibility into our planning. We are prioritising fewer brands and activities. Within core beer, we are intensifying the focus on our local power brands and international premium brands, such as Carlsberg and Tuborg. With respect to innovation, we are targeting our efforts towards more focused and efficient initiatives.

Using our value management approach, we will ensure that we hit the right price points. We are working with and supporting the ontrade to prepare for the new reality. In addition, we are investing in and expanding our e-commerce activities.

RESET FOR THE FUTURE

Recognising the need to reset, we initiated a review of our total cost base towards the end of the year. This led to a significant reduction in costs in our central, regional and support functions as well as in the supply chain. Unfortunately, this

meant that we had to depart with valued colleagues.

In our markets, we are ensuring the right structures to accommodate a potentially smaller on-trade and changes within off-trade subchannels. We also scrutinised all other nonessential spending and anticipate targeted reductions going forward.

The learnings from the COVID-19 pandemic, including a high degree of flexibility, rapid adaptation to sudden and very new challenges, and new ways of working, have been positive. We are taking steps to ensure that these learnings are embedded in our future ways of working.

+8% 1664 BLANC VOLUME GROWTH

Despite COVID-19, in 2020 we continued to invest in our key strategic priorities, including the launch of a new global communication platform for 1664 Blanc – Good Taste with a Twist – in order to invigorate this iconic French speciality beer. The campaign modernises the brand's premium credentials and realigns it with its French heritage. Recognising COVID-19's impact on consumers' lives, an

online video series, Chef at Home, was a key part of the new platform. The videos were produced to elevate stay-at-home moments by offering tasty yet simple recipes inspired by French cuisine but with a twist. When developing the campaign, our central team liaised with the brand's largest markets, including China and Russia. 1664 Blanc grew strongly in both markets.

GROW CRAFT & SPECIALITY

GROUP

MARGIN IMPROVEMENT AND STRONG CASH FLOW

2020 was a challenging and very volatile year for the Group, significantly impacted by the COVID-19 pandemic.

As a result of the high level of volatility and uncertainty during the year, we had to suspend the fullyear guidance in April and did not issue new guidance until August, after which we issued two earnings upgrades. See table on the righthand side.

VOLUMES

Group beer volumes were 110.1m hl, declining organically by 2.8%, as they were impacted by COVID-19 in most markets. Non-beer volumes were 20.0m hl, declining organically by 8.7%. In addition to COVID-19, non-beer volumes were impacted by lower sales of soft drinks at the German/Danish border.

Total volumes declined organically by 3.8%, while reported decline was 3.6% due to the acquisition of Marston's brewing activities in the UK in October.

INCOME STATEMENT

Revenue was DKK 58.5bn. Organic decline was 8.4%. Revenue per hl declined organically by 5%. Price/mix was negatively impacted by country, channel, product and packaging mix, and in Russia by higher promotions. Reported revenue declined by 11.2% due to currencies, mainly related to the Russian, Norwegian and Chinese currencies.

Gross profit was DKK 28.4bn. The organic decline was 10%, while COGS per hl improved organically by 3%, positively impacted by efficiencies and country and product mix. The gross margin declined by 110bp to 48.4%, as supply chain efficiencies were not enough to offset the under-absorption of fixed costs and the channel and product mix. The gross margin was also impacted by country mix.

Operating expenses declined organically by 14% as a result of tight cost control enabled by our Operating Cost Management toolkit. The main areas in which costs fell

were marketing, travel, supply chain and employee-related costs.

Reported operating expenses as a percentage of revenue declined by 200bp to 32.2%. Excluding marketing expenses, operating expenses declined organically by 13%.

Operating profit before depreciation, amortisation and impairment losses (EBITDA) declined by 2.4% organically and in reported terms by 6.1%. The EBITDA margin improved by 130bp to 24.1%.

Operating profit declined organically by 3.1%. We saw solid growth in Asia and Eastern Europe, while operating profit declined in Western Europe. Reported operating profit was DKK 9.7bn, corresponding to a decline of 7.3%. The reported operating margin improved by 70bp to 16.6%.

Earnings expectations 2020

Date	Expectation for operating profit
4 February	Mid-single-digit percentage organic growth
2 April	Guidance suspended
13 August	Organic decline of 10-15%
17 September	High-single-digit percentage organic decline
27 October	Mid-single-digit percentage organic decline

				Change		Change
Volume (million hl)	2019	Organic	Acq., net	FX	2020	Reported
Beer	113.0	-2.8%	0.2%	-	110.1	-2.6%
Non-beer	21.9	-8.7%	0.0%	-	20.0	-8.7%
Total volume	134.9	-3.8%	0.2%	-	130.1	-3.6%
DKK million
Revenue	65,902	-8.4%	0.3%	-3.1%	58,541	-11.2%
Operating profit before special items	10,465	-3.1%	-0.3%	-3.9%	9,699	-7.3%
Operating margin (%)	15.9				16.6	70bp

Section 1 in the consolidated financial statements contains more details on operating activities.

Net special items (pre-tax) amounted to DKK -247m (2019: DKK +501m). Special items were positively impacted by reversal of provisions made in purchase price allocations in previous years, offset mainly by restructuring costs, including costs related to the Reset for the future initiative (see page 14), and impairment of brands, including the Angkor brand in Cambodia. Special items were also impacted by one-off costs related to COVID-19, including safety measures and donations. Read more about net special items in section 3.1 in the consolidated financial statements.

Financial items, net, amounted to DKK -411m against DKK -738m in 2019. Excluding currency gains and losses, financial items, net, amounted to DKK -550m (2019: DKK -650m), positively impacted by lower other financial expenses. Currency gains were mainly related to USD/EUR deposits in Eastern Europe. Read more about net financial items in section 4.1 in the consolidated financial statements.

Tax totalled DKK -2,233m against DKK -2,751m in 2019. The effective tax rate of 24.7% was positively impacted by the net impact of taxexempt and non-deductible special

items. Excluding these, the effective tax rate would have been 25.7%. Read more about tax in section 6 in the consolidated financial statements.

Non-controlling interests were DKK 778m (2019: DKK 908m), mainly impacted by challenging market conditions in Malaysia and the new Carlsberg Marston's Brewing Company in the UK, of which the Group owns 60%. Read more about non-controlling interests in section 5.3 in the consolidated financial statements.

The Carlsberg Group's share of consolidated profit (net profit) was DKK 6,030m against DKK 6,569m in 2019. The decline was due to lower operating profit and special items, partly offset by lower financial expenses, net, and the lower tax rate.

Adjusted net profit (adjusted for special items after tax) was DKK 6,363m (2019: DKK 6,160m).

STATEMENT OF FINANCIAL POSITION ASSETS

Total assets amounted to DKK 118,816m at 31 December 2020 (31 December 2019: DKK 123,063m). The decline was mainly due to lower intangible assets, property, plant and equipment and trade receivables, partly offset by an increase in cash.

Intangible assets amounted to DKK 66,061m at 31 December 2020 (31 December 2019: DKK 70,027m). The decline was mainly due to the depreciation of currencies in Eastern Europe and Asia.

Property, plant and equipment totalled DKK 26,299m (31 December 2019: DKK 27,607m). The decline of DKK 1,308m was primarily due to depreciation, lower CapEx and currencies.

Current assets amounted to DKK 18,996m (31 December 2019: DKK 17,948m). Trade receivables declined by DKK 1,614m, mainly attributable to lower sales due to COVID-19 and higher provisions for bad debt. Inventories of DKK 4,613m were slightly below last year (31 December 2019: DKK 4,751m). Cash and cash equivalents amounted to DKK 8,093m (31 December 2019: DKK 5,222m), positively impacted by the two EUR 500m bonds issued in March and June respectively.

Section 2 in the consolidated financial statements contains more details on assets.

EQUITY AND LIABILITIES Equity

Equity amounted to DKK 43,362m at 31 December 2020 (31 December 2019: DKK 46,034m), DKK 39,308m of which was attributed to

shareholders in Carlsberg A/S and DKK 4,054m to non-controlling interests.

The net change in equity of DKK -2,672m was explained by the consolidated profit of DKK 6,808m, non-controlling interests of DKK 3,758m, which were impacted by fair value adjustments of contingent considerations, and acquisition of entities of DKK 1,027m, offset by the dividend payout, including noncontrolling interests of DKK - 3,898m, the share buy-backs of DKK -2,900m and foreign exchange adjustment in other comprehensive income of DKK -7,640m.

Liabilities

Total liabilities were DKK 75,454m against DKK 77,029m at 31 December 2019. The decline was impacted by lower trade payables and other liabilities.

Long- and short-term borrowings increased by DKK 5,259m compared with 31 December 2019. The increase was due to the issuance of two EUR 500m bonds in March and June respectively. At 31 December 2020, long-term borrowings were DKK 29,291m (31 December 2019: DKK 20,879m) and short-term borrowings were DKK 959m (31 December 2019: DKK 4,112m). Section 4 in the consolidated

financial statements contains more details on borrowings.

Tax liabilities, retirement benefit obligations etc. were DKK 17,714m (31 December 2019: DKK 22,839m). The decline was mainly due to fair value adjustments of contingent considerations.

Current liabilities excluding shortterm borrowings decreased to DKK 27,490m (31 December 2019: DKK 29,199m). Trade payables declined by DKK 551m, impacted by currencies partly offset by trade payables acquired in connection with the acquisition of Marston's brewing activities in the UK. Other current liabilities, excluding deposits on returnable packaging, declined by DKK 889m, impacted by lower bonus accruals and VAT.

CASH FLOW

Free cash flow amounted to DKK 5,057m versus DKK 9,962m in 2019, mainly impacted by the lower EBITDA, a lower net contribution from the change in working capital and acquisitions.

Net cash flow amounted to DKK 3,247m (2019: DKK -331m). The increase from 2019 was mainly due to external financing of DKK 5,060m (2019: DKK -935m), impacted by two bond placings of EUR 500m in March and June and lower noncontrolling interests of DKK -877m (2019: DKK -2,520m), partly offset by higher dividends of DKK 3,093m paid to shareholders in March (2019: DKK 2,738m) and a lower share buy-back in 2020 of DKK 2,900m compared to DKK 4,100m in 2019.

CASH FLOW FROM OPERATING ACTIVITIES

Cash flow from operating activities amounted to DKK 10,928m against DKK 12,239m in 2019.

EBITDA was DKK 14,085m (2019: DKK 15,007m).

The change in trade working capital was DKK +1,321m (2019: DKK +491m), mainly due to strong cash management discipline and lower trade receivables, the latter impacted by lower sales. Average trade working capital to revenue for the year was -18.6% compared to -16.8% for 2019, supported by the lower revenue.

The change in other working capital was DKK -1,033m (2019: DKK +634m), mainly impacted by lower VAT payable, change in provisions and a reclassification to trade working capital.

Restructuring costs paid amounted to DKK -531m (2019: DKK -445m). Net interest etc. paid amounted to DKK -424m (2019: DKK -894m).

The decline was mainly due to the settlement of financial instruments. Corporation tax paid was DKK -1,958m (2019: DKK -2,234m). The decrease versus last year was mainly due to lower earnings.

CASH FLOW FROM INVESTING ACTIVITIES

Cash flow from investing activities was DKK -5,871m against DKK -2,277m in 2019.

Operational investments totalled DKK -3,835m (2019: DKK -2,824m). In 2019, operation al investments were impacted by the disposal of the brewery sites in Norway and Germany.

Acquisition of property, plant and equipment and intangible assets (CapEx) amounted to DKK -4,396m (2019: DKK -4,588m). Excluding the purchase of the Brooklyn brand rights, CapEx declined by DKK 1.0bn to DKK 3.6bn due to lower sales CapEx, fewer returnable glass bottles, fewer investments in draught lines, and cancellations or postponements of non-business-critical projects.

Total financial investments amounted to DKK -2,036m (2019: DKK +551m). The increase was due to the acquisition of Marston's brewing activities, the prepayment for the acquisition of Wernesgrüner Brewery and lower dividends received. Read

more about the acquisitions in section 5.2 in the consolidated financial statements.

RETURN ON INVESTED CAPITAL

Return on invested capital (ROIC) improved by 10bp to 8.9%, mainly driven by the lower effective tax rate and supported by lower capital employed. The latter was positively impacted by trade working capital, a lower CapEx/depreciation ratio and currencies.

ROIC excluding goodwill improved by 80bp to 23.2%.

FINANCING

At 31 December 2020, gross financial debt amounted to DKK 30,250m and net interestbearing debt to DKK 21,263m. The difference of DKK 8,987m mainly comprised cash and cash equivalents of DKK 8,093m. At 31 December 2020, the average duration was 5.6 years.

The net interest-bearing debt/EBITDA ratio increased to 1.51x (1.25x at year-end 2019). Read more about net interest-bearing debt in section 4.2 in the consolidated financial statements.

Of the gross financial debt, 97% (DKK 29,291m) was long term, i.e. with maturity of more than one year from 31 December 2020.

To secure continued strong liquidity and financial flexibility, we issued a 10-year EUR 500m bond with a coupon of 0.625% on 4 March and a 7-year EUR 500m bond with a coupon of 0.375% on 16 June. 81% of the net financial debt was denominated in EUR and DKK (after swaps). Read more about our funding and liquidity in section 4.7 in the consolidated financial statements.

SHARE BUY-BACKS 2019 PROGRAMME

In January 2020, the Group bought 393,501 shares under the share buy-back programme initiated in 2019. The total purchase price amounted to DKK 0.4bn.

2020 PROGRAMME

In 2020, the Group carried out a share buy-back programme amounting to DKK 2.5bn. The Group bought 2,897,021 shares at an average repurchase price of DKK 863 per share, in total DKK 2.5bn.

Read more about the share buyback programmes, including the 2021 programme, on page 26.

WESTERN EUROPE

A YEAR OF VOLATILITY AND UNCERTAINTY

				Change		Change
Volume (million hl)	2019	Organic	Acq., net	FX	2020	Reported
Beer	46.6	-4.8%	0.5%	-	44.6	-4.3%
Non-beer	15.3	-14.9%	0.0%	-	13.0	-14.9%
Total volume	61.9	-7.3%	0.4%	-	57.6	-6.9%
DKK million
Revenue	36,317	-12.8%	0.6%	-0.9%	31,547	-13.1%
Operating profit before special items	6,187	-17.2%	-0.6%	-1.5%	4,993	-19.3%
Operating margin (%)	17.0				15.8	-120bp

Western Europe had a volatile year. COVID-19 severely impacted results in Q2 and Q4, while Q3 brought some relief due to fewer restrictions during the summer months.

Western Europe is our largest region, accounting for almost half of our operating profit. We are the second largest brewer in the region, with a particularly strong presence in the central and northern parts, where we hold no. 1 and 2 positions in several markets.

In the Nordic markets, we are mainly competing against local or regional players. Elsewhere, we are in competition with large global players.

Our Western Europe region also includes our global export and licence business.

REGIONAL RESULTS

The Western Europe region had a challenging and volatile year. The region delivered strong results in Q3, including beer volume growth supported by favourable weather, while Q2 and Q4 were challenging, with declining volumes due to restrictions and lockdowns, which particularly impacted the on-trade channel.

Beer volumes declined organically by 4.8%, while the organic decline in total volumes was 7.3%. The decline in non-beer volumes was due to the lost German/Danish border trade from 1 January 2020, compounded by the impact from on-trade closures. The positive acquisition impact of 40bp came from the acquisition of Marston's brewing activities, which was consolidated from the end of October.

Revenue/hl was reduced organically by 6%, impacted in all markets by channel mix and, for the region, by country mix. Revenue declined organically by 12.8%, while reported revenue declined by 13.1% due to a negative currency impact, mainly related to the Norwegian krone,

partly offset by the stronger Swiss franc.

We achieved significant cost savings within supply chain, logistics, marketing and administration, though these savings were insufficient to cover the revenue decline. Operating profit therefore declined organically by 17.2%. The development was particularly bad in Q2 and Q4 due to the severe COVID-19-related market situation.

The operating margin was 15.8% (-120bp). Some markets delivered good operating margin improvement, though this was offset by the significant headwinds in some markets.

THE NORDICS

Our Danish off-trade volumes grew, though not enough to compensate for lower on-trade and border volumes. Mainly due to the change to German/Danish border trade in soft drinks from 1 January 2020, total volumes in Denmark declined by more than 25%. Excluding the lost border trade, volumes declined by mid-single-digit percentages due to restrictions and lockdowns.

Our Norwegian business delivered solid double-digit-percentage volume growth, supported by good weather during the summer, domestic tourism and less border trade in Sweden due to the closure of the border. Our local power brand Frydenlund, Tuborg and craft &

		Consumption characteristics		Our position	Our operations
Markets	Per capita beer consumption (litres)	On-trade share of market, approx. (%)	Market position (no.)	Market share¹ (%)	Breweries²
Denmark	58	20	1	53	1
Sweden	46	12	1	26	1
Norway	47	17	1	50	1
Finland	70	9	1	41	1
Poland	99	11	3	19	3
France	30	16	2	25	1
Switzerland	52	27	1	38	1
UK	56	25	4	13³	4
Germany	93	15	14	184	35
The Baltics	62-85	2-4	1-2	27-40	2
Italy	35	21	4	6	1
South East Europe	25-71	8-39	1-3	16-41	6
Portugal	53	51	1	48	1

¹ Sept. 2020 MAT. ² Breweries with capacity above 100,000 hl. ³ Including Marston's. 4 Northern Germany. 5 Including Wernesgrüner Brewery. Source: Carlsberg estimates.

TOTAL VOLUME (m hl) REVENUE (DKKbn) OPERATING PROFIT (DKKbn) OPERATING MARGIN

Our markets in Western Europe

speciality performed particularly well.

Despite the Swedish government imposing less restrictive COVID-19 measures than most other countries, the on-trade channel was nevertheless negatively impacted. Coupled with the decline in the Norwegian border trade, our volumes were down by high-singledigit percentages.

FRANCE

In France, our business had a challenging year, with volumes declining by double-digit percentages. The on-trade channel was severely impacted by restrictions and lockdowns in Q2 and Q4. In addition, our brewery in Obernai was unable to run at normal capacity utilisation in H1 due to COVID-19 constraints, negatively impacting our promotional activities in the off-trade and market share. In H2, volumes and market shares improved following a normalisation of the supply chain and our promotional activities.

SWITZERLAND

Our business in Switzerland saw solid volume growth in the off-trade, but as the business is skewed towards the on-trade channel, total volumes were severely impacted by the lockdowns, declining by double-digit percentages. The brand mix was

positive due to growth of local and international craft & speciality brands and alcohol-free beverages.

POLAND

In Poland, we delivered solid revenue growth due to volume growth and positive price/mix. Although the beer market declined slightly, it was less impacted by COVID-19 than most other Western European markets due to a relatively small on-trade channel. Our craft & speciality, with brands such as Somersby and Zatecky, and alcohol-free brews, especially within the flavoured subcategory, did particularly well.

THE UK

In the UK, our off-trade volumes grew. Due to the prolonged lockdown of the on-trade, total volumes declined by high-singledigit percentages. In May, the Group announced the acquisition of Marston's brewing activities in the UK. The transaction was completed at the end of October and the integration is progressing well.

OTHER MARKETS

In Germany, our volumes were flat for the year. In December, we announced the acquisition of Wernesgrüner Brewery, the integration of which was concluded already in January 2021.

Markets such as Greece and Italy, being highly dependent on the ontrade and tourism, were severely impacted by the pandemic.

Our Bulgarian business performed well, growing volumes in a declining market. The local power brand Pirinsko and craft & speciality brands such as Somersby and Zatecky Gus saw strong growth.

ENGAGING IN M&A

During the year, we strengthened our footprint in Western Europe through the acquisitions of Marston's brewing activities in the UK, Wernesgrüner Brewery in Germany and the rights to the Brooklyn brand in all our markets across our three regions. In the UK, the new combined business, of which Carlsberg owns 60%, will significantly strengthen our business. Carlsberg Marston's Brewing Company has a strong portfolio of international, national and regional beer brands within lager and ale that brings our customers a wider choice. The business will also benefit from the extended distribution to the Marston's pub estate. In addition, the merger will result in substantial revenue and cost synergies.

ASIA

STRONG PERFORMANCE

The impact of COVID-19 differed significantly between our Asian markets. The important Chinese market recovered well during the year, contributing to the solid regional performance.

The importance of Asia for the Group has increased significantly over the past decade, during which we have expanded our presence in the region organically and through acquisitions.

Today, we have an attractive overall position, with no. 1 and 2 positions in six markets. China is the Group's largest market in terms of volume, revenue and operating profit. The competitive landscape varies significantly between markets, with global players and local brewers both present.

SAIL'22 specifically targets Asia as a key contributor to the Group's topand bottom-line growth, with premiumisation a key element, driven by both our international

brands and premiumisation of our local power brands. Consequently, a significant proportion of our SAIL'22 investments is allocated to the region.

REGIONAL RESULTS

The development in Asia varied significantly between markets and during the year. Our Chinese business was severely impacted by COVID-19 in Q1, but rebounded in Q2. The other markets in the region were impacted slightly later, with a significant negative impact seen in Q2. A few markets have since experienced some degree of rebound, though the situation towards the end of the year remained challenging in most markets.

Total volumes declined organically by 5.9%, as the recovery in China could not offset the market declines elsewhere in the region.

Revenue/hl grew by 1%, curbing the decline in organic revenue to 5.0%. Revenue/hl was mainly impacted by

			Change		Change
2019	Organic	Acq., net	FX	2020	Reported
37.2	-6.7%	0.0%	-	34.8	-6.7%
4.8	-0.2%	0.0%	-	4.8	-0.2%
42.0	-5.9%	0.0%	-	39.6	-5.9%

18,416	-5.0%	0.0%	-2.9%	16,959	-7.9%
3,931	5.0%	0.0%	-3.5%	3,991	1.5%
21.3				23.5	220bp

Our

country and channel mix. Reported revenue declined by 7.9% due to the devaluation of most Asian currencies against DKK.

The cost mitigation actions in Asia were substantial and very successfully executed. Consequently, operating profit grew organically by 5.0% and the operating margin improved strongly, by 220bp to 23.5%.

Marketing investments as a percentage of revenue for the full year were slightly down year on year, but with a significant difference between H1 and H2. In H1, we reduced marketing investments early on to mitigate the COVID-19 impact, while in H2 investments were back at the level we believe is required to sustain long-term sustainable growth in our Asian business.

CHINA

Our Chinese business performed very well in a highly volatile environment. Following a very challenging Q1 in which China was impacted by COVID-19, the business rebounded in Q2, and as a result our full-year volumes grew modestly, while the overall market declined.

The key drivers for the year were expanded distribution of the Wusu brand outside its home province, solid growth of our premium brands and continued big city growth.

Despite the negative channel mix resulting from the change from traditional off-trade to modern offtrade, revenue/hl increased by highsingle-digit percentages due to strong growth of premium brands, and further enhanced in Q4 by strong growth of the Wusu brand

		Consumption characteristics		Our position
Markets	Per capita beer consumption (litres)	On-trade share of market, approx. (%)	Market position (no.)	Market share¹ (%)	Breweries²
China	23	38	5/1³	7/65³	25
Laos	48	42	1	95	2
India	2	20	3	15	8
Vietnam	42	43	4	8	1
Cambodia	53	14	4	5	1
Malaysia	6	45	2	43	1
Nepal	3	62	1	60	1
Myanmar	7	34	4	9	1
Singapore	20	41	2	24	-
Hong Kong	19	27	1	29	-

¹ Sept. 2020 MAT. ² Breweries with capacity above 100,000 hl. ³ Total China/western China. Source: Carlsberg estimates.

TOTAL VOLUME (m hl) REVENUE (DKKbn) OPERATING PROFIT (DKKbn) OPERATING MARGIN

Our markets in Asia

25%

outside its home province and the change in discount accruals.

The Material Asset Restructuring of our Chinese assets was concluded in December, following which most of the Group's Chinese assets and those of Chongqing Brewery Company (CBC) are now owned by Chongqing Jianiang Brewery Co. (Jianiang).

Jianiang is owned 49% directly by the Carlsberg Group and 51% by CBC, the latter being listed on the Shanghai Stock Exchange. Carlsberg is the controlling shareholder in CBC, owning 60% of the shares. Consequently, Carlsberg's total economic interest in Jianiang following the restructuring is 79%.

INDIA AND NEPAL

2020 was a very challenging year for our businesses in India and Nepal, where the beer markets were significantly impacted by government lockdowns and restrictions.

In both markets, our breweries were forced to close during Q2 and distribution was severely restricted or even prohibited.

The situation improved slightly in H2, but volumes remained depressed. Consequently, full-year volumes declined significantly, by

approximately 40% in India and approximately 50% in Nepal.

VIETNAM, LAOS AND CAMBODIA

In a highly volatile Vietnamese market impacted by the pandemic, compounded by severe flooding in the central part of the country – our stronghold – in Q4, our volumes declined by mid-single-digit percentages. Our local power brand Huda continued to perform well.

In Laos, our total volumes declined slightly as growing soft drinks volumes largely compensated for lower beer and water volumes. The

market was impacted by COVID-19 in H1, but recovered from May onwards. Lack of tourists in the country continues to impact the ontrade sector.

Cambodia was impacted by restrictions and a significant decline in tourism. In addition, our beer volumes declined, especially at the beginning of the year. While we continued our work on rebuilding the business, the additional challenges brought by COVID-19 led us to revalue the Angkor brand, resulting in an impairment charge. Volumes grew in Q4, mainly driven by the soft drinks business, in spite of new COVID-19 outbreaks and restrictions in December.

MALAYSIA AND SINGAPORE

Malaysia was negatively impacted by restrictions related to the ontrade, distribution and production, the last of these leading to a closure of our brewery in Q2.

In Singapore, our volumes declined modestly while a change in channel mix, due to on-trade restrictions, impacted price/mix negatively.

TUBORG IN CHINA

Since its launch in 2012, Tuborg has been on a remarkable journey in China. Targeting young adult Chinese consumers, the brand has successfully positioned itself as the favourite beer for high-energy social explorers, and today Tuborg is the second largest international beer brand in China. With sales skewed to the on-trade, our big city expansion has been an important

growth driver in recent years, with around half of brand volumes now sold outside our stronghold in western China. To ensure the continued relevance of the brand, we launched Tuborg White in 2019 and Tuborg Pure Draft in 2020. From 2015 to 2019, Tuborg delivered strong growth of around 10% CAGR, while in 2020 volumes were flat due to the challenges of COVID-19.

EASTERN EUROPE

SUCCESSFUL BUSINESS RESET

The Eastern Europe region was less impacted by COVID-19 due to low on-trade exposure. Responding to the promotional pressure in Russia, we successfully grew volumes and strengthened our market share.

Eastern Europe is our smallest region, accounting for around onefifth of operating profit. Our two main markets in the region are Russia and Ukraine, accounting for 67% and 20% respectively of regional volumes.

We have no. 1 or 2 positions in all markets in Eastern Europe. In Russia and Ukraine, the competitive environment is split between a strong presence of global players and a large number of small, local brewers.

In light of the relatively small size of the region, from 1 January 2021 the region has been expanded to include some of the former Western Europe markets and our export and licence business, changing its name to

Central & Eastern Europe. See page 9.

REGIONAL RESULTS

In Eastern Europe, the impact of COVID-19 was relatively modest due to low on-trade exposure. However, particularly towards the end of the year, markets were negatively impacted by a change in channel, customer and product mix as a result of weakening consumer confidence.

All markets, with the exception of Ukraine, delivered total volume growth for the year. For the region, beer volumes grew organically by 5.3%. Non-beer volumes grew strongly by 22.6%, mainly due to growth of energy drinks across the

				Change		Change
Volume (million hl)	2019	Organic	Acq., net	FX	2020	Reported
Beer	29.2	5.3%	0.0%	-	30.7	5.3%
Non-beer	1.8	22.6%	0.0%	-	2.2	22.6%
Total volume	31.0	6.2%	0.0%	-	32.9	6.2%
DKK million
Revenue	11,097	1.0%	0.0%	-10.8%	10,010	-9.8%
Operating profit before special items	1,882	10.9%	0.0%	-9.0%	1,917	1.9%
Operating margin (%)	17.0				19.2	220bp

region. Total volumes were up organically by 6.2%.

Our markets in Eastern Europe

Revenue grew organically by 1.0%. Revenue/hl of -5% was impacted by the higher level of promotional

activities in Russia to regain some of the market share lost in recent years.

The region delivered strong organic operating profit growth of 10.9%, driven by strong performance in all

Market position (no.)

Market

share¹ (%) Breweries²

Consumption characteristics Our position

Per capita beer consumption (litres)

operations

Russia 57 10 2 27 8 Ukraine 40 8 2 30 3 Belarus 52 5 1 32 1 Kazakhstan 32 5 2 40 1 Azerbaijan ⁵ ⁴⁴ ¹ 76 1

On-trade share of market, approx. (%)

markets outside Russia. The operating margin increased by 220bp to 19.2%. We achieved significant cost savings across the region. Combined with a favourable development in costs of goods sold,

Our

we were able to more than offset the impact of the high level of promotional investments in Russia.

RUSSIA

The Russian beer market grew slightly in 2020 despite COVID-19, due to a relatively small on-trade channel and supported by very favourable weather during the summer.

The competitive environment remained challenging. t the end of Q1, we kicked off our changed commercial priorities with the aim of turning around the volume trajectory and restoring our market share.

For the year, volumes grew by 9%. Revenue/hl declined by high-singledigit percentages due to the higher

level of promotions and a negative channel and packaging mix.

UKRAINE

In Ukraine, our volumes declined slightly, largely in line with the market. Revenue/hl developed negatively, mainly due to channel and brand mix, and a higher level of promotions. Our local mainstream brands, 1664 Blanc and alcohol-free brews did well, while Carlsberg and Tuborg were impacted by the restrictions imposed on the on-trade.

OTHER MARKETS

The other markets in the region – Kazakhstan, Belarus and Azerbaijan – delivered double-digit revenue growth driven by solid volume growth and improved revenue/hl due to price increases and growth of craft & speciality and alcohol-free brews.

Source: Carlsberg estimates.

Market

¹ Sept. 2020 MAT. ² Breweries with capacity above 100,000 hl.

CAPITAL ALLOCATION

OPTIMAL CAPITAL ALLOCATION AND VALUE-ENHANCING ACQUISITIONS

SAIL'22 has clear priorities for how we intend to deliver shareholder value: by growing operating profit organically, improving return on invested capital and ensuring optimal capital allocation.

Our capital allocation principles are well defined:

1. Investing in our business to drive long-term sustainable growth.
1. Targeting NIBD/EBITDA of below 2.0x.
1. Targeting an adjusted payout ratio of around 50% (adjusted for special items after tax).
1. Distributing excess cash to shareholders through share buy-backs and/or extraordinary dividends.
1. Deviating from the above if value-enhancing acquisition opportunities arise.

DELIVERING ON CAPITAL ALLOCATION PRINCIPLES

Despite the headwind posed by COVID-19, we delivered on these priorities again in 2020.

DRIVING LONG-TERM GROWTH

Consequently, we continued to support and invest in our brands and activities. Examples include the launch of Tuborg line extensions in China (see page 23) and the launch of a new global communication platform for 1664 Blanc (see page 14).

LEVERAGE

Due to our efforts to protect operating profit and cash in 2020, net interestbearing debt to EBITDA at the end of the year was 1.51.

This leverage was achieved even though we carried out share buybacks, in total amounting to DKK 2.9bn, and completed several M&A transactions during the year.

DIVIDEND PAYOUT

In March, we paid out a dividend of DKK 21 per share, equal to a 17% increase on the previous year. In total, the dividend amounted to DKK 3.1bn, corresponding to an adjusted payout ratio of approximately 50%, in line with our dividend policy.

As a result of the continued low financial leverage, at the Annual General Meeting in March the Supervisory Board will propose an increase in dividend of 5% to DKK 22 per share. This corresponds to an adjusted payout ratio of 50%.

SHARE BUY-BACK IN 2020

From February to August, the Group carried out a share buy-back programme amounting to DKK 2.5bn, following the announcement on 4 February 2020 outlining the intention to buy back shares worth DKK 5bn over a 12-month period. The buy-back programme was to be split into two tranches of around six months each.

Under the first tranche, the Group bought 2,897,021 shares at an

average repurchase price of DKK 863 per share, in total DKK 2.5bn.

Due to M&A activities and the continued uncertainty related to COVID-19, the second DKK 2.5bn tranche of the buy-back was not initiated.

Combined with the share buy-back in January 2020 related to the 2019 share buy-back programme, 3,290,522 B shares were repurchased in fiscal 2020 at a total purchase price of DKK 2.9bn.

At the Annual General Meeting on 15 March 2021, the Supervisory Board will recommend that 2,900,000 treasury shares not used for hedging of incentive programmes be cancelled.

SHARE BUY-BACK IN 2021

Due to the continued business uncertainty related to the COVID-19 pandemic, especially at the beginning of 2021, the Group intends to execute the 2021 share buy-back programme quarter by quarter.

Consequently, from 5 February until 23 April, the Group intends to buy back Carlsberg B shares amounting to DKK 750m. On 28 April, in connection with the Q1 trading statement, we will provide information on the next quarterly share buy-back in 2021.

More information regarding the share buy-back can be found in the 2020 financial statement announcement of 5 February 2021.

VALUE-ENHANCING M&A

In addition to the share buy-back, we also engaged in M&A transactions during the year, amounting to DKK 3.2bn in total.

In June, we acquired the rights to the Brooklyn brand in our markets. In October, we completed the acquisition of Marston's brewing activities in the UK (see section 5.2 in the consolidated financial statements), and in Germany we acquired Wernesgrüner Brewery. In China, we merged our Chinese businesses, see page 22.

CARLSBERG GROUP ANNUAL REPORT 2020 REVIEW AND EXPECTATIONS 27

2021 EARNINGS EXPECTATIONS

EARNINGS EXPECTATIONS

In most markets, the COVID-19 pandemic continues to impact business performance, which means a challenging start to 2021.

The uncertainty related to the extent and length of the pandemic, further government actions, consumer reactions and macroeconomic developments remains high and may have significant implications for business performance. As a result, 2021 guidance is:

• Organic growth in operating profit within the range of 3% to 10%.

The earnings outlook is based on the following assumptions related to COVID-19:

• In Western Europe, the on-trade channel will likely be impacted by restrictions well into Q2, with a gradual recovery of the on-trade during the quarter. We are assuming that most restrictions will be lifted before the summer season.

• In Asia, the impact of COVID-19 varies by market. The Chinese market is assumed to be back to its normal trajectory, though with some local disruptions, including during the Chinese New Year celebrations. In other markets, such as India and Nepal, the situation remains very difficult and highly volatile, though in most markets we are assuming a slow recovery during H1, driven by a gradual lifting of restrictions.

• In Central & Eastern Europe , the markets in the southern part of the region, which have relatively higher on-trade exposure, will likely continue to be impacted by restrictions well into Q2, though we are assuming that most restrictions will be lifted before the summer season. In Russia, the on-trade channel is relatively small. However, consumer sentiment is increasingly being impacted by the consequences of the pandemic, and the competitive environment remains fierce.

Based on the spot rates at 4 February, we assume a translation impact of around DKK -200m for 2021.

Other relevant assumptions are: • Financial expenses, excluding currency losses or gains, are expected to be around DKK 600m. • The reported effective tax rate is expected to be around 25%.

• Capital expenditure at constant currencies is expected to be DKK 4.0-4.5bn.

Forward-looking statements

This Annual Report contains forward-looking statements. Any such statements are subject to risks and uncertainties that could cause the Group's actual results to differ materially from the results discussed in such forward-looking statements.

This is particularly relevant in 2021, due to the very high uncertainty related to the continuing development and impact of COVID-19.

Accordingly, forward-looking statements should not be relied on as a prediction of actual results. Please see page 52 for the full forwardlooking statements notice.

PURPOSE AND AMBITION

BREWING FOR A BETTER TODAY AND TOMORROW

We pursue perfection every day. We strive to brew better beers. Beers that stand at the heart of moments that bring people together. We do not settle for immediate gain when we can create a better tomorrow for all of us.

Our purpose is rooted in our heritage and in the mentality of our founders, who left a rich legacy that still greatly influences how we run our business today. Their pioneering spirit, passion for brewing and proactive contribution to society are what make us who we are.

We live our purpose every day by focusing on our brands and the art of brewing, exciting our consumers with quality brews that strengthen our identity and pride as brewers, and by continuously aiming to do better.

Our purpose demonstrated its value during the challenges of COVID-19. It was impressive to witness the high level of employee engagement and the innovative mindset at all levels of the organisation to help local communities, support our customers and minimise the impact of the pandemic on our business, while at the same time finding flexible and safe ways of working.

We will continue to live our purpose, as it is key for the successful execution of our strategy and achieving our ambition of being successful, professional and attractive in our markets:

Successful in achieving a sustainable balance of the Golden Triangle by improving long-term volumes, margins and earnings.

Professional in being the preferred supplier for our customers.

Attractive in creating value for our shareholders, facilitating a great working environment and highperformance culture for our employees, and being a responsible and sustainable corporate citizen for society at large.

BUSINESS MODEL

OUR BUSINESS MODEL ROOTED IN OUR PURPOSE

Our business model is rooted in our purpose and ambition. It takes its starting point in our focus on our brands and the art of brewing, how we excite our consumers with quality brews and our continuous striving to do better.

WE FOCUS ON THE MARKETS WHERE WE HAVE A NO. 1 OR 2 POSITION...

Core beer is a volume business, and strong market positions are key drivers of profitability. We have particular focus on the 24 markets in Western Europe, Asia and Eastern Europe where we are no. 1 or 2.

BREWING FOR A BETTER TODAY AND TOMORROW

In all our markets, we aim to lead in sustainability because it is central to our purpose and because we genuinely believe it is the right thing to do – delivering tangible benefits for our business and for society as a whole.

… WHERE WE DELIVER AN ATTRACTIVE BEER PORTFOLIO FOR ALL CONSUMER OCCASIONS...

The strength of our beer portfolio lies in the strong local roots of our local power brands, combined with our excellent craft & speciality brands, alcohol-free brews and international beer brands.

BREWING FOR A BETTER TODAY AND TOMORROW

Our brands offer us powerful opportunities for communicating with consumers. We use these opportunities to encourage moderate, responsible consumption of our products. We also increase the availability of alcohol-free brews.

… AND STRIVE TO EXCEL IN OUR SERVICE TO ON- AND OFF-TRADE CUSTOMERS...

Our customers range from on-trade to off-trade, from online to offline. We aim to become their preferred beer supplier, providing products and services that deliver value growth for them and us.

BREWING FOR A BETTER TODAY AND TOMORROW

We develop digital solutions and services to help our customers grow their business. We engage in developing sustainable packaging solutions and launching initiatives to increase collection and recycling rates.

... BY OPTIMISING OUR SUPPLY CHAIN AND IMPROVING PROCESSES AND SYSTEMS.

Our integrated supply chain focuses on optimising cost and asset utilisation and mastering cross-functional processes, while brewing high-quality beer and enabling our commercial growth agenda.

BREWING FOR A BETTER TODAY AND TOMORROW

Recognising the need for strong actions in the face of complex sustainability challenges, Together Towards ZERO sets clear and ambitious targets for carbon emissions, water usage and health & safety.

OUR STRATEGY

SHARPENED STRATEGIC FOCUS

While COVID-19 had a significant impact on our business in 2020, our SAIL'22 strategy proved resilient during the pandemic.

We introduced our seven-year strategy – SAIL'22 – in 2016.

The key elements of SAIL'22 are shown below.

The strategic priorities are further outlined in the 2016 Annual Report, available online at www.carlsberggroup.com.

STRATEGY REMAINS

COVID-19 was a stress-test for SAIL'22 and our strategic priorities, which proved resilient during a very challenging year. Notwithstanding the fact that we are now five years

into the SAIL'22 period, we continue to see many opportunities within the framework, and we fully expect to keep our strategy for all seven years.

SHARPENING FOCUS

Each year, specific opportunities and plans evolve. In addition, COVID-19 made new emphases appropriate. While staying in line with our strategic priorities, we will further

sharpen our focus on key brand, category and channel priorities, aspire to even better in-market execution, maintain even tighter control of costs, and develop even more flexibility in our ability to plan and amend plans.

This will require us to continuously evolve the way we best achieve our winning, team-based performance culture.

On the following pages, we provide further detail on the role and impact of our strategic priorities in 2020.

STRENGTHEN THE CORE

The importance of strong market positions, local power brands, execution capabilities and, in particular, our ability to control costs became evident in 2020.

CHANGES IN CONSUMER BEHAVIOUR…

Across our markets, COVID-19 drove changes in consumer behaviour, with increased demand in the off-trade for more mainstream brands and multipack offerings at the early stages of the pandemic, changing towards a pick-up of demand for more premium offerings later on. In addition, online shopping saw significant growth rates.

… EMPHASISED THE IMPORTANCE OF OUR CORE BUSINESS

Our focus on strengthening our core business was amplified by the pandemic, as seen by the strength of our local power brands, our improved digital capabilities and, in particular, our well-embedded Funding the Journey culture with its relentless focus on costs and efficiency.

STRENGTHEN THE CORE

LEVERAGING LOCAL POWER BRANDS

Our local power brands are an important part of our business. These brands have long histories and deep roots in their local markets. Aside from seeing increased interest from consumers looking for more authenticity, we premiumise the local power brands by launching "crafty" line extensions and alcohol-free variants. While results in 2020 were impacted by COVID-19, the resilience of these brands was evidenced by growth brands such as Frydenlund (Norway), Astra (Germany), Pirinsko (Bulgaria), Dali and Wusu (China), Baltika and Zatecky Gus (Russia) and Derbes (Kazakhstan).

GROWING IN RUSSIA LEVERAGE OUR STRONGHOLDS

2020 was a strong year for our Russian business in terms of volumes and market share. In response to high competition pressure in the market, we took significant promotional actions to protect our volumes and improve our market share. At the same time, we pursued the SAIL'22 growth priorities of craft & speciality and alcohol-free brews and stepped up our commercial capabilities, resulting in volume growth of 9%.

FUNDING THE JOURNEY CULTURE

OCM AND CASH MANAGEMENT

Our Funding the Journey culture, with its focus on costs and cash, played a key role in 2020. As part of this, we have in recent years successfully implemented our Operating Cost Management (OCM) toolkit across the Group, improving our cost planning, increasing transparency and enabling detailed follow-up on operating costs. We began taking actions to offset the negative top-line impact of COVID-19 when the virus hit China very early in 2020. When the disease turned into a pandemic, we intensified our cost reduction actions, successfully leveraging our OCM toolkit, which played a key role in reducing the negative impact on earnings. See pages 13 and 15.

EXPANDING DIGITAL

COVID-19 drove a rapid acceleration of e-commerce and digital platforms. Albeit still from a low base, third-party e-commerce sales were up by around 60%, mainly driven by Asia. Carl's Shop – our B2B e-commerce platform – also showed very good results. The ability to use advanced analytics to tailor the most relevant experience for each on-trade customer helped to grow value per order and strengthen customer loyalty.

POSITION FOR GROWTH

Although growth was hampered by COVID-19, we continued to support the growth priorities of SAIL'22.

RESILIENT PERFORMANCE FOR OUR GROWTH CATEGORIES…

On-trade is an important channel for the craft & speciality (C&S) category. Despite the severe impact of government restrictions, our C&S portfolio grew by 1%. Our alcoholfree brews (AFB) grew by 11%, with continued growth in Western and Eastern Europe, while the category remained small in Asia. AFB benefited from increasing consumer awareness of health and wellbeing, further amplified by COVID-19.

… WHILE MANY MARKETS IN ASIA WERE UNDER PRESSURE

All markets in Asia were impacted by COVID-19, albeit at different speeds and magnitudes. Following a difficult Q1, we saw strong performance in China, and we remain confident that the region will rebound once the pandemic has been contained.

GROWING CRAFT & SPECIALITY AND ALCOHOL-FREE BREWS

DRAUGHTMASTER DRIVING PREMIUMISATION

The roll-out of DraughtMaster across Western Europe continued and was almost completed in the Nordics, while trials were initiated in Asia. In 2020, we improved the equipment with a digital layer, delivering unique realtime consumption data. While volumes were impacted by COVID-19 restrictions, these actually served to further highlight the customer advantages of DraughtMaster, with less beer expiring thanks to the 31-day keg life and faster re-opening thanks to the self-cleaning system. DraughtMaster outlets also benefited from a better mix of C&S compared with outlets with traditional steel keg installations.

GROWING ALCOHOL-FREE BREWS WIN IN ALCOHOL-FREE BREWS GROW CRAFT & SPECIALITY

Our alcohol-free brews are wide-ranging, including lagers, IPAs and wheat beers. We are targeting new as well as already penetrated consumer occasions, leveraging our core beer and C&S brands to drive growth for our alcohol-free volumes. Poland is a good example of this strategy, with Somersby, Zatecky and Okocim alcohol-free variants all driving local AFB volume growth of 42% in 2020.

INVESTING IN BROOKLYN

Our cooperation with Brooklyn dates back to 2004, when we began importing the brand to Denmark. Since then, we have developed a close cooperation with this great New York craft brewer. In 2020, we further strengthened the collaboration when we acquired the rights to the Brooklyn brand in our markets. The deal will reduce complexity and increase profitability, supporting future growth of the brand.

CREATE A WINNING CULTURE

2020 was a defining year for our winning culture, passing the test during the immense challenges of the COVID-19 pandemic.

Our Sustainability Report contains extensive reporting on our winning culture. It describes our approach and performance in relation to our most material social, environmental and ethical issues, including progress against the four ambitions of our sustainability programme, Together Towards ZERO. The report also elaborates on how we Live by our Compass and conduct our business responsibly, and how we support and develop our team-based performance culture.

The Sustainability Report carries an assurance statement by PwC on selected indicators. It serves as our annual Communication on Progress to the United Nations Global Compact and is, as such, our disclosure in accordance with section 99a of the Danish Financial Statements Act.

TEAM-BASED PERFORMANCE

ENGAGING WITH EMPLOYEES

The flexibility, agility and ability of our people to quickly adjust to the new reality that affected all areas of our business is a testimony to the embedding of our teambased, performance-driven culture across all our markets and functions. During the year, our focus was on the physical safety and mental wellbeing of colleagues, and we conducted local pulse surveys to check on employee wellbeing and enable local leaders to respond to COVID-19 challenges and better support their teams.

TO HARASSMENT

Everyone must be treated with respect in our workplace and we have a zero tolerance approach to bullying, abuse, threats or any form of harassment, whether it be physical, verbal, sexual or psychological. Our Code of Ethics & Conduct protects this value and clearly states the consequences if anyone breaks the rules. We support and encourage anyone who may have experienced harassment to talk to their manager, their manager's manager or their local HR team – or to report it via our confidential Speak Up line – so we can take action.

TOGETHER TOWARDS ZERO

PROMOTING SUSTAINABLE AGRICULTURE

Our business depends on a long-term, sustainable supply of crops, mainly barley and rice. We invest in next-generation crops through the work of scientists at the Carlsberg Research Laboratory. Their ground-breaking efforts include developing high-yielding barley varieties with additional sustainable process benefits, accounting for significant CO2 savings when fully implemented.

Novel climate-tolerant varieties are also being developed that offer improved heat tolerance, salinity tolerance and drought resistance. Several promising genetic variants are currently being evaluated in drought trials in Australia and Russia, where we are seeing more than 10% higher yield levels with limited water supply. A specific focus has also been obtaining barley varieties targeting the very fertile soils in Russia, resulting in malting barley varieties with extract levels 1-2 percentage points higher than those of standard elite varieties.

TOGETHER TOWARDS ZERO

REDUCING WATER WASTE

Our dedicated team at the Dazhulin brewery in China has made it its mission to dramatically reduce water waste. Applying best practices from across the Group, it reduced the amount of water used to produce a hectolitre of beer by 18% – from 2.7 to 2.2 hl/hl – in just four months. This brings the brewery close to achieving our 2022 target to explore going below 2.0 hl/hl at sites with high water risk. Saving water also means saving energy, and combined with a move to 100% renewable electricity, the efficiencies almost halved the brewery's carbon emissions.

LIVE BY OUR COMPASS

TOGETHER TOWARDS ZERO

ZERO CARBON FOOTPRINT

Our ambitious carbon targets, approved by the Science-Based Targets Initiative, are in line with the latest climate science to limit global warming to 1.5°C. In 2020, we reduced relative brewery carbon emissions by 12%. Since 2015, our relative brewery carbon emissions are down by 39% while our full relative value chain (beer-in-hand) emissions have been reduced by 7%.

ZERO WATER WASTE

Water is an essential ingredient in our products, and other key ingredients like grains and hops need it to grow. At 2.8 hl/hl in 2020, we have made a 18% improvement in water efficiency from our 2015 baseline. We assessed water risk across 81 of our breweries using WWF's leading Water Risk Filter tool and also used its scenario analysis tool to understand our global water risk in a changing climate.

ZERO IRRESPONSIBLE DRINKING

Our targets include 100% distribution of alcohol-free brews to expand consumer choice and 100% of our markets to improve on responsible drinking year on year. All our beers and ciders carry messages or icons advising consumers not to drink-drive and not to drink when underage or pregnant. In 2020, ingredients were listed on 99% of our packaging globally, while nutritional information was provided on 67%.

ZERO ACCIDENTS CULTURE

The health and safety of our people always come first, and we believe all accidents are preventable. We manage key risks through our health and safety management systems, stringent standards, training and compliance with our Life Saving Rules. In 2020, the lost-time accident rate declined to 3.0 from 3.7 in 2019. However, we deeply regret the death of a contract worker in Russia.

STRENGTHEN THE CORE AND POSITION FOR GROWTH

2018: +26% 2019: +16% 2020: +1%

2018: +15% 2019: +7% 2020: +11%

2018: +15.8% 2019: +23.4% 2020: +5.0%

GROSS BRAND CONTRIBUTION FROM CORE BEER

no. 1 or 2 market positions. Ensuring continued relevance of our local power brands, including premiumisation, is an important part of the core beer priority of SAIL'22. We measure our success by our ability to grow gross brand contribution from core beer. Impacted by COVID-19, growth in recent years was not repeated in 2020, declining by 7%.

WIN IN CRAFT & SPECIALITY

Craft & speciality is an attractive category across our regions, driven by global consumer trends of premiumisation, authenticity and heritage. Positively contributing to price/mix and margins, our ambition is to grow the category. The strength of our brands became clear in 2020, when our craft & speciality portfolio volumes grew by 1% despite the negative impact on the important on-trade channel from COVID-19.

WIN IN ALCOHOL-FREE BREWS

Alcohol-free brews continued to grow in Western and Eastern Europe, further supported in 2020 by increased consumer health awareness due to COVID-19. Our attractive portfolio of alcohol-free brews leverages the well-established market position of our local power brands. In 2020, total volume growth of our alcohol-free brews was 11%, with growth of 16% in Western Europe and 14% in Eastern Europe.

GROW IN ASIA

In 2020, Asia accounted for 31% of Group volumes and 36% of operating profit. Growing in Asia, and particularly China, is a priority of SAIL'22. China recovered impressively from COVID-19, as did Laos, while markets such as India, Nepal and Malaysia suffered throughout the year. We saw strong growth for 1664 Blanc, while Tuborg was impacted by the severe market decline in India. Operating profit grew organically by 5.0%. Read more about our results in Asia on pages 21- 23.

DELIVER VALUE FOR SHAREHOLDERS

ORGANIC GROWTH IN OPERATING PROFIT

We aim to deliver organic growth in operating profit by delivering top-line growth and margin improvement. In 2020, COVID-19-related lockdowns and restrictions prevented us from continuing the organic growth trajectory of recent years. Our relentless focus on costs and early intervention enabled us to partly offset the top-line decline, containing the organic operating profit decline to 3.1%.

ROIC IMPROVEMENT

We aim to continuously improve return on invested capital (ROIC) by improving earnings and reducing invested capital. In 2020, ROIC improved by 10bp to 8.9%, mainly driven by the lower effective tax rate and supported by lower capital employed. The latter was positively impacted by trade working capital, a lower CapEx/depreciation ratio and currencies. Excluding goodwill, ROIC increased by 80bp to 23.2%.

2018: 1.29x/2.4bn 2019: 1.25x/6.8bn 2020: 1.51x/6.0bn

OPTIMAL CAPITAL ALLOCATION

Our capital allocation targets include NIBD/EBITDA of below 2.0x and an adjusted dividend payout ratio of around 50%. At the end of 2020, NIBD/EBITDA was 1.51x. In 2020, the dividend per share was DKK 21. For 2020, the proposed dividend per share is DKK 22, equal to an adjusted payout ratio of 50%. In addition, in 2020 we carried out share buy-backs amounting to DKK 2.9bn in total. Total cash return to shareholders in fiscal 2020 was DKK 6.0bn. Read more about our capital allocation principles and share buy-backs on page 26.

ADDRESSING CLIMATE RISKS

CLIMATE-RELATED RISKS

Climate change is already affecting our operations and markets. Across our regions, we see its impact through land degradation, spells of hot, dry weather, and intense rainfall.

We are working to understand the related risks and opportunities, and to mitigate impact on our business.

Our annual Sustainability Report details our approach and performance against the ambitious targets of Together Towards ZERO, and our actions to live up to the ambitious targets of the Paris Agreement on Climate Change to limit the increase in global average temperature to a maximum of 1.5°C.

In 2020, we broadened the scope of our climate-related reporting by embracing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In the table, we outline the relevant sections for TCFD reporting in this Annual Report and in our Sustainability and Remuneration Reports.

Task Force on Climate-related Financial Disclosures (TCFD) reporting recommendations

Recommendation	Our disclosure in brief	Learn more
Governance Disclose the organisation's governance around climate related risks and opportunities.	The Supervisory Board has ultimate responsibility for risk management, including climate-related risks. As part of the ongoing review of SAIL'22, the Supervisory Board reviews Together Towards ZERO, including progress towards our sustainability targets. The Executive Committee (ExCom) is responsible for sustainability, including climate change, with the CEO assuming ultimate responsibility. ExCom approves policies and targets for the entire organisation and monitors performance on a quarterly basis. Sustainability measures, including the reduction of carbon and water use, are included in the short-term incentive scheme for the CEO, CFO and other ExCom members.	• Risk management framework, page 37. • Overview of Supervisory Board and Audit Committee work and responsibilities, pages 42-44. • Sustainability Report, description of governance, pages 52-53. • Remuneration Report, pages 6-7.
Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation's businesses, strategy and financial planning, where such information is material.	Together Towards ZERO is an integrated part of our SAIL'22 strategy. It was developed in partnership with global experts using a science-based approach and has emission reduction targets that align with the ambitious goal of the Paris Agreement of a global temperature increase of maximum 1.5°C. Together Towards ZERO's focus areas and targets are based on a sustainability materiality assessment, updated in 2020, to ensure focus across our business on the most relevant sustainability management topics, risks and opportunities, including carbon emissions and water consumption.	• SAIL'22, Together Towards ZERO, pages 6 and 34. • Sustainability Report, carbon and water sections, pages 10-19 and 20-26. • Sustainability Report, materiality assessment, page 57.
Risks Disclose how the organisation identifies, assesses and manages climate-related risks.	From 2021, mid- and long-term risks, including climate-related risks and opportunities, will be reviewed annually at Group level. Every three years, and most recently in 2020, we carried out a materiality assessment to identify the most important sustainability management topics, risks and impacts. In 2020, climate change was among the highest-ranking issues for us to address. Working with WWF, we used the Water Risk Filter scenarios to understand how water risks across our breweries may evolve by 2030 and 2050 and identify priority sites for investments and community partnerships. We also updated our assessment of our beer-in-hand value chain footprint (Scope 1, 2 and 3 emissions) to measure our progress from the 2015 baseline and identify where to focus our efforts.	• Risk management framework, page 37. • Sustainability Report, carbon and water sections, pages 10-19 and 20-26. • Sustainability Report, materiality assessment, page 57.
Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities, where such information is material.	Our annual Sustainability Report discloses our approach, 2022 and 2030 targets, key performance indicators and performance in line with our Together Towards ZERO programme, the UN Sustainable Development Goals and the UN Global Compact. We disclose a comprehensive set of five-year comparable quantitative data for energy, carbon, including Scope 1, 2 and 3 emissions (full Scope 3 data collected every three years), and water. We have also disclosed detailed information to CDP on our greenhouse gas emissions and approach to climate change management since 2007.	• Sustainability Report, data summary table, pages 67-73. • Sustainability Report, SDG actions, pages 59-65.

MANAGING RISKS

MANAGING BUSINESS RISKS

In conducting our business and executing our strategy, we seek to manage risks in such a way as to minimise their threats while making the best use of their opportunities.

Our business is subject to a number of risks and uncertainties that could have both short-term and long-term implications for the Group.

The purpose of our risk management approach is to address these risks and uncertainties in due time.

GOVERNANCE STRUCTURE

The Supervisory Board is ultimately responsible for risk management, and it has appointed the Audit Committee to act on its behalf in monitoring the effectiveness of the Group's risk management.

While recurring risks are evaluated on a quarterly basis, monitoring is mainly performed in connection with the half-year reviews.

The Audit Committee has adopted guidelines for key areas of risk, monitors developments and ensures that plans are in place for managing individual risks, including strategic, operational, financial and compliance risks.

The Executive Committee (ExCom) is responsible for reviewing the overall risk exposure associated with the Group's activities.

SHORT-TERM RISK ASSESSMENT

Risks are assessed according to a two-dimensional heat map that estimates the impact of the risk on operating profit or brand/image and the likelihood of the risk materialising.

Based on this assessment, ExCom identifies the high-risk issues for the coming year. ExCom assigns risk owners, who are responsible for mitigating the risks through a programme of risk management activities.

Local and functional risk assessment follows the same principles and methodology as Group-level risk assessment.

Risk reporting is incorporated in regular business reviews, and Group Risk Management is responsible for the framework and Group Finance for facilitating and following up on risk action plans for the most significant risks in connection with regular business reviews.

MID- AND LONG-TERM RISK ASSESSMENT

A review of mid- and long-term risks is conducted annually at Group level.

Based on input from various central functions, including finance, legal, sustainability, human resources and investor relations, and regional teams, the Group strategy team identifies risks within the areas of commercial & competition, governance, consumer, macroeconomic and geopolitical environment, reputation, supply chain and climate.

For climate-related risks, in 2020 we initiated the process of TCFD reporting, see page 36.

Based on this risk identification, ExCom will evaluate and assess the

IDENTIFIED RISKS FOR 2021

RISKS WITH HIGHEST POTENTIAL IMPACT AND LIKELIHOOD

Impact from COVID-19
Economic instability/recession
Partnerships
Legal and regulatory compliance
Cyber and IT security
Tax

OTHER IDENTIFIED RISKS

Regulatory changes, incl. duties
Financial flexibility
Strategy execution
Western Europe operating model
Business interruption

Group's risk exposure, applying our two-dimensional heat map methodology, and determine appropriate actions.

RISKS IDENTIFIED FOR 2021

The identified risks for 2021 are shown in the box on the previous page.

Based on the heat map assessment, the six highest ranked risks are elaborated in the following, including in each case a description of the risk and associated mitigation efforts.

The risk movement paragraph indicates whether the likelihood of risk has increased or decreased, or remains unchanged, versus last year.

IMPACT FROM COVID-19

Risk movement New.

Description

COVID-19 continues to affect our people and our business. While government interventions vary by geography, lockdowns and other restrictive measures affect off-take in both the on-trade and off-trade channels. Further, supply chains may be impacted by raw material shortages and the ability to brew and distribute our products. Depending on geography and goto-market models, our markets may therefore be impacted in terms of volume, mix, margin and cash flow performance.

Despite the distribution of vaccines, we therefore anticipate a prolonged impact in 2021 from COVID-19.

Mitigation

Our first priority will remain the health and safety of our employees.

In 2021, our operating plan is based on our SAIL'22 priorities. In addition, we will continue to apply the learnings and ways of working from 2020. These include more frequent planning cycles, utilising our sales and operation planning (S&OP) practices to enable fast adaptation and response to changing market

demand and supply-chain circumstances.

Further, we will continue our scenario planning for the mid term, pre-empting multiple possible outcomes in terms of business impact.

Based on the scenario planning, we will continue to protect our operating profit and cash position, leveraging Funding the Journey, including our Operating Cost Management (OCM) toolkit. Read more about our cost mitigation actions in 2020 on pages 13 and 15.

Our actions and activities will continue to be tailored to local markets to ensure an appropriate response to country-specific challenges and situations.

MACROECONOMIC UNCERTAINTY/ RECESSION Risk movement

Increase versus last year.

Description

In continuation of the COVID-19 risk, the pandemic has led to increased macroeconomic uncertainty.

Although the consequences for our business may be more longer-term, we must prepare now for this greater uncertainty.

Mitigation

Due to the current market volatility, our planning is more short-term and highly flexible to allow appropriate actions within a short time horizon.

When the pandemic is under control, we will again become more longer term and reinstate our more thorough three-year planning cycle with its quarterly reviews and updates, while continuing to embed the positive learnings of COVID-19 and benefiting from the actions taken to reset our business and reduce costs (see pages 13-14).

PARTNERSHIPS

Risk movement Decrease versus last year.

Description

We cooperate with partners in some markets in Western Europe and Asia, and we also have local joint venture partners in some Asian and European markets.

Disagreements with partners on the operational management and strategic direction of partnerships may limit our ability to manage the growth and risk profile of our business.

Our partners' potential pursuit of goals and priorities different from those of the Group might result in disagreements, thereby affecting

operational and financial performance.

See section 5.1 in the consolidated financial statements for further details of our partnerships and the related financial risks.

Mitigation

The Group continuously seeks to promote a fair and mutually beneficial development of the partnerships in order to ensure their continued success.

We seek to have an ongoing dialogue with our partners to identify issues at an early stage. The relevant members of ExCom are actively involved in partner relationships, participating in the ongoing dialogues to ensure constructive negotiations and effective and fast resolution of potential issues.

LEGAL AND REGULATORY COMPLIANCE Risk movement

Unchanged versus last year.

Description

Legal and regulatory compliance risks include competition law and data protection compliance (GDPR), as well as non-compliance with anti-bribery & corruption regulations and trade sanctions. Failure to comply with regulations and Group

policies may lead to fines, claims, and brand and reputation damage.

In recent years, the Group has experienced competition-law dawn raids in a few jurisdictions. Noncompliance with competition law is a real and growing risk, and the Group is party to certain lawsuits and disputes. These and their significance are described in section 3.3 of the consolidated financial statements.

Mitigation

We continuously strengthen the Group-wide control framework covering legal compliance areas, including, but not limited to, competition law, anti-bribery & corruption, trade sanctions and data protection.

We regularly review and update relevant Group legal and compliance policies, and conduct compulsory training of all relevant employees.

We actively set a strong tone from the top and have developed toolkits to help managers in all markets to understand their role in shaping ethical behaviour every day.

We have stepped up our training approach and updated our elearning modules in the areas of anti-bribery & corruption, competition law and data protection, the latter to reflect GDPR

requirements. Employees are required to complete these elearning modules on an ongoing basis in order to further create awareness of relevant risks and how to mitigate them.

In 2021, we will review, simplify and rationalise the suite of compliance policies, manuals, guidance etc. to facilitate greater understanding and awareness by the wider business of the behaviour expected of all employees to reduce compliance risk. In addition, we will further enhance the compliance control framework.

Read more about our compliance efforts in the Responsible Business section of the Sustainability Report.

CYBER AND IT SECURITY Risk movement

Unchanged versus last year.

Description

Like all other businesses, the Carlsberg Group relies heavily on technology and IT infrastructure for its day-to-day business. A cyber attack or non-availability of IT systems could have severe financial, regulatory and reputational consequences for our business.

Mitigation

Our IT security organisation has regular dialogue with the Supervisory Board and ExCom to agree on risk mitigation plans and activities.

As the cyber security threat assessment has intensified in recent years, we have strengthened our protective work to counter the risk.

To further progress our protection against cyber security threats, a Chief Information Security Officer was appointed to lead an independent cyber security function within our IT organisation.

Furthermore, we are developing and deploying a wide array of advanced defensive technologies, as well as continuing to embed our risk management framework at all layers of the organisation.

We undertake regular testing of our security controls via an ongoing series of technological audits and breach simulations.

TAX

Risk movement

Unchanged versus last year.

Description

Given the Group's international presence and business set-up, its activities involve a high level of cross-border and inter-company transactions as well as different legal structures within and across markets.

The increasing focus on corporate tax payments may increase the risk of tax audits, which could lead to reassessments of taxable income.

In addition, changes in the legal and regulatory environment, as well as internal structures, may increase the risk of non-compliance with local and global tax laws and regulations.

Mitigation

The Group generates substantial revenues for governments through payment of corporate income tax, withholding taxes and indirect taxes such as excise duties. We pay taxes as required by law, and the foundation for handling our tax affairs is our Tax Policy, which stipulates good corporate citizenship and tax transparency.

In 2020, we updated our Tax Policy to align with best practice and ensure common understanding across the Group. The Tax Policy is approved by the Supervisory Board, while the Executive Committee exercises oversight of the tax affairs in the Group.

We are continuously strengthening our tax control framework and improving reporting transparency. This includes documentation of inter-company transactions to ensure compliance with tax legislation and improving data

quality for VAT and product classification for excise duties.

CORPORATE GOVERNANCE

FOCUS ON CORPORATE GOVERNANCE

Our governance framework aims to ensure value creation, safeguard active and transparent stewardship across the Group and reduce risk.

The basis of our corporate governance includes in particular the Danish Companies Act, the Danish Financial Statements Act, IFRS, the EU Market Abuse Regulation, Nasdaq Copenhagen A/S' rules for issuers of shares, local legislation, the Company's Articles of Association and the rules of procedure for the Supervisory Board.

The Group has policies for a number of key areas, including, but not limited to, anti-bribery & corruption, labour & human rights, diversity & inclusion, competition law, trade sanctions, data protection, risk management, finance, marketing,

www.carlsberggroup.com/sustainability/ download/download-our-policies

corporate communication, responsible drinking and public & government affairs.

The Supervisory Board is responsible for overseeing that the Executive Committee has an adequate system and resources in place to ensure compliance with these policies.

RECOMMENDATIONS ON CORPORATE GOVERNANCE

The recommendations of the Danish Committee on Corporate Governance form part of Nasdaq Copenhagen A/S' rules for issuers of shares. The Company complies with all but three of the recommendations, as explained below.

With respect to the recommendation to publish quarterly reports, the Group publishes full- and half-year reports. The Supervisory Board finds that half-year financial reporting is more appropriate due to the seasonality of the Group's business and the fact that the Group historically has seen high volatility in quarterly earnings and margins as a

result of phasing of certain commercial activities, etc.

The Supervisory Board considers the high volatility to be potentially misleading for understanding underlying Group performance. The Company issues Q1 and Q3 trading statements, which include volume and revenue data, along with comments on sales performance in the quarter.

Regarding the recommendation that a majority of the members of a board committee should be independent, in 2020 the Audit Committee and the Remuneration Committee complied with this, while two of the four Nomination Committee members were independent.

With respect to the recommendation to include external assistance in the board evaluation at least every third year, the Supervisory Board evaluation in 2020 was not facilitated by an external advisor due to the challenges posed by the COVID-19 pandemic.

The Company's statutory report on corporate governance includes the full list of the recommendations, with comments on the Group's position on each recommendation.

THE ANNUAL GENERAL MEETING

The 2020 Annual General Meeting (AGM) took place on 16 March. The minutes of the meeting are available on www.carlsberggroup.com.

Rules and deadlines applying to the AGM and other General Meetings are stipulated in the Company's Articles of Association, which are available on www.carlsberggroup.com along with other AGM-related information.

Download our statutory report on corporate governance

www.carlsberggroup.com/who-we-are/ corporate-governance/#statutoryreports

GOVERNANCE STRUCTURE

The Supervisory Board has established three board committees: the Audit, Nomination and Remuneration Committees. For the time being, the Supervisory Board considers these committees to be sufficient; however, each year the Supervisory Board considers whether the number and scope of the committees are appropriate. The board committees prepare and facilitate Supervisory Board decisions.

The Supervisory Board hires and supervises the Executive Board, which consists of the CEO and the CFO, who are not members of the Supervisory Board.

The Group also has an Executive Committee (ExCom), which, in addition to the CEO and the CFO, consists of a wider group of Executive Vice Presidents, portrayed on pages 49-50. While the Executive Board members are formally registered as executive directors of the Company, ExCom collectively

prepares and implements the Company's strategic plans.

COMPOSITION OF THE SUPERVISORY BOARD

The Supervisory Board currently has ten members elected by the General Meeting and, in accordance with the Danish Companies Act, five members elected by the employees. None of the members of the Supervisory Board are or have been involved in

the executive management of the Group.

The members elected by the General Meeting are elected individually and for a term of one year. Re-election is possible.

Five of the ten members elected by the General Meeting are independent and have an international business background in addition to competences related to FMCG,

digital, finance, ESG, supply chain, procurement and emerging markets.

The other five members are affiliated to the Carlsberg Foundation, the Company's largest shareholder, and have an academic background. These members are bearers of the Carlsberg Group culture and the heritage and values stemming from founder J.C. Jacobsen, and the Supervisory Board sees these members as patrons of the same.

Supervisory Board meetings

Board member	Chairship meetings attended	Board meetings attended
Flemming Besenbacher (Chair)1
Lars Fruergaard Jørgensen (Deputy Chair)1,2
Hans Andersen3
Carl Bache1
Magdi Batato1,2
Domitille Doat-Le Bigot1,2
Lilian Fossum Biner1,2
Richard Burrows1,2
Eva Vilstrup Decker3
Finn Lok3
Erik Lund3
Søren-Peter Fuchs Olesen1
Peter Petersen3
Majken Schultz1
Lars Stemmerik1

1 Elected by the General Meeting. 2 Independent. 3 Employee-elected.

Attended meeting. Did not attend meeting.

THE CARLSBERG FOUNDATION

The Carlsberg Foundation is the Company's largest shareholder. According to its Charter, the Foundation must own shares equivalent to at least 51% of the votes in Carlsberg A/S. At 31 December, the Carlsberg Foundation held 30% of the capital and 76% of the votes in Carlsberg A/S.

The Foundation is a long-term, valueoriented shareholder, supporting the Group in creating sustainable value growth through the execution of SAIL'22 and adherence to the Company's capital allocation priorities.

The Foundation participates pro rata in the share buy-back programmes (see page 26), and in 2020 total cash returns received by the Foundation amounted to DKK 1.8bn.

The dividends from Carlsberg A/S are given back to society by granting funds to foster and support academic research within natural sciences, humanities and social sciences, and funds for cultural and socially beneficial purposes. In 2020, this included COVID-19-related grants amounting to more than DKK 100m. The Foundation also grants funds to the Carlsberg Research Laboratory.

The employee representatives are elected for a term of four years. They hold the same rights and obligations as the members elected by the General Meeting. The current employee representatives were elected in 2018 and the next election will take place in 2022.

The Supervisory Board believes that the composition of the Board ensures an appropriate level of diversity and breadth in the members' approach to their duties, thereby helping to ensure that decisions are well considered and that both short- and long-term perspectives are taken into account.

Each year, the Supervisory Board considers the skills that should be represented on the Supervisory Board on the basis of a recommendation from the Nomination Committee. These skills are described in the Specification of Competences, available on www.carlsberggroup.com.

The Nomination Committee and the Supervisory Board take the description of the required skills into consideration when recommending new candidates for the Supervisory Board.

Information on the Supervisory Board members is available on pages 46-48. Detailed CVs can be found on www.carlsberggroup.com.

DIVERSITY

The Supervisory Board believes that its members should be chosen for their competences and recognises the benefits of diversity in respect of experience, culture, international experience and gender.

Diversity is therefore of high priority for the Supervisory Board and it has laid down the following specific objectives in relation to international experience and gender:

With regard to international experience, the objective is that 50% or more of the Supervisory Board members elected by the General Meeting should have substantial international experience from managing large corporations or institutions.
The proportion of the underrepresented gender (currently women) on the Supervisory Board should reach at least 40% of the members elected by the General Meeting no later than 2021. The gender target applies to the boards of all Danish Carlsberg Group companies that are required to set such objectives.

The Supervisory Board fulfils the objective regarding international experience.

Regarding the gender target,

currently three Supervisory Board members elected by the General Meeting are women, i.e. 30%. Hence, the objective with regard to gender diversity on the Supervisory Board is currently not met. The Supervisory Board will continue to work towards increasing the number of women on the Supervisory Board.

At Carlsberg Breweries A/S, the four Supervisory Board members elected by the General Meeting are men, being the members of the Chairship and of the Executive Board of Carlsberg A/S. At Carlsberg Danmark A/S and Carlsberg Supply Company Danmark A/S, one of three Supervisory Board members is a woman.

The 2020 Sustainability Report contains information on our work with diversity and inclusion in the Carlsberg Group.

THE WORK OF THE SUPERVISORY BOARD

The Supervisory Board monitors that the Executive Board observes the goals, strategies and business procedures established by the Board.

The Chair and Deputy Chair of the Supervisory Board constitute the Chairship. The specific duties of the Chair – and, in his absence, the Deputy Chair – are set out in the

Rules of Procedure. In 2020, the Chairship and the Executive Board held nine meetings.

The Supervisory Board of Carlsberg A/S also held nine meetings, of which one focused solely on COVID-19 crisis management and strategic implications.

The Executive Board always attends the Supervisory Board meetings and, in order to improve transparency, the members of ExCom are also invited and attend when it makes sense. This gives the Supervisory Board better insight into the business.

In connection with most Supervisory Board meetings, the Supervisory Board and ExCom have "Board update" sessions at which key people from the Group present a market, a function or another relevant topic. In 2020, these covered updates on Carlsberg's COVID-19 plans, perspective and impact on employees and business, digital including DraughtMaster, internal audit, research, IT security, market share development across markets and brands, and our business in Russia.

Due to COVID-19, most Supervisory Board meetings in 2020 were conducted virtually as a necessary alternative to physical meetings.

SUPERVISORY BOARD EVALUATION PROCESS

Each year, the Chair of the Supervisory Board heads a structured evaluation of the Board's work, accomplishments and composition. In addition, the Supervisory Board considers, based on input from the Nomination Committee as well as the Board evaluation process, whether its members' expertise should be updated or strengthened with respect to their duties and whether the Board members – in light of their other management positions – have adequate time to fulfil their duties as Carlsberg Board members.

The conclusions of the 2020 evaluation were that all members allocate sufficient time for their board work and duties and that all members are well prepared for the meetings.

During the evaluation process in 2020, the Supervisory Board members generally expressed that they find the pre-read material and presentations of a high quality, that the topics and agendas cover relevant matters adequately, that meetings are well planned and the time and discussions well prioritised, and that they appreciate the open discussions at the Supervisory Board meetings with the Executive Board and other management members.

The Supervisory Board also agreed that the cooperation with the Executive Board, in line with previous years, worked well and expressed satisfaction with management's fast and resolute COVID-19 management, including crisis and action plans, and the way the Group steered through the turbulence and high degree of volatility and uncertainty posed by the pandemic.

COVID-19 required some adjustments to the Supervisory Board's ways of working. The digital nature of meetings to some extent hampered the fruitful discussions that usually take place during meetings. Nevertheless, the Supervisory Board is of the opinion that the virtual meetings were an acceptable alternative to physical meetings and that the quality of discussions and decision-making were not compromised.

With respect to the three board committees, the Supervisory Board found them to be adequate and working well.

The evaluation process led to a short catalogue of ideas for the Supervisory Board work. Together with management, the ideas will be considered and, where relevant, implemented.

BOARD COMMITTEES

THE NOMINATION COMMITTEE

In 2020, the Nomination Committee consisted of four members. The Nomination Committee is appointed for one year at a time. Two Committee members qualify as being independent, while the other two members do not.

The Nomination Committee works according to Terms of Reference, which are reviewed and approved annually by the Supervisory Board.

Nomination Committee meetings

Committee member	Committee meetings attended
Flemming Besenbacher (Chair)
Carl Bache
Richard Burrows
Lars Fruergaard Jørgensen

Attended meeting.

SUPERVISORY BOARD 2020

MAIN TOPICS OF DISCUSSION

Strategy

Review and discussion of the Group's COVID-19 strategy and plans.
Ongoing review of SAIL'22, including potential impact of COVID-19 on strategic priorities.
Review of the progress of the Group's sustainability programme, Together Towards ZERO.
Review of and debate on R&D, innovation, branding, quality and other strategic initiatives.
Monitoring of the Funding the Journey culture in the Group's ways of working, including application of the Operating Cost Management toolkit to offset the negative volume and revenue impact from COVID-19.
Review and approval of the Group's capital structure, funding, dividend and share buy-backs.
Review and discussion of organic and inorganic opportunities.

Organisation, people, succession planning and talent management

Review of the Supervisory Board composition to ensure the right competences to support the strategy.
Succession planning for the executive management.
Review of the Group's approach to taking care of employees during the COVID-19 crisis.
Discussion of organisational restructuring following COVID-19.
Discussion and approval of the bonus structures in the Group's incentive programme, ensuring support of and alignment with SAIL'22.

Compliance

• Review of Carlsberg's compliance risks and set-up, including discussion of compliance-enhancing efforts.

Governance and risk management

Review of the outcome of the Supervisory Board evaluation process, including follow-up on all suggestions.
Review and discussion of the Group internal audit & control reports, working processes and continued improvement.
Review and discussion of the Group's IT & cyber security strategy.
Review and approval of new tax policy.
Discussion of relevant issues and ways of working with the external auditor.
Approval of the external auditor for election at the 2020 AGM.

The Terms of Reference are available on the Company's website. In 2020, the Committee had particular focus on:

Planning the Board's evaluation process.
Reviewing the Specification of Competences for Board members to ensure that they reflect the skills and experiences needed to best support the execution of SAIL'22.
Succession planning at Supervisory Board and management level.
Evaluating the composition of ExCom and the composition, structure and size of the Board.

THE REMUNERATION COMMITTEE

The work of the Remuneration Committee is described in the Remuneration Report.

THE AUDIT COMMITTEE

In 2020, the Audit Committee consisted of four members, all qualifying as being independent of the Company. The Audit Committee is appointed for one year at a time. The Committee has the relevant financial expertise and necessary experience of the Company's sector.

The Audit Committee works according to Terms of Reference and a detailed annual meeting plan, which are reviewed and approved by the Supervisory Board prior to the beginning of each financial year.

The Supervisory Board approved the Audit Committee meeting plan for 2021 and the current Terms of Reference at the Supervisory Board meeting in December 2020. The

Terms of Reference are available on the Company's website.

In 2020, the Audit Committee had particular focus on a number of areas, including:

• Monitoring the effectiveness of the control environment and overseeing the progress on improving and further developing the effectiveness of the controls over financial reporting.

Monitoring the external financial reporting and the work of the external auditors.
Reviewing the progress of the work of the Group Internal Audit function.
Reviewing the work regarding Speak Up matters (see page 45).
Managing financial risk.
Reviewing the risk management process.
Reviewing the new tax policy.

AUDITING

To safeguard the interests of shareholders and the general public, an independent auditor is appointed at the Annual General Meeting following a proposal from the Supervisory Board, which is based on a recommendation from the Audit Committee.

INTERNAL CONTROL AND RISK MANAGEMENT RELATED TO THE FINANCIAL REPORTING PROCESS

OVERALL CONTROL ENVIRONMENT

The Supervisory Board and ExCom have overall responsibility for the Carlsberg Group's control environment.

The Audit Committee is responsible for monitoring the effectiveness of the internal control and risk management systems related to the financial reporting process.

The Group has a number of policies and procedures in key areas of financial reporting, including the Finance Policy, the Accounting Manual, the Controller Manual, the Use of Auditors Policy, the Chart of Authority, the Risk Management Policy, the Financial Risk Management Policy, the Corporate Governance Policy, the Information Security & Acceptable Use Policy, the Records Management & Personal Data Protection Policy, the Stock Exchange Compliance Policy, the Tax Policy, and the Code of Ethics and Conduct. The policies and procedures apply to all subsidiaries, and similar requirements are set out in collaboration with the partners in joint ventures.

The Group's control framework for financial reporting is designed to reduce and mitigate financial risks identified and ensure reliable internal and external financial reporting. It defines who is responsible and provides assurance that key risks are covered by mitigating internal control assertions.

As a consequence of the Group's growth due to acquisitions, systems and processes are not standardised across entities. The current state of the control environment has improved in 2020 and is at an acceptable level, but not yet where the Group wants it to be.

The Group will continue to strengthen the control environment through further standardisation, increased automation, strong analytics and transparent governance.

The framework is monitored through entities' self-assessment of the effectiveness of the implemented controls and continuous testing of performance by an established central internal control team. The monitoring of the performance of the controls focuses on the quality of the controls, the effectiveness with which they are performed and the efficiency of the overall controlling processes.

Audit Committee meetings

Committee member	Committee meetings attended
Lilian Fossum Biner (Chair)
Magdi Batato
Richard Burrows
Lars Fruergaard Jørgensen
Flemming Besenbacher1

¹ Not a member of the Committee; attends meetings in his capacity as Chair of the Supervisory Board.

Attended meeting. Did not attend extraordinary meeting. Not a member at the time.

RISK ASSESSMENT

With the implementation of the control framework for financial reporting, the Group has identified the risks that could have a direct or indirect material impact on the financial statements. Group entities are required to document transaction processes and the controls in place to cover the key risks identified. The minimum requirements for documenting the risks must be set out in the framework and visualised in the processes.

Group entities are required to reassess their controls biannually and must update changes to the control framework for financial reporting, including new risks and controls.

CONTROL ACTIVITIES

The Group has implemented a formalised financial reporting process for the strategy process, budget process, estimates and monthly reporting on actual performance. The accounting information reported by all Group companies is reviewed by controllers with regional or functional in-depth knowledge of the individual companies/functions and by technical accounting specialists.

Controllers are continuously updated on best practice relating to internal financial controls, and trained in new accounting and reporting requirements.

The entities in the Group are dependent on IT systems. Any weaknesses in the system controls or IT environment are compensated for by manual controls in order to mitigate any significant risk relating to the financial reporting.

During 2019, a programme was initiated for most entities in Western Europe aimed at standardising financial reporting processes and implementing various tools. The programme was carried out as planned in 2020 and will continue in 2021.

The Group has established a quality assurance team in order to ensure the quality of the controls that are part of the outsourced processes, including their performance.

INFORMATION AND COMMUNICATION

The Group has established information and communication systems to ensure accounting and internal control compliance. During the risk assessment process, Group entities are required to report on missing or inadequate controls. Each entity assesses any need for compensating controls, or for design and implementation of new controls.

Furthermore, Group entities have mapped controls on segregation of duties to implement necessary compensating controls, and are now implementing stronger remediated controls for segregation of duties in the ERP systems.

MONITORING

The Audit Committee's monitoring covers both the internal control environment and business risk. Monitoring of the internal control environment is covered by the Group's control framework for financial reporting.

The financial risks are assessed and reviewed at multiple levels in the Group, including monthly performance review meetings at ExCom level, periodic review of control documentation, and audits performed by Group Internal Audit.

GROUP INTERNAL AUDIT

Group Internal Audit provides objective and independent assessment of the adequacy, effectiveness and quality of the Group's internal controls. Group Internal Audit works in accordance with a charter, which is reviewed on an annual basis and approved by the Audit Committee.

Taking into account the annual review of business risks (see pages 37-39), an internal audit plan is

drawn up for the year. The plan is reviewed and approved by the Audit Committee. In 2020, Group Internal Audit conducted audits mainly in the areas of financial reporting controls, compliance (internal and external regulation), information technology and third-party risk management.

SPEAK UP

The Carlsberg Group has a Speak Up system that enables employees to report misconduct. Reports typically relate to suspected violations of the Carlsberg Code of Ethics and Conduct.

The Speak Up system is operated by an external provider and allows concerns to be brought to the attention of the Group Speak Up Review team anonymously, confidentially and via multiple channels.

The Speak Up Review team is responsible for reviewing all reported Speak Up matters. Furthermore, an Integrity Committee, chaired by the CFO, oversees the follow-up of major Speak Up investigations and provides a report to ExCom and the Audit Committee at least quarterly.

The Speak Up Summary report also contains an overview of other open and closed investigations and the time taken to resolve cases.

The Misconduct Investigation Handbook was updated in 2020 to clarify how investigations should be undertaken. During 2019, there was also a campaign to raise awareness of the various Speak Up channels available. A new campaign will be launched in 2021.

Since the establishment of the Speak Up system, some reports and their subsequent investigation have led to disciplinary sanctions, including dismissal on the basis of violation of the Code of Ethics and Conduct and/ or Group policies.

The incidents have not had any material impact on the financial results of the Group except for those items recognised in the statement of financial position.

More information regarding the Speak Up system, including reported concerns and disciplinary actions, can be found in the Sustainability Report.

SUPERVISORY BOARD

SUPERVISORY BOARD MEMBERS

FLEMMING BESENBACHER

CHAIR (SINCE 2012) Nationality: Danish Year of birth: 1952 Appointed (until): 2005 (2021)

BOARD FUNCTION Non-executive, non-independent director.

BOARD COMMITTEES

Nomination Committee (Chair).

PROFESSION

Professor, D.Sc., h.c. mult, FRSC; Chair of the Board of Directors of the Carlsberg Foundation.

OTHER COMPANY BOARD POSITIONS

Chair of the Board of Directors of Aarhus Vand. Member of the Board of Directors of Unisense.

LARS FRUERGAARD JØRGENSEN

DEPUTY CHAIR (SINCE 2019) Nationality: Danish Year of birth: 1966 Appointed (until): 2019 (2021)

BOARD FUNCTION Non-executive, independent director. BOARD COMMITTEES Audit Committee, Nomination Committee.

PROFESSION President & CEO, Novo Nordisk.

OTHER COMPANY BOARD POSITIONS None other than Carlsberg A/S.

CARL BACHE Nationality: Danish Year of birth: 1953 Appointed (until): 2014 (2021)

Company Danmark A/S. OTHER COMPANY BOARD

HANS ANDERSEN Nationality: Danish Year of birth: 1955

BOARD FUNCTION Employee representative. BOARD COMMITTEES

None. PROFESSION

POSITIONS

Appointed (until): 1998 (2022)

Brewery worker, Carlsberg Supply

None other than Carlsberg A/S.

BOARD FUNCTION

Non-executive, non-independent director (member of the Board of Directors of the Carlsberg Foundation).

BOARD COMMITTEES

Nomination Committee.

PROFESSION

Professor, Ph.D., Dr.Phil.; head of the Doctoral School of the Humanities at the University of Southern Denmark.

OTHER COMPANY BOARD POSITIONS

None other than Carlsberg A/S.

MAGDI BATATO

Nationality: Swiss Year of birth: 1959 Appointed (until): 2018 (2021)

BOARD FUNCTION Non-executive, independent director.

BOARD COMMITTEES Audit Committee, Remuneration Committee.

PROFESSION Executive Vice President and Head of Operations, Nestlé S.A. OTHER COMPANY BOARD POSITIONS None other than Carlsberg A/S.

DOMITILLE DOAT-LE BIGOT

Nationality: French Year of birth: 1972 Appointed (until): 2019 (2021)

BOARD FUNCTION

Non-executive, independent director. BOARD COMMITTEES Remuneration Committee.

PROFESSION Chief Digital Officer, Danone.

OTHER COMPANY BOARD POSITIONS

None other than Carlsberg A/S.

Domitille Doat-Le Bigot has notified the Supervisory Board that she is not standing for re-election at the Annual General Meeting.

LILIAN FOSSUM BINER

Nationality: Swedish Year of birth: 1962 Appointed (until): 2019 (2021)

BOARD FUNCTION

Non-executive, independent director.

BOARD COMMITTEES Audit Committee (Chair).

PROFESSION Non-executive board director.

OTHER COMPANY BOARD POSITIONS

Member of the Board of Directors of Scania, a-connect, Givaudan and L E Lundbergföretagen.

RICHARD BURROWS

Nationality: Irish Year of birth: 1946 Appointed (until): 2009 (2021)

BOARD FUNCTION

Non-executive, independent director. BOARD COMMITTEES Remuneration Committee (Chair), Audit Committee, Nomination Committee.

PROFESSION Non-executive board director.

OTHER COMPANY BOARD POSITIONS

Chair of the Board of Directors of British American Tobacco.

EVA VILSTRUP DECKER

Nationality: Danish Year of birth: 1964 Appointed (until): 2014 (2022)

BOARD FUNCTION

Employee representative.

BOARD COMMITTEES None. PROFESSION Senior Director, Carlsberg

Breweries A/S.

OTHER COMPANY BOARD POSITIONS None other than Carlsberg A/S.

FINN LOK

Nationality: Danish Year of birth: 1958 Appointed (until): 2014 (2022)

BOARD FUNCTION

Employee representative. BOARD COMMITTEES

PROFESSION

None.

Ph.D. and Brew Master, Principal Scientist, Carlsberg A/S.

OTHER COMPANY BOARD POSITIONS

None other than Carlsberg A/S.

ERIK LUND

Nationality: Danish Year of birth: 1964 Appointed (until): 2015 (2022)

BOARD FUNCTION

Employee representative. BOARD COMMITTEES None. PROFESSION

Head Brewer, Carlsberg A/S. OTHER COMPANY BOARD POSITIONS None other than Carlsberg A/S.

SØREN-PETER FUCHS OLESEN

Nationality: Danish Year of birth: 1955 Appointed (until): 2012 (2021)

BOARD FUNCTION

Non-executive, non-independent director (member of the Board of Directors of the Carlsberg Foundation).

BOARD COMMITTEES

Remuneration Committee.

PROFESSION

Professor, D.M.Sc; CEO of the Danish National Research Foundation.

OTHER COMPANY BOARD POSITIONS

None other than Carlsberg A/S.

PETER PETERSEN

Nationality: Danish Year of birth: 1969 Appointed (until): 2010 (2022)

BOARD FUNCTION

Employee representative. BOARD COMMITTEES

None.

PROFESSION President of the Staff Association; Process Lead, Carlsberg Supply Company Danmark A/S. OTHER COMPANY BOARD POSITIONS None other than Carlsberg A/S.

MAJKEN SCHULTZ

Nationality: Danish Year of birth: 1958 Appointed (until): 2019 (2021)

BOARD FUNCTION

Non-executive, non-independent director (member of the Board of Directors of the Carlsberg Foundation).

BOARD COMMITTEES

None.

PROFESSION

Professor, Ph.D., Copenhagen Business School. International Research Fellow, Saïd Business School, Oxford University. OTHER COMPANY BOARD POSITIONS

None other than Carlsberg A/S.

LARS STEMMERIK

Nationality: Danish Year of birth: 1956 Appointed (until): 2010 (2021)

BOARD FUNCTION

Non-executive, non-independent director (member of the Board of Directors of the Carlsberg Foundation). BOARD COMMITTEES None. PROFESSION Professor, D.Sc., University of Copenhagen. OTHER COMPANY BOARD

POSITIONS None other than Carlsberg A/S.

The Supervisory Board members' full CVs, including their skills and competences, are available online

www.carlsberggroup.com/who-weare/about-the-carlsberggroup/supervisory-board/

EXECUTIVE COMMITTEE

EXECUTIVE COMMITTEE MEMBERS

CEES 'T HART

CEO Nationality: Dutch

Year of birth: 1958 Appointed: 2015

Prior to joining the Carlsberg Group, Cees was CEO of the Dutch dairy company Royal FrieslandCampina, a position he had held since 2008. Prior to FrieslandCampina, Cees spent 25 years with Unilever, holding management positions across Eastern Europe, Western Europe and Asia and with the last position being member of the Europe Executive Board. Cees is Chair of the Supervisory Board of KLM and a member of the Board of AFKLM.

HEINE DALSGAARD

CFO

Nationality: Danish Year of birth: 1971 Appointed: 2016

Heine joined the Carlsberg Group from ISS, one of the world's largest facility services companies. He went to ISS in 2013, prior to the company's IPO in 2014. Before ISS, he was Group CFO at Grundfos. Heine's previous

experience includes various senior management and financial positions at Carpetland, Hewlett Packard and Arthur Andersen. Heine is member of the Board of Directors and Chair of the Audit Committee of Novozymes.

JOÃO ABECASIS

CHIEF COMMERCIAL OFFICER Nationality: Portuguese

Year of birth: 1972 Appointed: 2019

João joined the Carlsberg Group in 2011 as CCO and later Managing Director of Super Bock, our associate in Portugal. In 2016, he became Vice President for smaller markets in the Western Europe region. He also served as interim Managing Director of Carlsberg Danmark. In 2017, he became Managing Director of our French business, Kronenbourg. Earlier in his career, João held a range of sales and marketing roles at Unilever.

GRAHAM FEWKES

EXECUTIVE VICE PRESIDENT ASIA

Nationality: British Year of birth: 1968 Appointed: 2014

Graham joined the Carlsberg Group as Vice President Commercial, Asia in 2008, before becoming Senior Vice President of Group Sales, Marketing & Innovation in 2014. Graham has

strong experience in the global drinks business, having served in a wide range of international sales and marketing roles for Grand Metropolitan plc, Foster's Brewing Group and S&N plc.

PHILIP A. HODGES

EXECUTIVE VICE PRESIDENT GROUP SUPPLY CHAIN Nationality: Swiss/British Year of birth: 1966 Appointed: 2017

Philip joined the Carlsberg Group in 2017. His most recent position was at Mondelēz, where he was Senior Vice President, heading up the integrated supply chain in Europe for Mondelēz International. His previous experience includes managerial positions with Kraft Foods in Europe, Asia and the USA within supply chain and finance.

LARS LEHMANN

EXECUTIVE VICE PRESIDENT EASTERN EUROPE (FROM 1 JANUARY 2021: CENTRAL & EASTERN EUROPE) Nationality: Danish Year of birth: 1966 Appointed: 2019

Lars joined the Carlsberg Group in 2003 as Commercial Development Director. Since then, he has held several management positions, including VP Commercial for Eastern Europe & BBH and head of Export, License & Duty Free. In 2016, he became Managing Director of Carlsberg Malaysia. Prior to joining Carlsberg, Lars was with Action Nordic and Unilever Denmark.

JACEK PASTUSZKA

EXECUTIVE VICE PRESIDENT WESTERN EUROPE Nationality: Polish Year of birth: 1963 Appointed: 2015

Jacek was appointed EVP, Western Europe in 2019. Before that, he was EVP, Eastern Europe. Jacek joined the Carlsberg Group in 2009 and has been Managing Director of our businesses in Poland, Norway and Russia. His prior career included various managerial sales positions in P&G in multiple markets, Commercial VP for Danone in Poland and the Baltics, and General Manager for AIG operations in Poland.

CHRIS WARMOTH

EXECUTIVE VICE PRESIDENT GROUP STRATEGY Nationality: British Year of birth: 1959 Appointed: 2014

Chris joined the Carlsberg Group as Senior Vice President, Asia in 2014. During his tenure, he has held several positions on the Executive

Committee. Chris previously worked for H.J. Heinz, where he held various senior management positions in Continental and Eastern Europe and in Asia Pacific. Before Heinz, Chris worked for The Coca-Cola Company and P&G.

CHANGES TO EXCOM IN 2021

Jacek Pastuszka will leave the Carlsberg Group at the end of February 2021. Graham Fewkes will take up the position as Executive Vice President, Western Europe, as of 1 March 2021.

Leo Evers has been appointed to replace Graham as Executive Vice President, Asia. He joins Carlsberg from Heineken, where he has held several senior positions in Asia, including Regional Managing Director of Heineken Asia Pacific and Managing Director of Heineken Vietnam.

SHARE INFORMATION

INFORMATION FOR SHAREHOLDERS

Carlsberg A/S is listed on Nasdaq Copenhagen. The Company has around 52,000 registered shareholders.

The Company has two share classes: Carlsberg A and Carlsberg B. An A share carries 20 votes, while a B share carries two votes and is entitled to a preferential dividend. The B share is included in the Nasdaq OMX Nordic Large Cap and OMXC20 blue-chip indices.

As a supplement to its Copenhagen listing, the Company has established a sponsored level 1 ADR (American Depository Receipt) programme with J.P. Morgan. The ADRs trade overthe-counter in the USA under the symbol CABGY. More information on the ADR programme is available on our investor website.

MAJOR SHAREHOLDERS

At 31 December 2020, the Company's largest shareholder was the Carlsberg Foundation with 30% of the capital and 76% of the votes. In accordance with section 29 of the Danish Securities Trading Act, Massachusetts Financial Services Company (Boston, USA) has notified Carlsberg that it too owns more than 5% of the share capital.

SHAREHOLDER RETURN

The Carlsberg Group's dividend policy stipulates an adjusted payout ratio of around 50%. In addition, the Company conducted a share buy-back programme in 2020. For more information, see page 26.

INVESTOR RELATIONS

The Carlsberg Group aims to give shareholders and the market the best possible insight into factors considered relevant for ensuring market-efficient and fair pricing of the Company's shares. This is achieved through the quality, consistency and continuity of the information provided to the market, which is handled by the Group's Investor Relations department.

We observe a four-week silent period prior to the publication of the annual and half-year reports, and a two-week silent period prior to the Q1 and Q3 trading statements.

GROUP WEBSITE

www.carlsberggroup.com provides comprehensive information about the Group and its shares and bonds, including Company announcements, annual and quarterly reports, share prices and financial data, investor presentations, webcasts and transcripts, and a financial and event calendar.

At the end of 2020, a total of 29 brokers had coverage of the Company. The analysts' names and consensus estimates can be found on the website.

CARLSBERG B SHARE 2020

(DKK)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

SHAREHOLDER GEOGRAPHIC SPLIT

(excluding the Carlsberg Foundation and treasury shares)

Share information
Share class	A	B	Total
Number of issued shares¹	33,699,252	114,457,554	148,156,806
Number of issued shares,
excl. treasury shares¹	33,699,252	111,402,379	145,101,631
Carlsberg Foundation	33,065,996	10,829,392	43,895,388
Votes per share	20	2
Par value	DKK 20	DKK 20
Share price, year-end	DKK 1,010.0	DKK 975.2
Proposed dividend per share	DKK 22.0	DKK 22.0

¹ At 31 December 2020.

Financial calendar 2021

Event	Date
Annual General Meeting	15 March
Q1 trading statement	28 April
H1 interim financial
statement	18 August
Q3 trading statement	28 October

FORWARD-LOOKING STATEMENTS AND ESEF

This Annual Report contains forward-looking statements, including statements about the Group's sales, revenues, earnings, spending, margins, cash flow, inventory, products, actions, plans, strategies, objectives and guidance with respect to the Group's future operating results.

Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe, anticipate, expect, estimate, intend, plan, project, will be, will continue, will result, could, may, might", or any variations of such words or other words with similar meanings.

Any such statements are subject to risks and uncertainties that could cause the Group's actual results to differ 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 Group assumes no obligation to update any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forwardlooking statements.

Some important risk factors that could cause the Group's actual results to differ materially from those expressed in its forward-looking statements include, but are not limited to: economic and political uncertainty (including interest rates and exchange rates), financial and regulatory developments, demand for the Group's products, increasing industry consolidation, competition from other breweries, the availability and pricing of raw materials and packaging materials, cost of energy,

production- and distribution-related issues, information technology failures, breach or unexpected termination of contracts, marketdriven price reductions, market acceptance of new products, changes in consumer preferences, launches of rival products, stipulation of fair value in the opening balance sheet of acquired entities, litigation, environmental issues and other unforeseen factors.

New risk factors can 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 Group's business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forwardlooking statement.

Accordingly, forward-looking statements should not be relied on as a prediction of actual results.

ESEF data

Domicile of entity	Denmark
Description of nature of entity's operations and principal activities	Brewing company
Country of incorporation	Denmark
Principal place of business	Global
Legal form of entity	A/S
Name of reporting entity or other means of identification	Carlsberg A/S
Address of entity's registered office	1 J. C. Jacobsens Gade 1799 Copenhagen V

CONSOLIDATED FINANCIAL STATEMENTS

Income statement54
Statement of comprehensive income 54
Statement of financial position 55
Statement of changes in equity 56
Statement of cash flows 57
Notes58
PARENT COMPANY FINANCIAL STATEMENTS

Statements 127
Notes 130
REPORTS
Management statement 137
Auditor's reports 138

SECTION 1 OPERATING ACTIVITIES

1.1 Segmentation of operations ..................60
1.2 Operating expenses, inventories
and deposit liabilities................................63
1.3 Foreign exchange risk related to earnings........................................................65
1.4 Cash flow from operating
activities........................................................66
1.5 Trade receivables and on-trade loans..............................................................67

SECTION 2

ASSET BASE AND RETURNS

2.1 Segmentation of assets and returns...........................................................71 2.2 Impairment..................................................72 2.3 Intangible assets and property, plant and equipment................................78

SECTION 3

SPECIAL ITEMS AND PROVISIONS
3.1 Special items...............................................82 3.2 Provisions.....................................................84
3.3 Contingent liabilities .................................85

SECTION 4 FINANCING COSTS, CAPITAL STRUCTURE AND EQUITY

4.1	Financial income and expenses	87
4.2	Net interest-bearing debt88
4.3	Capital structure 88
4.4	Borrowings and cash91
4.5	Interest rate risk92
4.6	Foreign exchange risk related to
	net investments and financing
	activities93
4.7	Funding and liquidity risk95

4.8 Derivative financial instruments............97

SECTION 5 ACQUISITIONS, DISPOSALS, ASSOCIATES AND JOINT VENTURES

5.1 Investment model and risks...................99
5.2 Acquisitions and disposals...................100
5.3 Non-controlling interests ....................102
5.4 Contingent considerations ...................103
5.5 Associates and joint ventures.............104

SECTION 6

TAX

6.1 Income tax................................................105
6.2 Tax assets and liabilities ......................106

SECTION 7

STAFF COSTS AND REMUNERATION

7.1	Staff costs108
7.2	Remuneration109
7.3	Share-based payments109
7.4	Retirement benefit obligations
	and similar obligations 111

SECTION 8 OTHER DISCLOSURE REQUIREMENTS

8.1	Earnings per share 114
8.2	Fees to auditors 115
8.3	Related parties 115
8.4	Events after the reporting period 115

SECTION 9

BASIS FOR PREPARATION

9.1	Significant accounting estimates
	and judgements 116
9.2	General accounting policies 116
9.3	Changes in accounting policies	120
9.4	New legislation 120
9.5	New segmentation*121

SECTION 10

GROUP COMPANIES

10	Group companies123

DKK million	Section	2020	2019
Revenue	1.1	58,541	65,902
Cost of sales	1.2.1	-30,180	-33,264
Gross profit		28,361	32,638
Sales and distribution expenses	1.2.3	-15,373	-17,826
Administrative expenses		-3,453	-4,733
Other operating activities, net	1.2.4	-151	108
Share of profit after tax of associates and joint ventures	5.5	315	278
Operating profit before special items		9,699	10,465
Special items, net	3.1	-247	501
Financial income	4.1	373	360
Financial expenses	4.1	-784	-1,098
Profit before tax		9,041	10,228
Income tax	6.1	-2,233	-2,751
Consolidated profit		6,808	7,477
Attributable to
Non-controlling interests	1.1	778	908
Shareholders in Carlsberg A/S (net profit)		6,030	6,569

DKK
Earnings per share	8.1
Earnings per share of DKK 20		41.3	43.7
Diluted earnings per share of DKK 20		41.1	43.4

INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME

DKK million	Section	2020	2019
Consolidated profit		6,808	7,477

Other comprehensive income
Retirement benefit obligations	7.4	1	-571
Share of other comprehensive income in associates and joint ventures	5.5	-4	4
Income tax	6.1	-42	38
Items that will not be reclassified to the income statement		-45	-529
Foreign exchange adjustments of foreign entities	4.1	-7,640	3,485
Fair value adjustments of hedging instruments	4.1	198	-323
Other		-	14
Income tax	6.1	-22	17
Items that will be reclassified to the income statement		-7,464	3,193
Other comprehensive income		-7,509	2,664
Total comprehensive income		-701	10,141
Attributable to
Non-controlling interests		456	905
Shareholders in Carlsberg A/S		-1,157	9,236

STATEMENT OF FINANCIAL POSITION

DKK million	Section	31 Dec. 2020	31 Dec. 2019
ASSETS
Non-current assets
Intangible assets	2.2, 2.3	66,061	70,027
Property, plant and equipment	2.2, 2.3	26,299	27,607
Investments in associates and joint ventures	5.5	4,188	4,364
Receivables	1.5	1,505	1,179
Tax assets	6.2	1,767	1,938
Total non-current assets		99,820	105,115

Current assets
Inventories	1.2.1	4,613	4,751
Trade receivables	1.5	3,725	5,339
Tax receivables		211	199
Other receivables	1.5	1,585	1,661
Prepayments		769	776
Cash and cash equivalents	4.4.2	8,093	5,222
Total current assets		18,996	17,948
Total assets		118,816	123,063

DKK million	Section	31 Dec. 2020	31 Dec. 2019
EQUITY AND LIABILITIES

Equity
Share capital	4.3.2	2,963	3,051
Reserves		-40,824	-33,651
Retained earnings		77,169	74,049
Equity, shareholders in Carlsberg A/S		39,308	43,449
Non-controlling interests		4,054	2,585
Total equity		43,362	46,034
Non-current liabilities
Borrowings	4.2, 4.4.1	29,291	20,879
Retirement benefit obligations	7.4	2,934	3,299
Tax liabilities	6.2	6,265	6,447
Provisions	3.2	3,319	4,037
Other liabilities	5.4	5,196	9,056
Total non-current liabilities		47,005	43,718
Current liabilities
Borrowings	4.2, 4.4.1	959	4,112
Trade payables		16,598	17,149
Deposits on returnable packaging materials	1.2.2	1,276	1,545
Provisions	3.2	1,277	1,663
Tax payables		925	999
Other liabilities		7,414	7,843
Total current liabilities		28,449	33,311
Total liabilities		75,454	77,029
Total equity and liabilities		118,816	123,063

STATEMENT OF CHANGES IN EQUITY

DKK million	Section	Shareholders in Carlsberg A/S
							Non
	Share	Currency	Hedging	Total	Retained		controlling	Total
2020	capital	translation	reserves	reserves	earnings	Total	interests	equity
Equity at 1 January	3,051	-32,930	-721	-33,651	74,049	43,449	2,585	46,034
Consolidated profit	-	-	-	-	6,030	6,030	778	6,808
Other comprehensive income	4.3.4 -	-7,285	112	-7,173	-14	-7,187	-322	-7,509
Total comprehensive income for the year	-	-7,285	112	-7,173	6,016	-1,157	456	-701
Cancellation of treasury shares	4.3.2 -88	-	-	-	88	-	-	-
Share-based payments	7.3 -	-	-	-	47	47	-5	42
Dividends paid to shareholders	4.3.3 -	-	-	-	-3,093	-3,093	-805	-3,898
Share buy-back	4.3.3 -	-	-	-	-2,900	-2,900	-	-2,900
Non-controlling interests	5.3 -	-	-	-	3,144	3,144	614	3,758
Acquisition of entities	5.3 -	-	-	-	-182	-182	1,209	1,027
Total changes in equity	-88	-7,285	112	-7,173	3,120	-4,141	1,469	-2,672
Equity at 31 December	2,963	-40,215	-609	-40,824	77,169	39,308	4,054	43,362

DKK million Section Shareholders in Carlsberg A/S
							Non
	Share	Currency	Hedging	Total	Retained		controlling	Total
2019	capital	translation	reserves	reserves	earnings	Total	interests	equity
Equity at 1 January	3,051	-36,116	-721	-36,837	79,088	45,302	2,586	47,888
Consolidated profit	-	-	-	-	6,569	6,569	908	7,477
Other comprehensive income 4.3.4	-	3,186	-	3,186	-518	2,668	-4	2,664
Total comprehensive income for the year	-	3,186	-	3,186	6,051	9,237	904	10,141
Share-based payments 7.3	-	-	-	-	214	214	3	217
Dividends paid to shareholders 4.3.3	-	-	-	-	-2,738	-2,738	-853	-3,591
Share buy-back 4.3.3	-	-	-	-	-4,100	-4,100	-	-4,100
Non-controlling interests	-	-	-	-	-4,466	-4,466	-55	-4,521
Total changes in equity	-	3,186	-	3,186	-5,039	-1,853	-1	-1,854
Equity at 31 December	3,051	-32,930	-721	-33,651	74,049	43,449	2,585	46,034

STATEMENT OF CASH FLOWS

DKK million	Section	2020	2019
Operating profit before special items		9,699	10,465
Depreciation, amortisation and impairment losses	2.3	4,386	4,542
Operating profit before depreciation, amortisation and impairment losses		14,085	15,007
Other non-cash items		-532	-320
Change in trade working capital		1,321	491
Change in other working capital		-1,033	634
Restructuring costs paid		-531	-445
Interest etc. received		97	139
Interest etc. paid		-521	-1,033
Income tax paid		-1,958	-2,234
Cash flow from operating activities	1.4	10,928	12,239
Acquisition of property, plant and equipment and intangible assets		-4,396	-4,588
Disposal of property, plant and equipment and intangible assets		222	1,714
Change in on-trade loans	1.4	339	50
Total operational investments		-3,835	-2,824
Free operating cash flow		7,093	9,415
Acquisition and disposal of subsidiaries, net	5.2	-2,409	-
Acquisition and disposal of associates and joint ventures, net	5.2	8	-41
Acquisition and disposal of financial investments, net		6	25
Change in financial receivables		42	-59
Dividends received		317	626
Total financial investments		-2,036	551
Other investments in real estate		-	-4
Total other activities		-	-4
Cash flow from investing activities		-5,871	-2,277
Free cash flow		5,057	9,962
Shareholders in Carlsberg A/S	4.3.2	-3,093	-2,738
Share buy-back	4.3.3	-2,900	-4,100
Non-controlling interests	4.3.3	-877	-2,520
External financing	4.4.1	5,060	-935
Cash flow from financing activities		-1,810	-10,293
Net cash flow		3,247	-331
Cash and cash equivalents at 1 January		5,149	5,434
Foreign exchange adjustment of cash and cash equivalents		-438	46
Cash and cash equivalents at 31 December	4.4.2	7,958	5,149

Acquisition of property, plant and equipment and intangible assets includes the purchase of the Brooklyn brand rights. Cash and cash equivalents are reported less bank overdrafts.

SECTION 1

OPERATING ACTIVITIES

58.5bn REVENUE (DKK)

Revenue declined by 11.2%, amounting to DKK 58,541m (2019: DKK 65,902m). Revenue was negatively impacted by COVID-19 in most markets and by negative currency developments, mainly in Russia, Norway and China.

Cost of sales per hl improved organically by 3%, positively impacted by country and product mix.

The gross margin declined by 110bp to 48.4%, as supply chain efficiencies were not enough to offset the under-absorption of fixed costs and the channel and product mix. The gross margin was also impacted by country mix.

9.7bn OPERATING PROFIT (DKK) REVENUE DEVELOPMENT (%) OPERATING PROFIT DEVELOPMENT (%)

Operating expenses, including marketing investments, declined organically by 14% as a result of tight cost control. The main areas in which costs fell were marketing, travel, supply chain and administration, including employeerelated costs. Reported operating expenses as a percentage of revenue declined by 200bp. Excluding marketing expenses, operating expenses declined organically by 13%. ⁶⁸ -3.1%

Operating profit before depreciation, amortisation and impairment losses (EBITDA) declined by 2.4% organically and by 6.1% in

reported terms. The EBITDA margin improved by 130bp to 24.1%.

The Asian and Eastern European regions delivered solid organic operating profit growth and strong operating margin improvements, while operating profit declined in Western Europe.

Operating profit before special items was DKK 9,699m (2019: DKK 10,465m). The Group's operating margin increased by 70bp to 16.6%.

6.0bn NET PROFIT (DKK)

Special items, net, amounted to DKK -247m (2019: DKK 501m). Special items were positively impacted by reversal of a provision made in a purchase price allocation, offset mainly by restructuring costs related to Reset for the future, and write-down of a brand in Cambodia.

Financial items, net, amounted to DKK -411m against DKK -738m in 2019. Excluding currency gains and losses, financial expenses, net, amounted to DKK 550m (2019: DKK 650m), positively impacted by lower other financial expenses.

Tax totalled DKK -2,233m against DKK -2,751m in 2019. The effective tax rate of 24.7% was positively impacted by tax-exempt and non-deductible special items. Excluding these, the effective tax rate would have been 25.7%.

Consolidated profit was DKK 6,808m compared to DKK 7,477m in 2019. The decline was due to lower operating profit and special

items, partly offset by lower financial expenses, net, and the lower tax rate.

The Carlsberg Group's share of consolidated profit was DKK 6,030m (2019: DKK 6,569m).

Non-controlling interests were DKK 778m (2019: DKK 908m), impacted by challenging market conditions in Malaysia, and the new joint venture with Marston's in the UK, of which the Group owns 60%.

41.3 EARNINGS PER SHARE (DKK)

Earnings per share were DKK 41.3 (2019: DKK 43.7). Adjusted for special items after tax, earnings per share were DKK 43.6 (2019: DKK 41.0), corresponding to a 6.3% improvement.

EARNINGS PER SHARE (DKK)

10.9bn OPERATING CASH FLOW (DKK)

Cash flow from operating activities amounted to DKK 10,928m against DKK 12,239m in 2019.

The change in trade working capital was DKK +1,321m (2019: DKK +491m), mainly due to lower trade receivables, impacted by lower sales as a result of the increased COVID-19 related restrictions towards the end of the year. Average trade working capital to revenue improved from -16.8% in 2019 to -18.6%.

The change in other working capital was DKK -1,033m (2019: DKK +634m), partly impacted by phasing and lower VAT payable.

Restructuring costs paid amounted to DKK -531m (2019: DKK -445m). Net interest etc. paid amounted to DKK -424m (2019: DKK -894m). The decline was mainly due to the settlement of financial instruments.

Corporation tax paid was DKK -1,958m (2019: DKK -2,234m). The decrease versus last year was mainly due to lower earnings.

5.1bn FREE CASH FLOW (DKK)

Free cash flow amounted to DKK 5,057m (2019: DKK 9,962m), while free operating cash flow amounted to DKK 7,093m (2019: DKK 9,415m).

Operational investments totalled DKK -3,835m (2019: DKK -2,824m), impacted by the purchase of the Brooklyn brand rights. In 2019, operational investments were impacted by the disposal of the brewery site in Norway.

Total financial investments amounted to DKK -2,036m (2019: DKK +551m), impacted by the acquisition of Marston's brewing activities, the prepayment of the purchase price for Wernesgrüner Brewery, Germany, and lower dividends received.

FREE CASH FLOW (DKKm)

Free operating cash flow Free cash flow

Total cash flow to investments in entities and brand rights, including acquisition of noncontrolling interests, amounted to DKK 3.2bn (2019: DKK 1.7bn). For 2020, this primarily included the acquisitions of Marston's brewing activities in the UK, and the acquisition of Wernesgrüner Brewery and the Brooklyn brand rights.

3.2bn ACQUISITIONS (DKK)

The cash flow for the purchase of the Brooklyn brand rights was included in operational investments.

The cash consideration paid on acquisition of 60% of Marston's brewing activities in the UK and the prepayment on the acquisition of Wernesgrüner Brewery amounted to DKK 2.4bn and was recognised as financial investments in the cash flow statement.

The prepayment on the acquisition of Wernesgrüner Brewery was recognised as a non-current receivable. The transaction was completed on 1 January 2021.

Total cash flow to investments in brand rights and entities thereby amounted to DKK 3.2bn.

EPS-A

SECTION 1.1 SEGMENTATION OF OPERATIONS

REVENUE

The Group's revenue arises primarily from the sale of beverages to our customers. Revenue from brand licensing, sale of by-products and other revenue in aggregate accounts for around 3% of the Group's revenue and is not considered material. Revenue declined by DKK -7,361m in 2020 and was negatively impacted by the lower volumes in Western Europe and Asia and deterioration in price/mix in Western Europe and Eastern Europe, along with a negative currency impact in all three regions.

Not allocated revenue, DKK 25m (2019: DKK 72m), consisted of DKK 1,112m (2019: DKK 1,355m) in revenue and DKK -1,087m (2019: DKK -1,283m) from eliminations of sales between the geographical segments.

Revenue in Denmark was impacted by lower sales of soft drinks at the German/Danish border.

The DKK value of revenue in Russia for 2020 was impacted by the 11.4% decrease in the average RUB/DKK rate.

CHANGES TO SEGMENTATION

The Group's regional structure was changed effective 1 January 2021, with the aim of rebalancing the European regions in terms of size and number of business units.

Segmentation of income statement

DKK million

	Western		Eastern	Not	Beverages,	Non	Carlsberg
2020	Europe	Asia	Europe	allocated	total	beverage	Group, total
Revenue	31,547	16,959	10,010	25	58,541	-	58,541
Total cost	-26,763	-13,057	-8,093	-1,208	-49,121	-36	-49,157
Share of profit after tax of associates and joint ventures	209	89	-	-	298	17	315
Operating profit before special items	4,993	3,991	1,917	-1,183	9,718	-19	9,699
Special items, net					-244	-3	-247
Financial items, net					-403	-8	-411
Profit before tax					9,071	-30	9,041
Income tax					-2,240	7	-2,233
Consolidated profit					6,831	-23	6,808
Operating margin	15.8%	23.5%	19.2%		16.6%		16.6%
2019
Revenue	36,317	18,416	11,097	72	65,902	-	65,902
Total cost	-30,320	-14,536	-9,215	-1,543	-55,615	-101	-55,715
Share of profit after tax of associates and joint ventures	190	51	-	-5	236	42	278
Operating profit before special items	6,187	3,931	1,882	-1,476	10,524	-59	10,465
Special items, net					568	-67	501

Financial items, net -728 -10 -738 Profit before tax 10,364 -136 10,228 Income tax -2,766 15 -2,751 Consolidated profit 7,598 -121 7,477 Operating margin 17.0% 21.3% 17.0% 16.0% 15.9%

The segmentation used in the Annual Report 2020 is unchanged. Please refer to section 9.5 for further disclosures.

Revenue and excise duties

DKK million	2020	2019
Revenue, including excise duties	83,182	93,483
Excise duties	-24,641	-27,581
Revenue	58,541	65,902

Geographical allocation of revenue

DKK million	2020	2019
Denmark (Carlsberg A/S' domicile)	3,512	4,736
China	9,858	8,999
Russia	6,405	7,307
Other countries	38,766	44,860
Total	58,541	65,902

SECTION 1.1 (CONTINUED) SEGMENTATION OF OPERATIONS

OPERATING PROFIT BEFORE SPECIAL ITEMS

Not allocated operating profit before special items, DKK -1,183m (2019: DKK -1,476m), related to central costs not managed by the regions, including costs of developing branding activities to support the SAIL'22 initiatives and general costs of centralised functions as well as various eliminations of DKK 62m (2019: DKK 71m).

VOLUMES

Organic growth in total volumes was impacted by declining volumes in Western Europe and Asia primarily due to COVID-19, partly offset by growth in Eastern Europe.

NON-CONTROLLING INTERESTS

The Group's non-controlling interests consist of Lao Brewery, Chongqing Brewery Group, Carlsberg Malaysia Group and other minor

interests, primarily in the Asia region. Also included are two months of earnings in the newly established Carlsberg Marston's Brewing Company Limited. Non-controlling interests are not individually material to the Group's total profit.

Non-controlling interests hold 40% of the shares in Carlsberg Marston's Brewing Company Limited, which includes Marston's brewing activities and the Group's activities in the UK.

The material asset restructuring whereby Carlsberg and Chongqing Brewery Co. contributed their controlled assets to Chongqing Jianiang Brewery was completed in December 2020. The transaction had an immaterial impact on the allocation of the consolidated profit for the year between the shareholders in Carlsberg A/S and noncontrolling interests for 2020.

With the full-year effect of these transactions, non-controlling interests' share of the result in Carlsberg Marston's Brewing Company

Limited, UK, and Chongqing Brewery Group, China, is expected to increase for 2021. The transactions are described in more detail in sections 5.2 and 5.3.

The Group considers all terms and activities in contracts with customers in order to determine the performance obligation, the transaction price and the allocation of the transaction price.

If the consideration in a contract includes a variable amount, the Group estimates the consideration to which it will be entitled in exchange for transferring goods to the customer. The variable consideration is estimated at contract inception based on expected sales volumes using historical and year-to-date sales data and other information about trading with the individual customer or with a group of customers.

The Group estimates discounts using either the expected value method or the most likely amount method, depending on which method better predicts the amount of consideration to which it will be entitled.

The most likely amount method is used for contracts with a single contract sum, while the expected value method is used for contracts with more than one threshold due to the complexity and the activities agreed with the individual customer.

Certain contracts related to specific major events that are held within such a short time period that it is not possible to sell all the goods during the event (e.g. football matches) give the customer the right to return the goods within a specified period.

The Group uses the expected value method to estimate the goods that will not be returned, as this method best predicts the amount of variable consideration to which the Group will be entitled. For goods that are expected to be returned, the Group recognises a refund liability instead of revenue.

Management makes judgements when deciding whether supporting activities with a customer should be classified as a discount or a marketing expense. Generally, activities with the individual customer are accounted for as a discount, whereas costs related to broader marketing activities are classified as marketing expenses.

Whether the Group is acting as a principal or an agent is evaluated by management on a country-bycountry basis. The Group has concluded that it is the principal in its revenue arrangements because it controls the goods before transferring them to the customer.

Excise duties, taxes and fees

The classification of duties, taxes and fees paid to local authorities or brewery organisations etc. requires judgements on the classification to be made by management.

Locally imposed duties, taxes and fees are typically based on product type, alcohol content, consumption of certain raw materials, such as glue, plastic or metal in caps, and energy consumption. These are classified as either sales- or production-related.

Excise duties are generally imposed by the tax authorities as taxes on consumption and are collected by the Group on behalf of the authorities when the goods are transferred to the customers and thereby ready for consumption.

Taxes and fees related to the input/use of goods in production, distribution etc. are recognised as part of the cost of the goods or services purchased. The type of authority or organisation imposing the duty, tax or fee and the objective of these are key factors when determining the classification.

Group financial performance

				Change		Change
Volumes (million hl)	2019	Organic	Acq., net	FX	2020	Reported
Beer	113.0	-2.8%	0.2%	-	110.1	-2.6%
Non-beer	21.9	-8.7%	0.0%	-	20.0	-8.7%
Total volume	134.9	-3.8%	0.2%	-	130.1	-3.6%
DKK million
Revenue	65,902	-8.4%	0.3%	-3.1%	58,541	-11.2%
Operating profit before special items	10,465	-3.1%	-0.3%	-3.9%	9,699	-7.3%
Operating margin (%)	15.9				16.6	70bp

SECTION 1.1 (CONTINUED) SEGMENTATION OF OPERATIONS

Revenue Recognition and measurement

Revenue from contracts with customers comprises sales of goods, royalty income, rental income from non-stationary equipment, service fees and sales of by-products.

Revenue from the sale of own-produced finished goods, goods for resale (third-party products) and by-products is recognised at the point in time when the control of goods and products is transferred to the customer, which is generally upon delivery. For contracts providing the customer with a right of return within a specified period, the Group considers the timing of recognition.

Royalty and licence fees are recognised when earned according to the terms of the licence agreements.

Revenue from contracts with customers is measured at an amount that reflects the expected consideration for those goods. Amounts disclosed as revenue exclude discounts, VAT and excise duties collected on behalf of authorities.

The Group considers whether contracts include separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price, the Group considers the effects of variable consideration. No element of financing is deemed present, as payment is generally made on the basis of cash on delivery or up to 30 days of credit.

Variable consideration

The Group offers various discounts depending on the nature of the customer and business.

Discounts comprise off-invoice discounts, volume- and activity-related discounts, including specific promotion prices offered, and other discounts. Furthermore, discounts include the difference between the present value and the nominal amount of on-trade loans to customers, cf. section 1.5.

Off-invoice discounts arise from sales transactions where the customer immediately receives a reduction in the sales price. This also includes cash discounts and incentives for early payments.

Volume- and activity-related discounts is a broad term covering incentives for customers to sustain business with the Group over a longer time and may be related to a current campaign or a sales target measured in volumes or total value. Examples include discounts paid as a lump sum, discounts for meeting certain sales targets or progressive discounts offered in step with increasing sales to a customer.

Other discounts include listing fees, i.e. fees for certain listings on shelves, in coolers or in favourable store locations, as specific promotions of this nature are closely related to the volumes sold.

Segment information

The Group's beverage activities are segmented according to the three geographical regions where sales take place. These regions make up the Group's reportable segments.

The segmentation reflects the geographical and strategic management, decision and reporting structure applied by the Executive Committee for monitoring the Group's strategic and financial targets. Segments are managed based on business performance measured as operating profit before special items.

Not allocated comprises income and expenses incurred for ongoing support of the Group's overall operations and strategic development. The expenses include costs of running central functions and marketing, including global sponsorships.

The non-beverage segment, comprising research and real estate activities, is managed separately and therefore shown separately instead of geographically segmented.

The geographical allocation of revenue and noncurrent assets is based on the selling entities' domicile and comprises countries individually accounting for more than 10% of the Group's consolidated revenue as well as the domicile country.

Decisions on restructuring, acquisition and divestment of entities included in special items as well as on financing (financial income and expenses) and tax planning (income tax) are made based on information for the Group as a whole and therefore not segmented.

Reported figures

Reported figures are analysed by looking at the impact of organic growth, net acquisitions and foreign exchange effects.

The net acquisition effect is calculated as the effect of acquisitions and divestments, including any share obtained from an increase/decrease in ownership of associates and joint ventures, for a 12-month period from the acquisition/divestment date.

The foreign exchange effect is calculated as the difference between the figures for the current reporting period translated at the current exchange rates and at the exchange rates applied in the previous reporting period.

Organic growth is the remaining growth that is not related to acquisitions, divestments or foreign exchange effects.

SECTION 1.2 OPERATING EXPENSES, INVENTORIES AND DEPOSIT LIABILITIES

1.2.1 COST OF SALES AND INVENTORIES

Cost of sales decreased by 9% compared with 2019, mainly as a result of lower volumes in Western Europe and Asia, and lower input costs in Eastern Europe due to foreign exchange. Cost of sales per hl decreased by approximately 6% compared with 2019.

Cost of sales

DKK million	2020	2019
Cost of materials	17,830	19,222
Direct staff costs	1,297	1,441
Amortisation and depreciation	2,704	2,637
Indirect production overheads	4,062	4,433
Purchased finished goods and other costs	4,287	5,531
Total	30,180	33,264

Inventories decreased by 3% compared with 2019, mainly impacted by minor changes to phasing of campaigns.

In general, write-offs of inventories did not increase significantly in 2020, as the Group managed to adapt the business and decrease production in line with customer demand.

Inventories

DKK million	2020	2019
Raw materials	2,072	2,116
Work in progress	295	333
Finished goods	2,246	2,302
Total	4,613	4,751

Commodity risks are associated in particular with purchasing of cans (aluminium), malt (barley), glass, paper, sugar and energy. The management of commodity risks is coordinated centrally and aimed at achieving stable and predictable prices in the medium term, and avoiding capital and liquidity being tied up unnecessarily.

As the underlying markets for the specified categories vary, so does the way in which they are hedged against price increases.

The most common form of hedging is fixedprice purchase agreements with suppliers in local currencies.

It is Group policy to fix the prices of 70% of malt (barley) purchases for a given year no

Hedging of raw material price risk

DKK million

		Sensitivity assuming 100% efficiency			Time of maturity
2020	Change	Effect on OCI	Tonnes purchased	Average price (DKK)	2021
Aluminium	+10%	80	66,323	11,132	66,323
2019	Change	Effect on OCI	Tonnes purchased	Average price (DKK)	2020
Aluminium	+10%	77	63,861	12,512	63,861

later than at the end of the third quarter of the previous year and to hedge up to around 90% at the beginning of the year. A significant part of the Group's exposure for 2020 was therefore hedged through fixed-price purchase agreements entered into during 2019. Likewise, the majority of the exposure for 2021 has been hedged during 2020. The percentage that is hedged or at fixed prices is higher for Western Europe and Eastern Europe than for Asia, which is partly due to the timing of the harvest season in Asia.

In the majority of purchase agreements for cans, the Group's purchase price is variable and based on the global market price of aluminium (London Metal Exchange, LME). The Group is thereby able to hedge the underlying aluminium price risk by applying a hedge ratio of 1:1.

In 2020, the majority of the aluminium price risk was hedged with financial instruments or with fixed prices via the suppliers to the Group. The same has been done for 2021. The fair values of the financial instruments are specified in section 4.8.

ACCOUNTING ESTIMATES AND JUDGEMENTS

At least once a year, management assesses whether the standard cost of inventories approximates the actual cost. During the year, the standard cost is revised if it deviates by more than 5% from the actual cost. Indirect production overheads are calculated on the basis of relevant assumptions as to capacity utilisation, production time and other factors.

Management also assesses the impact on standard cost of government and other grants received to fund operating activities. This includes assessing the terms and conditions of grants received and the risk of any repayment.

The calculation of the net realisable value of inventories is relevant to packaging materials, pointof-sale materials and spare parts. The net realisable value is normally not calculated for beer and soft drinks due to their limited shelf-life, which means that slow-moving goods must be scrapped instead.

ACCOUNTING POLICIES

Cost of sales comprises cost of materials used in own-produced finished goods, including malt (barley), hops, glass, cans, other packaging materials, direct labour, indirect production overheads and standard cost variations. Further, it comprises purchased finished goods that include cost of pointof-sale materials and third-party products sold to customers.

Indirect production overheads comprise indirect supplies, wages and salaries, amortisation of brands and software, as well as maintenance and depreciation of machinery, plant and equipment used for production.

The cost of purchased finished goods, raw and packaging materials and point-of-sale materials includes the purchase cost and costs directly related to bringing inventories to the relevant place of sale and getting them ready for sale, for example insurance, freight and duties.

SECTION 1.2 (CONTINUED)

OPERATING EXPENSES, INVENTORIES AND DEPOSIT LIABILITIES

Inventories are measured at the lower of standard cost (own-produced finished goods) and weighted average cost (other inventories), or net realisable value. The net realisable value is the estimated selling price less costs of completion and costs necessary to make the sale, also taking into account marketability, obsolescence and developments in expected selling price.

The cost of scrapped/impaired goods is expensed in the function (line item) responsible for the loss, i.e. losses during distribution are included in distribution expenses, while scrapping of products due to sales not meeting forecasts is included in sales expenses.

1.2.2 DEPOSITS ON RETURNABLE PACKAGING MATERIALS

Deposits on returnable packaging materials amounted to DKK 1,276m (2019: DKK 1,545m). The capitalised value of returnable packaging materials was DKK 1,791m (2019: DKK 2,102m). The decline in deposits is a consequence of the lower volumes sold, which led to a lower need for reinvestment and thereby a lower capitalised value of returnable packaging materials.

The capitalised value of returnable packaging materials exceeds the deposits because each of the returnable packaging items circulates a number of times in the market and some markets have regulations that require the deposit value to be set lower than the cost of the returnable packaging materials.

ACCOUNTING ESTIMATES AND JUDGEMENTS

Management assesses the local business model to determine whether the Group has a legal or constructive obligation to accept returns of packaging materials from the market and the level of control. This entails the Group considering, among other things, the return rate and the annual circulation in the individual markets. These factors are assessed annually. Returnable packaging materials controlled by the Group are capitalised as property, plant and equipment and depreciated over the expected useful life.

The deposit on returnable packaging materials is estimated based on movements during the year in recognised liabilities, loss of returnable packaging materials in the market, planned changes in packaging types and historical information about return rates.

ACCOUNTING POLICIES

Returnable packaging materials that the Group controls through a legal or constructive obligation are capitalised as property, plant and equipment.

Returnable packaging materials are depreciated over 3-10 years. The accounting policies for property, plant and equipment are further described in section 2.3.

The obligation to refund deposits on returnable packaging materials is measured on the basis of deposit price, an estimate of the number of bottles, kegs, cans and crates in circulation, and expected return rates.

1.2.3 SALES AND DISTRIBUTION EXPENSES

Total sales and distribution expenses decreased by 14% in reported terms and by 11% organically, as a result of tight cost control in response to the COVID-19 lockdowns and restrictions.

Sales and distribution expenses

2020	2019
4,390	5,581
5,101	5,768
5,882	6,477
15,373	17,826

ACCOUNTING POLICIES

Marketing expenses consist of expenses for brand marketing and trade marketing.

Brand marketing is an investment in the Group's brands and consists of brand-specific investments in the development of communication vehicles, the use of these to drive the sale of branded products, sales campaigns and sponsorships.

Trade marketing is promotional activities directed towards customers, such as the supply of point-ofsale materials, promotional materials and trade offers.

Sales expenses comprise costs relating to general sales activities, write-downs for bad debt losses, wages and salaries as well as depreciation and impairment of sales equipment. Distribution expenses comprise costs incurred in distributing goods, wages and salaries, and depreciation and impairment of distribution equipment.

1.2.4 OTHER OPERATING ACTIVITIES, NET

Other operating activities are secondary to the principal activities of the Group and include income and expenses relating to rental properties, restaurants, on-trade loans, research activities, and gains and losses on disposal of intangible assets and property, plant and equipment. On-trade loans, net, are impacted by impairment of outstanding loans

as a consequence of the impact of COVID-19 as further described in section 1.5.1.

Other operating activities, net

DKK million	2020	2019
Gains and losses on disposal of property, plant and equipment and intangible
assets, net	53	56
On-trade loans, net	-204	44
Real estate, net	38	11
Research centres, net	-123	-133
Other, net	85	130
Total	-151	108

ACCOUNTING POLICIES

Gains and losses on disposal of intangible assets and property, plant and equipment are determined as the sales price less selling costs and the carrying amount at the disposal date.

On-trade loans, net, comprise the effective interest on the loans measured at amortised cost less impairment.

Expenses relating to research activities comprise research in Denmark and France less funding received from the Carlsberg Foundation for the operation of the Carlsberg Research Laboratory and grants received to fund research. The funding and grants are recognised in the income statement in the same period as the activities to which they relate. Product development costs are included in cost of sales.

SECTION 1.3 FOREIGN EXCHANGE RISK RELATED TO EARNINGS

The majority of the Group's activities take place outside Denmark and in currencies other than DKK. Foreign exchange risk is therefore a principal financial risk for the Group, and exchange rate fluctuations can have a significant impact on the income statement.

TRANSACTION RISKS ON PURCHASES AND SALES

The Group is exposed to transaction risks on purchases and sales in currencies other than the local functional currencies. The Group aims to hedge 70-90% of future cash flows in currencies other than the local functional currency on a four-quarter rolling basis.

REVENUE BY CURRENCY (%)

2020 (2019)

EUR 18% (19%) CNY 17% (14%) RUB 11% (11%) DKK 8% (10%) NOK 6% (5%) GBP 5% (5%) CHF 5% (5%) SEK 4% (4%) LAK 4% (4%) Other 22% (23%)

The EUR/DKK exposure is considered to be limited and is not hedged.

Western Europe

For the entities in Western Europe, a major part of the purchases in foreign currencies is in EUR. This also applies for markets with a functional currency other than EUR.

Hedging of EUR against the local currencies will effectively eliminate a significant part of the currency risk in the entities' operating profit in local currency. At Group level, these hedges are effectively a hedge of (parts of) the revenue in the relevant currency and are accounted for as cash flow hedges, cf. section 4.8. The hedged amounts and the sensitivity analysis regarding these hedges are shown in section 4.6.4.

Asia

The transaction risk is considered to be less significant due to lower sales and purchases in currencies other than the local functional currencies as well as the high correlation between USD and most of the Asian currencies. Furthermore, the currencies are expensive to hedge and, in some cases, not possible to hedge at all. As a consequence, the risk is not hedged.

Eastern Europe

Baltika Breweries and the other entities in Eastern Europe have expenses in both USD and EUR, and appreciation of RUB and other currencies vis-à-vis EUR and USD has a positive impact on operating profit, while depreciation has a negative effect. The Group has chosen not to systematically hedge the

transaction risk due to the significant cost of hedging these currencies over a longer period of time. For 2020 and 2021, the Group has chosen to hedge a portion of Baltika Breweries' and Carlsberg Ukraine's expenses in USD. The volatility of the Eastern European currencies will continue to affect operating profit measured in both DKK and local currencies. Furthermore, some of the entities in Eastern Europe hold intercompany deposits in EUR and USD. The revaluation of these is recognised in financial items.

TRANSLATION RISK

The Group is exposed to risk from translation of foreign entities into the Group's presentation currency, DKK.

The single largest translation exposure in respect of operating profit in 2020 was RUB due to the double-digit depreciation of the currency compared with 2019. Looking into 2021, the largest exposure in terms of EBIT and currency volatility is CNY, while RUB remains the single largest exposure on translation of net investments in foreign entities.

The exposure to fluctuations in EUR/DKK is considered to be limited due to Denmark's fixed exchange rate policy towards EUR and is consequently not hedged.

The Group has chosen not to hedge the exposure arising from translation of revenue or earnings in foreign currencies. To reduce the risk, the Group has raised debt denominated in the currencies in which the Group generates significant earnings and cash flow.

Impact on operating profit

Developments in exchange rates between DKK and the functional currencies had a negative impact of 3.9% on operating profit measured in DKK.

Entities in	Functional currency	Change in average FX rate 2019 to 2020
The eurozone	EUR	-0.16%
China	CNY	-2.10%
Russia	RUB	-11.40%
United Kingdom	GBP	-1.60%
Switzerland	CHF	3.80%
Norway	NOK	-8.20%
Sweden	SEK	1.00%
Laos	LAK	-5.50%

SECTION 1.4 CASH FLOW FROM OPERATING ACTIVITIES

Change in trade working capital amounted to DKK 1,321m (2019: DKK 491m), primarily due to a decline in trade receivables due to lower sales and increased impairments. This was partly offset by a decrease in deposit liabilities.

Other working capital decreased by DKK 1,033m (2019: increase of DKK 634m), mainly impacted by lower VAT payable and changes in provisions.

The change in on-trade loans amounted to DKK 339m (2019: DKK 50m).

Restructuring costs paid amounted to DKK -531m (2019: DKK -445m), a large part of which relates to termination benefits to employees made redundant due to optimisations and reorganisations across the Group.

Net interest etc. paid amounted to DKK -424m (2019: DKK -894m). The decrease in net interest was mainly due to settlements of derivative financial instruments as well as lower interest income.

Income tax paid amounted to DKK -1,958m (2019: DKK -2,234m). The decrease in tax paid was the result of lower operating profit in some markets, mainly Laos, Greece, Norway and Russia.

Cash flow from disposal of property, plant and equipment and intangible assets was DKK 222m (2019: DKK 1,714m). In 2019, the cash flow included the proceeds from disposal of the former brewery sites in Trondheim, Norway, and Hamburg, Germany, totalling DKK 1,503m.

Average trade working capital improved from -16.8% to -18.6% of revenue, primarily due to the decrease in revenue.

Other specifications of cash flow from operating activities

DKK million	Section	2020	2019

Other non-cash items
Share of profit after tax of associates and joint ventures	5.5	-315	-278
Gain on disposal of property, plant and equipment and intangible assets, net	2.3	-53	-56
Share-based payments		42	217
Transfer of long-term medical insurance obligation	7.4	-199	-162
Other items		-7	-41
Total		-532	-320

Trade working capital
Inventories		-1	-188
Trade receivables		1,484	82
Trade payables, duties payable and deposits on returnable packaging materials		-162	597
Total		1,321	491

Other working capital
Other receivables		111	254
Other payables		-403	268
Retirement benefit obligations and other liabilities related to
operating profit before special items		-601	154
Unrealised foreign exchange gains/losses		-140	-42
Total		-1,033	634
On-trade loans
Loans provided		-464	-685
Repayments		353	426
Amortisation of on-trade loans		450	309
Total		339	50

SECTION 1.5 TRADE RECEIVABLES AND ON-TRADE LOANS

The Group's non-current receivables consist mainly of on-trade loans that fall due more than one year from the reporting date. As at 31 December 2020, it also includes the prepayment for the acquisition of Wernesgrüner Brewery, Germany. Of the total non-current receivables, DKK 258m (2019: DKK 207m) falls due more than five years from the reporting date.

The carrying amount of receivables approximates their fair value. For on-trade loans, the fair value is calculated as discounted cash flows using the interest rate at the reporting date.

ON-TRADE LOANS

Under certain circumstances, the Group grants loans to on-trade customers in France, the UK, Switzerland, Germany and Sweden. On-trade loans are spread across a large number of customers/debtors and consist of several types of loan, including loans repaid in cash or through reduced discounts and guarantees for loans provided by third parties, cf. section 3.3. The operating entities monitor and control these loans in accordance with Group guidelines.

The average effective interest rate on loans to the on-trade was 3.2% (2019: 4.5%).

Credit risk on receivables

DKK million

2020	Gross receivables	Loss allowance	Receivables, net	Weighted average loss rate
Receivables from sales of goods and services
Not past due	3,178	-182	2,996	6%
Overdue 1-30 days	349	-87	262	25%
Overdue 31-90 days	178	-75	103	42%
Overdue > 90 days	406	-355	51	87%
Receivables from sales of goods and services	4,111	-699	3,412
On-trade loans
Not past due	797	-101	696	13%
Overdue 1-30 days	14	-	14	-
Overdue 31-90 days	31	-3	28	10%
Overdue > 90 days	796	-395	401	50%
On-trade loans	1,638	-499	1,139
Other receivables
Not past due	1,595	-3	1,592	0%
Overdue 1-30 days	12	-	12	-
Overdue 31-90 days	53	-	53	-
Overdue > 90 days	127	-21	106	17%
Other receivables	1,787	-24	1,763
Total	7,536	-1,222	6,314
Total 2019	8,891	-712	8,179

Receivables included in the statement of financial position

	Non current		Current	Total
2020	Receivables	Trade receivables	Other receivables
Receivables from sales of goods and services	-	3,412	-	3,412
On-trade loans	826	313	-	1,139
Other receivables	178	-	1,585	1,763
Operating receivables	1,004	3,725	1,585	6,314
Prepayment for acquisition	501	-	-	501
Total receivables	1,505	3,725	1,585	6,815
2019
Receivables from sales of goods and services	-	4,889	-	4,889
On-trade loans	975	450	-	1,425
Other receivables	204	-	1,661	1,865
Total	1,179	5,339	1,661	8,179

SECTION 1.5 (CONTINUED) TRADE RECEIVABLES AND ON-TRADE LOANS

OTHER RECEIVABLES

Other receivables primarily comprise VAT and similar government receivables, interest receivables and other financial receivables, which are associated with low risk. The credit risk related to other receivables remains almost unchanged compared with previous years, as they are less impacted by the COVID-19 pandemic.

On-trade loans recognised in other operating activities, net

DKK million	2020	2019
Interest and amortisation of on-trade loans	50	75
Losses and write-downs on on-trade loans	-254	-31
On-trade loans, net	-204	44

Development in impairment losses on receivables

DKK million					2019
2020	Receivables from sales of goods and services	On-trade loans	Other receivables	Total	Total
Impairment at 1 January	-477	-214	-21	-712	-654
Impairment losses recognised	-323	-317	-2	-642	-187
Realised impairment losses	38	-25	-	13	97
Reversed impairment losses	85	62	7	154	57
Transfer	-71	-7	-13	-91	-
Foreign exchange adjustments	49	2	5	56	-25
Impairment at 31 December	-699	-499	-24	-1,222	-712

1.5.1 CREDIT RISK

In 2020, receivables not past due amounted to 74% (2019: 77%) of total gross receivables. The closure of on-trade businesses and other COVID-19 restrictions are impacting our customers, increasing in particular the past-due share of gross loans to on-trade customers to 51% (2019: 29%). Total impairment losses on trade loans were DKK 499m (2019: DKK 214m).

The past-due share for trade receivables has increased from 21% to 23%.

The credit risk is being closely managed in the markets and assessed in light of the changing restrictions, and the COVID-19 impact on the global risk pattern is being evaluated at Group level.

Throughout the year and continuing into 2021, our customers in most markets were impacted by lockdowns, full or partial closure of ontrade businesses, restrictions on cultural and sports activities, social distancing and other

government restrictions in response to the COVID-19 pandemic.

This makes our customers extremely vulnerable and dependent on ongoing government support in the form of subsidies and extended payment terms.

The increased credit risk on both trade receivables and on-trade loans already seen across all markets in 2020 is expected to continue into 2021.

The estimated impairment losses consider the expected impact both from the continuing restrictions and when government financial support schemes and extended payment terms come to an end when markets reopen.

RECEIVABLES FROM SALES OF GOODS AND SERVICES

(BROKEN DOWN BY COUNTRY)

2020 (2019)

Denmark 5% (5%) Other 44% (52%)

The distribution of receivables broken down by country is affected by market-specific changes in payment patterns. For receivables from sale of goods and services, the distribution is furthermore impacted by the amounts of receivables sold.

The relative share of receivables in the UK has increased following the acquisition of Marston's brewing activities. The overall level of receivables sold is similar to 2019.

ON-TRADE LOANS (BROKEN DOWN BY COUNTRY)

SECTION 1.5 (CONTINUED) TRADE RECEIVABLES AND ON-TRADE LOANS

ACCOUNTING ESTIMATES AND JUDGEMENTS

On-trade loan agreements are complex, cover several aspects of the customer relationship and may vary from agreement to agreement. Management assesses the recognition and classification of income and expenses for each agreement, including the allocation of payments from the customer between revenue, discounts, interest (other operating activities) and repayment of the loan.

Management also assesses both individually and on a portfolio basis whether developments in local conditions for on-trade customers could impact the expected credit losses.

Exposure to credit risk on receivables is managed locally, and credit limits are set as deemed appropriate for the customer, taking into account the current local market conditions.

The local entities assess the credit risk and adhere to Group guidelines, which include setting credit limits, encouraging cash payment, purchasing credit insurance and taking collateral.

In assessing credit risk, management analyses the need for impairment of trade receivables and ontrade loans due to customers' inability to pay. Many customers are currently dependent on government subsidies and support in the form of extended payment terms. The credit risk has thereby increased significantly during 2020 and is expected to continue to increase into 2021.

At year-end 2020, management has therefore assessed the lifetime expected credit losses for both trade receivables and on-trade loans, while in

previous years expected credit losses were applied to on-trade loans.

Expected credit losses are assessed for portfolios of receivables based on customer segments, historical information on payment patterns, terms of payment, concentration maturity, the impact of continuing COVID-19 restrictions and the expected impact of government schemes coming to an end when markets reopen. The expected impact includes the risk of insolvencies due to lack of liquidity when the extended government payment terms cease. The portfolios are based on on-trade and off-trade customers, and on-trade receivables and loans.

On-trade loans carry a higher risk than trade receivables and are concentrated on a few markets. The local entities manage and control these loans in accordance with Group guidelines.

The credit risk on on-trade loans can be reduced through collateral and pledges of on-trade movables (equipment in bars, cafés etc.). The fair value of the pledged on-trade movables cannot be estimated reliably but is assessed to be insignificant, as they cannot readily be used again.

ACCOUNTING POLICIES

Receivables are recognised initially at fair value and subsequently measured at amortised cost less loss allowance or impairment losses. Trade receivables comprise sale of goods and services as well as shortterm on-trade loans to customers. Other receivables comprise VAT receivables, loans to partners, associates and joint ventures, interest receivables and other financial receivables.

Regarding the on-trade loans, any difference between the present value and the nominal amount at inception is treated as a prepaid discount to the customer, and is recognised in the income statement in accordance with the terms of the agreement.

The market interest rate is used as the discount rate, corresponding to the money market rate based on the maturity of the loan with the addition of a risk premium. The effective interest on these loans is recognised in other operating activities, net. The amortisation of the difference between the discount rate and the effective interest rate is included as a discount in revenue.

The Group applies the simplified approach to measure expected credit losses. This entails recognising a lifetime expected loss allowance for all trade receivables. Loss rates are determined based on grouping of trade receivables sharing the same credit risk characteristics and past due days. Regarding on-trade loans and loans to associates, a loss allowance is recognised based on 12-month or lifetime expected credit losses, depending on whether a significant increase in credit risk has arisen since initial recognition.

SECTION 2

ASSET BASE AND RETURNS

118.8bn TOTAL ASSETS (DKK)

Total assets decreased by DKK 4.2bn, mainly due to a decrease in intangible assets and property, plant and equipment, which was partly offset by an increase in cash and the acquisition of Marston's brewing activities.

Intangible assets amounted to DKK 66.1bn at 31 December 2020 (2019: DKK 70.0bn), and were impacted by the depreciation of the Russian rouble and the impairment of a brand in Cambodia, and partly offset by the purchase of the Brooklyn brand rights and goodwill from the Marston's acquisition.

Property, plant and equipment decreased by DKK 1.3bn to DKK 26.3bn (2019: DKK 27.6bn), mainly impacted by depreciation and changes in foreign exchange rates.

Current assets increased by DKK 1.0bn to DKK 19.0bn. The increase was mainly driven by an increase in cash of DKK 2.9bn and partly offset by lower receivables and inventories.

3.6bn CAPEX (DKK)

CapEx, excluding the purchase of the Brooklyn brand rights, declined by DKK 1.0bn due to lower investment in sales CapEx, fewer returnable glass bottles due to lower demand, less need for capacity expansions in draught lines, and general cancellation and postponement of projects that are not business critical at a time when the Group is impacted by the COVID-19 pandemic. CapEx to amortisation and depreciation, excluding rightof-use assets, decreased to 90% (2019: 111%). Including purchase of the Brooklyn brand rights, the ratio amounts to 110%.

CAPEX* AND AMORTISATION/ DEPRECIATION (DKKbn)

2.0

CapEx

CapEx/revenue

3.0

4.0

5.0

Return on invested capital (ROIC) increased by 10bp to 8.9%, positively impacted by the lower invested capital and a lower effective tax rate, which more than offset the lower profitability. ROIC excluding goodwill increased by 80bp to 23.2%.

RETURN ON INVESTED CAPITAL

(% 12-MONTH AVERAGE)

5.0%

6.0%

7.0%

8.0%

ASSET BASE (DKKbn)

*Excluding the purchase of the Brooklyn brand rights.

Amortisation and depreciation

SECTION 2.1 SEGMENTATION OF ASSETS AND RETURNS

At year-end, invested capital was down by DKK 4.6bn, primarily due to the depreciation of the Russian rouble. The decrease was partly offset by the acquisition of Marston's brewing activities, which increased consolidated assets by DKK 3.3bn, and by the acquisition of the Brooklyn brand rights.

Both acquisitions had a limited impact on average invested capital, as Carlsberg Marston's Brewing Company has only been included for two months and the Brooklyn brand rights for six months.

The impact on total assets from fluctuations in the Russian rouble was a decrease of DKK 7.5bn (2019: increase of DKK 4.0bn).

Non-current assets comprise intangible assets and property, plant and equipment owned by the segment/country, even if the income is earned outside the segment/country that owns the asset. Furthermore, they include noncurrent financial assets other than financial instruments and tax assets.

Not allocated comprises supporting companies without brewing activities and eliminations of investments in subsidiaries, receivables and loans. Invested capital increased following the acquisition of the Brooklyn brand rights and the prepayment for the acquisition of Wernesgrüner Brewery.

Geographical allocation of non-current assets

DKK million	2020	2019
Denmark
(Carlsberg A/S'
domicile)	4,260	3,472
Russia	18,509	24,518
China	14,320	14,569
Other countries	59,459	59,439
Total	96,548	101,998

ACCOUNTING ESTIMATES AND JUDGEMENTS

The calculation of return on invested capital (ROIC) uses operating profit before special items adjusted for tax based on the effective tax rate, and invested capital including assets held for sale and trade receivables sold, and excludes contingent considerations and income tax.

ACCOUNTING POLICIES

The Group's assets and returns are segmented on the basis of geographical regions in accordance with the management reporting for the current year, cf. section 1.1.

Invested capital

Invested capital excl.

DKK million	2020	2019
Total assets	118,816	123,063

Less
Tax assets	-1,767	-1,938
Financial receivables,
hedging instruments and
receivables sold	1,904	1,899
Cash and cash equivalents	-8,093	-5,222
Assets included	110,860	117,802
Trade payables	-16,598	-17,149
Deposits on returnable
packaging materials	-1,276	-1,545
Provisions, excl.
restructurings	-4,322	-5,389
Other liabilities, excl. hedging
instruments	-7,123	-7,557
Liabilities offset	-29,319	-31,640
Invested capital	81,541	86,162

Goodwill -50,492 -53,130

goodwill 31,049 33,032 Invested capital, average 82,227 86,952

DKK million

Invested capital 41,795 18,045 20,915 6 80,761 780 19,151 2,682 8,430 6 30,269 780 1,474 1,395 552 965 4,386 10 2,095 1,499 654 78 4,326 10 50 292 10 5 357 - 9.4% 15.8% 7.0% - 9.0% - 20.2% 88.8% 17.4% - 24.4% -	Group, total
Invested capital excl. goodwill Acquisition of property, plant and equipment and intangible assets Amortisation and depreciation Impairment losses Return on invested capital (ROIC) ROIC excl. goodwill 2019	81,541
	31,049
	4,396
	4,336
	357
	8.9%
	23.2%

Invested capital 39,299 20,464 27,193 -2,347 84,609 1,553	86,162
Invested capital excl. goodwill 18,372 4,110 11,344 -2,347 31,479 1,553	33,032
Acquisition of property, plant and equipment and intangible assets 2,100 1,539 602 330 4,571 21	4,592
Amortisation and depreciation 2,025 1,450 710 319 4,504 8	4,512
Impairment losses 42 29 50 - 121 -	121
Return on invested capital (ROIC) 11.5% 14.2% 5.8% - 8.9% -	8.8%
ROIC excl. goodwill 23.7% 67.5% 13.9% - 23.1% -	22.4%

SECTION 2.2 IMPAIRMENT

2.2.1 RECOGNISED IMPAIRMENTS

In 2020 and 2019, the impairment tests of goodwill and brands with indefinite useful life were prepared at the reporting date.

Impairment losses of DKK 200m relating to the Angkor brand (Cambodia), a minor local brand of DKK 31m, other intangible assets of DKK 4m and DKK 124m (2019: DKK 124m) relating to property, plant and equipment have been recognised. The impairment loss on the Angkor brand is due to a significant decline in volumes impacted by COVID-19 restrictions in the market.

In 2019, impairment losses primarily related to steel keg installations and filling lines in the Nordic countries, which were impacted by the roll-out of the DraughtMaster system.

In 2020, the Group recognised reversal of impairment losses of DKK 2m (2019: DKK 3m) in Eastern Europe relating to assets that have been brought back into production.

Impact of COVID-19

The COVID-19 pandemic and the consequent impact on volumes, earnings and cash flows indicate possible impairment of non-current assets.

The Group has carefully assessed the expected recovery from the pandemic in terms of both volumes and earnings. Since the beverage industry is resilient and volumes have to some extent shifted from on-trade to off-trade, it is expected that these will shift back to the ontrade and earnings return to the level before the pandemic. The expected timing and speed of the recovery differ from market to market, depending on the extent of government restrictions as well as consumer behaviour.

With the exception of the Angkor brand, the assessment has not identified any indication of impairment of non-current assets as a result of the COVID-19 pandemic.

Significant amounts of goodwill and brands

Goodwill and brands with indefinite useful life relating to the acquisitions of Baltika Breweries, Kronenbourg, Chongqing Brewery Group and the 40% non-controlling interest in Carlsberg Breweries A/S each accounted for 10% or more of the total carrying amount of goodwill and brands with an indefinite useful life at the reporting date.

Goodwill from these acquisitions has been allocated to CGUs based on the geographical segmentation.

The international brands acquired with the 40% non-controlling interest in Carlsberg Breweries A/S and the Baltika brand are individually material and specified in section 2.2.3.

ACCOUNTING ESTIMATES AND JUDGEMENTS

Identification of cash-generating units

The Group's management structure reflects the geographical segments, cf. section 1.1, and decisions are made by the regional managements responsible for performance, operating investments and growth initiatives in their respective regions.

There is significant vertical integration of the production, logistics and sales functions, supporting and promoting optimisations across the Group or within regions.

Assets, other than goodwill and brands with regional and global presence, are allocated to individual cashgenerating units (CGUs), being the level at which the assets generate largely independent cash inflows. As

the Group operates with local sales and production organisations, the cash inflows are generated mostly locally, and the CGUs are therefore usually identified at country level.

Within 12 months from the date of acquisition, the determination of CGU allocation is made, and cash inflows are assessed in connection with the purchase price allocation.

Goodwill

Goodwill does not generate largely independent cash inflows on its own and is therefore allocated to the Group's geographical segments, which is the level at which it is monitored for internal management purposes.

At the time of acquisition of entities, goodwill is allocated to a CGU, cf. section 5.2. The structure and groups of CGUs are reassessed every year. The Group gained control of Marston's brewing activities in 2020 and of the Acrospires activities in 2019. The goodwill recognised on these acquisitions was allocated to the Western Europe CGU.

Brands

Cash flows for brands are separately identifiable and are therefore tested individually for impairment. This test is performed in addition to the test for impairment of goodwill.

The following brands are considered significant when comparing their carrying amount with the total carrying amount of brands with indefinite useful life: • Baltika brand

• International brands

International brands is a group of brands recognised in connection with the acquisition of the 40% noncontrolling interest in Carlsberg Breweries A/S and allocated to Western Europe. The amount is not allocated to individual brands.

Impairment of brands and other non-current assets

DKK million	2020	2019
Brands and other intangible assets
Brands	231	6
Other intangible assets	4	7
Total	235	13

Property, plant and equipment

Plant, machinery and equipment	124	111
Plant, machinery and equipment (reversal of impairment losses)	-2	-3
Total	122	108
Total impairment losses, net	357	121
Of which recognised in special items, cf. section 3.1	307	91

Corporate assets

The Group has identified capitalised software relating to the Group's ERP systems as corporate assets, and as such these are peripheral to the generation of cash inflow. The Group's ERP landscape is closely linked to the internal management structure, and the identified assets are therefore tested for impairment at the CGU level to which goodwill is allocated.

Other non-current assets

Other non-current assets are tested for impairment when indications of impairment exist.

For property, plant and equipment, management performs an annual assessment of the assets' future application, for example in relation to changes in production structure, restructurings or brewery closures. In 2020, the assessment also included the impact of the COVID-19 pandemic.

For investments in associates and joint ventures, examples of indications of impairment are lossmaking activities or major changes in the business environment.

Goodwill and brands with indefinite useful life are subject to an annual impairment test, performed initially before the end of the year of acquisition.

The test is performed at the level where cash flows are considered to be generated: either at CGU level or at the level of a group of CGUs. All assets are tested if an event or circumstance indicates that the carrying amount may not be recoverable. If an asset's carrying amount exceeds its recoverable amount, an impairment loss is recognised. The recoverable amount is the higher of the asset's fair value less costs of disposal and its value in use.

For all assets, the value in use is assessed based on budget and target plan with reference to the expected future net cash flows. The assessment is based on the lowest CGU affected by the changes that indicate impairment. The cash flow is discounted by a discount rate adjusted for any risk specific to the asset, if relevant to the applied calculation method.

Impairment losses on goodwill and brands, significant losses on property, plant and equipment, associates and joint ventures, and losses arising on significant restructurings of processes and structural adjustments are recognised as special items. Minor losses are recognised in the income statement in the relevant line item.

Impairment of goodwill is not reversed. Impairment of other assets is reversed only to the extent of changes in the assumptions and estimates underlying the impairment calculation. Impairment is only reversed to the extent that the asset's new carrying amount does not exceed the carrying amount of the asset after amortisation/depreciation had the asset not been impaired.

2.2.2 IMPAIRMENT TEST OF GOODWILL

The carrying amount of goodwill allocated to groups of CGUs

DKK million	2020	2019
Western Europe	22,644	20,927
Asia	15,363	16,354
Eastern Europe	12,485	15,849
Total	50,492	53,130

Estimating expected cash flow involves developing multiple probability-weighted scenarios to reflect different outcomes in terms of timing and amount. Measurement of the forecast period growth rates reflects risk adjustments made to calculate the expected cash flows.

Key assumptions

2020	Forecast cash flow growth	Terminal period growth	Pre-tax discount rate
Western Europe	-5%	0.0%	1.5%
Asia	2%	1.0%	4.1%
Eastern Europe	-14%	4.0%	6.7%

The average cash flow growth in the forecast period reflects the significant risk adjustments included in the forecast specifically for the impairment test. The risk adjustment considers only negative alternative scenarios to account for the particular uncertainty related to the continued impact on earnings and cash flow from the COVID-19 pandemic, the time and speed of the recovery, and the volatile macroeconomic and competitive situation in Eastern Europe.

Potential upsides are not identified and adjusted in the cash flows used for impairment testing. Growth is projected in nominal terms and therefore does not translate into cash flow at the same growth rate in the Group's presentation currency, DKK.

WESTERN EUROPE

The region primarily comprises mature beer markets, and market volumes tend to be flat. In recent years, the region has seen improving beer category dynamics through innovations, increased interest in craft & speciality beers and alcohol-free brews, and an overall improved category perception.

The region is generally characterised by wellestablished retail structures and a strong tradition of beer consumption. Consumption is generally resilient, but the on-trade tends to suffer in a weak macroeconomic environment. In 2020 however, the region suffered as a result of lockdowns across markets due to COVID-19. These will continue into 2021 but are not expected to have a significant longterm effect.

In the short term, the focus will be on recovering and regaining ground after the COVID-19 pandemic, and secondly on improving margins by driving a positive price/mix development and reducing the cost base across the value chain. This process is part of the SAIL'22 initiatives.

ASIA

The importance of Asia for the Group has increased significantly over the past decade, during which the Group has strengthened its presence in the region, both organically and through acquisitions.

The Asian markets are very diverse but offer prospects for volume and value growth, underpinned by young populations, urbanisation, rising disposable income levels, growing economies and, in some markets, relatively low per capita beer consumption. However, as many Asian markets are emerging markets, development is subject to volatility.

Both the on-trade and off-trade channels are generally characterised by a strong traditional outlet segment but with the modern outlet segment growing in most markets.

In 2020, markets in the region were impacted by COVID-19 at different times and to different extents, with some markets already seeing a strong rebound in the second half of the year.

The focus in the region is on revenue growth. Activities include the continued expansion of our international premium brands, in particular Tuborg, 1664 Blanc and Carlsberg, and the strengthening and premiumisation of our local power brands in combination with a continued focus on costs and efficiencies.

EASTERN EUROPE

The two main markets in the region are Russia and Ukraine, which account for 67% and 20% respectively of regional volumes.

In recent years, the modern off-trade, consisting of hypermarkets and supermarkets, has grown significantly and now accounts for approximately 50% of the market in Russia. Another growing channel is the so-called beer boutiques, which is estimated to account for around 20% of the market.

The region saw limited impact from COVID-19 due to the low on-trade exposure.

The competitive environment has been challenging in recent years, particularly in Russia, which has seen an increased focus on volume. To offset previous years' volume declines caused by the focus on value in this market, the Group chose to focus more on

volume, which resulted in significant volume growth in 2020. We expect the focus on volume and the related margin pressure to continue in the coming year.

Management expects the current macroeconomic situation and developments to continue in the short term, with inflation stabilising at the current level. In the medium to long term, interest rates are expected to decline and stabilise at a level slightly lower than currently observed in the market, although still with some volatility.

NEW SEGMENTATION FOR 2021

As described in section 9.5, the Group's segmentation and regional split of entities changed as of 1 January 2021, and the allocation of CGUs changed accordingly. This change will not have any impact on the conclusion of the impairment test of goodwill.

ACCOUNTING ESTIMATES AND JUDGEMENTS

Goodwill

The value in use is the discounted value of the expected future risk-adjusted cash flows. This involves developing multiple probability-weighted scenarios to reflect different outcomes in terms of timing and amount.

Key assumptions

The cash flow is based on the budget and target plans for the next three years. Cash flows beyond the three-year period are extrapolated using the terminal period growth rate. The budget and plans for 2021- 2023 take a cautious view of the extent and speed of the recovery from the COVID-19 pandemic.

The probability weighting applied is based on past experience and the uncertainty of the prepared budget and target plans.

Potential upsides and downsides identified during the budget process and in the daily business are reflected in the future cash flow scenarios for each CGU.

The risk-adjusted cash flows are discounted using a discount rate that reflects the risk-free interest rate for each CGU with the addition of a spread. The interest rates used in the impairment tests are based on observable market data. Please refer to the description of discount rates in section 2.2.3.

The key assumptions on which management bases its cash flow projections are:

Volumes
Sales prices
Input costs
Operating investments
Terminal period growth

The assumptions are determined at CGU level and are based on past experience, external sources of information and industry-relevant observations for each CGU. Local conditions, such as expected developments in macroeconomic and market conditions specific to the individual CGUs, are considered. The assumptions are challenged and verified by management at CGU and Group level.

The budget and target plan process take into account events or circumstances that are relevant to reliably project the short-term performance of each CGU. Examples include significant campaign activities, changes in excise duties etc., which may have a short-term impact but are non-recurring. Given their short-term nature, they are not taken into consideration when estimating the terminal period growth rate.

Impact of COVID-19

For 2020, the current and expected future impact of the COVID-19 pandemic has been carefully considered. The beverage industry is generally resilient, and it is expected that volumes and earnings will recover to pre-pandemic levels within the next few years. The decline in earnings in 2020 is therefore not expected to continue in the long term.

However, to avoid overlooking any long-term impact, additional risk adjustments have been made for the

uncertainty regarding the recovery from the pandemic.

Likewise, any impact on the development in volumes, sales prices, input cost and operating investments has been considered. Such impact primarily relates to the expected timing of a given development when this has been slowed down by the pandemic.

Volumes

Projections are based on past experience, external market data, planned commercial initiatives, such as marketing campaigns and sponsorships, and the expected impact on consumer demand and the level of premiumisation. If relevant, the projections are adjusted for the expected changes in the level of premiumisation. No changes in market share are assumed in the medium or long term.

Demographic expectations general to the industry, such as the development in population, consumption levels, generation-shift patterns, rate of urbanisation and of macroeconomic trends, are also considered in medium- and long-term projections.

Events and circumstances can impact the timing of volumes entering the market. This can be affected by excessive stocking related to an increase in excise duties, campaign activities, and the timing of national holidays and festivals. Such short-term effects are not material to volume projections and do not impact the long-term projections.

Sales prices

The level of market premiumisation and the locally available portfolio are key drivers in identifying price points. When planning pricing structures, factors including price elasticity, local competition and inflation expectations can also impact the projection.

Increases in excise duties are typically passed on to the customers immediately or with a delay of no more than a few months. Since the increase is a pass-through cost and thereby compensated for by price increases at the time of implementation, it does not impact the long-term sales price growth and is therefore not taken into consideration in the projections unless circumstances specifically indicate

otherwise. No changes to duties in the short or medium term are taken into consideration unless there is a firm plan to introduce changes.

Input costs

Input costs in the budget and target plans are based on past experience and on:

Contracted raw and packaging materials
Contracted services within sales, marketing, production and logistics
Planned commercial investments
Cost optimisations not related to restructurings
Expected inflation

In the long term, projections follow the level of inflation unless long-term contracts are in place.

Operating investments

Projections are based on past experience of the level of necessary maintenance of existing production capacity, including replacement of parts. This also includes planned production line overhauls and improvements to existing equipment. Non-contracted capacity increases and new equipment are not included.

Terminal period growth

Growth rates are projected to be equal to or below the expected rate of general inflation and assume no nominal economic growth. The projected growth rates and the applied discount rates are compared to ensure a sensible correlation between the two.

2.2.3 IMPAIRMENT TEST OF BRANDS

Brands with indefinite useful life

In 2020, significant brands represented 55% (2019: 60%) of the total carrying amount of brands with indefinite useful life. The decrease in the carrying amount of the Baltika brand compared with 2019 is due only to the depreciation of RUB.

Other brands comprise a total of 19 brands (2019: 18 brands) that individually are not material compared with the total carrying amount.

BALTIKA BREWERIES

Despite COVID-19, the Russian beer market grew slightly again in 2020, due to the relatively small on-trade sector and supported by very favourable weather during the summer.

Showing a positive trend in 2020, the Baltika brand has performed broadly in line with the growth projections made when the expected future growth for the brand was reassessed when the brand was impaired in 2017.

ANGKOR BRAND

The Angkor brand was recognised in connection with the acquisition of Cambrew Brewery, Cambodia, in 2018.

Following the acquisition, the volumes have not developed as expected due to failed attempt to

relaunch the brand combined with the impact of COVID-19.

The long-term expectations therefore remain significantly below the expectations at the time of acquisition, which is why the brand has been impaired by DKK 200m to DKK 86m.

Brands

The test for impairment of brands is performed using the relief from royalty method and is based on the expected future cash flows generated from the royalty payments avoided for the individual brand for the next 20 years and projections for subsequent years.

The risk-free cash flows are discounted using a discount rate reflecting the risk-free interest rate with the addition of the risk premium associated with the individual brand.

Key assumptions

The key assumptions on which management bases its cash flow projection include the expected useful life, revenue growth, a theoretical tax amortisation benefit, the royalty rate and the discount rate.

Expected useful life

Management has assessed that the value of brands with indefinite useful life can be maintained for an indefinite period, as these are well-established brands in their markets, some of which have existed for centuries. The beer industry is characterised as being

very stable with consistent consumer demand and a predictable competitive environment, and is expected to be profitable for the foreseeable future. Control of the brands is legally established and is enforceable indefinitely.

In management's opinion, the risk of the useful life of these brands becoming finite is minimal because of their individual market positions and because current and planned marketing initiatives are expected to sustain their useful life.

Revenue growth

At the time of acquisition of any individual brand, a revenue growth curve is forecast based on a longterm strategic view of the risk and opportunities relevant to the brand. The curve is forecast for a 20 year horizon. This horizon reliably reflects the lengthy process of implementing brand strategies to support a brand occupying its intended place in the Group's portfolio. The forecast period applied is comparable with the common term of the majority of licence agreements to which the Group is party.

In the local markets, the product portfolio usually consists of local power brands and international premium brands. When projecting revenue growth for local brands, in addition to their commercial strength – such as market share and segment position – the forecast takes into consideration the demographics of the primary markets, including expected developments in population, consumption levels, generation-shift patterns, rate of urbanisation, beer market maturity, level of premiumisation, circumstances generally limiting the growth opportunities for alcoholic beverages etc.

For brands with global or regional presence, enhanced investments in product development and marketing are expected. The expected growth rate for these brands is generally higher than for more localised brands, and is usually highest early in the 20-year period. Key assumptions

2020	2019
4,876	6,402
3,000	3,000
7,876	9,402

2020	Average revenue growth	Terminal period growth	Pre-tax discount rate	Post-tax discount rate
Baltika brand	4.4%	4.0%	11.3%	10.0%
International brands	1.1%	1.4%	3.7%	3.6%

Depending on the nominal growth expectations for the individual brand, the revenue growth in individual years may be above, equal to or below the forecast inflation level in the markets where the brand is present.

When preparing budgets, consideration is given to events or circumstances that are relevant to reliably project the short-term performance of each brand. Examples include significant campaign activities, changes in excise duties etc., which may have a short-term impact but are non-recurring and quickly absorbed by the business. Since the impact is not material to the long-term projections, it is not taken into consideration when estimating the long-term and terminal period growth rates. Please refer to the description of the impact of increases in excise duties in the description of sales prices in section 2.2.2.

In 2020, the current drop in revenue due to the COVID-19 pandemic and the expected recovery from this have been carefully considered. As the beverage industry is generally resilient, the decline in revenue in 2020 is expected to have only a short-term impact. Revenue is expected to recover to pre-pandemic levels in the medium and long term. The timing of the recovery has been carefully considered, particularly for brands with lower headroom to the carrying amount.

Tax benefit

The theoretical tax benefit applied in the test uses tax rates and amortisation periods based on current legislation. The impairment test applies tax rates in the range of 15-31% and amortisation periods of 5- 10 years.

Royalty rate

Royalties generated by a brand are based on the Group's total income from the brand and are earned globally, i.e. the income is also earned outside the CGU that owns the brand. If external licence agreements for the brand already exist, the market terms of such agreements are taken into consideration when assessing the royalty rate that the brand is expected to generate in a transaction with independent parties. The royalty rate is based on the actual market position of the individual brand in the global, regional and local markets, and assumes a 20-year horizon. This term is common to the beverage industry when licensing brands.

For some brands, the share of the total beer market profit exceeds the volume share to an extent that creates significant market entry barriers for competing brands and justifies a higher royalty rate.

In 2020, the royalty rate for one of the brands was adjusted downwards from 15% to 13% due to increased competition in the market and declining margins.

Royalty rates

International, premium and
speciality beers	3.5-13.0%
Strong regional and national brands	3.0-5.0%
Local and mainstream brands	2.0-3.5%

Discount rates

The discount rate is a weighted average cost of capital (WACC) that reflects the risk-free interest rate with the addition of a risk premium relevant to each brand.

The risk-free interest rates used in the impairment tests are based on observed market data. For countries where long-term risk-free interest rates are not observable or valid due to specific national or macroeconomic conditions, the interest rate is estimated based on observations from other markets and/or long-term expectations expressed by

international financial institutions considered reliable by the Group.

The added credit risk premium (spread) for the riskfree interest rate is fixed at market price or slightly higher, reflecting the expected long-term market price. The aggregate interest rate, including spread, thereby reflects the long-term interest rate applicable to the Group's investments in the individual markets.

Interest rates applied in Eastern Europe

In recent years, the macroeconomic situation has deteriorated significantly in Eastern Europe, resulting in interest rates and inflation increasing to a level significantly higher than the Group's long-term expectations.

In 2020, observable interest rates and inflation have normalised to the level expected by key international financial institutions. The observable risk-free interest and inflation have therefore been applied in the impairment test for 2020.

The Group continues to monitor market developments and compare these with the expectations of key international financial institutions to determine if the observable data can be applied.

The use of expected future interest rates in previous years in lieu of appropriate observable interest rates did not impact the conclusion of the impairment test because the relationship between discount rates and growth rates (the real interest rate) was expected to be constant. Expectations for the long-term real interest rate remain a key assumption for the impairment testing in general, and for CGUs with exposure to the Russian market in particular.

The impairment test of the Baltika brand is sensitive to changes in the real interest rate. Since no expected future long-term real interest rate can be directly observed, the estimate of a real interest rate is subjective and associated with risk.

Interest rates applied in Western Europe

Western Europe is experiencing very low interest rates, which in several countries are even lower than inflation, resulting in negative real interest rates. The Group generally applies a growth rate in the terminal period that is equal to or slightly lower than expected inflation. Management does not expect assets and CGUs subject to impairment testing to have a negative real interest rate in perpetuity.

To avoid applying negative real interest rates in perpetuity, the discount rate used to calculate net present value of the cash flows in the terminal period has been adjusted to incorporate an interest rate that is at least equal to the expected rate of inflation.

2.2.4 SENSITIVITY TESTS

Sensitivity tests have been performed to determine the lowest forecast and terminal period growth rates and/or highest discount rates that can occur in the groups of CGUs and brands with indefinite useful life without leading to any impairment loss.

The risk-free interest rates observable for Western Europe remained low at the end of 2020. The sensitivity tests calculate the impact of higher interest rates and allow for a doubledigit percentage-point increase in risk-free interest rates.

Due to a challenging macroeconomic situation in some CGUs and groups of CGUs, the Group performed additional sensitivity tests to ensure that no potential impairment had been overlooked. These additional sensitivity tests did not identify any potential impairment.

GOODWILL

The test for impairment of goodwill did not identify any CGUs or groups of CGUs to which goodwill is allocated where a reasonably possible negative change in a key assumption would cause the carrying amount to exceed the recoverable amount.

The goodwill allocated to Eastern Europe was primarily recognised when the Group completed the step acquisition of the remaining 50% of the Baltic Beverage Holding Group from Scottish & Newcastle in 2008. However, the impairment test includes 100% of the cash flow generated by Eastern Europe, resulting in the recoverable amount significantly exceeding the carrying amount.

BRANDS

Following the impairment losses recognised in 2017 and 2015 for the Baltika brand, a reasonably possible negative change in a key assumption would cause the carrying amount to exceed the recoverable amount. The sensitivity to changes in the assumptions is shown in the table below.

Key assumptions

The key assumptions relevant to the assessment of the recoverable amount are:

Volume
Price
Discount rate

The assumptions for volume and pricing are closely linked, which, together with the presence of multiple sub-brands in different geographies within each brand, makes individual sensitivity testing on the basis of these two assumptions highly impractical. Instead, sensitivity testing is performed for the overall revenue growth rate, in both the forecast period and the terminal period.

The sensitivity test for the maximum decline in growth rate in the forecast period assumes a year-on-year decline in the nominal growth rate, thereby estimating the accumulated effect of a negative change for the full forecast period.

The sensitivity tests were completed with all other assumptions unchanged, as it is relevant to assess the sensitivity to, for example, a decline in the growth rate independently of changes in the discount rate. This is because the growth rate in itself might be impacted by changes in brand strategy and other market factors.

The sensitivity calculated also assumes a straight-line impact despite the fact that changes in market dynamics and adjustments to these will in practice have different impacts in the individual years and might not apply in the long term.

Interest rates in Western Europe have been low for several years and are currently lower than inflation. An increase in the interest rates without a corresponding change in inflation would result in a lower recoverable amount for brands and could potentially lead to impairment. Management considers the risk of a significant write-down to be very low.

Baltika brand

The Baltika brand was written down to its recoverable amount at the end of 2017. As a result, even a small negative change in the key assumptions could lead to further impairment.

At 31 December 2020, the carrying amount of the Baltika brand was DKK 4,876m (2019: DKK 6,402m). The decline in the carrying amount is due to the depreciation of RUB.

Changes in the market dynamics in Russia and the increasingly challenging competitive environment could have a significant negative impact on the recoverable amount. Macroeconomic recovery could lead to further premiumisation or localisation, which could drive consumers towards international brands or local/regional brands.

An increase in the real interest rate from the current level (2.7%), either because of a higher interest rate or lower inflation, could significantly reduce the recoverable amount.

A 1 percentage point increase in the risk-free interest rate would result in a reduction in the recoverable amount of DKK 0.7bn, and a 1 percentage point decrease in the terminal growth rate would result in a reduction in the recoverable amount of DKK 0.3bn. The combined effect of a 1 percentage point negative change in the interest rate, the terminal growth rate and the average growth rate in the forecast period (year on year) would result in a reduction in the recoverable amount of DKK 1.3bn.

Angkor brand

As the Angkor brand was written down to the recoverable amount in 2020, a reasonably possible negative change in the key assumptions could lead to further impairment.

Following the impairment, the carrying amount of the brand amounts to DKK 86m. Any increase in the risk-free interest rate or decrease in the terminal growth rate would therefore result in a minor additional impairment.

Sensitivity test

DKKbn	Average forecast growth rate	Terminal period growth rate	Risk-free interest rate
∆	-1 %-point	-1 %-point	+1 %-point
Baltika brand	-0.5	-0.3	-0.7

SECTION 2.3 INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

DKK million				Intangible assets			Property, plant and equipment		Asset base
2020	Goodwill	Brands	Other intangible assets	Total	Land and buildings	Plant and machinery	Other equipment, fixtures and fittings	Total	Total
Cost
Cost at 1 January	54,748	27,548	4,967	87,263	18,978	30,595	15,760	65,333	152,596
Acquisition of entities	1,812	-	-	1,812	634	258	373	1,265	3,077
Additions, including right-of-use assets	-	804	245	1,049	224	1,781	1,818	3,823	4,872
Disposals	-	-	-66	-66	-603	-846	-1,392	-2,841	-2,907
Transfers	-	-	-6	-6	1,049	-1,222	195	22	16
Foreign exchange adjustments etc.	-4,496	-4,296	-173	-8,965	-1,054	-2,087	-1,140	-4,281	-13,246
Cost at 31 December	52,064	24,056	4,967	81,087	19,228	28,479	15,614	63,321	144,408
Amortisation, depreciation and impairment losses
Amortisation, depreciation and impairment losses at 1 January	1,618	11,593	4,025	17,236	8,258	18,827	10,641	37,726	54,962
Disposals	-	-	-42	-42	-464	-815	-1,253	-2,532	-2,574
Amortisation and depreciation	-	20	167	187	653	1,448	2,048	4,149	4,336
Impairment losses	-	231	4	235	8	84	30	122	357
Transfers	-	-	-	-	9	10	1	20	20
Foreign exchange adjustments etc.	-46	-2,417	-127	-2,590	-299	-1,399	-765	-2,463	-5,053
Amortisation, depreciation and impairment losses at 31 December	1,572	9,427	4,027	15,026	8,165	18,155	10,702	37,022	52,048
Carrying amount at 31 December	50,492	14,629	940	66,061	11,063	10,324	4,912	26,299	92,360
Right-of-use assets included at 31 December
Amortisation and depreciation	-	-	-	-	178	11	207	396	396
Carrying amount at 31 December	-	-	-	-	942	25	415	1,382	1,382

SECTION 2.3 (CONTINUED)

INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

DKK million				Intangible assets			Property, plant and equipment		Asset base
2019	Goodwill	Brands	Other intangible assets	Total	Land and buildings	Plant and machinery	Other equipment, fixtures and fittings	Total	Total
Cost
Cost at 1 January	52,752	25,028	5,683	83,463	17,321	28,960	14,197	60,478	143,941
Recognition of right-of-use assets	-	-	-	-	1,005	23	564	1,592	1,592
Restated cost at 1 January	52,752	25,028	5,683	83,463	18,326	28,983	14,761	62,070	145,533
Acquisition of entities	22	301	4	327	-	115	4	119	446
Additions, including right-of-use assets	-	-	118	118	424	2,139	2,448	5,011	5,129
Disposals	-	-	-925	-925	-873	-1,028	-2,011	-3,912	-4,837
Transfers	-	-	3	3	515	-680	156	-9	-6
Foreign exchange adjustments etc.	1,974	2,219	84	4,277	586	1,066	402	2,054	6,331
Cost at 31 December	54,748	27,548	4,967	87,263	18,978	30,595	15,760	65,333	152,596
Amortisation, depreciation and impairment losses
Amortisation, depreciation and impairment losses at 1 January	1,606	10,305	4,467	16,378	7,779	17,447	10,131	35,357	51,735
Disposals	-	-	-914	-914	-434	-884	-1,825	-3,143	-4,057
Amortisation and depreciation	-	21	405	426	624	1,420	2,042	4,086	4,512
Impairment losses	-	6	7	13	35	64	9	108	121
Transfers	-	-	-3	-3	10	-16	9	3	-
Foreign exchange adjustments etc.	12	1,261	63	1,336	244	796	275	1,315	2,651
Amortisation, depreciation and impairment losses at 31 December	1,618	11,593	4,025	17,236	8,258	18,827	10,641	37,726	54,962
Carrying amount at 31 December	53,130	15,955	942	70,027	10,720	11,768	5,119	27,607	97,634
Right-of-use assets included at 31 December
Amortisation and depreciation	-	-	-	-	167	8	227	402	402
Carrying amount at 31 December	-	-	-	-	1,013	26	469	1,508	1,508

SECTION 2.3 (CONTINUED)

INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment under construction amounted to DKK 1,121m (2019: DKK 1,514m). The decrease mainly relates to the new central office in Copenhagen being ready for use on 1 March 2020. Property, plant and equipment under construction are recognised in plant and machinery until completion.

Other equipment, fixtures and fittings include transport, office and draught beer equipment, coolers and returnable packaging materials.

Other intangible assets include software, land use rights and beer delivery rights.

RIGHT-OF-USE ASSETS

The Group leases various properties and warehouses, production equipment, cars and trucks. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

At 31 December 2020, the carrying amount of right-of-use assets amounted to DKK 1,382m. During the year, additions amounted to DKK 476m and depreciation to DKK 396m.

Lease expenses recognised in the income statement, relating to short-term leases and leases of low-value assets, amounted to DKK 44m. Such contracts comprise the lease of copy and printing machines, coffee machines, small IT devices and similar equipment.

For disclosures of the interest expenses and lease liabilities, please refer to sections 4.1, 4.4.1 and 4.7.

CAPITAL COMMITMENTS

The Group has entered into various capital commitments that will not take effect until after the reporting date and have therefore not been recognised in the consolidated financial statements. Capital commitments amounted to DKK 41m (2019: DKK 56m).

Useful life and residual value of intangible assets with finite useful life and property, plant and equipment

Useful life and residual value are initially assessed both in acquisitions and in business combinations.

Management assesses brands and property, plant and equipment for changes in useful life. If an indication of a reduction in the value or useful life exists, such as changes in production structure, restructuring and brewery closures, the asset is tested for impairment. If necessary, the asset is written down or the amortisation/depreciation period is reassessed and, if necessary, adjusted in line with the asset's changed useful life. When changing the amortisation or depreciation period due to a change in the useful life, the effect on amortisation/ depreciation is recognised prospectively as a change in accounting estimates.

Lease and service contracts

At inception of a contract, management assesses whether the contract is or contains a lease. Management considers the substance of any service being rendered to classify the arrangement as either a lease or a service contract. Particular importance is attached to whether fulfilment of the contract depends on the use of specific assets. The assessment involves judgement of whether the Group obtains substantially all the economic benefits from the use of the specified asset and whether it has the right to direct how and for what purpose the asset is used. If these criteria are satisfied at the commencement date, a right-of-use asset and a lease liability are recognised in the statement of financial position.

In determining the lease term, management considers all the facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. Extension or termination options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. The term is reassessed if a significant change in circumstances occurs. The assessment of purchase options follows the same principles as those applied for extension options.

The lease payment for cars and trucks often includes costs of service and insurance. If these costs are not objectively accessible, the Group estimates the costs when separating the service component from the lease.

Amortisation, depreciation and impairment losses

	Intangible assets	Property, plant and equipment
DKK million	2020	2019	2020	2019
Cost of sales	38	46	2,666	2,591
Sales and distribution expenses	71	209	1,249	1,267
Administrative expenses	78	171	284	258
Special items	235	13	72	78
Total	422	439	4,271	4,194

Gain/loss on disposal of assets

DKK million	2020	2019
Gain on disposal of property, plant and equipment and intangible assets	76	90
Loss on disposal of property, plant and equipment and intangible assets	-23	-34
Total	53	56

SECTION 2.3 (CONTINUED)

INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICIES

Cost

Intangible assets and property, plant and equipment are initially recognised at cost and subsequently measured at cost less accumulated amortisation or depreciation and impairment losses.

Cost comprises the purchase price and costs directly attributable to the acquisition until the date when the asset is available for use. The cost of acquired brand rights is accounted for using the accumulated cost approach if the total consideration includes an earnout dependent on the brands' future performance.

The cost of self-constructed assets comprises direct and indirect costs of materials, components, subsuppliers, wages and salaries, and capitalised borrowing costs on specific or general borrowings attributable to the construction of the asset, and is included in plant and machinery.

Research and development costs are recognised in the income statement as incurred. Development costs of intangible assets, for example software, are recognised as other intangible assets if the costs are expected to generate future economic benefits.

For assets acquired in business combinations, including brands and property, plant and equipment, cost at initial recognition is determined by estimating the fair value of the individual assets in the purchase price allocation.

Goodwill is only acquired in business combinations and is measured in the purchase price allocation. Goodwill is not amortised but is subject to an annual impairment test, cf. section 2.2.

Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items.

Subsequent costs, for example in connection with replacement of components of property, plant and equipment, are recognised in the carrying amount of the asset if it is probable that the costs will result in future economic benefits for the Group. The replaced components are derecognised from the statement of financial position and recognised as an expense in the income statement. Costs incurred for ordinary repairs and maintenance are recognised in the income statement as incurred.

Useful life, amortisation, depreciation and impairment losses

Useful life and residual value are determined at the acquisition date and reassessed annually. If the residual value exceeds the carrying amount, depreciation is discontinued.

Amortisation and depreciation are recognised on a straight-line basis over the expected useful life of the assets, taking into account any residual value. The expected useful life and residual value are determined based on past experience and expectations of the future use of assets.

Depreciation is calculated on the basis of the cost less the residual value and impairment losses.

Amortisation and depreciation are recognised as cost of sales, sales and distribution expenses, and administrative expenses depending on the use of the asset.

The expected useful life is as follows:

Brands with finite useful life	Normally 20 years
Software	Normally 3-5 years. Group-wide systems developed as an integrated part of a major business development programme: 5-7 years
Delivery rights	Depending on contract; if no contract term has been agreed, normally not exceeding 5 years
Customer agreements/ relationships	Depending on contract with the customer; if no contract exists, normally not exceeding 20 years

Buildings	20-40 years
Technical installations	15 years
Brewery equipment	15 years
Filling and bottling equipment	8-15 years
Technical installations in warehouses	8 years
On-trade and distribution equipment	5 years
Fixtures and fittings, other plant
and equipment	5-8 years
Returnable packaging materials	3-10 years
Hardware	3-5 years
Land	Not depreciated

Impairment

Impairment losses of a non-recurring nature are recognised under special items.

Leases

At the commencement date, the Group recognises a lease liability and a corresponding right-of-use asset at the same amount, except for short-term leases of 12 months or less and leases of low-value assets.

A right-of-use asset is initially measured at cost, which consists of the initial lease liability and initial direct costs less any lease incentives received. The Group has applied the practical expedient option allowed under IFRS by using a portfolio approach for the recognition of lease contracts related to assets of the same nature and with similar lease terms, i.e. cars and trucks.

Subsequently, the right-of-use asset is measured at cost less depreciation and impairment losses and adjusted for remeasurement of the lease liability. The right-of-use asset is depreciated over the earlier of the lease term or the useful life of the asset. The impairment testing of right-of-use assets follows the same principles as those applied for property, plant and equipment, cf. section 2.2.

Right-of-use assets are recognised as property, plant and equipment.

The Group has elected not to recognise right-of-use assets and liabilities for leases with a term of 12 months or less and leases of low-value assets. Lease payments related to such leases are recognised in the income statement as an expense on a straight-line basis over the lease term.

Government grants and other funding

Grants and funding received for the acquisition of assets and development projects are recognised in the statement of financial position by deducting the grant from the carrying amount of the asset. The grant is recognised in the income statement over the life of the asset as a reduced depreciation charge.

SECTION 3

SPECIAL ITEMS AND PROVISIONS

700m SPECIAL ITEMS, INCOME (DKK)

Impacted by reversal of provisions made in purchase price allocations in previous years.

-947m SPECIAL ITEMS, EXPENSES (DKK)

Primarily impacted by restructurings across the Group and write-down of the Angkor brand and brewery equipment in Cambodia.

SECTION 3.1 SPECIAL ITEMS

SPECIAL ITEMS, INCOME

In 2020, the Group recognised reversal of provisions made in purchase price allocations in a prior year (DKK 586m) and a gain on disposal of the last part of the former brewery site in Hamburg, Germany (DKK 62m).

In 2019, the Group recognised gains on the disposal of a brewery site in Trondheim, Norway, and the former brewery site in Hamburg, Germany.

SPECIAL ITEMS, EXPENSES

In 2020 and 2019, the Group carried out various restructuring projects as part of the continued focus on cost and efficiency initiatives.

The COVID-19 pandemic had a negative impact on the Group's performance in 2020, with government impositions such as lockdowns, travel restrictions, limited social gatherings and social distancing resulting in the closure or reduced operation of on-trade outlets and other businesses. To ensure that the Group is fit for the post-COVID-19 reality, a programme to reset the business was

initiated. The restructuring projects entailed changes within almost all functions, including termination of employees.

In addition, costs incurred to ensure the health and safety of our employees, such as personal protective equipment, hand sanitiser and

masks, and donations to local communities during the pandemic have been recognised as special items. These costs are considered to be by nature non-recurring and collectively significant to the Group's performance.

Special items

DKK million	2020	2019

Special items, income
Reversal of provisions made in purchase price allocations in a prior year	586	-
Gain on disposal of entities and assets	62	1,061
Disposal of property, plant and equipment previously impaired, including adjustments to gains and reversal of provisions made in prior years	52	3
Total	700	1,064

Special items, expenses
Impairment of brands, cf. section 2.2	-231	-6
Impairment of property, plant and equipment	-74	-
Reset, other restructurings and provisions	-419	-441
Provision related to disposal of real estate	-	-110
COVID-19, personal protective equipment and donations	-69	-
Adjustment of contingent consideration	-29	-
Costs related to acquisition of entities etc.	-125	-6
Total	-947	-563
Special items, net	-247	501

SECTION 3.1 (CONTINUED) SPECIAL ITEMS

The year was also impacted by write-downs, primarily of the Angkor brand and brewing equipment in Cambodia due to a significant decline in volumes following an unsuccessful attempt to relaunch the brand coupled with the impact of COVID-19 restrictions in the market.

In 2019, special items also included an increase in provisions retained by the Group on disposal of a former brewery site in previous years.

ACCOUNTING ESTIMATES AND JUDGEMENTS

The use of special items entails management judgement in the separation from ordinary items. Management carefully considers individual items and projects (including restructurings) in order to ensure the correct distinction and split between operating activities and significant income and expenses of a special nature.

Management initially assesses the entire restructuring project and recognises all present costs of the project. The projects are assessed on an ongoing basis, with additional costs possibly being incurred during the lifetime of the project.

The estimate includes expenses related to termination of employees, onerous contracts, break fees and other obligations arising in connection with restructurings. Management reassesses the useful life and residual value of non-current assets used in an entity undergoing restructuring.

ACCOUNTING POLICIES

Special items include significant income and expenses of a special nature in terms of the Group's revenuegenerating activities that cannot be attributed directly to the Group's ordinary operating activities.

Special items also include significant non-recurring items, including termination benefits related to retirement of members of the Executive Committee, impairment of goodwill and brands, significant provisions in relation to certain disputes and lawsuits, gains and losses on the disposal of activities and associates, revaluation of the shareholding in an entity held immediately before a step acquisition of that entity, and transaction costs in a business combination.

Significant restructuring of processes and structural adjustments are included in special items.

Special items are shown separately from the Group's ordinary operations to facilitate a better understanding of the Group's financial performance.

Impact of special items on operating profit

DKK million	2020	2019
If special items had been recognised in operating profit before special items, they would have been included in the following line items:
Cost of sales	-111	-296
Sales and distribution expenses	-305	-77
Administrative expenses	-307	55
Other operating income	668	1,061
Other operating expenses	-192	-242
Special items, net	-247	501

SECTION 3.2 PROVISIONS

Restructuring provisions relate to termination benefits to employees made redundant, primarily as a result of a restructuring project accounted for as special items.

The restructuring provision in 2020 of DKK 274m primarily related to Reset for the future. Other restructurings mainly relates to Kronenbourg, Ringnes, Carlsberg Sverige and certain local supply companies.

Other provisions of DKK 3,846m related to ongoing disputes and lawsuits, profit sharing in France and employee obligations other than retirement benefits. The provision has been impacted by reversal of provisions made in purchase price allocations in previous years, as described in section 3.1, and reversal of provisions in relation to real estate and other contractual obligations that did not materialise, in total DKK 1,136m.

ACCOUNTING ESTIMATES AND JUDGEMENTS

In connection with restructurings, management assesses the timing of the costs to be incurred, which influences the classification as current or non-current liabilities.

Provision for onerous contracts is based on agreed terms with the other party and expected fulfilment of the contract, based on the current estimate of volumes, use of raw materials etc.

Management assesses provisions, contingent assets and liabilities, and the likely outcome of pending or probable lawsuits etc. on an ongoing basis. The outcome depends on future events, which are by nature uncertain. In assessing the likely outcome of lawsuits and tax disputes etc., management relies on external legal advice and established precedents.

Provisions, including profit-sharing provisions, are recognised when, as a result of events arising before or at the reporting date, the Group has a legal or a constructive obligation and it is probable that there may be an outflow of economic benefits to settle the obligation.

Provisions are discounted if the effect is material to the measurement of the liability. The Group's average borrowing rate is used as the discount rate.

Restructuring costs are recognised when a detailed, formal restructuring plan has been announced to those affected no later than at the reporting date. On acquisition of entities, restructuring provisions in the acquiree are only included in the opening balance when the acquiree has a restructuring liability at the acquisition date.

A provision for onerous contracts is recognised when the benefits expected to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligations under the contract.

Provisions

DKK million	Restructurings	Onerous contracts	Other	Total
Provisions at 1 January 2020	311	400	4,989	5,700
Additional provisions recognised	188	178	357	723
Used during the year	-198	-28	-266	-492
Reversal of unused provisions	-22	-62	-1,136	-1,220
Transfers	8	-	29	37
Discounting	1	4	23	28
Foreign exchange adjustments etc.	-14	-16	-150	-180
Provisions at 31 December 2020	274	476	3,846	4,596
Recognised in the statement of financial position
Non-current provisions	80	443	2,796	3,319
Current provisions	194	33	1,050	1,277
Total	274	476	3,846	4,596

SECTION 3.3 CONTINGENT LIABILITIES

The Group operates in very competitive markets where consolidation is taking place within the industry and among our customers and suppliers, all of which in different ways influences our business.

In the ordinary course of business, the Group is party to certain lawsuits, disputes etc. of varying content and scope, some of which are referred to below. The resolution of these lawsuits, disputes etc. is associated with uncertainty, as they depend on relevant applicable proceedings, such as negotiations between the parties affected, government actions and court rulings.

In 2020, the German Supreme Court overruled the Higher Regional Court of Düsseldorf, which in 2019 had ruled in favors of Carlsberg Deutschland in relation to the competition case from 2014, in which the Federal Cartel Office in Germany issued a decision and imposed a fine of EUR 62m for alleged infringement of the competition rules in 2007. The German Supreme Court referred the competition case back to a new Senate for full new proceedings.

In 2018 and 2019, the Group's associate Super Bock in Portugal received three separate statements of objections from the local competition authority. Two of these cases are still awaiting a final decision, whereas the third case has been dropped by the Portuguese competition authority without any consequence for Super Bock.

A private consumer protection organisation in Portugal has made public that it intends to raise a civil claim of EUR 400m against Super Bock for compensation to Portuguese consumers for alleged harm on account of Super Bock's alleged anticompetitive practices.

In 2018, a dawn raid was conducted at the Group's subsidiary in India. At 31 December 2020, the case was still ongoing, and Carlsberg India is still awaiting the final decision of the competition authorities, which could entail a fine.

The Group is party to arbitration proceedings in Singapore with a partner who is the noncontrolling shareholder of the Group entities in question. The dispute relates to the Shareholders' Agreement between Carlsberg and the partner.

Although no final rulings have been made in the ongoing cases, there is still significant risk related to these cases due to the inherent uncertainty.

Management and the general counsel continuously assess these risks and their likely outcome. It is the opinion of management and the general counsel that, apart from items recognised in the statement of financial position, the outcome of these lawsuits, disputes etc. cannot be reliably estimated in terms of amount or timing. The Group does not expect the ongoing lawsuits and disputes to have a material impact on the Group's financial position, net profit or cash flow, in excess of items recognised in the statement of financial position.

GUARANTEES AND COMMITMENTS

The Group has issued guarantees for loans etc. raised by third parties (non-consolidated entities) of DKK 304m (2019: DKK 395m). In 2020 and 2019, no guarantees were issued for loans raised by associates and joint ventures.

Certain guarantees etc. are issued in connection with disposal of entities and activities, and in connection with on-trade loans. Apart from items recognised in the statement of financial position or disclosed in the consolidated financial statements, these guarantees etc. will not have a material effect on the Group's financial position.

Capital commitments, lease liabilities and service agreements are described in section 2.3.

SECTION 4

FINANCING COSTS, CAPITAL STRUCTURE AND EQUITY

21.3bn NET INTEREST-BEARING DEBT (DKK)

At 31 December 2020, gross financial debt amounted to DKK 30.3bn (2019: DKK 25.0bn). Net interest-bearing debt was DKK 21.3bn, an increase of DKK 2.5bn versus year-end 2019.

The financial position was impacted by lowerthan-normal free cash flow due to the COVID-19 impact on the business and the issue of two bonds for a total of EUR 1bn.

The leverage ratio, measured as net interestbearing debt to operating profit before depreciation, amortisation and impairment losses, was 1.51x at year-end (2019: 1.25x).

CHANGES IN NET INTEREST-BEARING DEBT (DKKbn)

2.9bn SHARE BUY-BACK (DKK)

During 2020, the Company repurchased shares worth DKK 2.9bn under the share buy-back programmes initiated in 2019 and 2020.

43.4bn EQUITY (DKK)

Equity amounted to DKK 43.4bn at 31 December 2020 (2019: DKK 46.0bn), DKK 39.3bn of which was attributable to shareholders in Carlsberg A/S and DKK 4.1bn to non-controlling interests.

The change in equity of DKK -2.6bn was the result of the consolidated profit of DKK 6.8bn, foreign exchange on translation of DKK 7.6bn, the dividend payout of DKK 3.9bn, the share buy-back of DKK 2.9bn, acquisition of entities of DKK 1.0bn and non-controlling interests of DKK 3.8bn.

The non-controlling interests were impacted by the acquisition of 60% of Marston's brewing activities in the UK, the simultaneous disposal of 40% of the Group's subsidiaries in the UK,

and the injection of the Group's Chinese entities into Chongqing Jianiang, cf. section 5.3.

Financial items, net, amounted to DKK -411m against DKK -738m in 2019. Excluding currency gains and fair value adjustments, financial items, net, amounted to DKK -550m (2019: DKK -650m), positively impacted by a reduction in other financial expenses.

LEVERAGE RATIO (NIBD/EBITDA)

SECTION 4.1 FINANCIAL INCOME AND EXPENSES

Interest income primarily relates to interest on cash and cash equivalents measured at amortised cost.

Foreign exchange gains, net, include fair value adjustments of hedges and foreign exchange gains. The fair value adjustment of hedges not designated as hedging instruments amounted to DKK -49m (2019: DKK 88m), cf. section 4.8. Foreign exchange gains amounted to DKK 188m (2019: DKK -176m).

Of the net change in fair value of cash flow hedges transferred to the income statement, DKK -30m (2019: DKK -102m) has been included in revenue and cost of sales and DKK -2m (2019: DKK 7m) in financial items.

FINANCIAL ITEMS, NET (DKKbn)

Financial items recognised in the income statement

DKK million	2020	2019

Financial income
Interest income	81	135
Foreign exchange gains, net	139	-
Interest on plan assets, defined benefit plans	114	189
Other	39	36
Total	373	360

Financial items excluding foreign exchange, net	-550	-650
Financial items, net, recognised in the income statement	-411	-738
Total	-784	-1,098
Other	-129	-241
Interest expenses, lease liabilities	-12	-12
Interest cost on obligations, defined benefit plans	-160	-256
Foreign exchange losses, net	-	-88
Capitalised financial expenses	1	18
Interest expenses	-484	-519
Financial expenses

Financial items recognised in other comprehensive income

DKK million	2020	2019
Foreign exchange adjustments of foreign entities
Foreign currency translation of foreign entities	-7,640	3,479
Recycling of cumulative translation differences of entities acquired in step acquisitions or disposed of	-	6
Total	-7,640	3,485
Fair value adjustments of hedging instruments
Change in fair value of effective portion of cash flow hedges	103	-93
Change in fair value of cash flow hedges transferred to the income statement	32	95
Change in fair value of net investment hedges	63	-325
Total	198	-323
Financial items, net, recognised in other comprehensive income	-7,442	3,162

SECTION 4.2 NET INTEREST-BEARING DEBT

Of the gross financial debt at year-end, 97% (2019: 84%) was long term, i.e. with maturity of more than one year.

Long-term and short-term borrowings amounted to DKK 30.3bn at 31 December 2020 (2019: DKK 25.0bn). Long-term borrowings totalled DKK 29.3bn (2019: DKK 20.9bn) and short-term borrowings totalled DKK 1.0bn (2019: DKK 4.1bn). The increase in long-term borrowings is mainly due to the issue of a 10-year EUR 500m bond maturing in March 2030 and a 7-year EUR 500m bond maturing in June 2027. Both bonds were issued to secure continued strong liquidity and financial flexibility.

The difference of DKK 9.0bn between gross financial debt and net interest-bearing debt mainly comprised cash and cash equivalents and on-trade loans.

Net interest-bearing debt DKK million 2020 2019 Non-current borrowings 29,291 20,879 Current borrowings 959 4,112 Gross financial debt 30,250 24,991 Cash and cash equivalents -8,093 -5,222 Net financial debt 22,157 19,769 Loans to associates, interest-bearing portion -209 -226 On-trade loans, net -618 -668 Other receivables, net -67 -99 Net interest-bearing debt 21,263 18,776

SECTION 4.3 CAPITAL STRUCTURE

4.3.1 CAPITAL STRUCTURE

Management regularly assesses whether the Group's capital structure is in the interests of the Group and its shareholders.

The overall objective is to ensure a continued development and strengthening of the Group's capital structure that supports long-term profitable growth and a solid increase in key earnings and ratios. This includes assessment of and decisions on the split of financing between share capital and borrowings, which is a long-term strategic decision to be made in connection with significant investments and other transactions.

Carlsberg A/S' share capital is divided into two classes (A shares and B shares). Combined with the Carlsberg Foundation's position as majority shareholder (in terms of control), management considers that this structure will remain advantageous for all of the shareholders, enabling and supporting the long-term development of the Group.

The Group targets a leverage ratio below 2.0x. At the end of 2020, the leverage ratio was 1.51x (2019: 1.25x). The Group currently uses share buy-back programmes to return excess cash to shareholders.

The share buy-back programmes are initiated based on a cautious evaluation of the Group's funding flexibility and credit resources available. The size and duration of each programme depend on the expected organic and inorganic investments needed to grow the business and the Group's intention to maintain a leverage ratio below 2.0x.

The Group generally intends to cancel treasury shares that are not used for hedging of incentive programmes.

The Group is rated by Moody's Investors Service and Fitch Ratings. Management assesses the risk of changes in the Group's investment-grade rating as an element in strategic decisions on capital structure. Identification and monitoring of risks that could change the rating were carried out on an ongoing basis throughout the year.

4.3.2 SHARE CAPITAL

At the Annual General Meeting on 16 March 2020, it was decided to reduce the share capital of Carlsberg A/S by a nominal amount of DKK 88,000,000 to a nominal amount of DKK 2,963,136,120 by cancelling 4,400,000 of the B shares held by the Company, each with a nominal value of DKK 20. The cancellation was completed on 14 April 2020. These shares had been repurchased as part of the Company's share buy-back programme running from 6 February 2019 to 30 January 2020.

Share capital
		Class A shares		Class B shares		Total share capital
	Shares of	Nominal value,	Shares of	Nominal value,	Shares of	Nominal value,
	DKK 20	DKK '000	DKK 20	DKK '000	DKK 20	DKK '000
1 January 2019	33,699,252	673,985	118,857,554	2,377,151	152,556,806	3,051,136
No change in 2019	-	-	-	-	-	-
31 December 2019	33,699,252	673,985	118,857,554	2,377,151	152,556,806	3,051,136
Cancellation of treasury
shares	-	-	-4,400,000	-88,000	-4,400,000	-88,000
31 December 2020	33,699,252	673,985	114,457,554	2,289,151	48,156,806	2,963,136

A shares carry 20 votes per DKK 20 share. B shares carry two votes per DKK 20 share. A preferential right to an 8% non-cumulative dividend is attached to B shares. Apart from votes and dividends, all shares rank equally.

4.3.3 EQUITY DIVIDENDS

The Group proposes a dividend of DKK 22.00 per share (2019: DKK 21.00 per share), amounting to DKK 3,259m (2019: DKK 3,204m). The proposed dividend has been included in retained earnings at 31 December 2020.

SECTION 4.3 (CONTINUED) CAPITAL STRUCTURE

Dividends to be paid out in 2021 for 2020, net of dividends on treasury shares held at 31 December 2020, will amount to DKK 3,192m (paid out in 2020 for 2019: DKK 3,108m).

At 31 December 2020, dividends to noncontrolling interests of DKK 51m (2019: DKK 41m) were payable.

SHARE BUY-BACK AND TREASURY SHARES

As of 31 January 2020, the Company had repurchased 393,501 B shares under the share buy-back programme initiated in 2019 at a total purchase price of DKK 0.4bn.

On 4 February 2020, the Company announced its intention to continue the share buy-back programme and repurchase shares worth DKK

5bn over a 12-month period. In the first tranche, which was finalised on 7 August 2020, the Company repurchased 2,897,021 B shares at a total purchase price of DKK 2.5bn. Due to the continued uncertainties related to COVID-19, and the acquisitions of Marston's brewing activities and the Brooklyn brand rights, the Board decided not to initiate the second tranche of the share buy-back.

According to the authorisation of the Annual General Meeting, the Supervisory Board may, in the period until 13 March 2023, allow the Company to acquire treasury shares up to a total holding of 10% of the nominal share capital at a price quoted on Nasdaq Copenhagen at the time of acquisition with a deviation of up to 10%. The permitted holding of treasury shares covers those acquired in share buy-back programmes. The Company holds no class A shares.

Transactions with shareholders in Carlsberg A/S

DKK million	2020	2019
Dividends paid to shareholders	-3,093	-2,738
Share buy-back	-2,900	-4,100
Total	-5,993	-6,838

Transactions with non-controlling interests

DKK million	2020	2019
Dividends paid to NCI	-796	-850
Consideration paid for acquisition of NCI	-81	-1,670
Total	-877	-2,520

The acquisition of non-controlling interests in 2019 related to shares in Cambrew and Carlsberg Ukraine, cf. section 5.3.

ACCOUNTING POLICIES

Proposed dividends

The proposed dividend is recognised as a liability at the date when it is adopted at the Annual General Meeting (declaration date).

Treasury shares

Cost of acquisition, consideration received and treasury share dividends received are recognised directly in equity as retained earnings. Capital reductions from the cancellation of treasury shares are deducted from the share capital at an amount corresponding to the nominal value of the shares and added to retained earnings.

Proceeds from the sale of treasury shares in connection with the settlement of share-based payments are recognised directly in equity.

46.0 43.4 6.8 - 7.6 - 3.9 - 2.9 3.8 1.0 0.2 Treasury shares

	Fair value, DKKm	Shares of DKK 20	Nominal value, DKKm	Percentage of share capital
1 January 2019	69	99,453	2.0	0.1%
Acquisition of treasury shares		4,518,999	90.4	3.0%
Used to settle share-based payments		-58,057	-1.2	-0.1%
31 December 2019	4,532	4,560,395	91.2	3.0%
Acquisition of treasury shares		3,290,522	65.8	2.3%
Cancellation of treasury shares		-4,400,000	-88.0	-2.9%
Used to settle share-based payments		-395,742	-7.9	-0.3%
31 December 2020	2,979	3,055,175	61.1	2.1%

Equity (DKKbn)

SECTION 4.3 (CONTINUED) CAPITAL STRUCTURE

4.3.4 OTHER COMPREHENSIVE INCOME

Other comprehensive income has mainly been impacted by a negative foreign exchange adjustment from the depreciation of RUB.

4.3.5 FINANCIAL RISK MANAGEMENT

The Group's activities mean it is exposed to a variety of financial risks, including market risk (foreign exchange risk, interest rate risk and commodity risk), credit risk and liquidity risk. These risks are described in the following sections:

Foreign exchange risk: sections 1.3 and 4.6
Interest rate risk: section 4.5
Commodity risk: section 1.2.1
Credit risk: sections 1.5.1 and 4.4.2
Funding and liquidity risk: section 4.7

The Group's financial risks are managed by Group Treasury in accordance with the Financial Risk Management Policy approved by the Supervisory Board as an integrated part of the overall risk management process. The risk management governance structure is described in the Management review.

To reduce exposure to these risks, the Group enters into a variety of financial instruments and generally seeks to apply hedge accounting to reduce volatility in the income statement.

Debt instruments and deposits in foreign currency reduce the overall risk, but will not as a general rule achieve the objective of reducing volatility in specific items in the income statement.

Other comprehensive income as recognised in the statement of changes in equity

DKK million

2020	Currency translation	Hedging reserves	Retained earnings	Total	Non controlling interests	Other comprehensive income
Foreign exchange adjustments of foreign entities	-7,330	-	-	-7,330	-310	-7,640
Value adjustments of hedging instruments	63	132	-	195	3	198
Retirement benefit obligations	-	-	-1	-1	2	1
Other	-	-	-4	-4	-	-4
Income tax	-18	-20	-9	-47	-17	-64
Total	-7,285	112	-14	-7,187	-322	-7,509
2019
Foreign exchange adjustments of foreign entities	3,490	-	-	3,490	-5	3,485
Value adjustments of hedging instruments	-325	-	-	-325	2	-323
Retirement benefit obligations	-	-	-570	-570	-1	-571
Other	-	-	16	16	2	18
Income tax	20	-	36	56	-1	55
Total	3,185	-	-518	2,667	-3	2,664

SECTION 4.4 BORROWINGS AND CASH

4.4.1 BORROWINGS

Non-current funding increased by DKK 8.4bn due to the issue of a 10-year EUR 500m bond maturing in March 2030 and a 7-year EUR 500m bond maturing in June 2027. Both bonds were issued to secure continued strong liquidity and financial flexibility.

Gross financial debt

DKK million	2020	2019

Non-current
Issued bonds	27,002	19,673
Bank borrowings	922	27
Lease liabilities	1,080	1,165
Other borrowings	287	14
Total	29,291	20,879
Current
Bank borrowings	472	347
Lease liabilities	398	424
Other borrowings	89	3,341
Total	959	4,112
Total borrowings	30,250	24,991

An overview of issued bonds is provided in section 4.5.

Fair value 31,732 26,414

Changes in gross financial debt

DKK million	2020	2019
Gross financial debt
at 1 January	24,991	23,983
Recognition of lease
liabilities	-	1,592
Restated gross financial debt
at 1 January	24,991	25,575
Proceeds from issue of
bonds	7,402	2,946
Repayment of bonds	-	-5,598
Instalments on and proceeds
from borrowings, long-term	1,155	-236
Instalments on and proceeds
from European Commercial
Papers	-3,264	3,264
Release of prepayment
received for disposal of the
former brewery site in Hamburg, Germany	-	-1,026

Instalments on lease liabilities	-414	-414
Other	181	129
External financing	5,060	-935
Change in bank overdrafts	62	-82

Increase in lease liabilities, net	190	411
Other, including foreign
exchange adjustments and
amortisation	-53	22
Gross financial debt
at 31 December	30,250	24,991

ACCOUNTING POLICIES

Borrowings

Borrowings are initially recognised at fair value less transaction costs and subsequently measured at amortised cost using the effective interest method. Accordingly, the difference between the fair value less transaction costs and the nominal value is recognised under financial expenses over the term of the loan.

Lease liability

The lease liability is measured at the present value of the remaining lease payments at the reporting date, discounted using the incremental borrowing rate for similar assets, taking into account the terms of the leases. A remeasurement of the lease liability, for example a change in the assessment of an option to purchase, results in a corresponding adjustment of the related right-of-use assets, cf. section 2.3.

Extension or termination options are included in the lease term if the lease is reasonably certain to be extended or not terminated. Consequently, all cash outflows that are reasonably certain to impact the future cash balances are recognised as lease liabilities at initial recognition of lease contracts. The Group reassesses the circumstances leading to it not recognising extension or termination options on an ongoing basis.

4.4.2 CASH

Cash and cash equivalents include short-term marketable securities with a term of three months or less at the acquisition date that are subject to an insignificant risk of changes in value. Short-term bank deposits amounted to DKK 353m at 31 December 2020 (2019: DKK 188m). The average interest rate on these deposits was 2.7% (2019: 4.3%).

During 2020, the Group had an increased focus on liquidity and maintaining sufficient cash at bank to better protect against the uncertainties and increased risks in relation to COVID-19. Total cash at bank amounted to DKK 8,093m in 2020 (2019: DKK 5,222m).

Cash and cash equivalents

2020	2019
8,093	5,222
-135	-73
7,958	5,149

ASSESSMENT OF CREDIT RISK

The Group is exposed to credit risk on cash and cash equivalents (including fixed deposits), investments and derivative financial instruments with a positive fair value, due to uncertainty as to whether the counterparty will be able to meet its contractual obligations as they fall due.

The Group has established a credit policy under which financial transactions may be entered into only with financial institutions with a solid credit rating.

The Group primarily enters into financial instruments and transactions with the Group's relationship banks, i.e. banks extending loans to the Group. Group Treasury manages and monitors the Group's gross credit exposure to banks and operates with individual limits on banks, based on rating and access to netting of assets and liabilities.

EXPOSURE TO CREDIT RISK

The carrying amount of DKK 8,093m (2019: DKK 5,222m) represents the maximum credit exposure related to cash and cash equivalents.

The credit risk on receivables is described in section 1.5.1.

SECTION 4.5 INTEREST RATE RISK

The Group's exposure to interest rate risk is considered limited. At the reporting date, 127% of the net financial debt consisted of fixed-rate borrowings with interest rates fixed for more than one year (2019:100%). As 110% of the Group's net debt is in EUR, the interest rate exposure primarily relates to the development in the interest rates for EUR.

The share of fixed-rate net financial debt in CNY is negative (-78%) as the cash position exceeds the total debt. For USD and EUR, the share is positive (225% and 111% respectively) as the cash position exceeds the current debt.

The interest rate risk is measured by the duration of the net financial debt. The target is to have a duration between three and eight years. At 31 December 2020, the duration was 5.6 years (2019: 4.4 years). Interest rate risk is mainly managed using fixed-rate bonds.

SENSITIVITY ANALYSIS

It is estimated that a 1 percentage point interest rate increase would lead to a decrease in interest expenses of DKK 60m (2019: DKK 0m). The impact is due to the relatively high portion of cash. The analysis assumes a parallel shift in the relevant yield curves.

If the market interest rate had been 1 percentage point higher at the reporting date, it would have led to a financial gain of DKK 1,242m (2019: DKK 865m), and a similar loss had the interest rate been 1 percentage point lower. However, since all fixed-rate borrowings are measured at amortised cost, there is no

impact on other comprehensive income or the income statement.

The sensitivity analysis is based on the financial instruments recognised at the reporting date.

The sensitivity analysis assumes a parallel shift in interest rates and that all other variables remain constant, in particular foreign exchange rates and interest rate differentials between the different currencies. The analysis was performed on the same basis as for 2019. The Group did not enter into any new interest rate swaps in 2020 or 2019.

Net financial debt by currency

DKK million					Interest rate
2020	Net financial debt	Floating	Fixed	Floating %	Fixed¹ %
EUR	24,298	-2,786	27,084	-11%	111%

CNY	-1,058	-1,884	826	178%	-78%
PLN	-29	-29	-	100%	-
USD	119	-149	268	-125%	225%
CHF	33	33	-	100%	-
RUB	113	113	-	100%	-
Other	-1,319	-1,319	-	100%	-
Total	22,157	-6,021	28,178	-27%	127%

2019
EUR	22,822	3,072	19,750	13%	87%
CNY	-1,770	-1,770	-	100%	-
PLN	14	14	-	100%	-
USD	-101	-101	-	100%	-
CHF	122	122	-	100%	-
RUB	59	59	-	100%	-
Other	-1,377	-1,377	-	100%	-
Total	19,769	19	19,750	0%	100%

¹The percentage of net debt at fixed interests are above 100% in some currencies, as the total cash exceeds the current debt. In some currencies the percentage of net debt at fixed interests is negative, as the total cash exceeds the total debt.

Interest rate risk

DKK million

2020	Interest rate	Average effective interest rate	Fixed for	Carrying amount	Interest rate risk
Issued bonds
EUR 750m maturing 15 November 2022	Fixed	2.7%	1-2 years	5,570	Fair value
EUR 500m maturing 6 September 2023	Fixed	0.7%	2-3 years	3,703	Fair value
EUR 1,000m maturing 28 May 2024	Fixed	2.6%	3-4 years	7,403	Fair value
EUR 500m maturing 30 June 2027	Fixed	0.5%	> 5 years	3,691	Fair value
EUR 400m maturing 1 July 2029	Fixed	1.0%	> 5 years	2,942	Fair value
EUR 500m maturing 11 March 2030	Fixed	0.7%	> 5 years	3,693	Fair value
Total issued bonds		1.6%		27,002
Total issued bonds 2019		2.0%		19,673

Bank borrowings and other borrowings

Total bank borrowings and other borrowings 2019				5,318
Total bank borrowings and other borrowings				3,248
Fixed-rate	Fixed	2.9%	> 1 year	1,176	Fair value
Floating-rate	Floating	1.1%	< 1 year	2,072	Cash flow

SECTION 4.6

FOREIGN EXCHANGE RISK RELATED TO NET INVESTMENTS AND FINANCING ACTIVITIES

4.6.1 CURRENCY PROFILE OF BORROWINGS

The Group is exposed to foreign exchange risk on borrowings denominated in a currency other than the functional currency of the local entities reporting the debt, as well as the risk that arises when net cash inflow is generated in one currency and loans are denominated and have to be repaid in another currency.

4.6.2 HEDGING OF NET INVESTMENTS IN FOREIGN SUBSIDIARIES

The Group holds a number of investments in foreign subsidiaries where the translation of net assets to DKK is exposed to foreign exchange risks. The Group hedges part of this foreign exchange exposure by entering into forward exchange contracts (net investment hedges). This mainly applies to net investments in CHF, CNY, MYR, NOK and PLN. The basis for hedging is reviewed at least once a year, and the two parameters, risk reduction and cost, are balanced. In economic terms, having debt in foreign currency or creating synthetic debt via forward exchange contracts constitutes hedging of the DKK value of future cash flows arising from operating activities or specific transactions.

The most significant net risk relates to foreign exchange adjustment of net investments in RUB. This is because of the size of the net investments in RUB combined with the currency's high volatility.

Where the fair value adjustments of forward exchange contracts do not exceed the fair value adjustments of the investment, the adjustments of the financial instruments are recognised in other comprehensive income. At 31 December 2020, all adjustments of financial instruments have been recognised in other comprehensive income. Fair value adjustments of loans designated as strategic intra-group loans have also been recognised in other comprehensive income.

The fair value of derivatives used as net investment hedges recognised at 31 December 2020 amounted to DKK 84m (2019: DKK -91m). The closing balance in the equity reserve for currency translation of hedges of net investments amounted to DKK -1,611m (2019: DKK -1,628m). Positive fair values of derivatives are recognised as other receivables and negative values as other liabilities.

Net investment hedges

														2020		2019
					amount in local currency	Hedging of investment,	amount in local currency	Intra-group loans,	Other comprehensive	income (DKK)		Average hedged rate	Fair value of derivatives		Fair value of derivatives
	Currency profile of borrowings			DKK million	2020	2019	2020	2019	2020	2019	2020	2019	Asset	Liability	Asset	Liability
	Before and after derivative financial instruments			RUB	-	-	-	-	32	-77	-	-	-	-	-	-
				CNY	-2,407	-1,500	-	-	-29	-63	0.9176	0.9257	56	-	-	-20
DKK million				MYR	-292	-318	-	-	24	-35	1.5145	1.5656	8	-	-	-11
	Original	Effect	After	HKD	-	-	-1,077	-27	53	22	-	-	-	-	-	-
2020	principal	of swap	swap	CHF	-305	-273	-	-	6	-50	6.9925	6.7148	40	-	-	-45
CHF	119	1,477	1,596	GBP	-	-	-	59	-27	30	-	-	-	-	-	-
NOK	190	619	809	NOK	-1,300	-1,300	3,000	3,000	-105	-	0.6874	0.7398	-	-19	-	-14
EUR	27,730	-6,327	21,403	SEK	-	-	3,773	3,335	86	-114	-	-	-	-	-	-
USD	495	1,689	2,184	PLN	-135	-135	-	-	12	-8	1.6201	1.7346	-	-1	-	-1
CNY	864	1,833	2,697	SGD	-	-	47	-154	16	-33	-	-	-	-	-	-
Other	852	709	1,561	USD	-	-	-	-28	-5	3	-	-	-	-	-	-
Total	30,250	-	30,250	Other	-	-	-	-	-	-	-	-	-	-	-	-
Total 2019	24,991	-	24,991	Total					63	-325			104	-20	-	-91

SECTION 4.6 (CONTINUED)

FOREIGN EXCHANGE RISK RELATED TO NET INVESTMENTS AND FINANCING ACTIVITIES

4.6.3 EXCHANGE RATE RISK ON CASH AND BORROWINGS

The main principle for funding of subsidiaries is that cash, loans and borrowings should be denominated in local currency or hedged to local currency to avoid foreign exchange risk. However, in some Group entities, net debt is denominated in a currency other than the functional currency of the local entity without the foreign exchange risk being hedged. This applies primarily to a few entities in Eastern Europe that hold cash and loans in EUR and USD and in this way obtain proxy hedging of the foreign exchange risk associated with the purchase of goods in foreign currency in these markets.

4.6.4 IMPACT ON FINANCIAL STATEMENTS AND SENSITIVITY ANALYSIS

IMPACT ON INCOME STATEMENT

For the impact of currency on operating profit and financial items, please refer to sections 1.3 and 4.1 respectively.

IMPACT ON STATEMENT OF FINANCIAL POSITION

Fluctuations in foreign exchange rates will affect the level of debt, as funding is obtained in a number of currencies. In 2020, net interest-bearing debt increased by DKK 297m (2019: decreased by DKK 14m) due to changes in foreign exchange rates.

SENSITIVITY ANALYSIS

An adverse development in the exchange rates would, all other things being unchanged, have had the hypothetical impact on the income statement and other comprehensive income (OCI) for 2020 illustrated in the tables. The calculations have been made based on items in the statement of financial position at 31 December 2020.

Exchange rate sensitivity - income statement

2020								2019
DKK million	EUR receivable	EUR payable	EUR cash	Gross exposure	Exposure, net of hedging	Change	Effect on P/L	Effect on P/L
EUR/GBP	550	-348	-483	-281	-281	5%	-14	-6
EUR/NOK	118	-873	586	-169	-169	5%	-8	-9
EUR/PLN	232	-238	54	48	48	5%	2	-
EUR/KZT	-	-18	367	349	349	10%	35	28
EUR/RUB	5	-71	274	208	208	10%	21	15
EUR/SEK	159	-296	78	-59	-59	5%	-3	-1
EUR/CHF	100	-174	-270	-344	-344	5%	-17	-1
Total							16	26

						on P/L	on P/L
	-1	284	283	283	10%	28	29
-	-1	88	87	87	10%	9	16
						37	45
	-

Exchange rate sensitivity - other comprehensive income

2020						2019
DKK million	Average hedged rate	Notional amount	Change	Effect on OCI	Average hedged rate	Effect on OCI
NOK/DKK	0.6913	-663	5%	-33	0.7383	-34
SEK/DKK	0.7078	-668	5%	-33	0.7009	-32
PLN/DKK	1.6649	-508	5%	-25	1.7015	-26
CHF/DKK	6.9217	-456	5%	-23	6.7438	-24
RUB/DKK	0.0854	-140	10%	-14	0.0991	-29
GBP/DKK	8.3212	-111	5%	-6	8.3781	-6
Other	N/A	-142	5%	-7	N/A	-1
Total				-141		-152

SECTION 4.6 (CONTINUED)

FOREIGN EXCHANGE RISK RELATED TO NET INVESTMENTS AND FINANCING ACTIVITIES

Income statement

The hypothetical impact ignores the fact that the subsidiaries' initial recognition of revenue, cost and debt would be similarly exposed to the exchange rate developments.

Other comprehensive income

Other comprehensive income is affected by changes in the fair value of currency derivatives designated as cash flow hedges of future purchases and sales.

APPLIED EXCHANGE RATES

The average exchange rate was calculated using the monthly exchange rates weighted according to the phasing of the revenue per currency throughout the year.

SECTION 4.7 FUNDING AND LIQUIDITY RISK

The Group's overall objective is to ensure continuous access, at the right price, to the financial resources needed for operations and growth.

Liquidity risk results from the Group's potential inability to meet the obligations associated with its financial liabilities, for example settlement of financial debt and paying suppliers.

The aim is to ensure effective liquidity management, which involves obtaining sufficient committed credit facilities to ensure adequate financial resources and, to some extent, tapping a range of funding sources.

DIVERSIFIED FUNDING SOURCES

The Group is diversifying its access to funding to avoid relying on one single source of funding.

At 31 December 2020, bonds accounted for 89% of the gross funding.

Committed credit facilities and credit resources available

DKK million

2020	Total committed loans and credit facilities	Utilised portion of credit facilities	Unutilised credit facilities	2019 Unutilised credit facilities
Current
< 1 year	2,145	959	1,186	1,531
Total current committed loans and credit facilities	2,145	959	1,186	1,531
Non-current
1-2 years	6,730	6,730	-	-
2-3 years	3,959	3,959	-	-
3-4 years	7,701	7,701	-	-
4-5 years	14,954	75	14,879	14,939
> 5 years	10,826	10,826	-	-
Total non-current committed loans and credit facilities	44,170	29,291	14,879	14,939
Cash and cash equivalents			8,093	5,222
Current portion of utilised credit facilities	-	-	-959	-4,112
Credit resources available (total non-current committed loans and credit facilities less net debt)			22,013	16,049

Applied exchange rates

		Closing rate	Average rate
DKK	2020	2019	2020	2019
Swiss franc (CHF)	6.8521	6.8712	6.9656	6.7135
Chinese yuan (CNY)	0.9284	0.9555	0.9452	0.9654
Euro (EUR)	7.4393	7.4697	7.4539	7.4659
Pound sterling (GBP)	8.2378	8.7664	8.3838	8.5218
Laotian kip (LAK)	0.0007	0.0008	0.0007	0.0008
Norwegian krone (NOK)	0.7053	0.7587	0.6958	0.7582
Polish zloty (PLN)	1.6327	1.7548	1.6770	1.7377
Russian rouble (RUB)	0.0820	0.1077	0.0915	0.1033
Swedish krona (SEK)	0.7397	0.7155	0.7120	0.7049
Ukrainian hryvnia (UAH)	0.2142	0.2827	0.2438	0.2594

SECTION 4.7 (CONTINUED) FUNDING AND LIQUIDITY RISK

The Group still has access to a committed EUR 2bn revolving credit facility (RCF) maturing in 2025 that is currently not being utilised. In addition, the Group has committed cash pool bank overdraft facilities to cover the day-today liquidity needs and uncommitted access to the Euro Commercial Paper (ECP) market, which provides short-term funding.

FUNDING STRATEGY AND REACTION TO COVID-19

Since March 2020 and the first COVID-19 lockdowns in Western Europe, the Group has maintained a central cash position of minimum EUR 200m as a safety measure. In addition, a special effort has been made to improve cash flow forecasting, including introducing frequent short-term cash flow updates.

uncertainty. In addition, Carlsberg issued a 7 year EUR 500m bond in June, which was used to repay the bank loan issued in March.

CREDIT RESOURCES AVAILABLE

The Group uses the term "credit resources available" to determine the adequacy of access to credit facilities.

The credit resources available include cash and unutilised credit facilities with more than 12 months to maturity less utilised credit facilities with less than 12 months to maturity and uncommitted working capital facilities.

Net financial debt is used internally to monitor the Group's credit resources available. Net financial debt is the Group's net interestbearing debt, excluding interest-bearing assets other than cash, as these assets are not actively managed in relation to liquidity risk. Net financial debt is shown in section 4.2.

At 31 December 2020, the Group had total credit resources available of DKK 22,013m, consisting of cash and cash equivalents of DKK 8,093m plus committed unutilised non-current credit facilities of DKK 14,879m less utilisation of current facilities of DKK -959m. Including current credit facilities of DKK 1,186m, total committed unutilised credit facilities amounted to DKK 16,065m.

Credit resources available increased by DKK 6.0bn compared with 2019, primarily due to the issuance of the two bonds for a total of EUR 1.0bn. Both bonds were issued to secure continued strong liquidity and financial flexibility.

The credit resources available and the access to unused committed credit facilities are

Maturity of financial liabilities

considered reasonable in light of the Group's current needs in terms of financial flexibility.

In addition to efficient working capital management and credit risk management, the Group mitigates liquidity risk by arranging borrowing facilities with solid financial institutions.

The Group uses cash pools for day-to-day liquidity management in most of the entities in Western Europe, as well as intra-group loans to subsidiaries. Eastern Europe and Asia are less integrated in terms of cash pools, and liquidity is managed via intra-group loans.

The table lists the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements, and thus summarises the gross liquidity risk.

In March, Carlsberg issued a 10-year EUR 500m bond and secured a EUR 500m bank loan as a precaution against the market

Time to maturity for non-current borrowings

DKK million

2020	1-2 years	2-3 years	3-4 years	4-5 years	> 5 years	Total
Issued bonds	5,570	3,703	7,403	-	10,326	27,002
Bank borrowings	723	70	127	2	-	922
Lease liabilities	345	96	81	72	486	1,080
Other non-current borrowings	92	90	90	1	14	287
Total	6,730	3,959	7,701	75	10,826	29,291
Total 2019	412	5,729	3,821	7,465	3,452	20,879

DKK million

2020	Contractual cash flows	Maturity < 1 year	Maturity > 1 year < 5 years	Maturity > 5 years	Carrying amount
Derivative financial instruments
Derivative financial instruments, payables	142	142	-	-	127
Non-derivative financial instruments
Gross financial debt	30,426	959	18,552	10,915	30,250
Interest expenses	1,654	492	950	212	N/A
Trade payables and other liabilities	17,874	17,874	-	-	17,874
Contingent liabilities	304	304	-	-	304
Contingent considerations	5,290	110	5,180	-	5,290
Non-derivative financial instruments	55,548	19,739	24,682	11,127	-
Financial liabilities	55,690	19,881	24,682	11,127	-
Financial liabilities 2019	55,192	23,887	27,696	3,609	-

SECTION 4.7 (CONTINUED) FUNDING AND LIQUIDITY RISK

The risk implied by the values reflects the onesided scenario of cash outflows only. Trade payables and other financial liabilities originate from the financing of assets in ongoing operations, such as property, plant and equipment, and investments in working capital, for example inventories and trade receivables.

The nominal amount/contractual cash flow of gross financial debt totalled DKK 30,426m (2019: DKK 25,144), whereas the total carrying amount was DKK 30,250m (2019: DKK 24,991m). The difference between these amounts arises at initial recognition and is treated as a cost that is capitalised and amortised over the duration of the borrowings.

The interest expense is the contractual cash flows expected on the gross financial debt existing at 31 December 2020.

The cash flow is estimated based on the notional amount of the above-mentioned borrowings and expected interest rates at year-end 2020 and 2019. Interest on debt recognised at year-end 2020 and 2019 for which no contractual obligation exists (current borrowing and cash pools) has been included for a two-year period. The synthetic interest on lease liabilities has also been included for a two-year period. The interest applied to the part of the debt where no contractual obligation exists is 2.5% (2019: 1%).

SECTION 4.8 DERIVATIVE FINANCIAL INSTRUMENTS

The Group enters into various derivative financial instruments to hedge foreign exchange and commodity risks, cf. sections 1.2 and 1.3, and seeks to apply hedge accounting when this is possible. Hedging of future, highly probable forecast transactions is designated as cash flow hedges.

The Group monitors the cash flow hedge relationships twice a year to assess whether the hedge is still effective.

Positive fair values of derivatives are recognised as other receivables and negative values as other liabilities.

The impact on other comprehensive income and the fair value of derivatives classified as cash flow hedges is presented in the cash flow hedge table.

Cash flow hedges comprise aluminium hedges, where the hedged item is aluminium cans that will be used in a number of Group entities in 2021. The hedging instrument is aluminium swaps.

The impact on other comprehensive income from other instruments relates to hedges of Group entities' exposure to changes in aluminium prices.

The impact on other comprehensive income from exchange rate instruments relates to hedges of Group entities' purchases and sales in currencies other than their functional currencies.

Cash flow hedges

DKK million					Expected recognition
2020	Other comprehensive income	Fair value receivables	Fair value payables	Fair value, net	2021
Exchange rate instruments	51	13	-21	-8	-8
Other instruments	84	60	-	60	60
Total	135	73	-21	52	52

2019	Other comprehensive income	Fair value receivables	Fair value payables	Fair value, net	2020
Exchange rate instruments	-60	-	-56	-56	-56
Other instruments	62	-	-24	-24	-24
Total	2	-	-80	-80	-80

Financial derivatives not designated as hedging instruments (economic hedges)

DKK million

2020	Income statement	Fair value receivables	Fair value payables	Fair value, net
Exchange rate instruments	-47	-	-78	-78
Ineffectiveness	-2	-	-	-
Total	-49	-	-78	-78
2019
Exchange rate instruments	81	56	-13	43
Ineffectiveness	7	-	-	-
Total	88	56	-13	43

SECTION 4.8 (CONTINUED) DERIVATIVE FINANCIAL INSTRUMENTS

As of 31 December 2020, the hedging reserve within equity included DKK 843m in relation to cash flow hedges for which hedge accounting is no longer applied.

Fair value adjustments of derivative financial instruments that are not designated either as net investment hedges or as cash flow hedges are recognised in financial income and expenses.

ACCOUNTING ESTIMATES AND JUDGEMENTS

When entering into financial instruments, management assesses whether the instrument is an effective hedge of recognised assets and liabilities, expected future cash flows or financial investments. The effectiveness of recognised hedging instruments is assessed at least twice a year.

Fair values of derivative financial instruments are calculated on the basis of level 2 input consisting of current market data and generally accepted valuation methods. Internally calculated values are used, and these are compared with external market quotes on a quarterly basis. For currency and aluminium derivatives, the calculation is as follows:

a) The forward market rate is compared with the agreed rate on the derivatives, and the difference in cash flow at the future point in time is calculated.
b) The amounts are discounted to present value.

When entering into a contract, management assesses whether the contract contains embedded derivatives and whether they meet the criteria for separate classification and recognition. The Group currently does not have any embedded derivatives that meet the criteria for separate classification and recognition.

ACCOUNTING POLICIES

Derivative financial instruments are initially recognised at fair value on the trade date and subsequently remeasured at their fair value at the reporting date.

The accounting for subsequent changes in fair value depends on whether the derivative is designated as one of:

Fair value hedges of the fair value of recognised assets or liabilities
Cash flow hedges of particular risks associated with the cash flow from forecast transactions
Net investment hedges of currency fluctuations in subsidiaries, associates or joint ventures.

The fair values of derivative financial instruments are presented in other receivables or payables, and positive and negative values are offset only when the Group has the right and the intention to settle several financial instruments net.

Changes in the fair value of a fair value hedge and of derivative financial instruments not designated in a hedge relationship are recognised in financial income or expenses in the income statement.

Changes in the effective portion of the fair value of derivative financial instruments that are designated and qualify as a cash flow hedge are recognised in the hedging reserve within equity. When the hedged transaction materialises, amounts previously recognised in other comprehensive income are transferred to the same item as the hedged item.

Derivatives designated as and qualifying for recognition as a cash flow hedge of financial investments are recognised in other comprehensive income. On complete or partial disposal of the financial investment, the portion of the hedging instrument that is recognised in other comprehensive income and relates to that financial investment is recognised in the income statement when the gain or loss on disposal is recognised.

Hedges of net investments in foreign subsidiaries, associates and joint ventures are accounted for in the same way as cash flow hedges.

SECTION 5

ACQUISITIONS, DISPOSALS, ASSOCIATES AND JOINT VENTURES

Marston's brewing activities

Forming the jointly owned entity Carlsberg Marston's Brewing Company by injection of the Group's UK brewing activities and the brewing activities from Marston's PLC.

China

Reorganisation of the Group's Chinese entities into the Chongqing Brewery Group.

Wernesgrüner

Prepayment on the acquisition of Wernesgrüner Brewery, Germany. The acquisition completed 1 January 2021.

SECTION 5.1 INVESTMENT MODEL AND RISKS

MARKET ACCESS

In the beer industry, access to local markets is highly dependent on establishing good relationships with customers in the on- and off-trade channels, national distributors, local suppliers and relevant authorities governing the beverage industry. Often, the most efficient way of establishing such relations is by acquiring a local brewer or engaging with a local partner that already has the relevant relationships.

Therefore, when the Group expands its business, it often does so in collaboration with a local partner. Such a partnership can take different legal forms and impacts the consolidated financial statements to a varying degree accordingly.

INVESTMENT MODEL

Entering into a partnership can reduce the financial exposure and mitigate the business risks associated with entering new markets or expanding the activities in an existing market.

The financial exposure, however, varies depending on the structure of the partnership. Business and financial success, and the related risks, depend on the ability of the Group and the local partner to forge a strong and aligned cooperation.

In some markets, the Group enters as a noncontrolling shareholder, providing a degree of financing and contributing knowledge of the beer industry. The Group thus leaves the controlling influence with the partner and recognises the investment as an associate.

Other investments are structured as joint ventures, where the Group and the local partner jointly make the operational decisions and share strategic and tactical responsibility.

More commonly, the Group structures its partnerships such that it exercises management control, usually by way of majority of the voting rights. These investments are fully consolidated subsidiaries, which are just as important as other types of partnership for success in the local markets, but mean that the Group has increased financial exposure. Investments in businesses in which the Group exercises management control often involve put and/or call options or a similar structure.

IMPACT ON FINANCIAL STATEMENTS

Investments in associates and joint ventures are consolidated in the financial statements using the equity method. The accounting risks associated with these entities are limited to the investment made, the proportionate share of the net profit and any specific additional commitments to banks or other parties, as well as specific guarantees or loans the Group provides to the partnership.

In businesses where the Group exercises management control, the consolidated financials are impacted by full exposure to the earnings and other financial risks. From an accounting point of view, the Group treats any put options held by partners in such entities as if they had already been exercised by the partner, i.e. anticipating that the acquisition will occur. The accounting impact is that the noncontrolling interests are not recognised, and no part of net profits or equity is attributed to them. Instead, the dividends the partner receives from the business are – for accounting purposes – classified as financial expenses.

SECTION 5.1 (CONTINUED) INVESTMENT MODEL AND RISKS

Common to all partnerships is the risk of disagreement and, ultimately, dissolution. Disagreements with partners on the operational management and strategic directions of partnerships may limit our ability to manage the growth and risk profile of our business. The Group continuously seeks to promote a fair and mutually beneficial development of the partnerships, which is crucial for the development to be successful. However, in certain partnerships the partners' pursuit of goals and priorities that are different from those of the Group might result in disagreements, affecting operational and financial performance. Such different goals and priorities can become more pronounced in the period before a partner has the right to exit the partnership.

A dissolution will initially impact the accounting treatment of an investment. The accounting treatment will depend on whether the Group or our partner is exiting the business. In the long term, however, the impact can be significant to the operation of the local entity and the collaboration with customers, distributors, authorities etc. if the partner was instrumental in managing these relationships. Therefore, the risk of a partnership dissolution may have a negative impact on the underlying business and the financial performance recognised in the consolidated financial statements.

SECTION 5.2 ACQUISITIONS AND DISPOSALS

ACQUISITION OF ENTITIES

Marston's brewing activities

In October 2020, Carlsberg UK and Marston's PLC injected their respective brewing activities into a jointly owned company named Carlsberg Marston's Brewing Company Limited.

Carlsberg is the controlling shareholder with a shareholding of 60%.

The jointly owned company was formed to strengthen the Group's presence in the important UK market through a stronger beer portfolio. The calculated goodwill represents staff competences and synergies from expected optimisations of sales and distribution, supply chain and procurement, possible product innovations, the increase in market share and access to new customers.

The total cost of the acquisition comprises the cash consideration paid, a contingent consideration and the fair value of the 40% of Carlsberg UK businesses that were effectively transferred to Marston's PLC when the Carlsberg entities were injected into the jointly owned company.

The purchase price allocation of the fair value of identified assets, liabilities and contingent liabilities is ongoing. Adjustments are therefore expected to be made to several items in the opening balance, including brands and property, plant and equipment. The accounting treatment of the acquisition will be completed within the 12-month period required by IFRS.

Acquisition of Marston's brewing activities

DKK million	2020
Consideration paid	1,908
Fair value of contingent consideration	61
Fair value of non-controlling shareholding in Carlsberg UK transferred to the seller	548
Foreign currency exchange translation difference	13
Total cost of acquisition	2,530

Acquired assets and liabilities

Acquired assets and liabilities attributable to shareholders in Carlsberg A/S	2,530
Non-controlling interests	-479
Acquired assets and liabilities	3,009
Other payables	-307
Trade payables	-302
Borrowings and lease liabilities	-174
Trade and other receivables	414
Inventories	235
Financial assets	66
Property, plant and equipment	1,265
Intangible assets	1,812

Other

In 2020, the Group adjusted a purchase price allocation made in prior years due to an error in the recognised fair value of land. The adjustment reduced the recognised value of land by DKK 273m and deferred tax by DKK 56m, and increased goodwill by DKK 217m. The comparative figures have been restated accordingly.

In 2019, the Group completed a minor acquisition of DKK 18m.

ACQUISITION OF BRAND RIGHTS

In 2020, the Group acquired the Brooklyn brand rights in our markets. The brand rights are recognised as an intangible asset.

The acquisition is described in section 2.

ACQUISITION OF ENTITIES IN 2021

On 31 December 2020, the Group prepaid DKK 501m for the acquisition of Wernesgrüner Brewery, Germany. The transaction has been completed, and the entity will be fully consolidated as of 1 January 2021. The acquisition is not material to the Group's financial statements.

SECTION 5.2 (CONTINUED) ACQUISITIONS AND DISPOSALS

CASH FLOW

Cash flow to acquire shareholdings in associates and when gaining control of subsidiaries is included in financial investments, while the cash flow on acquisition of an additional shareholding in a subsidiary, i.e. acquiring non-controlling interests, is recognised in financing activities.

Elements of cash consideration paid and received

DKK million	2020	2019
Cash consideration received/paid, subsidiaries, net	-1,908	-18
Prepayment for acquisition of entities not completed at the reporting date	-501	-
Cash consideration received/paid, associates	8	-41
Cash and cash equivalents acquired/disposed of	-	18
Total cash consideration received/paid, net	-2,401	-41
- of which consideration paid for entities acquired	-2,409	-18
- of which consideration received for entities disposed	8	-

Cash flow from acquisition of shareholdings

Total	-2,482	-1,711

controlling interests	-81	-1,670
acquisition of non
Consideration paid for
activities	-2,401	-41
Cash flow from acquisitions, net, included in investing

ACCOUNTING ESTIMATES AND JUDGEMENTS

Assessment of control

The classification of entities where Carlsberg controls less than 100% of the voting rights is based on an assessment of the contractual and operational relationship between the parties. This includes assessing the conditions in shareholder agreements, contracts etc. Consideration is also given to the extent to which each party can govern the financial and operating policies of the entity, how the operation of the entity is designed, and which party possesses the relevant knowledge and competences to operate the entity.

Another factor relevant to this assessment is the extent to which each of the parties can direct the activities and affect the returns, for example by means of rights, reserved matters or casting votes.

Purchase price allocation

For acquisitions of entities, the assets, liabilities and contingent liabilities of the acquiree are recognised using the acquisition method. The most significant assets acquired generally comprise goodwill, brands, property, plant and equipment, receivables and inventories.

No active market exists for the majority of the acquired assets and liabilities, in particular in respect of acquired intangible assets. Accordingly, management makes estimates of the fair value of acquired assets, liabilities and contingent liabilities. Depending on the nature of the item, the determined fair value of an item may be associated with uncertainty and possibly adjusted subsequently.

The unallocated purchase price (positive amount) is recognised in the statement of financial position as goodwill and allocated to the Group's cashgenerating units.

Brands

The value of the brands acquired and their expected useful life are assessed based on the individual brand's market position, expected long-term developments in the relevant markets and profitability. The estimated value includes all future

cash flows associated with the brand, including the related value of customer relations etc.

Management determines the useful life based on the brand's relative local, regional and global market strength, market share, and the current and planned marketing efforts that are helping to maintain and increase its value. When the value of a wellestablished brand is expected to be maintained for an indefinite period in the relevant markets, and these markets are expected to be profitable for a long period, the useful life of the brand is determined to be indefinite.

Brands are measured using the relief from royalty method, under which the expected future cash flows are based on key assumptions about expected useful life, royalty rate, growth rate and a theoretically calculated tax effect. A post-tax discount rate is used that reflects the risk-free interest rate with the addition of a risk premium associated with the particular brand. The model and assumptions applied are consistent with those used in impairment testing, and are described in further detail in section 2.2.3.

Customer agreements and portfolios

The value of acquired customer agreements and customer portfolios is assessed based on the local market and trading conditions. For most entities, there is a close relationship between brands and sales. Consumer demand for beer and other beverages drives sales, and therefore the value of a brand is closely linked to consumer demand, while there is no separate value attached to customers (shops, bars etc.), as their choice of products is driven by consumer demand. The relationship between brands and customers is carefully considered so that brands and customer agreements are not both recognised on the basis of the same underlying cash flows.

Property, plant and equipment

The fair value of land and buildings, and standard production and office equipment is based, as far as possible, on the fair value of assets of similar type and condition that may be bought and sold in the open market.

Property, plant and equipment for which there is no reliable evidence of the fair value in the market (in particular breweries, including production equipment) are valued using the depreciated replacement method.

This method is based on the replacement cost of a similar asset with similar functionality and capacity. The calculated replacement cost is then reduced to reflect functional and physical obsolescence. The expected synergies and the user-specific intentions for the expected use of assets are not included in the determination of the fair value.

Acquisition of Marston's brewing activities Purchase price allocation

Management believes that the purchase price for Marston's brewing activities accounted for in the consolidated financial statements reflects the best estimate of the total fair value of the business. The fair value of the contingent consideration is primarily based on the expected development in market conditions.

The provisional opening balance recognised in the consolidated financial statements is based on the carrying amounts at the time of injection of Marston's PLC's brewing activities into a newly established entity held by the joint venture.

The purchase price allocation of the identified assets, liabilities and contingent liabilities will be completed within 12 months of the acquisition. This is primarily expected to impact the value of brands, property, plant and equipment, trade loans and trade receivables.

Brands

The value of the brands will be estimated using the Group's principle described above. It is expected that significant brands will be assumed to have an indefinite useful life.

Property, plant and equipment

The fair value and expected useful life of the brewery equipment and related buildings of the six acquired breweries will be determined with assistance from leading external engineering experts in the brewery industry.

SECTION 5.2 (CONTINUED) ACQUISITIONS AND DISPOSALS

Trade loans and receivables

The fair value of the trade loans and receivables will be estimated in line with the Group's principle for assessment of credit risk and recognition of impairment losses to reflect the amount that is expected to be collected. The valuation will take into consideration the expected increase in losses in the on-trade segment due to the restrictions and lockdowns under COVID-19.

Goodwill

Goodwill will be allocated to the CGU covering the Western Europe region in line with the allocation of the Group's existing UK business.

ACCOUNTING POLICIES

Acquisitions

The acquisition date is the date when the Group effectively obtains control of an acquired subsidiary or significant influence over an associate or a joint venture.

The cost of a business combination comprises the fair value of the consideration agreed upon, including the fair value of any consideration contingent on future events.

In a step acquisition, the Group gains control of an entity in which it already held a shareholding. The shareholding held before the step acquisition is remeasured at fair value at the acquisition date, added to the fair value of the consideration paid for the shareholding acquired in the step acquisition and accounted for as the total cost of the shareholding in the acquired entity. The gain or loss on the remeasurement is recognised in the income statement under special items.

Goodwill and fair value adjustments in connection with the acquisition of an entity are treated as assets and liabilities belonging to the foreign entity and translated into the foreign entity's functional currency at the exchange rate at the transaction date.

The acquired entities' identifiable assets, liabilities and contingent liabilities are measured at fair value at the acquisition date.

Identifiable intangible assets are recognised if they are separable or arise from a contractual right. Deferred tax on revaluations is recognised.

The identifiable assets, liabilities and contingent liabilities on initial recognition at the acquisition date are subsequently adjusted up until 12 months after the acquisition. The effect of the adjustments is recognised in the opening balance of equity, and the comparative figures are restated accordingly if the amount is material.

Changes in estimates of contingent purchase considerations are recognised in the income statement under special items, unless they qualify for recognition directly in equity.

Disposals

Gains or losses on the disposal or liquidation of subsidiaries, associates and joint ventures are stated as the difference between the sales price and the carrying amount of net assets (including goodwill) at the date of disposal or liquidation, foreign exchange adjustments recognised in other comprehensive income, and costs to sell or liquidation expenses.

SECTION 5.3 NON-CONTROLLING INTERESTS

MATERIAL ASSET RESTRUCTURING IN CHINA

In December 2020, Carlsberg and Chongqing Brewery Co. completed a material asset restructuring and contributed their controlled Chinese assets to Chongqing Jianiang Brewery.

Chongqing Jianiang Brewery is jointly owned by Chongqing Brewery Co. (51%) and the Carlsberg Group (49%). The ownership remains unchanged following the completion of the restructuring, and the ownership of the listed company Chongqing Brewery Co. is also unchanged at 60%. The Group thereby directly and indirectly holds 79% of Chongqing Jianiang Brewery.

At completion, the Group's ownership of the assets it injected (previously 70-100% owned) thereby declined to 56-79%, while the Group's ownership of the assets injected by Chongqing Brewery Co. increased from 60% to 79%. Effectively, the transactions thereby exchange shareholdings of the injected entities between the Group and the non-controlling shareholders in Chongqing Brewery Co.

The fair value of the entities injected by the Carlsberg Group exceeds that of the entities injected by Chongqing Brewery Co. In addition to the exchange of shareholdings, Chongqing Brewery Co. will therefore pay a cash amount to the Group. The amount will be determined based on 2020 earnings and paid in April 2021.

The transaction is accounted for as an equity transaction with the non-controlling interests and resulted in a net increase in equity for

Transactions with non-controlling interests

DKK million	Changes in equity
2020	Shareholders in Carlsberg A/S	Non-controlling interests	Total equity
Change in ownership from asset restructuring in China	-553	553	-
Transaction cost related to asset restructuring in China	-51	-26	-77
Fair value adjustments of contingent consideration and other transactions with non-controlling interests	3,748	87	3,835
Recognised in equity	3,144	614	3,758
2019	-4,466	-55	-4,521
Disposal of 40% of Carlsberg UK to Marston's Non-controlling interest in Marston's brewing activities retained	-182	730	548
by Marston's	-	479	479
Acquisition of entities	-182	1,209	1,027

SECTION 5.3 (CONTINUED) NON-CONTROLLING INTERESTS

non-controlling interests and a corresponding decrease for shareholders in Carlsberg A/S.

The transaction was completed in December 2020 and had an insignificant impact on the allocation of profit for December 2020. At completion, the transferred shareholdings impacted the allocation of equity between shareholders in Carlsberg A/S and noncontrolling interests by DKK 553m.

CHANGES IN THE UK AS A RESULT OF THE ACQUISITION OF MARSTON'S BREWING ACTIVITIES

In October 2020, Carlsberg UK and Marston's PLC injected their respective brewing activities into a jointly owned company named Carlsberg Marston's Brewing Company Limited. The transaction is further described in section 5.2. Carlsberg is the controlling shareholder in the joint venture with a shareholding of 60%, having effectively transferred 40% of its businesses in the UK.

The fair value of the transferred shareholding is part of the total consideration paid for the brewing activities injected by Marston's PLC. At completion, the transferred shareholding impacted the allocation of equity between shareholders in Carlsberg A/S and noncontrolling interests by DKK 730m.

SECTION 5.4 CONTINGENT CONSIDERATIONS

Contingent considerations relate to options held by non-controlling interests in subsidiaries to sell their shares to the Group and to deferred payments in the acquisition of entities depending on market developments.

At the end of the reporting period, the contingent considerations primarily related to put options on the shares in Carlsberg South Asia Pte Ltd (the parent company holding 100% and 90% of the shares in the businesses in India and Nepal respectively), in Brewery Alivaria, Belarus, in a craft brewery in Western Europe, and to the contingent consideration in the acquisition of Marston's brewing activities.

In accordance with the Group's accounting policy, shares subject to put options are consolidated as if the shares had already been acquired. The ownership percentage at which these subsidiaries are consolidated therefore differs from the legal ownership interest retained by the Group. Both the legal and the consolidated ownership is stated in section 10.

The carrying amount of contingent considerations is determined in accordance with the terms of the agreements made with the holders of the options. Therefore, not all are measured at fair value.

The valuation of put options at fair value decreased due to the COVID-19 impact on the businesses. The size of the decline differs from market to market depending on the impact of the pandemic, government actions, including lockdowns, and the expected time to return to the market conditions and earnings seen before the outbreak. Interest rates of 4.8-7.4% and residual growth rates of 4.0-5.0% were applied in the valuation of contingent considerations.

Other contingent considerations are linked to the development in the share price of selected beverage companies.

Movements during the year comprise acquisition of entities and fair value adjustments of contingent considerations, net of exercised put options during the year.

Of the contingent considerations, DKK 5bn (2019: DKK 9bn) is expected to fall due within one to five years, whereas the rest will fall due within 12 months. The majority of the contingent considerations are expected to fall due within the next few years.

In one of the agreements, the partner can initiate the put option process from 1 January 2021. Our partner has not yet initiated the put option process, and it is not expected that the options will be exercised during 2021.

TRANSACTIONS IN 2019

In 2019, the remaining outstanding shares in Caretech Limited (the parent company in the Cambrew Group) were acquired. The related contingent consideration was derecognised. A loss of DKK 526m was recognised in equity on exercise of these put options.

Contingent considerations

DKK million	2020	2019
Contingent considerations at 1 January	9,023	6,168
Movements, net	-3,733	2,855
Contingent considerations at 31 December	5,290	9,023

SECTION 5.4 (CONTINUED) CONTINGENT CONSIDERATIONS

ACCOUNTING ESTIMATES AND JUDGEMENTS

The fair value of contingent considerations linked to put options is calculated on the basis of level 3 input consisting of non-observable data, such as entityspecific discount rates and industry-specific expectations of price developments, and generally accepted valuation methods, including discounted cash flows and multiples.

Estimates are based on updated information since initial recognition of the contingent consideration, including new budgets and sales forecasts, discount rates etc. The assumptions applied are in line with those used in the impairment tests as described in section 2.2, but reflecting the different models and valuation techniques needed.

The fair values of other contingent considerations are measured at the expected future price of certain selected shares.

On acquisition of non-controlling interests, i.e. subsequent to the Group obtaining control, acquired net assets are not measured at fair value. The difference between the cost and the non-controlling interests' share of the total carrying amount, including goodwill, is transferred from the non-controlling interests' share of equity to equity attributable to shareholders in Carlsberg A/S. The amount deducted cannot exceed the non-controlling interests' share of equity immediately before the transaction.

On disposal of shareholdings to non-controlling interests, the difference between the sales price and the share of the total carrying amount, including goodwill acquired by the non-controlling interests, is transferred from equity attributable to shareholders in Carlsberg A/S to the non-controlling interests' share of equity.

Fair value adjustments of put options granted to noncontrolling interests are recognised directly in the statement of changes in equity.

Other contingent considerations (earn-outs), which are not linked to a future transfer of additional shareholdings, are measured in accordance with the terms of the contract with the seller. The revaluation of such contingent considerations is recognised in special items.

SECTION 5.5 ASSOCIATES AND JOINT VENTURES

Investments in associates and joint ventures include the businesses in Portugal (60%) and Myanmar (51%) and five associates in China (each 50%). The total investment in these associates amounted to DKK 2,589m at 31 December 2020 (2019: DKK 2,658m).

In 2019, the Group increased its ownership of Super Bock, Portugal, to 60%. Nevertheless, Super Bock remains an associate of the Group due to the ownership structure. Please refer to section 10 for further details.

Despite the legal 51% ownership share in Myanmar Carlsberg, the entity is classified as an associate due to the structure of the agreement with the partner.

For associates in which the Group holds an ownership interest of less than 20%, the Group participates in the management of the company and is therefore exercising significant influence.

Fair value of investment in listed associates

DKK million	2020	2019
The Lion Brewery
Ceylon, Sri Lanka	382	443

None of the associates and joint ventures are material to the Group.

Investments in associates and joint ventures are recognised according to the equity method, which entails measurement at cost and adjustment for the Group's share of the profit or loss and other comprehensive income of the associate after the date of acquisition. The share of the result must be calculated in accordance with the Group's accounting policies. The proportionate share of unrealised intragroup profits and losses is eliminated. Investments in associates and joint ventures with negative net asset values are measured at DKK 0.

If the Group has a legal or constructive obligation to cover a deficit in the associate or joint venture, the deficit is recognised under provisions. Any amounts owed by associates and joint ventures are written down to the extent that the amount owed is deemed irrecoverable.

Key figures for associates and joint ventures

DKK million	Carlsberg Group share
2020	Profit after tax	Other comprehensive income	Total comprehensive income	Investments in associates and joint ventures
Associates	315	-4	311	4,191
Joint ventures	-	-	-	-3
Total	315	-4	311	4,188
2019
Associates	278	4	282	4,366
Joint ventures	-	-	-	-2
Total	278	4	282	4,364

SECTION 6 TAX

24.7% TAX RATE The tax rate is down from 26.9% in 2019.

SECTION 6.1 INCOME TAX

The nominal weighted tax rate for the Group is calculated as domestic tax rates applicable to profits in the entities as a proportion of each entity's share of the Group's profit before tax.

The nominal weighted tax rate declined compared with 2019, as Russia (tax rate 20%) and Laos (tax rate 20%) contributed a proportionally larger share, countered by Norway (tax rate 22%).

The effective tax rate of 24.7% (2019: 26.9%) was positively impacted by the non-taxable and non-deductible transactions in special items. Excluding these items, the effective tax rate would be 25.7%.

The Group's total tax cost at the effective tax rate was DKK 354m higher than the Group's nominal weighted tax, negatively impacted by withholding taxes (particularly on dividends), non-capitalised tax assets and non-deductible expenses (particularly marketing expenses and intercompany charges).

It is not possible to deduct all interest and fair value adjustments arising in Denmark due to thin capitalisation rules. Tax on such adjustments therefore fluctuates from year to year.

ACCOUNTING POLICIES

Income tax comprises current tax and changes in deferred tax for the year, including changes as a result of a change in the tax rate. The tax expense relating to the profit/loss for the year is recognised

Reconciliation of the effective tax rate for the year

in the income statement, while the tax expense relating to items recognised in other comprehensive income is recognised in the statement of comprehensive income.

If the Group obtains a tax deduction on computation of the taxable income in Denmark or in foreign jurisdictions as a result of share-based payment programmes, the tax effect of the programmes is recognised in tax on profit/loss for the year. However, if the total tax deduction exceeds the total expense, the tax benefit of the excess deduction is recognised directly in equity.

	2020			2019
	%	DKK million	%	DKK million
Nominal weighted tax rate	20.8	1,879	21.8	2,225
Change in tax rate	0.1	9	-0.1	-8
Adjustments to tax for prior years	0.4	40	0.2	24
Non-capitalised tax assets, net movements	1.5	138	1.5	156
Non-taxable income	-0.7	-59	-0.5	-54
Non-deductible expenses	1.6	148	1.7	172
Tax incentives etc.	-0.5	-45	-0.3	-27
Special items	-	-3	-0.9	-87
Withholding taxes	1.9	167	3.9	395
Other, including tax in associates and
joint ventures	-0.4	-41	-0.4	-45
Effective tax rate for the year	24.7	2,233	26.9	2,751
Effective tax rate for the year, excluding the effect of non-taxable and non-deductible
transactions in special items	25.7	-	26.9	-

SECTION 6.1 (CONTINUED) INCOME TAX

Income tax expenses

	2020					2019
DKK million	Income statement	Other comprehensive income	Total comprehensive income	Income statement	Other comprehensive income	Total comprehensive income
Tax for the year can be specified as follows
Current tax	2,024	22	2,046	2,127	5	2,132
Change in deferred tax and non-current tax payables during the year	160	42	202	608	-60	548
Change in deferred tax as a result of change in tax rate	9	-	9	-8	-	-8
Adjustments to tax for prior years	40	-	40	24	-	24
Total	2,233	64	2,297	2,751	-55	2,696

Tax recognised in other comprehensive income

	2020					2019
DKK million	Recognised item before tax	Tax income/ expense	After tax	Recognised item before tax	Tax income/ expense	After tax
Foreign exchange adjustments	7,640	-	7,640	-3,485	-	-3,485
Hedging instruments	-198	22	-176	323	-20	303
Retirement benefit obligations	-1	42	41	571	-38	533
Share of other comprehensive income in associates and joint ventures	4	-	4	-4	-	-4
Other	-	-	-	-14	3	-11
Total	7,445	64	7,509	-2,609	-55	-2,664

SECTION 6.2 TAX ASSETS AND LIABILITIES

Of the total deferred tax assets recognised, DKK 201m (2019: DKK 312m) related to tax loss carryforwards, the utilisation of which depends on future positive taxable income exceeding the realised deferred tax liabilities. It is management's opinion that these tax loss carryforwards can be utilised.

Tax assets not recognised of DKK 936m (2019: DKK 678m) primarily related to tax losses that are not expected to be utilised in the foreseeable future. Of these, tax losses that will not expire amounted to DKK 962m (2019: DKK 472m). Remaining tax losses of DKK 355m (2019: DKK 206m) will expire within five years.

Deferred tax of DKK 41m (2019: DKK 54m) was recognised in respect of the tax of 5% payable on planned dividends from certain entities in Eastern Europe.

Planned distribution of reserves for other subsidiaries will not trigger a significant tax liability based on current tax legislation.

Deferred tax on temporary differences relating to investments in subsidiaries, associates and joint ventures was recognised at DKK 0m (2019: DKK 180m). The deferred tax plus the additional tax on the gain on the Group's internal transfer of shares is expected to materialise within the next few years.

SECTION 6.2 (CONTINUED) TAX ASSETS AND LIABILITIES

Changes in deferred tax and non-current tax payables for the year amounted to DKK 160m (2019: DKK 608m).

Non-current tax liabilities recognised in the statement of financial position

DKK million	2020	2019
Deferred tax liabilities	4,779	4,652
Non-current tax payables	1,486	1,795
Non-current tax liabilities at
31 December	6,265	6,447

ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group recognises deferred tax assets, including the expected tax value of tax loss carryforwards, if management assesses they can be offset against positive taxable income in the foreseeable future. This judgement is made annually and based on budgets and business plans for the coming years, including planned commercial initiatives.

Carlsberg operates in a large number of tax jurisdictions where tax legislation is highly complex and subject to interpretation. Management makes judgements on uncertain tax positions to ensure recognition and measurement of tax assets and liabilities.

ACCOUNTING POLICIES

Current tax payable and receivable are recognised in the statement of financial position as tax computed on the taxable income for the year, adjusted for tax on the taxable income of prior years and for tax paid on account respectively.

Deferred tax on all temporary differences between the carrying amount and the tax base of assets and liabilities is measured using the balance sheet liability method. However, deferred tax is not recognised on temporary differences relating to goodwill that is not deductible for tax purposes or on office premises and other items where temporary differences, apart from business combinations, arise at the acquisition date without affecting either profit/loss for the year or taxable income.

Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on the planned use of the asset or settlement of the liability. Deferred tax is recognised on expected dividend payments from subsidiaries, associates and joint ventures in countries levying withholding tax on distributions.

Deferred tax assets related to tax loss carryforwards are recognised under other non-current assets at the expected value of their utilisation, either as a set-off against tax on future income or as a set-off against

deferred tax liabilities in the same legal tax entity and jurisdiction.

Deferred tax assets and tax liabilities are offset if the entity has a legally enforceable right to offset current tax liabilities and tax assets or intends either to settle current tax liabilities and tax assets or to realise the assets and settle the liabilities simultaneously. Deferred tax assets are recognised only to the extent that it is probable that the assets will be utilised.

Deferred tax is measured according to the tax rules at the reporting date and at the tax rates applicable when the deferred tax is expected to materialise as current tax.

The change in deferred tax as a result of changes in tax rates is recognised in the income statement. Changes to deferred tax on items recognised in other comprehensive income are, however, recognised in other comprehensive income.

Specification of deferred tax

		Deferred tax assets		Deferred tax liabilities
DKK million	2020	2019	2020	2019
Intangible assets	388	465	3,280	3,680
Property, plant and equipment	281	432	1,583	1,734
Current assets	386	367	25	28
Provisions and retirement benefit obligations	929	1,022	228	26
Fair value adjustments	35	-	10	-
Tax losses etc.	1,204	1,403	1,109	935
Total before offset	3,223	3,689	6,235	6,403
Offset	-1,456	-1,751	-1,456	-1,751
Deferred tax assets and liabilities at 31 December	1,767	1,938	4,779	4,652
Expected to be used as follows
Within one year	964	695	1,701	2,115
After more than one year	803	1,243	3,078	2,537

Total 1,767 1,938 4,779 4,652

Changes to non-current tax assets and liabilities

DKK million	2020	2019
Tax assets and liabilities at 1 January, net	4,509	3,910
Adjustments to prior years	107	-206
Acquisition of entities	-	40
Recognised in other comprehensive income	42	-60
Recognised in the income statement, net	160	608
Change in tax rate	9	-8
Foreign exchange adjustments	-329	225
Tax assets and liabilities at 31 December, net	4,498	4,509

Recognised as follows

Tax assets and liabilities at 31 December, net	4,498	4,509
Tax assets	-1,767	-1,938
Tax liabilities	6,265	6,447

SECTION 7

STAFF COSTS AND REMUNERATION

Reset

To prepare for a new post-COVID-19 reality, we initiated a review and reset of our total cost base towards the end of the year, called Reset for the future.

Pensions

Defined benefit obligations were affected by lower discount rates across all markets as a result of the COVID-19 pandemic, and by the transfer of the large medical insurance scheme to the municipal government, releasing the Group from the obligation.

Employees by segment (%)

Western Europe 29% (28%) Asia 38% (38%) Eastern Europe 30% (32%) Other 3% (2%)

by function (%)

SECTION 7.1 STAFF COSTS

Staff costs decreased for several entities in 2020 as a consequence of lower performance-related payouts due to COVID-19 and compared with the relatively high payouts for 2019 due to good financial performance. This was partly offset by increased redundancies etc.

During 2020, the average number of employees decreased due to terminations as part of Reset for the future, partly offset by the acquisition of Marston's brewing activities. As the restructurings and acquisition were completed in the second half of the year, the full impact is not visible in the average number of employees for the year.

Staff costs

Salaries and other remuneration	7,841
		8,549
Severance payments	177	88
Social security costs	1,172	1,344
Retirement benefit costs – defined contribution plans	303	300
Retirement benefit costs – defined benefit plans	-19	32
Share-based payments	66	217
Other employee benefits	91	60
Total	9,631	10,590
Average number of employees	40,010	41,248

Staff costs are included in the following line items in the income statement

Total	9,631	10,590
Special items (restructurings)	91	27
Financial expenses (pensions)	-189	-133
Other operating activities, net	68	63
Administrative expenses	1,902	2,192
Sales and distribution expenses	5,087	5,575
Cost of sales	2,672	2,866

SECTION 7.2 REMUNERATION

The remuneration of the Supervisory Board, the executive directors and key management personnel is described in detail in the Remuneration Report.

The remuneration of key management personnel decreased in 2020, primarily as a result of the COVID-19 impact on the KPIs measured in both short- and long-term incentive programmes.

In 2020, the Supervisory Board received total remuneration of DKK 9.86m (2019: DKK 9.59m), comprising fixed salary only.

All elements except for share-based payments are classified as short-term employee benefits. Share-based payments are classified as a long-term employee benefit.

ACCOUNTING POLICIES

Staff costs are recognised in the financial year in which the employee renders the related service.

The cost of share-based payments, which is expensed over the vesting period of the programme according to the service conditions, is recognised in staff costs and provisions or equity, depending on how the programme is settled with the employees.

Key management personnel comprise the Executive Committee, excluding the executive directors. Other management personnel included in the share-based payment schemes comprise vice presidents and other key employees in central functions as well as the management of significant subsidiaries.

SECTION 7.3 SHARE-BASED PAYMENTS

The Group has set up share-based incentive programmes to attract, retain and motivate the Group's executive directors and other levels of management personnel, and to align their interests with those of the shareholders. There is no share-based incentive programme for the Supervisory Board.

The Group has two types of share-based payment: share options and performance shares. Share options entitle the holder to purchase class B shares in Carlsberg A/S at a predetermined price after completing three years of service. Share options are exercisable for five years.

Entitlement to performance shares also requires fulfilment of service in the vesting period (2-3 years), but does not have any exercise price.

Instead, the shares are transferred to the recipients based on achievement of the KPIs attached to the shares. Performance shares have been awarded under three programmes that differ in terms of KPI structure and vesting period.

PERFORMANCE SHARES

The number of performance shares granted is the maximum number of performance shares that can vest. The number of shares outstanding at the end of the period is the number expected to vest, based on the extent to which the vesting conditions are expected to be met. The number of shares expected to vest is revised on a regular basis.

Regular performance shares

In 2020, 190 employees (2019: 192 employees) across the Group were awarded performance shares.

Vesting is subject to achievement of four KPIs: total shareholder return, adjusted EPS growth, organic revenue growth and growth in ROIC. The average share price at vesting was DKK 770 (2019: DKK 803). The average contractual life at the end of 2020 was 1.2 years (2019: 1.5 years).

Remuneration

		Executive directors		Key management personnel
DKK million	2020	2019	2020	2019
Fixed salary	20.7	20.2	29.7	26.5
Cash bonus	9.3	18.5	12.4	24.5
Other benefits	1.1	1.1	8.5	7.0
Severance payments	-	-	8.3	-
Remuneration settled in cash	31.1	39.8	58.9	58.0
Non-monetary benefits	0.4	0.4	1.1	0.7
Share-based payments	26.0	37.0	10.5	21.4
Remuneration, non-monetary and share-based	26.4	37.4	11.6	22.1
Total cash and non-cash	57.5	77.2	70.5	80.1

SECTION 7.3 (CONTINUED) SHARE-BASED PAYMENTS

Fund & Grow performance shares

The Fund & Grow performance share programme was set up in 2018 to align the initiatives driven by Group management in our SAIL'22 strategy with the interests of our shareholders. Shares were granted to 204 employees across the Group, not including the executive directors. The programme vested in 2020 with all KPIs fully achieved.

Share options

No share options have been granted since 2016. The outstanding options are all exercisable at the end of the reporting period. The average contractual life was 2.8 years (2019: 3.6 years).

Share option disclosures

DKK million	2020	2019
Fair value at 31 December	52	54

The volatility of performance shares is based on the historical volatility of the price of Carlsberg A/S' class B shares over the previous three years. For share options, the volatility is based on similar data over the previous eight years.

The share price and the exercise price of share options are calculated as the average price of Carlsberg A/S' class B shares on Nasdaq Copenhagen during the first five trading days after publication of Carlsberg A/S' financial statements.

The risk-free interest rate is based on Danish government bonds of the relevant maturity. The expected life is based on exercise at the end of the exercise period.

The fair value of granted performance shares is estimated using a stochastic (quasi-Monte Carlo) valuation model of market conditions and a Black-Scholes call option-pricing model of other conditions, taking into account the terms and conditions upon which the performance shares were granted.

On initial recognition of performance shares, an estimate is made of the number of awards expected to vest and subsequently revised for any changes. Accordingly, recognition is based on the number of awards that ultimately vest.

Performance shares

	Executive directors	Key management personnel	Other management personnel	Total
31 December 2018	203,484	88,919	513,661	806,064
Granted	61,331	27,569	167,918	256,818
Forfeited/adjusted	-17,353	-18,240	-64,592	-100,185
Exercised/settled	-58,057	-	-	-58,057
31 December 2019	189,405	98,248	616,987	904,640
Granted	48,991	22,550	130,515	202,056
Forfeited/adjusted/transferred	-28,919	-16,970	-160,696	-206,585
Exercised/settled	-66,865	-49,277	-307,465	-423,607
31 December 2020	142,612	54,551	279,341	476,504

Key information

		Regular performance shares	Fund & Grow performance shares
	2020	2019
Assumptions
Expected volatility	16.0%/21.0%	16%	N/A
Risk-free interest rate	0.0%	0.0%	0.0%
Expected dividend yield	0.0/3.0%	2.3%	2.2%
Expected life of options, years	3.0	3.0	2.0
Fair value at measurement date	DKK 567-894	DKK 648-651	DKK 684

Performance share disclosures

		Regular		Fund & Grow
DKK million	2020	2019	2020	2019
Fair value at grant date	131	167	-	-
Cost of shares granted in the year	30	46	-	-
Total cost of performance shares	56	104	10	112
Cost not yet recognised	132	162	7	14
Fair value at 31 December	458	510	-	361

Share options

Total
114,984
114,984
114,984

SECTION 7.4 RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS

A number of employees are covered by retirement benefit plans. The nature of the plans varies depending on labour market conditions in the individual countries. Benefits are generally based on wages/salaries and length of employment.

Retirement benefit obligations cover both present and future retirees' entitlement to retirement benefits.

DEFINED CONTRIBUTION PLANS

A defined contribution plan is a postemployment benefit plan under which the Group pays contributions to a separate independent company. The Group's legal or constructive obligation is limited to the contributions.

61% (2019: 61%) of the Group's retirement benefit costs related to defined contribution plans. In 2020, the expense recognised in relation to these contributions was DKK 303 (2019: DKK 300m).

DEFINED BENEFIT PLANS

The defined benefit plans guarantee employees a certain level of pension benefits for life. The pension is based on seniority and salary at the time of retirement. The Group assumes the risk

associated with future developments in interest rates, inflation, mortality and disability etc.

The most significant plans are in the UK and Switzerland, representing 50% and 38% respectively (2019: 47% and 39%), while the eurozone countries represented 5% (2019: 5%) of the gross obligation at 31 December 2020.

The majority of the obligations are funded, with assets placed in independent pension funds, mainly in Switzerland and the UK. In some countries, primarily Germany, Sweden and China, the obligation is unfunded. The retirement benefit obligations for these unfunded plans amounted to DKK 1,589m (2019: DKK 1,802m) or 12% (2019: 13%) of the gross obligation.

In 2020, the Group's obligation, net, on defined benefit plans decreased by DKK 365m compared with 2019 because of general decreases in the net obligation across the Group. Two particularly significant factors in this were the DKK 213m decrease in China, as a result of the municipal government in Xinjiang assuming responsibility for the longterm medical insurance scheme, and the DKK 305m net decrease in Switzerland, reflecting higher benefits paid out and an increase in the assets plan. This effect was partially offset by changes in actuarial assumptions in the UK, primarily lower discount rates, as an effect of the COVID-19 pandemic, which increased the net obligation, mainly due to actuarial losses of DKK 150m.

Obligation, net
			2020			2019
DKK million	Present value of obligation	Fair value of plan assets	Obligation, net	Present value of obligation	Fair value of plan assets	Obligation, net
Obligation at 1 January	13,771	10,472	3,299	12,239	9,331	2,908
Recognised in the income statement
Current service cost	223	-	223	199	-	199
Past service cost	-242	-	-242	-169	-	-169
Net interest on the net defined benefit obligation (asset)	160	114	46	256	189	67
Curtailments and settlements	-	-	-	2	-	2
Total	141	114	27	288	189	99
Remeasurements
Gain/loss from changes in demographic assumptions	51	-	51	-98	-	-98
Gain/loss from changes in financial assumptions	682	734	-52	1,452	717	735
Asset ceiling	-	-	-	-	66	-66
Total	733	734	-1	1,354	783	571
Other changes
Contributions to plans	-	182	-182	-	225	-225
Benefits paid	-608	-504	-104	-594	-486	-108
Acquisition and disposal of entities,
net	-	-	-	1	-	1
Transfers	-28	7	-35	1	-	1
Foreign exchange adjustments etc.	-421	-351	-70	482	430	52
Total	-1,057	-666	-391	-110	169	-279
Obligation at 31 December	13,588	10,654	2,934	13,771	10,472	3,299

The total return on plan assets for the year amounted to DKK 850m (2019: DKK 906mm).

SECTION 7.4 (CONTINUED) RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS

The Group expects to contribute DKK 74m (2019: DKK 79m) to the plan assets in 2021. Plan assets do not include shares in or properties used by Group companies.

Amounts recognised in other comprehensive income for 2020 totalled DKK -429m (2019: net gain of DKK 681m), comprising foreign exchange adjustment, DKK 129m, and net actuarial loss, DKK 300m, which in 2019 included reversal of an asset ceiling in the UK of DKK 66m.

The accumulated actuarial loss and foreign exchange adjustment recognised at 31 December 2020 was DKK 3,287m (2019: DKK 3,710m), with actuarial net losses of DKK 3,733m (2019: DKK 3,734m).

Assumptions applied

In 2020, the discount rate used for the defined benefit plans in Western Europe was determined by reference to market yields on corporate bonds. In the Asian countries, where no deep market in high-quality corporate bonds exists, the discount rate was determined by reference to market yields on government bonds.

The mortality tables used in Carlsberg UK are S3PMA/S3PFA tables for post-retirement and AMC00/AFC00 for pre-retirement, both with CMI_2019 projections, while the Swiss entities use BVG 2015 for valuation of their retirement benefit obligations.

Sensitivity analysis

The sensitivity analysis is based on a change in one of the assumptions, while all other assumptions remain constant. This is highly unlikely, however, as a change in one assumption would probably affect other assumptions as well. When calculating the obligation on the basis of a changed assumption, the same method has been applied as when calculating the defined benefit obligation.

Expected maturity and duration

Defined benefit obligations are primarily expected to mature after five years. The expected duration of the obligations at yearend 2020 was 21 years. The duration is calculated using a weighted average of the duration divided by the obligation.

Breakdown of plan assets

	2020		2019
	DKK million	%	DKK million	%
Shares	992	9	1,004	10
Bonds and other securities	7,578	71	7,080	68
Real estate	1,914	18	2,231	21
Cash and cash equivalents	170	2	157	1
Total	10,654	100	10,472	100

Assumptions applied

					Weighted
2020	CHF	UK	EUR	Other	average
Discount rate	0.2%	1.6%	0.3 - 0.7%	1.8%	0.6%
Growth in wages and salaries	1.0%	2.1%	0.2 - 2.7%	2.0%	1.2%

2019
Discount rate	0.1%	2.2%	0.3-0.9%	2.5%	1.3%
Growth in wages and salaries	1.0%	2.2%	0.0-2.7%	3.1%	1.8%

Sensitivity analysis

		2020		2019
DKK million	+0.5%	-0.5%	+0.5%	-0.5%
Discount rate	-1,514	1,715	-1,063	1,216
Growth in wages and salaries	74	-67	70	-65
	+1 year	-1 year	+1 year	-1 year
Mortality	452	-378	580	-582

Maturity of retirement benefit obligations

DKK million	< 1 year	1-5 years	> 5 years	Total
2020	611	2,313	10,664	13,588
2019	449	2,121	11,201	13,771

SECTION 7.4 (CONTINUED)

RETIREMENT BENEFIT OBLIGATIONS AND SIMILAR OBLIGATIONS

ACCOUNTING ESTIMATES AND JUDGEMENTS

The value of the Group's defined benefit plans is based on valuations from external actuaries. The valuation is based on a number of actuarial assumptions, including discount rates, expected return on plan assets, expected growth in wages and salaries, mortality and retirement benefits.

The present value of the net obligation is calculated by using the projected unit credit method and discounting the defined benefit plan by a discount rate for each country. The discount rate is determined by reference to market yields on high-quality corporate bonds. Where high-quality corporate bonds are not available, the market yields on government bonds are used instead.

Mortality assumptions are based on the Group entity's best estimate of the mortality of plan members during and after employment, and include expected changes in mortality. Due to the broad range of entities comprising the retirement benefit obligation, several different mortality tables are used to calculate the future retirement benefit obligation.

ACCOUNTING POLICIES

Contributions paid to a defined contribution plan are recognised in the income statement in the period during which services are rendered by employees. Any contributions outstanding are recognised in the statement of financial position as other liabilities.

The Group's net obligation recognised in the statement of financial position in respect of defined benefit plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets calculated by a qualified actuary.

The present value is determined separately for each plan by discounting the estimated future benefits that employees have earned in return for their service in the current and prior years.

The costs of a defined benefit plan are recognised in the income statement and include service costs, net interest based on actuarial estimates and financial expectations at the beginning of the year.

Service costs comprise current service cost and past service cost. Current service cost is the increase in the present value of the defined benefit obligation resulting from employee services in the current period. Past service cost is the change in the present value of the obligation regarding employee services in prior years that arises from a plan amendment or a curtailment. Past service costs are recognised immediately, provided employees have already earned the changed benefits.

Realised gains and losses on curtailment or settlement are recognised under staff costs.

Interest on retirement benefit obligations and the interest on return on plan assets are recognised as financial income or financial expenses.

Differences between the development in retirement benefit assets and liabilities and realised amounts at year-end are designated as actuarial gains or losses and recognised in other comprehensive income. As they will never be reclassified to the income statement, they are included in retained earnings.

If a retirement benefit plan constitutes a net asset, the asset is recognised only if it offsets future refunds from the plan or will lead to reduced future payments to the plan.

Realised gains and losses on the adjustment of retirement benefit obligations as a result of termination of a significant number of positions in connection with restructurings are recognised under special items.

SECTION 8

OTHER DISCLOSURE REQUIREMENTS

6,363m

Profit attributable to shareholders in Carlsberg A/S, adjusted for special items after tax (DKK).

43.6

Earnings per share, adjusted for special items after tax (DKK).

SECTION 8.1 EARNINGS PER SHARE

During 2020, the Group repurchased a total of 2.9m B shares under the share buy-back programme. The continued share buy-back programme decreased the average number of shares by 4.3m. This increased adjusted earnings per share by DKK 1.2. The adjustment for special items after tax more than offset the lower profit for the year compared with the previous year and increased adjusted earnings per share by DKK 1.4.

For all share-based incentive instruments, the average market price of Carlsberg B shares exceeded the exercise price and the fair value at the grant date. As a result, diluted earnings per share included all share-based incentive instruments that could potentially dilute earnings in the future.

Earnings per share

DKK	2020	2019
Earnings per share of DKK 20 (EPS)	41.3	43.7
Diluted earnings per share of DKK 20 (EPS-D)	41.1	43.4
Earnings per share, adjusted (EPS-A)	43.6	41.0

Average number of shares

Average number of issued shares	149,407	152,557
Average number of treasury shares	-3,303	-2,146
Average number of shares	146,104	150,411
Average dilutive effect of share-based incentives	646	817
Diluted average number of shares	146,750	151,228

Profit attributable to shareholders

DKK million

Profit attributable to shareholders in Carlsberg A/S, adjusted	6,363	6,160
Special items after tax	333	-409
Profit attributable to shareholders in Carlsberg A/S (net profit)	6,030	6,569
Non-controlling interests	-778	-908
Consolidated profit	6,808	7,477

SECTION 8.2 FEES TO AUDITORS

Fees to auditors appointed by the Annual General Meeting

DKK million	2020	2019
PwC, including network firms
Statutory audit	21	20
Assurance engagements	1	1
Tax advisory	2	2
Other services	2	7
Total	26	30

Fees for services other than the statutory audit of the financial statements provided by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab, Denmark, amounted to DKK 2m (2019: DKK 8m), including advice relating to information security, internal controls, and other assurance opinions and agreed-upon procedures, as well as accounting advice.

SECTION 8.3 RELATED PARTIES

RELATED PARTIES EXERCISING CONTROL

The Carlsberg Foundation, H.C. Andersens Boulevard 35, 1553 Copenhagen V, Denmark, exercises control over Carlsberg A/S. The Foundation holds 29.6% of the shares and 75.6% of the voting power in Carlsberg A/S, excluding treasury shares.

The following transactions took place between the Carlsberg Foundation and the Group in 2020:

The Carlsberg Foundation received a dividend of DKK 21.00 per share from Carlsberg A/S, the same as every other shareholder. The dividend received amounted to DKK 970m.

Through its pro-rata participation in the share buy-back programme, the Carlsberg Foundation sold B shares to Carlsberg A/S at a fair value of DKK 880m. The Foundation thereby reduced its shareholding to 29.6% at 31 December 2020 (2019: 29.4%). The shares were sold back at the average weekly share buy-back market prices.

FUNDING AND GRANTS

Carlsberg A/S received statutory grants and further funding from the Carlsberg Foundation, DKK 30.3m, for the basic research and development activities at the Carlsberg Research Laboratory (2019: DKK 39m). Of the total grants, DKK 22m (2019: DKK 41m) was deferred to be used for research projects in the future.

In 2020, the Carlsberg Foundation contributed DKK 52m that will be used to support the rebuilding of the Carlsberg Visitor Centre during 2021 and 2022 to better showcase Carlsberg's rich history and value creation.

OTHER ACTIVITIES

Carlsberg A/S held the Annual General Meeting at Ny Carlsberg Glyptotek at a cost of DKK 0.2m. Furthermore, Ny Carlsberg Glyptotek received event products free of

charge from the Group as part of the sponsorship of certain events at an accumulated value of DKK 0.01m.

The Group's delivery of beer and soft drinks to the Carlsberg Foundation is charged at ordinary listing price minus a discount. In 2020, the deliveries amounted to DKK 0.1m (total sales of goods) (2019: DKK 0.2m).

Carlsberg A/S leases parking spaces from the Carlsberg Foundation to provide parking for employees at the Research Laboratory and Visit Carlsberg. Furthermore, Carlsberg Breweries A/S leases storage facilities in the researcher apartments. These lease agreements are with subsidiaries of the Foundation. Both of the annual lease payments amount to DKK 0.2m and the leases are on market terms.

It is estimated that the benefit for the Carlsberg Group corresponds to the value of the other activities provided to the Carlsberg Foundation, which in turn corresponds to what each party would have had to pay to have the same deliverables provided by external parties.

OTHER RELATED PARTIES

Related parties also comprise Carlsberg A/S' Supervisory Board and Executive Board, their close family members and companies in which these persons have significant influence. During the year, there were no transactions between these parties and the Group, except for remuneration as disclosed in section 7 of the consolidated financial statements.

The income statement and the statement of financial position include the following transactions

DKK million	2020	2019
Associates and joint ventures
Revenue	78	72
Cost of sales	-756	-703
Sales expenses	-14	-
Interest income	15	-
Loans	213	241
Receivables	-	48
Trade payables and other liabilities	-10	-2

SECTION 8.4 EVENTS AFTER THE REPORTING PERIOD

On 1 January 2021, the Group completed the minor acquisition of Wernesgrüner Brewery, Germany, which will be fully consolidated as of the acquisition date.

Apart from this and the events recognised or disclosed in the consolidated financial statements, no events have occurred after the reporting period of importance to the consolidated financial statements.

BASIS FOR PREPARATION

Changes in 2021

SEGMENTATION

The regional structure of the Group changed as of 1 January 2021 to rebalance the European regions in terms of size and number of business units. Consequently, the segmentation changed on the same date (in line with the structure).

SECTION 9.1 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing the consolidated financial statements, management makes various accounting estimates and judgements that form the basis of presentation, recognition and measurement of the Group's assets, liabilities, income and expenses. The estimates and judgements made are based on historical experience and other factors that management assesses to be reliable, but that, by nature, are associated with uncertainty and unpredictability and may therefore prove incomplete or incorrect.

Areas involving significant estimates and judgements:

Impairment testing, useful life and residual value Section 2
Restructurings, provisions and contingencies	Section 3
Receivables	Section 1
Tax assets and liabilities	Section 6
Defined benefit obligations	Section 7
Acquisitions and disposals, including contingent considerations	Section 5

SECTION 9.2

GENERAL ACCOUNTING POLICIES

The Group's 2020 consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and further requirements in the Danish Financial Statements Act.

The consolidated financial statements are presented in Danish kroner (DKK), which is the Parent Company's functional currency, and all values are rounded to the nearest DKK million, except when otherwise stated.

The accounting policies set out below have been used consistently in respect of the financial year and the comparative figures.

DEFINING MATERIALITY

Significant items are presented individually in the financial statements as required by IAS 1. Other items that are considered relevant to stakeholders and necessary for an understanding of the Group's business model, including research, real estate and geographical diversity, are also presented individually in the financial statements.

The consolidated financial statements are prepared as a consolidation of the financial statements of the Parent Company, Carlsberg A/S, and its subsidiaries according to the Group's accounting policies.

Entities over which the Group exercises significant influence, but which it does not control, are considered associates. Significant influence is generally obtained by direct or indirect ownership or control of less than 50% of the voting rights or participation in the management of the company. The assessment of whether Carlsberg A/S exercises control or significant influence includes potential voting rights exercisable at the reporting date. Entities that by agreement are managed jointly with one or more other parties are considered joint ventures.

On consolidation, intra-group income and expenses, shareholdings, balances and dividends, and realised and unrealised gains are eliminated. Unrealised gains on transactions with associates and joint ventures are eliminated in proportion to the Group's ownership share of the entity.

SECTION 9.2 (CONTINUED)

GENERAL ACCOUNTING POLICIES

Unrealised losses are eliminated in the same way as unrealised gains to the extent that impairment has not taken place.

The accounting items of subsidiaries are included in full in the consolidated financial statements. Non-controlling interests' share of subsidiaries' profit/loss for the year and of equity are included in the Group's profit/loss and equity but are disclosed separately. Entities acquired or established in the year are recognised in the consolidated financial statements from the date of acquisition or formation. Entities disposed of or discontinued are recognised in the consolidated income statement until the date of disposal or discontinuation. The comparative figures are not restated.

FOREIGN CURRENCY TRANSLATION

A functional currency is determined for each of the reporting entities in the Group. The functional currency is the primary currency used for the reporting entity's operations. Transactions denominated in currencies other than the functional currency are considered transactions denominated in foreign currencies.

On initial recognition, transactions denominated in foreign currencies are translated to the functional currency at the exchange rates at the transaction date. Foreign exchange differences arising between the

exchange rates at the transaction date and at the date of payment are recognised as financial income or expenses.

Receivables, payables and other monetary items denominated in foreign currencies are translated at the exchange rates at the reporting date. The difference between the exchange rates at the reporting date and at the date at which the receivable or payable arose or the exchange rate in the latest consolidated financial statements is recognised as financial income or expenses.

On recognition of entities with a functional currency other than the presentation currency, the income statement and statement of cash flows are translated at the exchange rates at the transaction date, and the statement of financial position items are translated at the exchange rates at the reporting date. Foreign exchange differences arising on translation of the opening balance of equity, and of the income statement on the reporting date, are recognised in other comprehensive income and attributed to a separate translation reserve in equity. Foreign exchange differences arising on the translation of the proportionate share of associates and joint ventures are likewise recognised in other comprehensive income.

Foreign exchange adjustment of balances with entities that are considered part of the investment in the entity is recognised in other comprehensive income. Correspondingly, foreign exchange gains and losses on the part of loans and derivative financial instruments that are designated as hedges of investments in foreign entities, and that effectively hedge

against corresponding foreign exchange gains and losses on the investment in the entity, are also recognised in other comprehensive income and attributed to a separate translation reserve in equity.

When the gain or loss from a complete or partial disposal of an entity is recognised, the share of the cumulative exchange differences recognised in other comprehensive income is recognised in the income statement. The same approach is adopted on repayment of balances that constitute part of the net investment in the entity.

INCOME STATEMENT

The presentation of the Group's income statement is based on the internal reporting structure, as IFRS does not provide a specific disclosure requirement.

Special items are not directly attributable to ordinary operating activities and are shown separately in order to facilitate a better understanding of the Group's financial performance.

CASH FLOW

Cash flow is calculated using the indirect method and is based on operating profit before special items adjusted for depreciation, amortisation and impairment losses. Cash flow cannot be derived directly from the statement of financial position and income statement.

FINANCIAL RATIOS AND NON-IFRS FINANCIAL MEASURES

The Group uses certain additional financial measures to provide management, investors and investment analysts with additional measures to evaluate and analyse the Company's results. These non-IFRS financial measures are defined and calculated by the Group, and therefore may not be comparable with other companies' measures.

The non-IFRS financial measures disclosed in the Annual Report are:

Earnings per share, adjusted, and payout ratio, adjusted
Organic development

The Danish Finance Society does not acknowledge use of special items and states that adjustments of tax should be based on the marginal tax rate. When calculating financial measures, the Group uses operating profit before special items as well as the effective tax rate for measures adjusted for tax.

Other financial ratios are calculated in accordance with the Danish Finance Society's online guidelines on the calculation of financial ratios, "Recommendations and Financial Ratios", unless specifically stated.

SECTION 9.2 (CONTINUED)

GENERAL ACCOUNTING POLICIES

9.2.1 REPORTING UNDER THE ESEF REGULATION

The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) has introduced a single electronic reporting format for the annual financial reports of issuers with securities listed on the EU regulated markets.

The combination of XHTML format and iXBRL tags enables the annual financial reports to be read by both humans and machines, thus enhancing accessibility, analysis and comparability of the information included in the annual financial reports.

The Group's iXBRL tags have been prepared in accordance with the ESEF taxonomy, which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation.

The line items in the consolidated financial statement are tagged to elements in the ESEF taxonomy. For financial line items that are not directly defined in the ESEF taxonomy, an extension to the taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for extensions that are subtotals.

The annual report submitted to the Danish Financial Supervisory Authority (the Officially Appointed Mechanism) consists of the XHTML document together with the technical files, all of which are included in the ZIP file CARL-2020-12-31.ZIP.

Key definitions

XHTML (eXtensible HyperText Markup Language) is a text-based language used to structure and mark up content such as text, images and hyperlinks in documents that are displayed in a web-browser.

iXBRL tags (or Inline XBRL tags) are hidden metainformation embedded in the source code of an XHTML document that enables the conversion of XHTML-formatted information into a machine-readable XBRL data record using appropriate software.

A financial reporting taxonomy is an electronic dictionary of business reporting elements used to report business data. A taxonomy element is an element defined in a taxonomy that is used for the machine-readable labelling of information in an XBRL data record.

SECTION 9.2 (CONTINUED)

GENERAL ACCOUNTING POLICIES

FINANCIAL RATIOS
Gross margin	Gross profit as a percentage of revenue.
EBITDA margin1	Operating profit before depreciation, amortisation and impairment losses as a percentage of revenue.
Operating margin	Operating profit before special items1 as a percentage of revenue.
Return on invested capital (ROIC)	Operating profit before special items1 adjusted for tax as a percentage of average invested capital2 calculated as a 12-month rolling average (MAT).
Return on invested capital excluding goodwill (ROIC excl. goodwill)	Operating profit before special items1 adjusted for tax as a percentage of average invested capital2 excluding goodwill calculated as a 12-month rolling average (MAT).
Effective tax rate1	Income tax as a percentage of profit before tax.
Equity ratio	Equity attributable to shareholders in Carlsberg A/S at year-end as a percentage of total assets at year-end.
NIBD/equity ratio1	Net interest-bearing debt3 at year-end divided by total equity at year-end.
NIBD/EBITDA1	Net interest-bearing debt3 divided by operating profit before depreciation, amortisation and impairment losses.
Interest cover1	Operating profit before special items divided by interest expenses, net.

STOCK MARKET RATIOS
Earnings per share (EPS)	Consolidated profit for the year, excluding non-controlling interests, divided by the average number of shares.
Earnings per share, diluted (EPS-D)	Consolidated profit for the year, excluding non-controlling interests, divided by the average number of shares, fully diluted for share options and performance shares in the money.
Earnings per share, adjusted (EPS-A)	Consolidated profit for the year adjusted for special items after tax1, excluding non-controlling interests, divided by the average number of shares.
Free cash flow per share (FCFPS)1	Free cash flow4 divided by the average number of shares, fully diluted for share options and performance shares in the money.

STOCK MARKET RATIOS (CONTINUED)
---------------------------------	--	--	--

Payout ratio, adjusted	Proposed dividend for the year on number of shares at year-end as a percentage of consolidated profit, adjusted for special items after tax1, excluding non-controlling interests.

Market capitalisation	Number of shares at year-end multiplied by the share price.
Average number of issued shares	Number of issued shares as an average for the year.
Average number of shares	Number of issued shares, excluding treasury shares, as an average for the year.
Number of shares at year-end	Total number of issued shares, excluding treasury shares, at year-end.
GLOSSARY

EBITDA1	Expression used for operating profit before depreciation, amortisation and impairment losses.
Leverage ratio1	Expression used for NIBD/EBITDA.
NCI	Abbreviation for non-controlling interests.
OCI	Abbreviation for other comprehensive income.
Off-trade	Expression used for sale of beverages for consumption off the premises (e.g. retailers).
On-trade	Expression used for sale of beverages for consumption on the premises (e.g. restaurants, hotels and bars).
Operating profit	Expression used for operating profit before special items1.
Organic development1	Measure of growth excluding the impact of acquisitions, divestments and foreign exchange from year-on-year comparisons.
Volumes1	The Group's sale of beverages in consolidated entities and sale of the Group's products under licence agreements.

¹ This key figure, ratio or elements thereof are not defined or deviate from the definitions of the Danish Finance Society. ² The calculation of invested capital is specified in section 2.1.

³ The calculation of net-interest bearing debt is specified in section 4.2.

⁴ The calculation of free cash flow is specified in the statement of cash flows.

SECTION 9.3 CHANGES IN ACCOUNTING POLICIES

CHANGED ACCOUNTING POLICIES AND CLASSIFICATION IN THE ANNUAL REPORT 2020

The Annual Report 2020 has been prepared using the same accounting policies for recognition and measurement as those applied to the consolidated financial statements for 2019, except for the following Amendments that were adopted as of 1 January 2020:

Amendments to IAS 1 and IAS 8 "Definition of Material"
Amendments to IFRS 3 "Business Combinations"
Amendments to IFRS 9, IAS 39 and IFRS 7 "Interest rate benchmark reform"
Amendments to "References to the Conceptual Framework in IFRS Standards"

The, Amendments had no impact on the Group's accounting policies, as they cover areas that are not material and/or relevant for the Group or do not change the accounting policies applied in 2020.

SECTION 9.4 NEW LEGISLATION

NEW AND AMENDED IFRS STANDARDS

The following Amendments to IFRS became effective as of 1 January 2021:

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 "Interest rate benchmark reform – Phase 2"
Amendment to IFRS 4 "Insurance Contracts"

The amendment to IFRS 3 is expected to be adopted by the EU in early 2021. The Group will adopt the amendment when it becomes mandatory.

The implemented Amendments are not expected to have any significant impact on the financials or the Group's accounting policies, as they cover areas that are not material and/or relevant for the Group or do not change the accounting policies applied in 2020.

NEW AND AMENDED IFRS STANDARDS AND INTERPRETATIONS NOT YET ADOPTED BY THE EU

The following Amendments that become effective in future years have been issued but not yet adopted by the EU:

Amendments to IFRS 3 "Business Combinations"
Amendment to IAS 16 "Property, Plant and Equipment"
Amendment to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets"
Annual Improvements 2018-2020
Amendment to IAS 1 "Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Current or Non-current – Deferral of Effective Date"

The new Standard is not mandatory for the financial reporting for 2020. The Group expects to adopt the new Standard when it becomes mandatory.

SECTION 9.5 NEW SEGMENTATION

NEW SEGMENTATION FOR 2021

The regional structure of the Group changed as of 1 January 2021, with the aim of rebalancing the European regions in terms of size and number of business units.

IFRS 8 requires that an entity discloses information about its operating segments, including profit and loss for each reportable segment. These segment disclosures should follow the "management approach", meaning they should be the same segments as are regularly reported to management.

The disclosure in the Annual Report follows the same regional segmentation as was used in the internal reporting to the Executive Committee throughout 2020.

As the management structure was unchanged during 2020, the segmentation used in the Annual Report 2020 continues without any changes compared with 2019.

The segmentation changed as of 1 January 2021, when the new management structure took effect. To provide transparency, it has been decided to disclose the effect of the new segmentation had it become effective at 1 January 2020 and as it will be disclosed in the comparative figures for 2020 in the Annual Report 2021.

The effect of the new segmentation

With the new segmentation the entities in the Baltic and Balkan countries, Greece and Italy (collectively known as the Southern Europe & Baltics markets) as well as Carlsberg Export & License move from the Western Europe region to Eastern Europe.

Eastern Europe will then be renamed Central & Eastern Europe to better reflect its new composition.

New segmentation 2020

DKK Million	Western Europe	Asia	Eastern Europe	Western Europe	Asia	Central & Eastern Europe
Revenue	31,547	16,959	10,010	25,875	16,959	15,682
Total cost	-26,763	-13,057	-8,093	-22,143	-13,057	-12,713
Share of profit after tax of associates and joint ventures	209	89	-	194	89	15
Operating profit before special items	4,993	3,991	1,917	3,926	3,991	2,984
Operating margin	15.8%	23.5%	19.2%	15.2%	23.5%	19.0%
Invested capital	41,795	18,045	20,915	35,746	18,045	26,964
Invested capital excl. goodwill	19,151	2,682	8,430	16,142	2,682	11,439
Acquisition of property, plant and equipment and intangible assets	1,474	1,395	552	1,258	1,395	768
Amortisation and depreciation	2,095	1,499	654	1,712	1,499	1,037
Impairment losses	50	292	10	44	292	16
Return on invested capital (ROIC)	9.4%	15.8%	7.0%	8.7%	15.8%	8.5%
ROIC excl. goodwill	20.2%	88.8%	17.4%	18.8%	88.8%	19.8%

Reported Restated

New segmentation	Q1	Q2	H1	Q3	Q4	H2	FY

Beer (million hl)
Western Europe	5.6	7.7	13.3	7.8	5.7	13.5	26.8
Asia	7.8	9.8	17.6	10.5	6.7	17.2	34.8
Central & Eastern Europe	9.0	13.4	22.4	15.6	10.5	26.1	48.5
Total	22.4	30.9	53.3	33.9	22.9	56.8	110.1
Non-beer (million hl)
Western Europe	2.5	2.8	5.3	3.2	2.7	5.9	11.2
Asia	1.3	1.0	2.3	1.2	1.3	2.5	4.8
Central & Eastern Europe	0.7	1.2	1.9	1.2	0.9	2.1	4.0
Total	4.5	5.0	9.5	5.6	4.9	10.5	20.0
Total beverages (million hl)
Western Europe	8.1	10.5	18.6	11.0	8.4	19.4	38.0
Asia	9.1	10.8	19.9	11.7	8.0	19.7	39.6
Central & Eastern Europe	9.7	14.6	24.3	16.8	11.4	28.2	52.5
Total	26.9	35.9	62.8	39.5	27.8	67.3	130.1
Revenue (DKK million)
Western Europe	5,613	6,888	12,501	7,674	5,700	13,374	25,875
Asia	4,052	4,411	8,463	4,703	3,793	8,496	16,959
Central & Eastern Europe	3,275	4,582	7,857	4,873	2,952	7,825	15,682
Not allocated	6	3	9	9	7	16	25
Total	12,946	15,884	28,830	17,259	12,452	29,711	58,541

SECTION 10

GROUP COMPANIES

Parent

This section lists the subsidiaries, associates and joint ventures in the Group. Parent direct ownership shows the legal ownership held by the immediate holding company in the Group. Cross-holdings held by fully owned companies in the Group are aggregated. Consolidated ownership shows the share of the result of the entity that is attributed to the shareholders of Carlsberg A/S in the consolidated financial statements.

	Market	Number of subsidiaries	Parent direct ownership	Consolidated ownership
Carlsberg Breweries A/S	Denmark	3	100%	100%
Western Europe
Carlsberg Danmark A/S	Denmark		100%	100%
Carlsberg Supply Company Danmark A/S	Denmark		100%	100%
Carlsberg Sweden Holding 2 AB	Sweden		100%	100%
Carlsberg Sverige AB	Sweden		100%	100%
Carlsberg Supply Company Sverige AB	Sweden		100%	100%
Ringnes Norge AS	Norway	1	100%	100%
Ringnes AS	Norway		100%	100%
Ringnes Brygghus AS	Norway		100%	100%
Ringnes Supply Company AS	Norway		100%	100%
Ringnes Farris Eiendom AS	Norway		100%	100%
Ringnes Imsdal Eiendom AS	Norway		100%	100%
Ringnes Administrasjon Eiendom AS	Norway		100%	100%
Ringnes Gjelleråsen Eiendom AS	Norway		100%	100%
Solo AS	Norway		91%	91%
Oy Sinebrychoff Ab	Finland		100%	100%
Sinebrychoff Supply Company Oy	Finland		100%	100%
Carlsberg Deutschland Holding GmbH	Germany		100%	100%
Holzmarkt Brewing Company GmbH	Germany		100%	100%
Carlsberg Deutschland Logistik GmbH	Germany		100%	100%
Tuborg Deutschland GmbH	Germany		100%	100%

			Number of	direct	Consolidated
Western Europe	Market	Note	subsidiaries	ownership	ownership
Carlsberg Deutschland GmbH	Germany		4	100%	100%
Duckstein GmbH	Germany			100%	100%
Holzmarkt Beteiligungsgesellschaft mbH	Germany			100%	100%
Holsten-Brauerei AG	Germany			100%	100%
Carlsberg Supply Company Deutschland GmbH Germany				100%	100%
Carlsberg Supply Company Polska SA	Poland			100%	100%
Carlsberg Polska Sp. z o.o.	Poland			100%	100%
Saku Ölletehase AS	Estonia			100%	100%
Aldaris JSC	Latvia			100%	100%
Svyturys-Utenos Alus UAB	Lithuania			99%	99%
Carlsberg UK Holdings Limited	UK		4	100%	100%
Carlsberg Marston's Brewing Company Limited UK				60%	60%
Marston's Beer Company Limited	UK			100%	60%
Carlsberg UK Limited	UK			100%	60%
Carlsberg Supply Company UK Limited	UK			100%	60%
LF Brewery Holdings Limited	UK		4	100%	60%
LF Brewery Limited	UK			100%	60%
Emeraude S.A.S.	France		8	100%	100%
Kronenbourg S.A.S.	France			100%	100%
Kronenbourg Supply Company S.A.S.	France			100%	100%
Kronenbourg Breweries Canada Inc.	Canada			100%	100%
Fondation Kronenbourg	France			100%	100%
S.A.S. Onyx	France			100%	100%

				Parent						Parent
			Number of	direct	Consolidated				Number of	direct	Consolidated
Western Europe	Market	Note	subsidiaries	ownership	ownership	Asia	Market	Note	subsidiaries	ownership	ownership
Feldschlösschen Getränke Holding AG	Switzerland		2	100%	100%	Carlsberg Supply Company Asia Ltd	Hong Kong			100%	100%
Feldschlösschen Getränke AG	Switzerland			100%	100%	Carlsberg Brewery Hong Kong Ltd	Hong Kong			100%	100%
Schlossgarten Gastronomie AG	Switzerland			100%	100%	Guangzhou Carlsberg Consultancy and
SB Swiss Beverage AG	Switzerland			100%	100%	Management Services Co Ltd	China			100%	100%
Feldschlösschen Supply Company AG	Switzerland			100%	100%	Chongqing Brewery Co., Ltd	China	A		60%	60%
Carlsberg Supply Company AG	Switzerland			100%	100%	Chongqing Jianiang Brewery Ltd	China	B	5	51%	79%
Nya Carnegiebryggeriet AB	Sweden			98%	98%	Kunming Huashi Brewery Company
E.C. Dahls Bryggeri AS	Norway			100%	100%	Limited	China			100%	79%
HK Yau Limited	Hong Kong			100%	100%	Carlsberg (China) Breweries and Trading Company Limited	China			100%	79%
UAB "Svyturys Brewery"	Lithuania			100%	100%	Carlsberg Brewery (Guangdong) Ltd	China			99%	79%
Monster the Cat GmbH	Switzerland			100%	100%	Xinjiang Wusu Breweries Co., Ltd	China		4	100%	79%
Carlsberg Italia S.p.A.	Italy			100%	100%	Ningxia Xixia Jianiang Brewery Limited	China			70%	56%
Carlsberg Horeca Srl	Italy			100%	100%	Carlsberg Beer Enterprise Management
T&C Italia Srl	Italy			100%	100%	(Chongqing) Company Limited	China			100%	79%
Olympic Brewery SA	Greece			100%	100%	Carlsberg Brewery (Anhui)
Hellenic Beverage Company SA	Greece			100%	100%	Company Ltd	China			75%	60%
Carlsberg Serbia Ltd	Serbia			100%	100%	Carlsberg Tianmuhu Brewery
	Bosnia and					(Jiangsu) Company Ltd	China			100%	79%
Carlsberg BH d.o.o.	Herzegovina			100%	100%	Carlsberg Brewery Malaysia Berhad	Malaysia	A		51%	51%
Carlsberg Montenegro d.o.o.	Montenegro			100%	100%	Carlsberg Marketing Sdn BHD	Malaysia			100%	51%
Carlsberg Croatia d.o.o.	Croatia			100%	100%	Euro Distributors Sdn BHD	Malaysia			100%	51%
Carlsberg Bulgaria AD	Bulgaria			100%	100%	Carlsberg Singapore Pte Ltd	Singapore			100%	51%
Carlsberg Hungary Kft.	Hungary			100%	100%	Maybev Pte Ltd	Singapore	C		51%	26%
Grimbergen Abbey Brewery	Belgium			100%	100%	Carlsberg South Asia Pte Ltd	Singapore	D		67%	100%
Zatecky Pivovar spol. S.r.o.	Czechia			100%	100%
CTDD Beer Imports Ltd	Canada			100%	100%	South Asian Breweries Pte. Ltd	Singapore	D		100%	100%
Carlsberg Canada Inc.	Canada			100%	100%	Carlsberg India Pvt. Ltd	India	D		100%	100%
Carlsberg USA Inc.	USA			100%	100%	Gorkha Brewery Pvt. Ltd	Nepal	D, E		90%	90%
						G.B. Marketing Pvt Ltd	Nepal	D, E		90%	90%

A Listed company.

B Chongqing Jianiang Brewery Ltd is owned by Chongqing Brewery Co., Ltd (51%) and Carlsberg Brewery Hong Kong Ltd (49%), resulting in a consolidated ownership of 79%.

Carlsberg Vietnam Trading Co. Ltd Vietnam 100% 100%

C Maybev Pte Ltd is owned by Carlsberg Singapore Pte Ltd (51%), which is owned by Carlsberg Brewery Malaysia Berhad (51%), resulting in a consolidated ownership of 26%.

D The Group owns 67% of Carlsberg South Asia Pte Ltd, which is the holding company of South Asian Breweries Pte. Ltd, Carlsberg India Pvt. Ltd and Gorkha Brewery Pvt. Ltd (Nepal). The consolidation percentage of Carlsberg South Asia Pte Ltd is 100% due to a written put option.

E Company not audited by PwC.

Asia	Market	Number of subsidiaries	Parent direct ownership	Consolidated ownership
Carlsberg Vietnam Breweries Ltd	Vietnam		100%	100%
Lao Brewery Co. Ltd	Laos		61%	61%
Paduak Holding Pte. Ltd	Singapore		100%	100%
Caretech Limited	Hong Kong	1	100%	100%
Cambrew Limited	Cambodia	2	100%	100%
Cambrew Properties Ltd	Cambodia		99%	99%
Angkor Beverage Co Ltd	Cambodia		100%	100%
CB Distribution Co., Ltd	Thailand		100%	100%
Carlsberg Asia Pte Ltd	Singapore		100%	100%
KS Holding 1 Pte Ltd	Singapore		100%	100%

Eastern Europe	Market	Note	Number of subsidiaries	Parent direct ownership	Consolidated ownership
Hoppy Union LLC	Russia			100%	100%
Baltika Breweries LLC	Russia	F	3	100%	100%
Carlsberg Azerbaijan LLC	Azerbaijan			100%	100%
Baku Piva JSC	Azerbaijan			91%	91%
PJSC Carlsberg Ukraine	Ukraine		1	100%	100%
OJSC Brewery Alivaria	Belarus	G		78%	89%
Carlsberg Kazakhstan Ltd	Kazakhstan		1	100%	100%
Baltic Beverages Invest AB	Sweden			100%	100%
Baltic Beverages Holding AB	Sweden			100%	100%

F Baltika Breweries is owned by Carlsberg Sverige AB.

G The consolidation percentage is higher than the ownership share due to written put options.

Not allocated	Market	Parent direct ownership	Consolidated ownership
Carlsberg Finans A/S	Denmark	100%	100%
Carlsberg International A/S	Denmark	100%	100%
Visit Carlsberg A/S	Denmark	100%	100%
Carlsberg Invest A/S	Denmark	100%	100%
Carlsberg Global Business Services A/S	Denmark	100%	100%
Carlsberg Insurance A/S	Denmark	100%	100%
Carlsberg Central Office A/S	Denmark	100%	100%
Carlsberg Shared Services Sp. z o.o.	Poland	100%	100%

Non-beverage	Market	Note	Parent direct ownership	Consolidated ownership
Ejendomsaktieselskabet Tuborg Nord C	Denmark		100%	100%
Carlsberg Ejendomme Holding A/S	Denmark		100%	100%
Boliginteressentskabet Tuborg	Denmark	H	100%	100%

H A separate annual report is not prepared.

				Parent
			Number of	direct	Consolidated
Associates and joint ventures	Market	Note	subsidiaries	ownership	ownership
Carlsberg Byen P/S	Denmark	E	94	25%	25%
Shangri-la Beverages AG	Switzerland			35%	35%
Sinergie Proattive Srl	Italy			50%	50%
Viacer S.G.P.S., Lda	Portugal	I		29%	29%
Super Bock Group, S.G.P.S., S.A.	Portugal	I	13	56%	60%
Serviced Dispense Equipment (Holdings) Limited	UK		2	33%	20%
Nuuk Imeq A/S	Greenland	E		32%	32%
Chongqing Jiawei Beer Co. Ltd	China			33%	26%
Tibet Lhasa Brewery Company Limited	China			50%	50%
Lanzhou Huanghe Jianiang Brewery Company
Limited	China			50%	50%
Qinghai Huanghe Jianiang Brewery Company Ltd	China			50%	50%
Jiuquan West Brewery Company Limited	China			50%	50%
Tianshui Huanghe Jianiang Brewery Company Ltd China				50%	50%
Capital Brewing Company Ltd	Hong Kong		4	49%	49%
Lion Brewery (Ceylon) PLC	Sri Lanka	A, E, J		25%	13%
Hanoi Beer Alcohol and Beverage Joint Stock
Corporation	Vietnam	E		17%	18%
Carlsberg Distributors Taiwan Limited	Taiwan		1	50%	50%
NCC Crowns Private Limited	India			33%	33%
Bottlers Nepal Limited	Nepal		1	22%	20%
Myanmar Carlsberg Co. Ltd	Myanmar	E	1	51%	51%

I Viacer S.G.P.S (Viacer) is the controlling shareholder of Super Bock Group, S.G.P.S. (Super Bock) with a 56% shareholding, with Carlsberg Breweries A/S owning the remaining 44%. In addition, Carlsberg Breweries A/S has a direct ownership in Viacer of 29% without exercising control. Therefore, both Viacer and Super Bock are considered associates of the Group. The Group's direct and indirect ownership of Super Bock totals 60%.

J Lion Brewery (Ceylon) PLC is owned by Carlsberg Brewery Malaysia Berhad (25%). Carlsberg owns 51% of Carlsberg Brewery Malaysia Berhad, resulting in 13% of the result being attributed to the shareholders in Carlsberg A/S.

PARENT COMPANY FINANCIAL STATEMENTS

Income statement 127
Statement of comprehensive income 127
Statement of financial position 128
Statement of changes in equity 129
Statement of cash flows 129
Notes 130

SECTION 1 SUBSIDIARIES AND RELATED PARTIES

1.1	Investments in subsidiaries130
1.2	Related parties 130

SECTION 2 CAPITAL STRUCTURE

2.1	Financial items 131
2.2	Net interest-bearing debt131
2.3	Share capital 132

SECTION 3 STAFF COSTS AND REMUNERATION

3.1 Staff costs and remuneration..................133
3.2 Retirement benefit obligations................133

SECTION 4 OTHER DISCLOSURE REQUIREMENTS

4.1	Other operating activities, net 134
4.2	Cash flow 134
4.3	Provisions 134
4.4	Asset base and leases 134
4.5	Fees to auditors 134
4.6	Tax 135
4.7	Contingent liabilities and other
	commitments 136
4.8	Events after the reporting period 136

SECTION 5 GENERAL ACCOUNTING POLICIES

5 General accounting policies ..................... 136

INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME

DKK million	Section	2020	2019
Administrative expenses		-42	-73
Other operating activities, net	4.1	-4	-29
Operating profit before special items		-46	-102
Special items		-2	-3
Financial income	2.1	3,211	2,748
Financial expenses	2.1	-14	-11
Profit before tax		3,149	2,632
Income tax	4.6	11	23
Profit for the year		3,160	2,655
Attributable to
Dividend to shareholders		3,259	3,204
Reserves		-99	-549

DKK million	Section	2020	2019
Profit for the year		3,160	2,655

Other comprehensive income
Retirement benefit obligations	3.2	-1	-2
Income tax	4.6	-	-
Items that will not be reclassified to the income statement		-1	-2
Other comprehensive income		-1	-2
Total comprehensive income		3,159	2,653

Profit for the year	3,160	2,655
Reserves	-99	-549
Dividend to shareholders	3,259	3,204

STATEMENT OF FINANCIAL POSITION

DKK million	Section	31 Dec. 2020	31 Dec. 2019
ASSETS

Non-current assets
Intangible assets	4.4	3	5
Property, plant and equipment	4.4	218	218
Investments in subsidiaries	1.1	38,733	40,353
Financial investment		1	-
Receivables		323	322
Tax assets	4.6	93	111
Total non-current assets		39,371	41,009
Current assets
Receivables	1.2	275	86
Tax receivables		9	6
Other receivables	1.2	371	1,205
Total current assets		655	1,297
Total assets		40,026	42,306

DKK million Section	31 Dec. 2020	31 Dec. 2019
EQUITY AND LIABILITIES
Equity
Share capital 2.3	2,963	3,051
Retained earnings	35,589	37,974
Total equity	38,552	41,025
Non-current liabilities
Retirement benefit obligations 3.2	30	33
Provisions 4.3	13	48
Total non-current liabilities	43	81
Current liabilities
Borrowings 1.2	1,263	1,033
Trade payables	39	52
Provisions 4.3	39	34
Other liabilities	90	81
Total current liabilities	1,431	1,200
Total liabilities	1,474	1,281
Total equity and liabilities	40,026	42,306

STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS

DKK million Section		Shareholders in Carlsberg A/S
2020		Share capital	Retained earnings	Total equity
Equity at 1 January		3,051	37,974	41,025
Profit for the year			3,160	3,160
Other comprehensive income		-	-1	-1
Total comprehensive income for the year		-	3,159	3,159
Cancellation of treasury shares		-88	88	-
Share-based payments	3.1	-	8	8
Share-based payments to employees in subsidiaries		-	353	353
Share buy-back	2.3	-	-2,900	-2,900
Dividends paid to shareholders	2.3	-	-3,093	-3,093
Total changes in equity		-88	-2,385	-2,473
Equity at 31 December		2,963	35,589	38,552

2019

Equity at 1 January		3,051	41,937	44,988
Profit for the year Other comprehensive income		- 2,655		2,655
		-	-2	-2
Total comprehensive income for the year		-	2,653	2,653
Share-based payments	3.1	-	13	13
Share-based payments to employees in subsidiaries		-	209	209
Share buy-back	2.3	-	-4,100	-4,100
Dividends paid to shareholders	2.3	-	-2,738	-2,738
Total changes in equity		-	-3,963	-3,963
Equity at 31 December		3,051	37,974	41,025

DKK million	Section	2020	2019
Operating profit before special items		-46	-102
Depreciation and amortisation	4.4	10	8
Operating profit before depreciation and amortisation		-36	-94
Other non-cash items		-	18
Change in working capital¹		88	29
Restructuring costs paid		-2	-
Interest etc. received		2	3
Interest etc. paid		-13	-11
Income tax paid		28	31
Cash flow from operating activities		67	-24
Acquisition of property, plant and equipment and intangible assets		-10	-17
Disposal of property, plant and equipment and intangible assets		1	2
Total operational investments		-9	-15
Acquisition and disposal of subsidiaries		-	9
Disposal of securities		5	-
Dividends from subsidiaries and joint ventures	1.2	3,204	2,746
Capital reductions in subsidiaries	1.2	2,500	4,500
Total financial investments		5,709	7,255
Other investments in real estate		-	-4
Total other activities		-	-4
Cash flow from investing activities		5,700	7,236
Free cash flow		5,767	7,212
Shareholders in Carlsberg A/S	2.3	-5,993	-6,838
External financing	2.2	226	-374
Cash flow from financing activities		-5,767	-7,212
Net cash flow		-	-
Cash and cash equivalents at 1 January		-	-
Cash and cash equivalents at 31 December		-	-

SECTION 1

SUBSIDIARIES AND RELATED PARTIES

SECTION 1.1 INVESTMENTS IN SUBSIDIARIES

The carrying amount includes goodwill of DKK 11,206m (2019: DKK 11,206m) on acquisition of subsidiaries.

Share-based payments to employees in subsidiaries comprise exercised as well as outstanding share-based incentive instruments.

Investments in subsidiaries

DKK million	2020	2019

Cost
Cost at 1 January	40,353	45,238
Disposals	-	-13
Capital reduction	-2,500	-4,500
Share-based payments
to employees, net	880	-372
Cost at 31 December	38,733	40,353
Carrying amount at 31 December	38,733	40,353

Please see section 10 in the consolidated financial statements for a list of companies in the Carlsberg Group.

ACCOUNTING ESTIMATES AND JUDGEMENTS

Indications of impairment of investments in subsidiaries are assessed annually by management. Impairment tests are conducted in the same way as for goodwill in the Group, cf. section 2.2 in the consolidated financial statements.

It is management's assessment that no indications of impairment existed at year-end 2020. Impairment tests have therefore not been carried out for subsidiaries.

ACCOUNTING POLICIES

Dividends on investments in subsidiaries are recognised in the income statement of the Parent Company in the financial year in which the dividend is declared.

Investments in subsidiaries are measured at the lower of cost and recoverable amount.

Share-based payments granted to employees of the Company's subsidiaries and the recharge of losses to the subsidiaries in connection with the employees' exercise of share-based awards are recognised as contributions to and reductions of the investment in the subsidiaries respectively.

SECTION 1.2 RELATED PARTIES

The following transactions took place between the Carlsberg Foundation and the Carlsberg Group in 2020:

The Carlsberg Foundation received a dividend from Carlsberg A/S and participated pro rata in the Carlsberg A/S share buy-back.
Carlsberg A/S received statutory funding and grants for research and development.
Carlsberg A/S leased parking spaces from the Carlsberg Foundation.
The Carlsberg Foundation supported the rebuilding of the Carlsberg Visitor Centre.
Carlsberg Breweries leased storage facilities in the researcher apartments.

• Carlsberg A/S held the Annual General Meeting at Ny Carlsberg Glyptotek and provided the Ny Carlsberg Glyptotek with products at a discount or free of charge as part of the sponsorship of certain events. • The Group delivered beer and soft drinks to the Carlsberg Foundation.

These transactions are described in further detail in section 8.3 of the consolidated financial statements.

It is estimated that the benefit for the Carlsberg Group corresponds to the value of the services provided to the Carlsberg Foundation, which in turn corresponds to what each party would have had to pay to have the same deliverables provided by external parties.

OTHER RELATED PARTIES

SECTION 2

CAPITAL STRUCTURE

SECTION 1.2 (CONTINUED) RELATED PARTIES

No losses on loans to or receivables from subsidiaries or joint ventures were recognised or provided for in either 2020 or 2019.

Transactions with subsidiaries

DKK million	2020	2019
Other operating
activities, net	40	31
Interest income	2	2
Interest expenses	-11	-14
Dividends received	3,204	2,746
Capital reduction	-2,500	-4,500
Loans	321	319
Receivables	275	84
Borrowings	-1,263	-1,033
Trade payables	-17	-7
Other payables	-1	-6

The fair value of receivables and borrowings in subsidiaries corresponds to the carrying amount in all material respects.

SECTION 2.1 FINANCIAL ITEMS

Interest income relates to interest from cash and cash equivalents and loans to subsidiaries, whereas interest expenses relate to interest on borrowings.

Financial items recognised in the income statement

DKK million	2020	2019

Financial income
Interest income	2	2
Dividends from subsidiaries	3,204	2,746
Gain on disposal of financial assets	5	-
Total	3,211	2,748

Financial items, net	3,197	2,737
Total	-14	-11
Other	-3	3
Interest expenses	-11	-14

No financial items were recognised in other comprehensive income. The average effective interest rate on loans to

subsidiaries was 0.6% (2019: 0.6%) and on loans from subsidiaries 0.4% (2019: 0.5%).

SECTION 2.2

NET INTEREST-BEARING DEBT

Net interest-bearing debt

Net interest-bearing debt	941	711
Loans to subsidiaries	-321	-319
Receivables	-1	-3
Gross interest-bearing debt	1,263	1,033
Current borrowings	1,263	1,033
DKK million	2020	2019

Changes in net interest-bearing debt

Total change	226	-374
Dividends to shareholders	3,093	2,738
Share buy-back	2,900	4,100
Cash flow from investing activities	-5,700	-7,236
Cash flow from operating activities, excluding interest-bearing part	-67	24
Net interest-bearing debt at 1 January	711	1,085

SECTION 2.3 SHARE CAPITAL

SHARE CAPITAL

At the Annual General Meeting on 16 March 2020, it was decided to reduce the share capital of Carlsberg A/S by a nominal amount of DKK 88,000,000 to a nominal amount of DKK 2,963,136,120 by cancelling of 4,400,000 of the B shares of the Company, each with a nominal value of DKK 20. The cancellation was completed on 14 April 2020. These shares had been repurchased as part of the Company's share buy-back programme running from 6 February 2019 to 30 January 2020.

DIVIDENDS

The proposed dividend of DKK 22.00 per share (2019: DKK 21.00 per share), amounting to DKK 3,259m (2019: DKK 3,204m), has been included in retained earnings at 31 December 2020.

Dividends to be paid out in 2021 for 2020, net of dividends on treasury shares held at 31 December 2020, will amount to DKK 3,192m. Dividends paid out in 2020 for 2019, net of dividends on treasury shares, amounted to DKK 3,093m (paid out in 2019 for 2018: DKK 2,728m). Dividends paid out to shareholders in Carlsberg A/S do not impact taxable income in Carlsberg A/S.

SHARE BUY-BACK AND TREASURY SHARES

As of 31 January 2020, the Company had repurchased 393,501 B shares under the share buy-back programme initiated in 2019 at a total purchase price of DKK 0.4bn.

On 4 February 2020, the Company announced its intention to continue the share buy-back programme to repurchase shares worth DKK 5bn over a 12-month period. In the first tranche, which was finalised on 7 August, the Company repurchased 2,897,021 B shares at a total purchase price of DKK 2.5bn. Due to the continued uncertainties related to COVID-19 and the acquisitions of Marston's brewing activities and the Brooklyn brand rights, the Board decided not to initiate the second tranche of the share buy-back.

Transactions with shareholders in Carlsberg A/S

	2020	2019
Dividends to shareholders	-3,093	-2,738
Acquisition of treasury shares	-2,900	-4,100
Total	-5,993	-6,838

In the 2020 financial year, the Company acquired class B treasury shares of a nominal amount of DKK 66m (2019: DKK 90m) at an average price of DKK 882 (2019: DKK 907). Class B treasury shares are acquired and disposed of as part of the share buy-back programme and to facilitate settlement of the share-based incentive programmes.

At 31 December 2020, the fair value of treasury shares amounted to DKK 2,979m (2019: DKK 4,532m). The holdings of treasury shares are specified in section 4.3 in the consolidated financial statements.

Share capital

		Class B shares		Class A shares
	Shares of DKK 20	Nominal value, DKK '000	Shares of DKK 20	Nominal value, DKK '000	Shares of DKK 20	Nominal value, DKK '000
1 January 2019 No change in 2019	33,699,252 -	673,985 -	118,857,554 -	2,377,151 -	152,556,806 -	3,051,136 -
31 December 2019 Cancellation of	33,699,252	673,985	118,857,554	2,377,151	152,556,806	3,051,136
treasury shares	-	-	-4,400,000	-88,000	-4,400,000	-88,000
31 December 2020	33,699,252	673,985	114,457,554	2,289,151	148,156,806	2,963,136

A shares carry 20 votes per DKK 20 share. B shares carry two votes per DKK 20 share. A preferential right to an 8% non-cumulative dividend is attached to B shares. Apart from votes and dividends, all shares rank equally.

SECTION 3

STAFF COSTS AND REMUNERATION

SECTION 3.1 STAFF COSTS AND REMUNERATION

The remuneration of the Supervisory Board, the executive directors and key management personnel is described in detail in the Remuneration Report.

In 2020, the Supervisory Board received total remuneration of DKK 9.86m (2019: DKK 9.59m), comprising fixed salary only.

Staff costs and remuneration

DKK million	2020	2019
Salaries and other remuneration	99	112
Retirement benefit costs - defined contribution plans	5	5
Share-based payments	26	38
Total	130	155

Staff costs are included in the following items in the income statement

Total	130	155
Staff costs recognised by other Group companies	38	50
Total staff costs recognised by the Parent Company	92	105
Other operating activities, net	63	63
Administrative expenses	29	42

The Company had an average of 95 (2019: 97) full-time employees during the year.

SHARE-BASED INCENTIVE PROGRAMMES

The executive directors in the Parent Company are the same as for the Carlsberg Group. Please refer to section 7.3 in the consolidated financial statements for share-based incentive programmes for the executive directors.

PERFORMANCE SHARES

Besides the executive directors, one employee in the Parent Company participates in the Group's performance share programmes as described in section 7.3 in the consolidated financial statements. Refunds etc. between Carlsberg A/S and its subsidiaries are recognised directly in equity.

Staff costs are recognised in the financial year in which the employee renders the related service. The fair value of share-based incentives, which is expensed over the vesting period of the programme according to the service conditions, is recognised in staff costs and offset directly against equity.

The fair value of share-based incentives granted to employees in subsidiaries is recognised as investments in subsidiaries and offset directly against equity.

The difference between the purchase price and the selling price for the exercise of share-based incentives is settled between Carlsberg A/S and the individual subsidiary and offset directly against investments in subsidiaries.

The difference between the fair value of the Parent Company's equity instruments and the exercise price of outstanding share-based incentives is recognised as a receivable and offset directly against investments in subsidiaries.

Share-based incentives granted to the Parent Company's own employees are recognised and measured in accordance with the accounting policies used by the Group.

SECTION 3.2 RETIREMENT BENEFIT OBLIGATIONS

Retirement benefit obligations and similar obligations comprise payments to retired directors that are not covered by an insurance company. The plan is unfunded.

Total obligations amounted to DKK 30m (2019: DKK 33m) and include actuarial losses of DKK 1m (2019: DKK 2m) and benefits paid in the year of DKK 4m (2019: DKK 3m).

Of the expected payment obligation, DKK 3m is due within one year and DKK 14m after more than five years from the reporting date.

The underlying actuarial assumptions are based on local economic and labour market conditions. The discount rate was 0.5% (2019: 0.5%). The rate of increase in future retirement benefit obligations was 0% (2019: 1%).

During the year, DKK 0m (2019: DKK 0m) was recognised in the income statement and DKK -1m (2019: DKK -2m) in other comprehensive income.

SECTION 4

OTHER DISCLOSURE REQUIREMENTS

SECTION 4.1 OTHER OPERATING ACTIVITIES, NET

Other operating activities are secondary to the principal activities of the Group and include income and expenses relating to rental properties, research activities, and gains and losses on the disposal of intangible assets and property, plant and equipment.

In 2020, real estate, net, amounted to DKK 9m (2019: DKK -1m), driven by parking lot income in Tuborg Harbour.

Other operating activities, net

DKK million	2020	2019
Gains on disposal of real estate	-	1
Real estate, net	9	-1
Research activities, including the Carlsberg Research Laboratory, net	-13	-27
Other, net	-	-2
Total	-4	-29

Research expenses are partially financed through funding received from the Carlsberg Foundation for the operation of the Carlsberg Research Laboratory and other grants.

ACCOUNTING POLICIES

The funding and grants are recognised in the income statement in the same period as the activities to which they relate.

SECTION 4.2 CASH FLOW

Change in working capital consists of other receivables of DKK 20m (2019: DKK -5m), trade payables and other liabilities of DKK 102m (2019: DKK 40m) and retirement benefit obligations and other provisions of DKK -34m (2019: DKK -6m).

Other activities cover real estate activities.

SECTION 4.3 PROVISIONS

Provisions primarily comprise warranty provisions regarding real estate disposed of and provisions for ongoing disputes.

At 31 December 2020, provisions amounted to DKK 51m (2019: DKK 82m). Provisions amounting to DKK 10m (2019: DKK 5m) were utilised during the year. In 2020, unutilised provisions of DKK 20m were reversed.

Of total provisions, DKK 39m (2019: DKK 34m) falls due within one year and the remaining DKK 13m (2019: DKK 48m) between one and five years. As in previous years, no provisions fell due after more than five years from the end of the reporting period.

SECTION 4.4 ASSET BASE AND LEASES

The carrying amount of intangible assets was DKK 3m (2019: DKK 5m), and the carrying amount of property, plant and equipment was DKK 218m (2019: DKK 218m). Property, plant and equipment comprised land and buildings of DKK 180m (2019: DKK 182m) and plant and machinery of DKK 38m (2019: DKK 36m).

Depreciation and amortisation of DKK 10m (2019: DKK 8m) were included in administrative expenses.

Carlsberg A/S has no lease contracts to be recognised. The lease expenses recognised in the income statement related to short-term leases and leases of low-value assets and amounted to DKK 1m (2019: DKK 1m). Such contracts comprise the lease of copy and printing machines, coffee machines, small IT devices and similar equipment.

SECTION 4.5 FEES TO AUDITORS

Fees to auditors appointed by the Annual General Meeting

DKK million	2020	2019
Statutory audit	0.3	0.3
Assurance engagements	-	-
Tax advisory	-	-
Other services	-	-
Total	0.3	0.3

SECTION 4.6 TAX

Deferred tax assets amounted to DKK 103m (2019: DKK 121m) and comprised tax on property, plant and equipment of DKK 31m (2019: DKK 34m), provisions and retirement benefit obligations of DKK 13m (2019: DKK 19m), and tax losses etc. of DKK 59m (2019: DKK 68m).

The utilisation of tax loss carryforwards depends on future positive taxable income exceeding the realised deferred tax liabilities. Deferred tax liabilities amounted to DKK 10m (2019: DKK 10m).

The net change in deferred tax assets of DKK 18m comprised tax recognised in total comprehensive income of DKK 11m (2019: DKK 23m) and a joint taxation contribution of DKK -29m (2019: DKK -29m).

The total tax for the year recognised in the income statement comprised income of DKK 11m (2019: DKK 23m). Of the deferred tax assets, DKK 5m (2019: DKK 6m) is expected to be used within one year. All tax assets have been recognised.

The administration company, Carlsberg A/S, has unlimited and joint legal responsibility with the other Danish companies under the joint taxation scheme for withholding taxes on dividends, interest and royalties.

Reconciliation of tax for the year

DKK million	2020	2019
Calculated tax on profit	693	579
Adjustments to tax for
prior years	-1	-
Non-deductible
expenses	3	3
Tax-free dividend and
tax-exempt items	-706	-605
Tax for the year	-11	-23

ACCOUNTING ESTIMATES AND JUDGEMENTS

Carlsberg A/S recognises deferred tax assets, including the tax base of tax loss carryforwards, if management assesses that these tax assets can be offset against positive taxable income in the foreseeable future. This judgement is made annually and based on budgets and business plans for the coming years.

ACCOUNTING POLICIES

Carlsberg A/S is the administration company and is subject to the Danish rules on mandatory joint taxation of the Carlsberg Group's Danish companies. Carlsberg A/S accordingly pays all income taxes to the tax authorities under the joint taxation scheme.

Danish subsidiaries are included in the joint taxation from the date when they are included in the consolidated financial statements and up to the date when they are excluded from the consolidation. The jointly taxed Danish companies are taxed under the on-account tax scheme.

On payment of joint taxation contributions, the current Danish income tax is allocated between the Danish jointly taxed companies in proportion to their taxable income. Companies with tax losses receive joint taxation contributions from other companies that have used the tax losses to reduce their own taxable profit (full absorption).

Tax on profit/loss for the year comprises profit/loss from real estate partnerships (joint ventures), as these are not individually taxed but included in the taxable income of the partners. In addition, tax on profit/loss and deferred tax are calculated and recognised as described in section 6 in the consolidated financial statements.

Income tax expenses

	2020					2019
DKK million	Income statement	Other comprehensive income	Total comprehensive income	Income statement	Other comprehensive income	Total comprehensive income
Tax for the year
Change in deferred tax and non-current tax liabilities during the year	-11	-	-11	-23	-	-23
Total	-11	-	-11	-23	-	-23

SECTION 5

GENERAL ACCOUNTING POLICIES

SECTION 4.7 CONTINGENT LIABILITIES AND OTHER COMMITMENTS

Carlsberg A/S has issued guarantees to subsidiaries for pension obligations of DKK 350m (2019: DKK 337m).

Carlsberg A/S is jointly registered for Danish VAT and excise duties with Carlsberg Breweries, Carlsberg Danmark, Carlsberg Supply Company Danmark and various other Danish subsidiaries, and is jointly and severally liable for payment of VAT and excise duties.

Carlsberg A/S is party to certain lawsuits, disputes etc. of various scopes. In management's opinion, apart from items recognised in the statement of financial position or disclosed in the financial statements, the outcome of these lawsuits, disputes etc. will not have a material negative effect on the Company's financial position.

SECTION 4.8 EVENTS AFTER THE REPORTING PERIOD

Apart from the events recognised or disclosed in the financial statements, no events have occurred after the reporting date of importance to the financial statements.

The 2020 financial statements of Carlsberg A/S have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial Statements Act.

The financial statements are presented in Danish kroner (DKK), which is the presentation currency.

The accounting policies for the Parent Company are the same as for the Group, cf. section 9 in the consolidated financial statements and the individual sections.

SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing Carlsberg A/S' financial statements, management makes various accounting estimates and judgements that form the basis of presentation, recognition and measurement of the Company's assets and liabilities.

The estimates and judgements made are based on historical experience and other factors that management assesses to be reliable, but that by their very nature are associated with uncertainty and unpredictability. These estimates and judgements may therefore prove incomplete or incorrect, and unexpected events or circumstances may arise.

The significant accounting estimates and judgements made and accounting policies specific to the Parent Company are presented in the explanatory notes.

REPORTS

MANAGEMENT STATEMENT

The Supervisory Board and the Executive Board have today discussed and approved the Annual Report of the Carlsberg Group and the Parent Company for 2020.

The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act.

In our opinion, the consolidated financial statements and the Parent Company's financial statements give a true and fair view of the Carlsberg Group's and the Parent Company's assets, liabilities and financial position at 31 December 2020 and of the results of the Carlsberg Group's and the Parent Company's operations and cash flows for the financial year 2020.

Further, in our opinion the Management review includes a fair review of the development in the Carlsberg Group's and the Parent Company's operations and financial matters, of the result for the year, and of the Carlsberg Group's and the Parent Company's financial position, as well as describing the significant risks and uncertainties affecting the Carlsberg Group and the Parent Company.

In our opinion, the Annual Report of the Carlsberg Group and the Parent Company for the financial year 1 January to 31 December 2020 identified as CARL 2020-12-31.ZIP has been prepared, in all material respects, in compliance with the ESEF Regulation.

We recommend that the Annual General Meeting approve the Annual Report.

Copenhagen, 5 February 2021

Executive Board of Carlsberg A/S

Cees 't Hart President & CEO Heine Dalsgaard CFO Supervisory Board of Carlsberg A/S Flemming Besenbacher Chair Lars Fruergaard Jørgensen Deputy Chair Hans Andersen Carl Bache Magdi Batato Domitille Doat-Le Bigot Lilian Fossum Biner Richard Burrows Eva Vilstrup Decker Finn Lok Erik Lund Søren-Peter Fuchs Olesen Peter Petersen Majken Schultz

Lars Stemmerik

REPORTS

INDEPENDENT AUDITOR'S REPORTS

TO THE SHAREHOLDERS OF CARLSBERG A/S

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OUR OPINION

In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements (pp [53-121] and [123-136]) give a true and fair view of the Group's and the Parent Company's financial position at 31 December 2020 and of the results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act.

Our opinion is consistent with our Auditor's Long-form Report to the Audit Committee and the Board of Directors.

What we have audited

The Consolidated Financial Statements and Parent Company Financial Statements of Carlsberg A/S for the financial year 1 January to 31 December 2020 comprise income statement and statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and notes, including summary of significant accounting policies for the Group as well as for the Parent Company.

Collectively referred to as the "Financial Statements".

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the 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 International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with the IESBA Code.

To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided.

Appointment

We were first appointed auditors of Carlsberg A/S on 30 March 2017 for the financial year 2017. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of four years including the financial year 2020.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2020. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter	How our audit addressed the key audit matter	Key audit matter	How our audit addressed the key audit matter
Revenue recognition		Recoverability of the carrying amount of goodwill and brands
Recognition of revenue is complex due to the variety of different revenue streams, ranging from sales of goods, royalty income and sales of by-products recognised when all significant risks and rewards have been transferred to the customer or in terms of the licence agreement. Furthermore, the various discounts and locally imposed duties and fees in regard to revenue recognition are complex and introduce an inherent risk to the revenue recognition process. We focused on this area, as there is a risk of non-compliance with accounting standards due to complexity arising from different customer behaviours, structures, market conditions and terms in the various countries. Revenue recognition and accounting treatment are described in section 1.1 "Segmentation of operations – Accounting estimates and judgements" in the Consolidated Financial Statements.	Our audit procedures included considering the appropriateness of the revenue recognition accounting policies and assessing compliance with the accounting standards. We tested the relevant controls, including applicable information systems and Management's monitoring of controls used to ensure the completeness, accuracy and timing of revenue recognised. We discussed the judgements related to the recognition and classification of revenue with Management. Further, we performed substantive procedures regarding invoicing, significant contracts, significant transaction streams (including discounts), and locally imposed duties and fees and cut-off at year end in order to assess the accounting treatment and principles applied. We applied data analysis in our testing of revenue transactions in order to identify transactions outside the ordinary transaction flow, including journal entry testing.	The principal risks are in relation to Management's assessment of the future timing and amount of cash flows that are used to project the recoverability of the carrying amount of goodwill and brands. There are specific risks related to macroeconomic conditions and volatile earnings caused by volume decline, intensified competition and changed regulations in key markets – conditions that could also result in Management deciding to change brand strategy to drive business performance. Bearing in mind the generally long lived nature of the assets, the significant assumptions are Management's view of prices, volumes, discount rates, growth rates, royalty rates, expected useful life and costs, and future free cash flows as well as the judgement in defining cash generating units (CGUs). We focused on this, as there is a high level of subjectivity exercised by Management in estimating future cash flows and the models used are complex. The key assumptions and accounting treatment are described in section 2.2 "Impairment" in the Consolidated Financial Statements.	In addressing the risks, we walked through and tested relevant controls related to assessing the carrying amount of goodwill and brands. We considered the appropriateness of Management's defined CGUs within the business. We evaluated whether there were factors requiring Management to change its definition. We examined the methodology used by Management to assess the carrying amount of goodwill and brands assigned to CGUs, and the process for identifying CGUs that require impairment testing to determine compliance with IFRS. We performed detailed testing for the assets where an impairment review was required or indications of impairment were identified. For those assets, we analysed the reasonableness of significant assumptions in relation to the ongoing operation of the assets. We corroborated estimates of future cash flows and challenged whether they are reasonable and supported by the most recent approved Management budgets, including expected future performance of the CGUs, and challenged whether these are appropriate in light of future macroeconomic expectations in the markets. We evaluated the assumptions used by Management, including assessment of price and volume forecasts, discount rates and long-term growth rates, and tested the mathematical accuracy of the relevant value-in-use models prepared by Management. We made use of our internal valuation specialists in the audit. Further, we assessed the appropriateness of disclosures, including sensitivity analyses prepared for the significant assumptions.

STATEMENT ON THE MANAGEMENT REVIEW

Management is responsible for Management's Review, pp [3-52] and [122].

Our opinion on the Financial Statements does not cover 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 Management's Review and, in doing so, consider whether Management's Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

Moreover, we considered whether Management's Review includes the disclosures required by the Danish Financial Statements Act.

Based on the work we have performed, in our view, Management's Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management's Review.

MANAGEMENT'S RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation of consolidated 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 further requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting 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 about 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism 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 appropriate 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, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate 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 related disclosures made by Management.
Conclude on the appropriateness of Management's use of the going concern basis

of accounting 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 Statements 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 or the Parent Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
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 regarding, among other matters, the planned scope and timing 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 statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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 Financial Statements we performed procedures to express an opinion on whether the annual report of Carlsberg A/S for the financial year 1 January to 31 December 2020 with the filename CARL-2020-12-31.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:

Preparing the annual report in XHTML format;
The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all 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 necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation.

Our responsibility is to obtain reasonable assurance on whether the annual report has been prepared, in all material respects, 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 procedures 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 has been 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 Carlsberg A/S for the financial year 1 January to 31 December 2020 with the file name CARL-2020-12-31.zip has been prepared, in all material respects, in compliance with the ESEF Regulation.

Copenhagen, 5 February 2021

PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR No 3377 1231

Mogens Nørgaard Mogensen State Authorised Public Accountant mne21404

Gert Fisker Tomczyk State Authorised Public Accountant mne9777

Carlsberg Group Annual Report

CARLSBERG GROUP ANNUAL REPORT 2020 FINANCIAL STATEMENTS 142

Carlsberg A/S 1 J. C. Jacobsens Gade 1799 Copenhagen V Denmark Phone +45 3327 3300 www.carlsberggroup.com CVR No. 61056416

Editor: Carlsberg Group Investor Relations Design & layout: Operate & SkabelonDesign Photos: Nana Reimers et al. Proofreading: Borella projects

AI assistant

Carlsberg A/S — Annual Report 2020

3355_10-k_2021-02-05_17b5a0b9-aa38-412d-9075-e73159892ef4.pdf

ANNUAL REPORT 2020

MANAGEMENT REVIEW

FINANCIAL STATEMENTS

OUR ANNUAL REPORTING

LETTER FROM THE CHAIR & THE CEO

COMMITMENT AND RESILIENCE

COVID-19 presented significant challenges for our customers, people and business. We are proud of the great commitment of all our employees, which contributed to the resilience of the Group.

A RESILIENT COMPANY

ORGANISATION & PEOPLE RESILIENCE

FINANCIAL RESILIENCE

PORTFOLIO RESILIENCE

RESPOND AND RESET

ADVANCING SUSTAINABILITY

CHANGES TO THE SUPERVISORY BOARD

THANK YOU

STRATEGIC PRIORITIES

2020 HIGHLIGHTS

RESILIENCE OF OUR GROWTH PRIORITIES

GROWING IN CHINA

STRENGTHEN THE CORE

SUPPORTING THE ON-TRADE

FUNDING THE JOURNEY CULTURE

CREATE A WINNING CULTURE

SUPPORTING OUR COMMUNITIES

STRATEGIC PRIORITIES

TOGETHER TOWARDS ZERO

-12% ZERO CARBON FOOTPRINT

100% ZERO

IRRESPONSIBLE DRINKING

-19% ZERO

FINANCIAL ACHIEVEMENTS

RESILIENCE, COST CONTROL AND CASH DELIVERY

TOP- AND BOTTOM-LINE GROWTH, STRONG CASH FLOW AND IMPROVING RETURNS, ALBEIT RESULTS IN 2020 IMPACTED BY COVID-19 CHALLENGES

OUR REGIONS

THREE REGIONS 24 NO. 1 OR 2 POSITIONS

WESTERN EUROPE

SHARE OF GROUP OPERATING PROFIT

EASTERN EUROPE

SHARE OF GROUP OPERATING PROFIT

SHARE OF GROUP OPERATING PROFIT

OUR REGIONS

NEW REGIONAL STRUCTURE

WESTERN EUROPE ASIA CENTRAL & EASTERN EUROPE

OUR BRANDS

AN ATTRACTIVE BEER PORTFOLIO

CORE BEER

CRAFT & SPECIALITY (C&S)

ALCOHOL-FREE BREWS (AFB)

LOCAL POWER BRANDS ALCOHOL-FREE BREWS

CORE BEER GROWTH CATEGORIES

KEY FIGURES

FIVE-YEAR SUMMARY

COVID-19

NAVIGATING UNCHARTED WATERS

MARKET IMPACT

ON-TRADE

OFF-TRADE

E-COMMERCE

SUPPORTING OUR PEOPLE

SUPPORTING COMMUNITIES

SECURING THE FINANCIAL HEALTH OF THE BUSINESS

SAFEGUARDING OPERATING PROFIT

PROTECTING CASH AND LIQUIDITY

PREPARING FOR THE REBOUND

RESPOND FOR TOP-LINE GROWTH

RESET FOR THE FUTURE

+8% 1664 BLANC VOLUME GROWTH

GROUP

MARGIN IMPROVEMENT AND STRONG CASH FLOW

2020 was a challenging and very volatile year for the Group, significantly impacted by the COVID-19 pandemic.

VOLUMES

INCOME STATEMENT

Earnings expectations 2020

STATEMENT OF FINANCIAL POSITION ASSETS

EQUITY AND LIABILITIES Equity

Liabilities

CASH FLOW

Carlsberg A/S Annual Report 2020