Europris

Untitled ANNUAL REPORT EUROPRIS ASA 2021 2 3 Content Content About Europris �� 4 Key gures �� 7 Letter from the CEO �� 9 Directors’ report �� 10 The board �� 22 Corporate governance �� 24 Sustainability report �� 33 The management �� 63 Consolidated nancial statements �� 65 Income statement �� 67 Balance sheet �� 68 Statement of changes in equity �� 70 Statement of cash ows �� 71 Notes �� 72 Parent company �� 103 Income statement �� 104 Balance sheet �� 105 Statement of changes in equity �� 107 Statement of cash ows �� 108 Notes �� 109 Decleration to the annual report ��117 Alternative performance measures denitions ��118 Auditor’s report �� 120 Shareholder information �� 125 4 Europris – Europris – Norway´s #1 discount variety retailerNorway´s #1 discount variety retailer 30 years of consecutive growth 1992 Founded by Wiggo Erichsen 2004 Acquired by IK Investment Partners 2015 Listing on Oslo Børs 2006 Store #150 2017 Store #250 2012 Acquired by Nordic Capital 2021 1 million customer club members 2013 JV with Tokmanni and opened Shanghai sourcing ofce Store #100 2000 2021 Acquired 67% of Lekekassen and Lunehjem 5 9 modernised stores 5 relocated stores 4 new stores Number of stores 270 1 million customer club members 6 Europris employees are models in the photos. Clear Simple Europris´values Positive attitude Business acumen Proactive 7 (Amounts in NOK million) FY 2021 FY 2020 GROUP KEY INCOME STATEMENT FIGURES Sales directly operated stores 7,438 7,240 Sales from partly owned subsidiaries 423 - Sales from wholesale to franchise stores 707 689 Franchise fees and other income 80 84 Total operating income 8,648 8,013 % growth in total operating income 7�9% 28�5% Cost of goods sold 4,592 4,534 Gross prot 4,056 3,478 Gross margin 46�9% 43�4% Opex 1,973 1,773 Opex-to-sales ratio 22�8% 22�1% EBITDA 2,083 1,705 EBITDA margin 24�1% 21�3% EBIT (Operating prot) 1,512 1,166 EBIT margin (Operating prot margin) 17�5% 14,5% Net prot 1,104 804 Prot attributable to owners of the parent 1,082 804 Earnings per share (in NOK) 6.72 4.86 Dividend per share (in NOK) 4.00 2.70 GROUP KEY CASH FLOW AND BALANCE SHEET FIGURES Net change in working capital (139) 227 Capital expenditure 131 104 Financial debt 3,010 2,846 Cash 570 540 Net debt 2,440 2,306 - Lease liabilities 1,914 1,851 Net debt ex lease liabilities 526 455 Cash and liquidity reserves 1,981 1,926 EUROPRIS CHAIN KEY FIGURES Total chain sales 8,569 8,388 % growth in total chain sales 2�2% 27�8% % growth in like-for-like chain sales 1�5% 26�7% Total number of chain stores at end of period 270 266 - Directly operated stores 242 237 - Franchise stores 28 29 * For denitions and reconciliations of APMs, please see page 118 Key figures 8 9 Letter from the CEO Espen Eldal CEO of Europris ASA 30 years, but still young and promising Europris added 2021 to our run of successful years. Since the rst store opened its doors at Stavanger’s Støperigata in 1992, we have enjoyed three decades of growth and success – every single year. That is impressive. Regardless of who has owned or led our company, we have grown stronger year by year and taken ever larger market shares. The most important component for us is not the owners or the management – it is the culture and the people. That has been the formula for our success. During another year marked by Covid-19, we succeeded in adapting to more or less continuous changes in infection control measures and pandemic effects. That was demanding for the workforce, but we collectively succeeded in adapting well and, not least, in taking good care of the opportu- nities offered by the market. At Europris, we always strive to concentrate on the things we can affect ourselves. We focus our attention where we can make a difference and try not to be distracted by external factors beyond our control. At the same time, a culture has been established for continuous development and improvement where employees seek constantly to become a little better in everything they do. Overall, this yields a company which concentrates on opportunities rather than threats and which constantly strengthens its competence. We are emerging from the Covid-19 pandemic as a stronger company. This time has been used well. We have improved our concept and the way we work, and we have produced a good plan for the future. Over the past two years, we have: • strengthened our price position in the market by executing campaigns better • improved the customer experience by upgrading several important categories • safeguarded customer growth by recruiting more than a million members to our customer club • strengthened our e-commerce commitment with the acquisition of Lunehjem and Lekekassen • made operational improvements in our organisa- tion which benet both employees and customers. This means we are well equipped to meet day-to-day life in 2022, our 30th anniversary year. The battle over customers is going to be harder. Norwegian consumers will now be lured to carefree nightlife and holiday travel in a reopened society, at the same time as power companies, service stations and banks will seize a larger share of their disposable income. The ght for their wallets will be tough. In more difcult times, our concept should do well. When customers must watch their pennies, having good products at low prices is an advantage. A broad product range and low prices have been a relative market winner for many years – not only in Norway, but also in the rest of the world. Condence in discount variety stores is increasing, and customers are ever more positive to trying private labels. While it used to be considered “cheap” to shop in such places, the “smart” customers are now ocking to this part of the market. A broad range of products at low prices represent a growing part of the market, and we are a winner in this segment. As the market leader, we accept that our success will be noted and that more players will seek to emulate us. We have lived with that for 30 years, and would dare to claim that the competition sharpens us. The trick is to concentrate on what we can inuence ourselves and constantly get a little better at everything we do. 10 Directors’ report Europris exceeded its previous record year of 2020 for both sales and prot in 2021. A cold winter gave a strong start to the year. Solid seasonal execution and good performance for upgraded categories ensured a good performance throughout the year. As in 2020, the group benetted from closed borders as a result of Covid-19 for large parts of the year. Towards the end of January 2021, the government imposed strict restrictions which led to temporary store closures from 23 January to 6 June. On average, nine per cent of the chain’s stores were shut during the rst half of 2021. Society reopened gradually from mid-June and fully by the end of September, until restrictions were reimposed in mid-December. Employees did a tremendous job in adapting to rapid changes in infection control measures and quarantines, and to a higher sick leave because of Covid-19. Europris successfully completed two acquisitions during 2021, securing holdings of 67 per cent in the online players Lunehjem and Lekekassen. These strategic transactions have strengthened the group’s online position in the home and interior and toy categories and reinforce its expertise in e-commerce. Both companies reported growth in sales and prots for 2021 on top of record performances in 2020. Synergies through joint sourcing of products and services have already begun to show results. Owing to a favourable xed-rate agreement for inbound freight, Europris was not affected by the supply chain crisis which caused distribution problems for retailers globally during 2021. These difculties led to higher prices in the market, which in turn had a positive effect on the gross margin for the group. For 2021 as a whole, total sales growth for retail and shopping centres was higher than for the Europris chain. This development must be seen in relation to the extraordinary sales growth achieved by the chain in 2020. Taking 2020 and 2021 together, Europris strengthened its position as a market leader in variety retail and was a market winner with 30 per cent growth. By comparison, variety retail achieved 17.9 per cent growth over the same two-year period. Virke retail index (using igur es reported by Statistics Norway) ** Kvarud Analyse shopping centre index Total sales were NOK 8,648 million, up by 7.9 per cent. Excluding companies acquired during 2021, sales growth was 2.6 per cent. Where the Europris chain is concerned, the basket increased while the number of customer visits declined compared with 2020, but was still well above the 2019 level. The basket was positively affected by price, the product mix and a larger number of articles. The gross margin was very strong at 46.9 per cent, an improvement of 3.5 percentage points. The xed-rate agreement for inbound freight affected positively, in addition to positive effects obtained from currency hedging and the product mix. The latter was from a higher share of seasonal items compared with 2020 and from sales growth in upgraded higher-margin categories. Opex was NOK 1,973 million (NOK 1,773 million). Development was affected by the consolidation of part-owned subsidiaries, an increase in the number of directly operated stores (from 237 to 242) and higher costs from the product mix owing to a bigger share of large-volume seasonal items which are more costly to handle and transport. The majority’s share of net prot was NOK 1,082 million (NOK 804 million). The board of Europris ASA will propose an ordinary dividend of NOK 2.50 per share for 2021 to the general meeting. This represents a 13.6 per cent increase from the ordinary dividend of NOK 2.20 for 2020. To reect the strong nancial perfor - mance, the board also proposes to pay an additional dividend of NOK 1.50 per share for 2021. In total, the proposed dividend will be NOK 4.00 per share and amounts to NOK 644 million (excluding treasury shares at 31 December 2021) which represents 59.5 per cent of the majority’s share of the prot. Sales growth 2021 2020 Two years combined Virke: total retail +4�6% +10�0% +14�6% Virke: groceries -0�2% +15�9% +15�7% Virke: variety retail -0�6% +18�5% +17�9% Kvarud shopping centre index* +3�6% +4�0% +7�6% Europris chain +2.2% +27.8% +30.0% 11 Net cash ow for the year was an inow of NOK 30 million (outow of NOK 28 million). Net debt at 31 December 2021 amounted to NOK 2,440 million (NOK 2,306 million). Adjusted for lease liabilities, it was NOK 526 million (NOK 455 million). Cash and available credits were NOK 1,981 million at 31 December 2021 (NOK 1,926 million). Business operations and strategy Europris is Norway’s largest discount variety retailer by sales. It has a exible business model which delivers a unique value proposition for shoppers by offering a broad range of quality private-label and branded merchandise across 15 product categories. Europris is a campaign-driven, low-price retailer focused on conducting campaigns and providing good customer offerings every week of the year. It aims to ensure that advertised products are readily available in all stores throughout the campaign period. The Europris chain comprised a network of 270 stores nationwide at 31 December 2021. Of these, 242 were directly operated and 28 run as franchises. Europris stores are designed to facilitate a consistent, easy and efcient shopping experience with a dened layout, making use of a distinctive shop-in-shop concept. Europris strengthened its e-commerce presence during 2021 through the acquisition of two pure online players in addition to strengthening the Europris.no platform. The group’s head ofce is located in Fredrikstad. Europris opened its new central warehouse in Moss in 2019. Europris has had signicant volume growth in 2020 and 2021. To cope with future seasonal summer volumes, the group has decided to expand warehouse capacity in Moss. Europris employs a low-cost operating model, with attention concentrated on efciency across the entire value chain from factory to customer. It aims to maintain a low cost base through optimised and efcient sourcing, logistics and distribution processes. Goods are mainly sourced directly from suppliers in large volumes. High-quality sourcing is central to the group’s value proposition, and it benets from its cooperation with Tokmanni and ÖoB. The acquisition of Lekekassen and Lunehjem provides synergies for all parties through joint sourcing of products and services. The group contributes to local communities by supporting local activities and organisations such as sports clubs, humanitarian and charitable organisa - tions, cultural festivals and other local events. Through its agreement with the City Mission of the Church of Norway since 2016, the group helps to improve conditions for people in difcult circumstances. Its membership in the Norwegian Retailers Environment Fund allows it to contribute to local and global initiatives on reducing plastic waste. The group’s key strategic initiatives are: • strengthen the price and cost position • improve the customer experience • drive customer growth. Operational review Concept and category development During the rst quarter of 2021, Europris upgraded its home and interior department. This is an important category, with a high share of own brands and above-average margins. The upgrade has been well received by customers and was one of the categories with the highest growth in 2021. It upgraded the chocolate and snacks category during the third and fourth quarters of 2021. This was good timing, since the border is opening, and this category is exposed to cross-border trade� The acquisition of Lekekassen provides access to premium toy brands for sale in the Europris chain’s physical stores. A trial run in 10 stores during parts of the fourth quarter showed good results, with sales growth above the chain average in the toy category. Testing continues and a full roll-out is scheduled for the second half of 2022. E uropris works continuously to improve its concept and customer experience. It tested self-service sales of selected outdoor seasonal items during 2021, allowing customers to shop whenever it suits them by simply scanning products and paying with the aid of the Vipps mobile app. A test where customers were offered the loan of a car trailer to facilitate more convenient transport home of larger seasonal items has been well received, and more stores will offer this service in 2022. The group initiated two projects during 2021 to increase efciency for handling the ow of goods in the stores. These are expected to be rolled out to all stores 12 during the rst half of 2022. The rst project involves measures to improve store readiness every week ahead of campaigns, while the second aims to improve the process of restocking stores. Both involve new routines and a new way of working for store employees. Positive effects from these projects are an increase in both campaign and total sales, more efcient operations, an improved customer experience and better working conditions for employees. Europris conducts a customer and market survey every year via Mediacom, covering both the group and key competitors. The results from the 2021 survey conrm strong progress for price perception, deals, product quality, shopping experience and service. This is very satisfying, since the group has worked on improving these areas. For many years, Europris has worked systematically with sustainability and ethical trade in the purchase of goods. This work will continue. At the same time Europris has set the target of making it easier for customers to reach sustainable choices in its stores. With its large volumes and efcient operations, the group can ensure that ethical and sustainable products are more easily accessible to customers at competitive prices. For a start, Europris has collected 20 ofcial sustainability certications under a single common umbrella brand. This will make it easier for customers to locate these sustainable products. Europris is also in the process of testing the co-location of sustainable products in its stores so that these have a more prominent place and clearer labelling. E-commerce and e-CRM E-commerce sales from Europris.no amounted to NOK 147 million in 2021, up by 71 per cent. Customers prefer to collect their orders at the stores, and around 85 per cent of sales were click and collect. As a response to this and to improve the customer experience, the range offered for home delivery at Europris.no is in the process of being slimmed, while the number of products offered as click and collect will be increased. Europris is positioning itself as an omnichannel retailer, and the interaction between physical and digital marketing is an important factor in growing customer visits to the stores. The goal is to shape an environment where customers nd good information online and can shop in the way which best suits them, whether online or by visiting one of the chain’s physical stores. On average, Europris.no had 2.6 million visitors every month during 2021 (2.3 million). Around 700,000 newsletters are distributed electronically on a weekly basis, in addition to some one million printed leaets. Digital newsletters will gradually become more person- alised and reect products and offers relevant to the individual customer, with the aim of increasing store visit frequency and basket size. The group has continued recruiting members to its Mer customer club. Launched in 2019, this reached over a million members during 2021, up by more than 50 per cent from the year before. Expansion of the membership base reects successful recruitment campaigns, the conversion of xed multibuy offers to exclusive Mer offers, and campaign prices available only to Mer members� Lekekassen performed strongly in 2021, with record sales in Norway and a promising start in Denmark. In Sweden, competition and price pressure rose during 2021. Total sales for the Lekekassen group were NOK 591 million, an increase of 8.5 per cent. EBITDA was NOK 110 million (up by 17.1 per cent) and the EBITDA margin was 18.5 per cent (a rise of 1.4 percentage points). Improved margins illustrate that synergies from the cooperation can already be seen. Lunehjem had a good year on top of a strong 2020, with sales of NOK 32 million in 2021 (up by 12.8 per cent) and EBITDA of NOK 4.4 million (a rise of 56.7 per cent). One new position was created during 2021, with a logistics manager hired to handle the company’s growth. Warehouse capacity has reached its limits and the company will relocate during 2022 to handle future volumes. Store estate Europris opened four new stores in 2021, bringing the total number in the chain to 270 at 31 December 2021. The group has a healthy pipeline of new stores, with board approval for an additional 10 in 2022 and beyond. Of these, two are subject to planning permission. Month Store County March Austevoll Vestland June Xhibition Vestland September Jåttå Rogaland November Selbu Trøndelag New store openings in 2021 13 Europris relocated ve stores and completed nine store modernisations/expansions during 2021. New stores are an important driver for growth, and continued expansion of the store base – in addition to relocations, refurbishments and expansions of existing stores – will remain important. An analysis of stores opened in recent years showed a performance in line with similar studies carried out previously. This shows that, on average, sales growth is strong in the rst four years after opening, before stabilising at the same level as the chain’s like-for-like growth. The most recently opened stores have performed in accordance with their strict investment criteria� The appeal court proceedings over the Grini store have been nalised and Europris can continue to operate there. This is one of its larger stores, with annual sales of around NOK 60 million. Central warehouse To cope with future volumes, Europris has decided to expand warehouse capacity in Moss by 21,000 square metres to 83,000 square metres. Finalisation of the construction phase is scheduled for the rst half of 2023. Automation of the high-bay area is expected to be completed in the rst quarter of 2024, and the old central warehouse in Fredrikstad can then be nally vacated. The total investment will be around NOK 100 million. The ramp-up of automation for the low-bay area at the central warehouse in Moss, with an original deadline for nalisation before the summer of 2021, has been delayed by technical issues. To avoid risking product deliveries during the fourth-quarter high season, the ramp-up was postponed until early 2022. Savings from the total warehouse project remain intact, but are delayed as a result of this late ramp-up. ÖoB equity transaction and operational development Europris acquired a 20 per cent equity stake in ÖoB on 13 December 2019, with payment in Europris shares. As part of the agreement with ÖoB, the group holds an option to acquire the remaining 80 per cent of the ÖoB shares. This option runs for six months from the date the parties reach an agreement on ÖoB’s 2019 EBITDA. Pricing at both stages is based on an EV/EBITDA multiple of 7.7, adjusted for net debt and average net working capital. The parties have not been able to reach an agreement on the group’s EBITDA for 2019 and an arbitration process has been initiated, but no date has yet been set. The arbitration regarding the disagree- ment over the legal right for Europris to challenge the 2020 EBITDA was concluded in favour of Europris in February 2022� Eva Lundqvist, the former head of HR, was appointed as the new CEO of ÖoB on 15 November 2021. Sales declined for ÖoB in 2021, but an improved gross margin contributed to a higher EBITDA. Key gures for ÖoB (preliminary and unadited) * Excluding IFRS 16 effects. Financial review Income statement Operating income amounted to NOK 8,648 million in 2020 (NOK 8,013 million), up by 7.9 per cent. Excluding part-owned subsidiaries, sales growth was 2.6 per cent. The key drivers for revenue growth were the acquisition of part-owned subsidiaries, a 1.5 per cent increase in the chain’s like-for-like sales, and new store openings. Gross prot was NOK 4,056 million (NOK 3,478 million). The gross margin was 46.9 per cent (43.4 per cent), an improvement of 3.5 percentage points. Gross prot was positively affected by the xed-rate agreement on inbound freight, in addition to the product mix. The cost of goods sold included a net unrealised gain of NOK 49 million (loss of NOK 30 million) on hedging contracts and accounts payable. Opex came to NOK 1,973 million (NOK 1,773 million). It was affected by the inclusion of part-owned subsidi - aries and the increase in directly operated stores from 237 to 242. Operating expenses were 22.8 per cent (22.1 per cent) of consolidated revenue. SEK million FY 2021 FY 2020 Sales 3,899�0 4,186�0 EBITDA 70�8 62�3 14 Operating prot amounted to NOK 1,512 million (NOK 1,166 million), up by NOK 346 million or 29.7 per cent. Net nancial expenses in 2021 were NOK 94 million (NOK 139 million). The group recognised a net unrea - lised prot of NOK 26 million on interest swaps for 2021 (prot of NOK 11 million). In 2020, the group booked a non-recurring interest expense totalling NOK 32 million related to an error in interest-rate calculations, which was discovered in connection with the transition to a new IFRS 16 system. Prot before tax was NOK 1,418 million (NOK 1,029 million). Income tax expense in 2021 was NOK 314 million (NOK 225 million), giving an effective tax rate of 22.1 per cent (21.9 per cent). Net prot for 2021 was NOK 1,104 million (NOK 804 million), up by NOK 300 million. Net prot in 2021 from acquired companies was NOK 68 million. The net prot margin was 12.8 per cent (10 per cent). Prot attribu - table to non-controlling interests was NOK 22 million and prot attributable to owners of the parent amounted to NOK 1,082 million. Earnings per share in 2021 were NOK 6.72, compared with NOK 4.86 in 2020. Cash ow Net cash ow generated from operating activities was NOK 1,591 million (NOK 1,705 million). The net change in working capital was negative at NOK 139 million (positive at NOK 227 million). Working capital was negatively affected by timing differences for accounts payable and the payment of other provisions and accruals, as well as increased inventory owing to the inclusion of part-owned subsidiaries and to shipping goods earlier. Net cash ow used in investing activities was negative at NOK 684 million (negative at NOK 112 million). The increase is related to the automation of the low-bay area at the central warehouse in Moss, start-up investment for automation in the coming expansion of the high-bay area, and a larger number of store projects. In addition, the acquisition of 67 per cent of Lekekassen was completed during 2021, with NOK 501 million paid. Net cash from nancing activities was negative at NOK 877 million (negative at NOK 1,621 million). The year 2020 was affected by renancing the group’s term loan and the repayment of old term loan. In addition, sales of treasury shares related to share programmes for the employees, executive management and the board amounted to NOK 7 million (buy-back of treasury shares of NOK 245 million). The net change in cash for 2021 was an inow of NOK 30 million (outow of NOK 28 million). Financial position Financial debt at 31 December 2021 was NOK 3,010 million (NOK 2,846 million). Net debt at 31 December 2021 was NOK 2,440 million (NOK 2,306 million). Adjusted for lease liabilities, net nancial liabilities were NOK 526 million (NOK 455 million). The group is in compliance with its nancial covenant. Cash and liquidity reserves for the group at 31 December 2021 amounted to NOK 1,981 million (NOK 1,926 million). Equity Equity at 31 December 2021 was NOK 2,889 million (NOK 2,214 million) and represented an equity ratio for the group of 33.4 per cent. The increase in equity was made up of NOK 1,104 million in net prot and NOK 7 million in the sale of treasury shares, less NOK 434 million in dividend paid. Allocation of prot Europris ASA (the parent company) posted a prot of NOK 639 million for 2021. The board proposes the following allocation (NOK million): Ordinary dividend 418 Additional dividend 251 Retained earnings (30) Total 639 15 The Europris group achieved a prot of NOK 1,104 million in 2021. Prot attributable to the owners of the parent company amounted to NOK 1,082 million. The board of Europris ASA will propose an ordinary dividend of NOK 2.50 per share for 2021 to the general meeting. This represents a 13.6 per cent increase from the ordinary dividend of NOK 2.20 for 2020. To reect the strong nancial performance, the board also proposes to pay an additional dividend of NOK 1.50 per share for 2021. In total, the proposed dividend will be NOK 4.00 per share and amounts to NOK 644 million (excluding treasury shares at 31. December 2021). The proposed dividend represents 59.5 per cent of the majority’s share of the prot. Pursuant to section 3-3a of the Norwegian Account- ing Act, the board conrms that the nancial statements have been prepared on the assumption that the group is a going concern. Risk and risk management The board pays great attention to risk, risk management and internal control procedures, and reviews the company’s risk register annually. Risk classication is subject to periodic review by management to identify any change in classication and to follow up any actions agreed in order to mitigate risks. For each key category, risks are identied and classied in accordance with the likelihood of their occurrence and the potential impact should they occur. The risk register focuses on the following key risk categories: • nancial • market • operational • strategic The key risks identied are presented in the tables below. Risk type Description of risk Internal control Interest rate risk. Interest-rate volatility affecting the group’s interest costs. The nancial policy includes hedging interest rates. Sixty per cent of the group’s long-term loan is currently hedged. Liquidity risk. Increased indebtedness affecting the group’s ability to grow and posing a threat of breaching nancial covenants. Projected cash ows are updated regularly, and the group has sufcient cash and credit facilities available. Credit risk. Risk of customers defaulting. Europris has limited exposure to credit risk. The clear majority of revenue transactions are settled by debit card or in cash. Trade receivables relate mainly to the group’s franchisees, where losses on trade receivables have historically been limited. Sales to B2B customers are still a relatively small part of total revenues and historically involve limited losses. All B2B customers are subject to credit rating review. Financial risk 16 Risk type Description of risk Internal control Natural disaster, conict, pandemic, etc. N atural disasters and conicts may affect the production and supply of goods. A pandemic, depending on restrictions imposed and customer behaviour, could have either a positive or a negative effect. Europris has many suppliers, who are located in different geographic regions. The prob - ability that the entire value chain will be affected is therefore low. The group can adapt its range and campaign of fering on the basis of available goods. Online shopping and click and collect can also be offered to customers as a substitute for shopping in physical stores. Europris’ store network is spread over a large geographical areas, thereby limiting the risk that many of them will be affected by the same restrictions/effects simultaneously. The product range consists mainly of products which all households need in their everyday lives. Macroeconomic environment. Changes in the macro- economic environment which reduce consumer spending. The Europris concept is resilient in uncertain times, with a wide and accessible store network, a broad product offering at low prices, and attractive campaigns. The wide range of products and price points allows customers to trade up and down. The operating model is based on low costs to keep sale prices as low as possible. Forecasting and planning models are detailed so that the group can react fast if the economic outlook changes. Competition. Signicantly increased competition in the market. Management follow developments in the market closely through regular reporting of market data as well as through its own competitor analysis. Price surveys are conducted systematically to monitor the group’s competitiveness on a continuous basis. Category development is an important element, where Europris can, if desired, reduce its product offering in categories facing strong competition while introducing new products in cate- gories where competition is less erce. Digitalisation. Change in shopping patterns as a result of digitalisation. Europris has a well-functioning e-commerce solution, with a broad range of products available for click and collect in the stores or home delivery. The number of members in the Mer customer club has reached more than one million, and a new e-CRM system which permits personalised direct marketing is in place. Market ing is directed to a greater extent at social and digital media. Europris sees increased digitalisation as an opportunity to use e-CRM to expand trafc in the physical stores. A large part of the range is low-value products, less exposed to online shopping. Europris has also strengthened its online presence in some categories through the acquisition of 67 per c ent stakes in Lekekassen and Lunehjem. Sustainability. Change in shopping patterns as a result of sustainability. Sustainability forms an integrated part of Europris’ strategy and is taken into account in product development and strategic initiatives. In addition, a separate sustainability strategy has been developed. Seventy-ve per cent of all products sourced from the Shanghai ofce were from externally certied factories (BSCI) in 2021. Europris also conducts its own audits with its team at the Shanghai ofce and has several employees at this ofce dedicated solely to sustainability and of supplier quality. In 2021, a new position was also lled with a packaging expert whose main job is to reduce packaging and contribute to more efcient transport and thereby cut CO 2 emissions. Detailed programmes for reducing waste and energy consumption are in place for the stores, the logistics centre and the main ofce. Purchasing prices, including currency, and overall cost development. Increased purchasing prices, including currency rate volatility, and rise in other costs� Purchasing prices and general cost development would also affect competitors in the same way, and historically these types of cost increases have been absorbed by the market. The group’s nancial policy includes a currency strategy, whereby all purchase orders in USD and EUR are hedged for up to six months. This allows sufficient time to adj ust the retail price. Historically, this has proved to work well during periods with large uctuations in the currency market. Market risk 17 Risk type Description of risk Internal control Central infra- structure, property� Loss of operating facilities affecting operations or causing serious injury to employees. The group’s buildings are properly protected against re, and re drills are conducted regularly. The group’s assets are covered by full-value insurance in addition to business interruption policies. IT infrastructure, including cyber risk. Damage to IT infrastructure. Europris has good routines for backup and data security. Extensive IT security tests, both physical and digital, are carried out and deviations handled and improved on an ongoing basis. Europris has agreements with third-party providers both for continuously monitoring logs for rapid identication of any security breach - es and a cyber incident agreement which ensures swift assistance should anything arise� Product risk, food risk, harm to people, animals, the environment or property� Risk if a product harms people, animals or the environment. Europris uses reputable suppliers who are well-established and have good ex - pertise in their categories and product types. Seventy-ve per cent of all products sourced from the Shanghai ofce were from externally certied factories (BSCI) in 2021, in addition to audits by the team at the Shanghai ofce. The group performs quality tests before approval and sale of products, in addition to random testing of food products. Follow-up of suppliers with high-risk products have been intensied. Routines for product withdrawals are established. Europris has insurance to cover product risk and any consequential damage. Supply chain. Disruption to the supply chain leading to shortages of goods in stores. Europris has a xed agreement with a solid logistics company for inbound freight for long-travelled goods. Two transport rms are used for outbound logistics and, if one fails. volumes can be shifted to the other. Other transport methods can also be evaluated if a need for this should arise. Inventory levels in the stores are sufcient to manage for some time without deliveries. Regulation and compliance. Breach of regulatory or legislative requirements resulting in nancial penalties and/or reputational damage. The group has established policies and procedures with instructions in such areas as ethical behaviour, diversity and equality, anti-corruption, data protection, compli - ance and corporate governance in the company. These are revised annually by the board, and employee training is regularly conducted. Seventy-ve per cent of all products sourced from the Shanghai ofce were from externally certied factories (BSCI) in 2021, in addition to supplier audits by the team at the Shanghai ofce and quality checks both at the Shanghai ofce and the quality ofce in Norway. Europris conducts on-site inspections of suppliers in addition to extensive product testing. Reliance on key management. Loss of key personnel/skills which are critical to business operations. Europris has a structured approach to succession planning and talent manage- ment. In this work, all managers are evaluated and potential successors in both short and long terms are identied. In addition, plans are implemented for retention, development and training of key staff. Operational risk 18 Risk type Description of risk Internal control Concept and cate- gory development. Lack of innovation entailing lower margins and growth. Europris has dedicated category teams which work systematically on concept and category development. This is a strategic priority area for the group. The market and consumer trends are continuously monitored and the group can rapidly adapt to changes. New store rollout. Lack of protable new store locations which affects the group’s growth plans. The property development team has a pipeline of potential locations and works continuously to expand this list. The group maintains good relationships with land- lords and is working strategically with other retailers for co-location of stores. New store openings must meet strict investment criteria and all are subject to board approval. Development of new stores is monitored closely and shows that these have historically performed well. Omnichannel and e-commerce� Incomplete development of solutions. The group has developed a separate strategic plan for digitalisation, including omnichannel and e-commerce. As part of this work, the board has appointed a digital advisory board to support management. The group also made two acqui- sitions of pure online players during 2021, strengthening expertise in this eld. Alliances and cooperation. Improving sourcing prices and co-developing PL range. Europris has a collaboration with Tokmanni and ÖoB for sourcing and product development, in order to achieve better purchasing prices and to realise synergies. Europris and Tokmanni also have a joint venture at the Shanghai ofce. Central warehouse and automation. Failure in implementing the new warehouse and automa- tion solutions, and in realising communicated cost savings. Finalising automation of the low-bay area has been delayed. However, the group is condent that communicated savings are intact but at a delayed pace. A dedicated team with sufcient expertise and resources is assigned to the project, and the board monitors progress and conducts risk reviews on a regular basis. External partners are highly rated professionals in their elds. The high-bay area is already established and working well. Expansion of the central warehouse in Moss will include automation of the expanded high-bay area, which works well, while expansion of the low-bay area will be conventional. Strategic risk Directors’ and ofcers’ liability insurance Europris ASA has taken out a directors’ and officers’ liability insurance policy for the group and its subsidi- aries. This covers legal costs and personal liability for directors and ofcers arising out of possible claims made against them while serving on a board of directors or as an ofcer. Corporate governance The board and executive management of Europris ASA review the group’s corporate governance principles annually. Reporting accords with section 3-3b of the Norwegian Accounting Act and the Norwegian code of practice for corporate governance as updated most recently on 14 October 2021. See page 24 for a detailed statement on corporate governance at Europris. Organisation and corporate social responsibility Employees and organisation The employee engagement score, which showed an all-time high in 2020, was exceeded again in 2021. During two challenging years, it is particularly pleasing that employees feel well cared for and enjoy their workplace. Europris devotes great attention to employee development. Improved virtual training during 2021, in addition to courses with physical attendance, has been greatly valued by participants. Europris has high attention on ensuring a safe working enviroment. As in 2020, the pandemic continued to affect everyday working conditions for the employees in 2021. Europris’ main focus during the pandemic has been to ensure a safe place for employees to work and for customers to shop. The organisation has handled the pandemic in an impressive way, especially when strict restrictions were imposed and stores were forced to close temporarily at 19 very short notice. Managing store closures, sick leave (from illnesses affecting both employees and their children) and quarantines has not been an easy task, but the Europris culture has again showed itself at its best� The global supply chain market has been demanding, but this has been dealt with in an excellent manner by employees handling the logistics operations. Through hard work, the group managed to get all products to the stores in time. Equal opportunities and discrimination Europris is a workplace with equal opportunities in all areas. Where gender equality in parent company Europris ASA is concerned, women accounted for 43 per cent of directors and 25 per cent of the executive management group in 2021. The group’s ambition is to increase the proportion of women in senior positions. The group has 3,298 employees, of whom 60 per cent are women. Working time arrangements are independent of gender. Europris’ policy is to promote equal human rights and opportunities, and to prevent discrimination on the grounds of age, gender, religion, ethnicity, nationality, disability, sexual orientation, sexual identity or stage of life. The group is working actively to promote Norway’s Anti-Discrimination Act in its business. These activities include recruitment and promotion, training and development, pay and working conditions, and protection against any type of harassment. The actual condition in the organisation related to gender equality and the actions implemented to full the duty of activity in accordance with the Equality and Anti-Discrimination Act § 26, are described in more detail in a separate section of this annual report. See page 49. Natural environment The group does not pollute the natural environment beyond the level considered normal for this type of business. Pursuant to section 3-3c of the Norwegian Accounting Act, the board has drawn up guidelines covering business ethics and corporate social responsibility. The main principles are covered in the company’s sustaina - bility policy, available on its website at https://investor. europris.no. Europris’ activities in the area of corporate social responsibility, including human rights, labour rights, the working environment, equality, discrimination, anti-corruption and the natural environment, are described in more detail in a separate section of this annual report. See page 33. Transactions with related parties No signicant transactions were conducted with related parties in 2021. Market developments and outlook Rising energy prices, higher interest rates, continued uncertainty related to Covid-19 and turbulence in the world contribute to an uncertain macroeconomic environment. In addition, price levels for groceries and other goods are expected to increase. In total, these represent signicant elements, which are expected to affect consumer spending in 2022. The Europris concept has proved resilient in uncertain times, with a wide and accessible store network, a broad product offering at low prices and attractive campaigns. Europris signicantly improved its competitive position in 2020 and 2021. With its unique and customer-friendly concept, the group is a market winner and is conti - nuously gaining market share. It will continue to devote attention to improving the shopping experience through concept and category development, while the Mer customer club provides a unique channel for promoting activities which will bring trafc to the stores. In addition, acquiring Lunehjem and Lekekassen have broadened Europris’ exposure to the online channel for certain categories. Expertise from these acquisitions will also enhance the group’s online initiatives and seamlessly integrate online shopping, digital activities and shopping in physical stores. The market for container freight is still unstable. No indications of disruptions affecting Europris can currently be seen, but a major Covid-19 outbreak, market tubulence or other factors in the global supply chain may change this picture. Europris is monitoring the situation closely. Securing sourcing capacity is a main priority, and a two-year agreement for inbound freight from Asia has therefore been signed. This ensures guaranteed capacity for an agreed level of volumes. The annualised increase in costs for inbound freight is estimated at NOK 170-200 million, and will affect the nancial gures from March 2022. 20 With its exible business model, Europris has proven its ability to adapt quickly to changes, and the board is condent that the group is well positioned for the future. The group’s long-term nancial and operational ambitions remain unchanged: • continue to deliver like-for-like growth above market performance over time • aim to open an average of ve new stores net per annum, depending on the availability of locations which meet strict requirements for the rate of return as well as the potential for relocations, expansion and refurbishment • increase the EBITDA margin over time through improved sourcing and a more cost-effective value chain • continue a dividend policy of paying out 50-60 per cent of net prot while maintaining an efcient balance sheet. The board emphasises that uncertainty is faced in assessing the outlook. Events after the reporting period No material events have occurred since 31 December 2021� Fredrikstad, 24 March 2022 THE BOARD OF DIRECTORS OF EUROPRIS ASA Claus Juel-Jensen Karl Svensson Espen Eldal CEO Tom Vidar Rygh Chair Hege Bømark Tone Fintland Pål Wibe Bente Sollid Storehaug 21 22 The board Tom Vidar Rygh is an adviser to the Nordic Capital Funds. He holds a degree in economics and business administration (siviløkonom) from the Norwegian School of Economics (NHH). Rygh has held various leading executive positions in industrial and nancial companies, including executive vice president of Orkla ASA, CEO of SEB Enskilda and partner in/CEO of NC Advisory AS – adviser to the Nordic Capital Funds. He has served as chair and director of several companies in a number of sectors, including Telenor ASA, Oslo Børs, Carlsberg Brewer- ies A/S, Storebrand ASA, Aktiv Kapital ASA, Eniro AB, Netcom ASA, Helly Hansen ASA, Dyno ASA, Industrikap- ital Ltd, Actinor Shipping ASA, Borregaard Forests AS, Holberg Inc, Orkla Eiendom AS, Telia Overseas AB and Baltic Beverage Holding AB. Rygh has also served as an adviser to a number of prominent investment groups, such as TPG and the John Fredriksen group. He is regarded as independent of senior executives, material business associates and the company’s major shareholders. Number of shares in Europris ASA: 610,035. Hege Bømark is a director of AF-Gruppen ASA, OBOSbanken AS and the Institute for Eating Disorders. She has also been a director of Oslo Areal ASA, Norgani Hotels ASA, BWGHomes ASA, Norwegian Property ASA and Fornebu Utvikling ASA, all of which are or have been listed companies. Prior to becoming a full-time professional director, Bømark served as a project broker in AS Eiendomsutvikling and as a nancial analyst at Fearnley Finans AS and Orkla Finans AS. She holds a degree in economics and business administration (siviløkonom) from the Norwegian School of Economics (NHH). Bømark is regarded as independent of senior executives, material business associates and the company’s major shareholders. Number of shares in Europris ASA: 8,129. Tone Fintland has many years of experience as a senior executive in the pharma- ceutical industry. She has functioned since 2016 as global procurement Director at TEVA Pharmaceuticals, and has previously held similar positions in the Actavis Group and Alpharma Inc. In addition, Fintland is a President of NIMA (the Norwegian Association for Purchasing and Logistics) and NIMA Oslo Akershus Afliate. She holds a Bachelor in Business Administration from the BI Norwegian Business School. Fintland is regarded as independent of senior executives, material business associates and the company’s major shareholders. Number of shares in Europris ASA: 10,808. Tom Vidar Rygh (chair) Hege Bømark Tone Fintland 23 Claus Juel-Jensen is a professional board member and has extensive boardroom experience from different companies in food and non-food retail, food production and wholesale in Germany, Denmark, Sweden and Norway. In his professional career, he was the CEO of Netto Germany, a joint venture between Edeka Germany and Dansk Supermarked Group, from 1995-2004 and after that CEO of Netto International (DK, DE, SE, PL, UK) from 2005-2017. Juel-Jensen has extensive experience in the food discount industry and the internationalisation of retail concepts. He holds a Master of Business Administration and an MSc from Copen- hagen Business School and the University of Cologne, and has the rank of captain in the Royal Danish Guard. Juel-Jensen is regarded as independent of senior executives, material business associates and the company’s major shareholders. Number of shares in Europris ASA: 7,112. Karl Svensson Claus Juel-Jensen Pål Wibe Bente Sollid Storehaug Pål Wibe joined XXL ASA as its chief executive ofcer in 2020. He has been the CEO of Europris from 2014 to 2020. Prior to that appointment, he served as CEO of Nille AS for almost seven years and CEO of Travel Retail Norway AS for two years. Before that, he held various executive positions at ICA Ahold AB for six years and worked for ve years in McKinsey & Co. Wibe holds a degree in economics and business administration (siviløkonom) from the Norwegian School of Economics (NHH) and an MBA from the University of California at Berkeley. He is regarded as independent of senior executives, material business associates and the company’s major shareholders. Number of shares in Europris ASA: 408,572. Bente Sollid Storehaug is CEO of Digital Hverdag and non-executive director of Polaris Media, Hafslund E-CO, Nortel, Questback, Motor Gruppen and Eika Gruppen. She is also chair of PlaceWiseGroup, Ocean Visioneering and Vinje Ullvarefabrikk. Storehaug has been a member of several policy advisory boards for government ministers in Norway. She has also been appointed by the government to an expert committee on the future funding of the Norwegian Broadcasting Corporation (NRK). Storehaug established her own internet consul- tancy in 1993, which is listed today on Oslo Børs as Bouvet ASA. She is the youngest member of the Norwegian Association of Editors. Storehaug is regarded as independent of senior executives, material business associates and the company’s major shareholders. Karl Svensson is a director of RuNor AS, the Svensson family’s special purpose vehicle for its investment in Europris. He is partner of Zurich-based nancial advisory rm Lilja Capital Advisory Partners. Svensson also has operational retail experience, having previously worked for Runsvengruppen AB, the parent company of ÖoB. He graduated from Uppsala University in 2003 with an MSc in business and economics. Svensson is regarded as independent of senior executives, material business associates and the company’s major shareholders, with the exception that Europris holds an option to acquire the remaining 80 per cent of the ÖoB shares. Number of shares in Europris ASA: 281,891. 24 1. Implementation and reporting on corporate governance The board of Europris is conscious of its responsibility for the development and implementation of internal procedures and regulations to ensure that the group complies with applicable principles for corporate governance. Europris is listed on Oslo Børs and subject to reporting requirements for corporate governance under the Norwegian Accounting Act as stock exchange regulations. Europris complies with the Norwegian Code of Practice for Corporate Governance (the code), last revised on 14 October 2021, which is available on the Norwegian Corporate Governance Committee’s website at www.nues.no. Application of the code is based on the “comply or explain” principle and any deviation from the code is explained under the relevant item. At 31 December 2021 Europris deviated from the recommendation in one section of the code during 2021 pertaining to the establishment of separate guidelines regulating responses to takeover bids (section 14). The principles and implementation of the code are subject to annual reviews by the board and a statement is included in the annual report in accordance with the requirements of the continuing obligations for listed companies from Oslo Børs as well as the Norwegian code� 2. The business Europris is Norway’s largest discount variety retailer by sales. The group offers a broad range of quality own brand and branded merchandise across a wide range of product categories. The group’s merchandise is sold through the Europris store chain, which consisted at 31 December 2021 of a network of 270 stores throughout Norway. Of these, 242 are directly owned by the group and 28 operate as franchise stores. While Europris also offers online shopping, physical stores will continue to be the main sales channel in Europris for the forese - eable future. The group’s growth strategy remains unchanged, and its expansion in discount variety retailing will continue through both physical stores and the online channel. The group’s headquarters and storage facilities are located in Fredrikstad and Moss, Norway. The company’s business purpose, as presented in article 3 of the company’s articles of association, is as follows: “The company’s business is commercial activity in the European wholesale and retail market, or business in relation to this, including issuing loans, and collateral and issuing guarantees for group companies and direct or indirect involvement in business with similar or other company object, as well as other business in relation to the above mentioned”. The board has established clear objectives, strategies and risk proles for the group’s business activities, to create value for its shareholders and to ensure that its resources are utilised in an efcient, sustainable manner to the benet of all its stakeholders. Europris, as a consumer group, actively seeks to reduce risk and the potential for negative business effects by integrating sustainability in its business strategy. This is an approach which also creates opportunities for growth and long-term value creation. Europris has developed various policies providing business practice guidance, including on sustainability, code of conduct, ethical trade, anti-corruption, data protection, trade sanctions and whistleblowing. These policies set the standards for the behaviour which can be expected internally and externally in order to build trust, loyalty and responsible behaviour internally, and to prevent violations and negative effects externally. Europris’ sustainability policy and supplier code of conduct are available from the group’s website at https:// investor.europris.no. The group’s objectives, strategies Corporate governance Europris ASA has made a strong commitment to ensuring trust in the group and to enhancing shareholder value through effective decision-making and improved communication between the management, the board of directors and the share- holders. The group’s framework for corporate governance is intended to reduce business risk, maximise value and utilise the group’s resources in an efcient, sustainable manner to the benet of shareholders, employees and society. 25 and risk prole are described on pages 10-20 of the 2021 annual report, while the group’s sustainability efforts are described on pages 33-62. Deviations from the code: None. 3. Equity and dividends Capital structure At 31 December 2021, the group’s equity totalled NOK 2,889 million, which corresponded to an equity ratio of 33.4 per cent. The board considers Europris’ capital structure to be adequate in relation to the group’s objectives, strategy and risk prole. Dividend policy Europris aims at a dividend pay-out ratio of 50-60 per cent of the group’s net prot while maintaining an efcient balance sheet. The group intends to provide shareholders with a competitive return on invested capital, taking into account its risk prole. It plans to pay out surplus liquidity (funds not necessary for the group’s day-to-day operations) in the form of a dividend or by means of a capital reduction through distribution to the shareholders. The group considers whether the available liquidity should be used for new investment or repayment of debt, instead of being paid out as dividend. Subject to the approval of the AGM, the aim is to pay dividend annually. Dividend payments are subject to certain legal restrictions pursuant to the Norwegian Public Limited Companies Act and should also take account of the group’s capital requirements and nancial position as well as general business condi- tions. Based on the nancial results for 2021 the board will propose a dividend of NOK 2.50 per share. To reect the strong nancial performance, the board proposes to pay an additional dividend of NOK 1.50 per share for 2021. In total, the proposed dividend is NOK 4.00 per share. The proposed dividend represents 59.5 per cent of the majority’s share of the prot. Europris’ leverage policy is to run the business with moderate leverage and to maintain an efcient balance sheet. Board mandates The annual general meeting on 5 May 2021 granted two separate mandates to the Europris board. Both mandates are valid until the next AGM in 2022, but in any event no longer than to 30 June 2022. A separate vote was held on each mandate. For supplementary information, reference is made to the minutes of the AGM in 2021. • A mandate to increase the share capital of Europris ASA by a maximum of NOK 16,696,888� The mandate corresponds to ten per cent of the shares and share capital of the company. It may be used for necessary strengthening of the company’s equity and the issue of new shares as consideration for the acquisition of relevant businesses. As of 31 December 2021, the authorisation had not been used� • A mandate to repurchase Europris ASA’s own shares up to a total nominal value of NOK 16,696,888. The maximum amount that can be paid for each share is NOK 100 and the minimum is NOK 10. The mandate corresponds to ten per cent of the shares and share capital. Shares acquired pursuant to the mandate may be deleted in connection with a later reduction of the registered share capital, used as consideration shares with regard to the acquisition of businesses or used in the company’s incentive and investment schemes for employees, executive management and the board of directors� At 31 December 2021, the company owns 5,997,376 treasury shares. Deviations from the code: None. 4. Equal treatment of shareholders Europris has one class of shares and all shares have equal rights. Each share has a nominal value of NOK 1.00 and carries one vote. Europris ASA owned 5,997,376 treasury shares at 31 December 2021� The board has a mandate to increase the company’s share capital which allows the board to waive the pre-emptive right of existing shareholders. In the event of such a capital increase, the reason for the transaction and the waiver will be provided in a public announ - cement. There were no such events in 2021. Transactions involving treasury shares will be under - taken on the stock exchange or otherwise at the listed price and reported immediately. Deviations from the code: None. 26 5. Shares and negotiability The Europris share is freely transferable on Oslo Børs. No restrictions are set in the articles of associ- ation on owning, trading or voting for shares. Deviations from the code: None. 6. General meetings The general meeting is the highest authority in Europris ASA. It is open to all shareholders, and Europris encourages shareholders to participate and exercise their rights at the company’s general meetings. In order to vote, the shareholder must be registered with the Norwegian Central Securities Depository (VPS) at the time of the general meeting. Notication The annual general meeting will be held each year before 30 June. The 2021 AGM is scheduled for 21 April 2022. Extraordinary general meetings may be called by the board at any time. The auditor or shareholders representing at least ve per cent of the shares may call in writing for an extraordinary general meeting to discuss a specied matter. Written notice of a general meeting, along with supporting documents, is sent to all shareholders with a known address at least 21 days prior to the date of the meeting. Pursuant to article 7 of the articles of associ - ation, the notication and supporting documents need not be sent to the shareholders if they are made available to them on the group’s website at https:// investor.europris.no. Any shareholder may nevertheless request that the documents be sent by mail by contact- ing the investor relations department at Europris ASA or by e-mail to [email protected]. Registration and proxies The registration deadline is normally ve days before the general meeting, pursuant to article 7 of the articles of association, and all the necessary registration information is provided in the notice. Shareholders who are unable to attend may vote by proxy. The notice of the meeting will contain more detailed information about the procedure for appointing a proxy, including an authorisation form which permits separate votes for each item up for consideration at the general meeting. In addition, a person will be appointed who can act as proxy on behalf of shareholders. The board may decide that shareholders can submit their votes in writing, including the use of electronic communication, during a period before the general meeting. Agenda and execution The agenda for the general meeting is determined by the board, and the main items which it must contain for the AGM are specied in article 8 of the articles of association. The agenda will include detailed infor- mation on the resolutions to be considered and the recommendations from the nomination committee. The chair of the board, the chair of the nomination committee, the CEO, the CFO and the group’s auditor will attend general meetings under normal circum - stances and unless they have valid grounds to be absent. The meeting will normally be chaired by the chair of the board. In the event of any disagreement over individual agenda items where the chair of the board belongs to one of the factions, or for some other reason is not deemed to be impartial, a different person will be selected to chair the meeting in order to ensure independence with respect to the matters concerned. Deviations from the code: None. 7. Nomination committee The company’s nomination committee is regulated by article 6 of the articles of association. It will comprise two to three members, and the majority will be independent of the board and the group management. The composition of the committee will ensure that the interests of the shareholders are safeguarded. Instructions for the nomination committee were adopted at the general meeting on 13 May 2015. They include the main principles for the nomination commit - tee’s work, making and supporting proposals and general procedures. The instructions are subject to annual reviews, and any proposed changes will be submitted to the general meeting for approval. The nomination committee makes recommendations to the general meeting regarding the election of shareholder-elected directors, remuneration of directors including relevant subcommittees, the election of 27 members and the chair of the nomination committee and remuneration of members of the nomination committee. Each proposal is justied on an individual basis and presented with the notice documents to the AGM. Shareholders in Europris are encouraged to nominate candidates for the board. More information on this can be found on the group’s website at https:// investor.europris.no. At 31 December 2021, the nomination committee consisted of the following members: • Mai-Lill Ibsen (chair) • Inger Johanne Solhaug • Alf Inge Gjerde. The members are elected by the general meeting for a term of two years, and all the members are up for election in 2022. All the members are considered independent of the board and executive management. Remuneration of the members of the nomination committee is determined by the general meeting. Deviations from the code: None. 8. Board of directors: composition and independence Article 5 of the articles of association provides that the board will consist of a minimum of three and a maximum of ten directors, as determined by the general meeting. The board had seven members at 31 December 2021, of whom three were women. All shareholder-elected directors are regarded as independent of senior executives and material business associates. Europris holds an option to acquire the remaining 80 per cent of the shares in ÖoB (Runsvengruppen), and one of the directors are related to this company. The person in question does not participate in related cases. None of the executives are directors. The directors are elected for a term of two years and may be re-elected. The general meeting elects the chair of the board� According to the instructions for the nomination committee, the board’s composition will be broadly based to ensure that it has the necessary experience, qualications and capacity to safeguard the common interests of the shareholders. Furthermore, the compo - sition of the board should allow it to function effectively as a collegiate body and to act independently of special interests. A detailed presentation of the expertise and background of the directors is available on the group’s website at https://investor.europris.no. Europris ASA has no direct employees and therefore no requirement to appoint employee representatives to the board. Three employees are represented on the board of the Europris AS subsidiary and as observers on the board of Europris ASA. Directors are encouraged to hold shares in Europris. An overview of director shareholdings in the company can be found in note 22 to the 2021 annual report and on the company’s website at https://investor.europris.no. Deviations from the code: None. Name Postion Served since Up for election Tom Vidar Rygh Chair 2012 1 2023 Bente Sollid Storehaug Director 2015 2023 Hege Bømark Director 2015 2023 Tone Fintland Director 2017 2023 Claus Juel-Jensen Director 2017 2023 Karl Svensson Director 2019 2023 Pål Wibe Director 2020 2022 1 Served since 2012 in Europris AS and in Europris ASA since 2015. 28 9. The work of the board of directors Board’s responsibilities and tasks The board is responsible for supervising the general and day-to-day management of the group’s business, ensuring proper organisation, preparing plans and budgets for its activities, ensuring that the group’s activities, accounts and asset management are subject to adequate controls, and undertaking investigations necessary to the performance of its duties. Further- more, the board determines the group’s overall objectives and strategy, in addition to appointing the CEO and determining the terms and conditions of his or her employment. Instructions for the board of directors The board has adopted instructions which describe its responsibilities, duties and administrative procedures, including handling of related party transactions. The instructions also regulate the distribution of duties between the chair and the CEO. The current instructions were approved by the board in May 2015 and are subject to annual reviews. Instructions for the chief executive ofcer (CEO) The instructions for the CEO regulate the day-to-day management of the group’s operations to ensure that the group pursues and seeks to reach the strategic targets set by the board. The CEO is also responsible for keeping the group’s accounts in accordance with prevailing Norwegian legislation and regulations, and for managing the group’s assets in a responsible manner. The CEO briefs the board about the group’s activities, nancial position and operating results at least once a month. The current instructions for the CEO were approved by the board in May 2015 and are subject to annual reviews. Conicts of interests and disqualication Directors and members of the executive management must notify the board immediately if they have a direct or indirect material interest in an agreement or trans- action entered into by the group. The board’s conside- ration of material matters in which the chair of the board is, or has been, personally involved will be chaired by some other director� Related party transactions The group will immediately make public any material transaction between the group and shareholders, directors, leading employees or any of their close relations, as well as with other companies in the group. In the event of such transactions, the board will evaluate whether it is necessary to seek a third-party valuation. An independent valuation is required for material transactions between companies in the same group where there are minority shareholders. There were no transactions with close associates in 2021. Financial reporting The board receives nancial reports and comments from the CEO at least once a month on the group’s operations, economic position and nancial status. The board will also be kept continuously informed of any material legal disputes, contract terminations, changes in management and material conicts related to clients, suppliers and employees. The nancial report forms the basis for enabling the board to maintain an informed view of the group’s results, capital adequacy and nancial position. Quarterly nancial reports are reviewed at board meetings, and these provide the basis for external nancial reporting. The work of the board of directors The board will meet at least ve times a year. It held nine meetings in 2021, with one meeting conducted by email, four meetings were held virtually and four were physical meetings. The overall attendance rate at board meetings was 97 per cent. Audit committee The group’s audit committee is governed by the Norwegian Public Limited Liability Companies Act and a separate instruction has been adopted by the board. The members of the audit committee are appointed by and among the directors. The audit committee’s primary purpose is to act as a preparatory and advisory body for the board on matters concerning accounting, auditing and nance. The committee reports and makes recommendations to the board, but the latter retains responsibility for deciding on and implementing such recommendations. The audit committee held ve meetings in 2021, with an overall 29 attendance rate of 100 per cent. At 31 December 2021, the audit committee consisted of three directors who all were regarded as independent of the group: • Hege Bømark (chair) • Tom Vidar Rygh • Claus Juel-Jensen. Remuneration committee The group’s remuneration committee is governed by a separate instruction adopted by the board. The members are appointed by and among the directors. Its primary purpose is to assist the board in discharging its duties related to determining the compensation of the executive management. The committee reports and makes recommendations to the board, but the latter retains responsibility for implementing such recommen- dations. The remuneration committee held two meetings in 2021, with an attendance rate of 100 per cent. At 31 December 2021, the remuneration committee consisted of three directors: • Tom Vidar Rygh (chair) • Bente Sollid Storehaug • Tone Fintland. Board’s evaluation of its own work The board conducts an annual assessment of its own work and expertise, which is presented to the nomination committee. The assessment includes the work of the board, the work of its committees and the contribution made by the various directors. The board sets individual and collective targets to measure performance, in order to ensure that the evaluation is an effective tool. An evaluation of this kind was last conducted in December 2021. Deviations from the code: None. 10. Risk management and internal control The board is responsible for ensuring that the group’s risk management and internal control systems are adequate in relation to the regulations governing the business. The board reviews the group’s main areas of risk and internal control systems annually, including the group’s guidelines and practices on sustainability and how consideration for its stakeholders is integrated into the group’s value creation. The audit committee holds at least one meeting a year with the auditor, who presents the group’s internal control routines, including identied weaknesses and areas subject to improvements, for review by the committee. The board works to a plan which ensures that all the various operational areas are subject to a more in-depth review at least once a year. Management follows a similar schedule in performing an evaluation of the same topics ahead of the board’s review, in addition to a periodic risk review. Europris has established a treasury policy to dene a framework for managing nancial exposure and group treasury operations. The most recent update was approved by the board in March 2021. The policy takes account of the nancial and commercial risks that Europris is exposed to and details the allocation of responsibility for nancial risk management between the board, the CEO, the CFO and within the Europris group. The policy further species the risks that Europris is exposed to, and how they should be managed, reported, measured and controlled. The content of the treasury policy is described in detail as working proce - dures in the Europris nance manual, where processes and procedures are established in the form of instruct- ions which serve as a reference for compliance with the treasury policy. The policy is subject to annual reviews by the board� Europris prepares its consolidated nancial state - ments in accordance with the International Financial Reporting Standards (IFRS), which are intended to give a true and fair view of the company’s and the group’s assets, liabilities, nancial position and results of operations. The board receives reports at least once a month on the group’s business and nancial results, providing a good overview of the group’s strategic and operational performance as well as plans for the forthcoming period. In addition, quarterly reports are prepared in accordance with Oslo Børs’ recommenda- tions, which are reviewed by the audit committee before the board meeting and subsequent publication. As a discount retailer, Europris is exposed to a range of market, operational and strategic risks which may adversely affect the group’s business. Further infor - mation regarding such risk factors and how these are 30 managed is disclosed in the directors’ report and the notes to the annual accounts for 2021. Europris furthermore monitors attendance by employees and promotes the health and wellbeing of its workforce. In addition, it devotes attention to the training and education of employees across all aspects of its business. The group’s CFO is responsible for conducting unbiased, complete audits of the group’s compliance programme, including guidelines for anti-corruption, on a regular basis in light of the group’s specic business areas, geographical location and legal obligations. Deviations from the code: None. 11. Remuneration of the board of directors The nomination committee is responsible for proposing the remuneration of directors in order to reect the responsibilities, expertise and time spent as well as the complexity of the business. Members of the audit committee and remuneration committee are entitled to additional remuneration, reecting the extra workload. The proposal is approved by the company’s general meeting. Directors’ fees for 2021 were approved by the AGM in 2021. Directors’ fees at 31 December 2021 were not linked to performance, and the company does not grant share options to its directors. Additional information relating to directors’ fees can be found in note 7 to the nancial statements included in the 2021 annual report. Directors and/or companies with which they are associated should not take on specic assignments for the group in addition to their board appointment. If they do, however, this must be disclosed to and approved by the full board. Deviations from the code: None. 12. Salary and other remuneration for executive personnel Europris has a policy of offering competitive remune- ration for the executive management based on current market standards as well as on group and individual performance. The board has established guidelines for determining pay and other remuneration for members of the executive management. Remuneration consists of a basic pay element combined with a performance-based bonus scheme linked to the group’s nancial and operational perfor - mance. The bonus scheme is limited to annual pay-out of 12 months of gross base pay. The management group participates in the group’s insurances, and may be entitled to certain fringe benets, such as free newspaper, car and phone. The board has prepared a statement on the determi - nation of salaries and other benets payable to senior executives. The guidelines were presented to and adopted by the 2021 AGM. Further details relating to the pay and benets payable to the CEO and other senior executives can be found in note 7 to the nancial statements included in the 2021 annual report. Deviations from the code: None. 13. Information and communications Investor relations Investor relation activities at Europris ASA aim to ensure that the information provided to nancial markets gives market participants the best possible foundation for a correct valuation of the group. Europris communi- cates in an open, precise and transparent manner about the group’s performance and market position in order to give nancial markets a correct picture of its nancial condition and other factors which may affect value creation. Europris complies with the Oslo Børs code of practice for IR, last updated in March 2021. The group has adopted an IR policy, which is available in a condensed form on the website at https://investor. europris.no. All market participants will have access to the same information published in English. All notices sent to the stock exchange are made available on the group’s website at https://investor.europris.no and at https:// newsweb.oslobors.no. The CEO, CFO and IR manager are responsible for communication with shareholders and analysts in the period between general meetings. Financial information Interim reports are published on a quarterly basis, in line with Oslo Børs’ recommendations. In connection 31 with the publication of its interim results, Europris holds open investor presentations to provide an overview of the group’s operational and nancial performance, market outlook and future prospects. These presenta- tions are also made available through webcasts on the group’s website. Deviations from the code: None. 14. Take-overs No defensive mechanisms against takeover bids are provided in Europris’ articles of association. Nor are any other measures implemented specically to hinder the acquisition of shares. Deviations from the code: The board has not established written guidelines for how it should act in the event of a takeover bid. Since such circumstances are normally one-off by nature, drawing up general guidelines is challenging. Were a takeover bid to be made, the board would consider the relevant recommendations in the code and whether the specic circumstances permit compliance with the recommendations in the code. 15� Auditor The group’s auditor, BDO AS, is appointed by the general meeting and is independent of Europris ASA. The board has received a written conrmation from the auditor that requirements for independence and objectivity have been met. The board requires the auditor annually to present to the board and the audit committee a plan covering its main auditing activities and a review of the group’s internal control systems, including identied weaknesses and proposals for improvement. In addition, the board requires the auditor to attend the board meeting dealing with the group’s annual accounts in order to highlight any material changes to accounting principles, comment on any material estimates, and report on any topics where a signicant difference of opinion exists between auditor and management. At least once a year, the auditor and the board hold a meeting without any representatives of the group’s executive management being present. The auditor normally attends all meetings in the audit committee. The board has established guidelines for any work performed by the auditor. All material services, audit- related and otherwise, must be approved in advance by the audit committee. The CFO is authorised to approve such services on condition that (1) services approved by the CFO are reported to the next meeting of the audit committee, (2) such services must need to be approved at short notice to protect the group’s interests, (3) such services, following a case-specic evaluation, do not affect the independence of the auditor and (4) the service amount to a maximum of NOK 250,000 and is of a “normal” nature. The board will inform the AGM about the remune - ration payable to the auditor, broken down between auditing and other services. The AGM approves the auditor’s fees. For further information about remune- ration of the auditor, see note 6 in the 2021 nancial statements. Deviations from the code: None. 32 33 Sustainability report 2021 Sustainability topics Main priority areas Commitments UN SDGs Sustainable value chain 1. Sustainable products 2. Safe and good- quality products 3. Responsible supply chain management Europris’ recognises that its main impacts on ESG issues comes from the products sourced and sold in the stores. The group commits itself to ensuring that merchandise in all stores is produced and sourced in a sustainable manner and that this is communicated clearly to encourage customers to make sustainable choices. Resource- efficient business model 4. Climate-friendly operations and logistics 5. Circular solutions and waste reductions Europris acknowledges that its operations have an impact on the environment and strives to reduce its environmental footprint by promoting circular initiatives in its operations. The group seeks to limit the impact of the business through resource-efficient operations and logistics. Responsible employer 6. Equal opportunities and an inclusive work environment 7. Health and safety at the workplace The group commits itself to being an ethical and responsible business which develops and cares for its employees. Empowering customers and communities 8. Satisfied customers 9. Local value creation and community engagement Europris cares about its customers and the local communities in which it operates. The group commits itself to ensuring its customers’ wellbeing and satisfaction and to giving back the to local communities. The Europris approach - sustainability in all we do The Europris approach – sustainability in all we do 34 Sustainability in all we do Europris shares the vision of a sustainable future and recognises that sustainable development can only be realised through a concerted effort by all businesses and markets. The group supports inter- national initiatives such as the Paris agreement and the UN sustainable development goals (SDGs). Europris believes it can play a key role in providing affordable and sustainable choices for everyone. The group takes a broad approach to sustai - nable development, with the overall aim of ensuring long-term value creation. It integrates environmental, social and governance (ESG) aspects in its value chain and opera - tions, and in its engagements with customers and commu- nities. These four aspects provide the structure for this sustainability report, which is divided into four main chapters: sustainable value chain, resource-efcient business model, responsible employer and empowering customers and communities. Sustainability as an integrated part of the corporate culture The group is continuing its efforts to discuss sustainability issues with employees in day-to-day work and to integrate sustainability into its corporate culture through information and training. The internal “sustainability week” held for the rst time in 2020 was repeated in 2021, with increased participation by employees and building on the objective of increasing the understanding of and engagement with sustainability in Europris. Employees held presentations in the priority areas – unlike 2020, when external partners were invited to present throughout the week. This shows an increased and growing understanding of sustainability across the organisation. Recordings are published on the group´s social media channel (Workplace), which is available to all employees. Moreover, sustainability newsletters have been introduced and sent to all employees with facts and updates on these issues. In addition, a monthly challenge is passed from one store to another, where each shares and explains how it works with a particular sustainability issue in order to increase knowledge about and inspiration for work done in this area. Knowledge of sustainability has increased among employees in general. An evaluation after the internal sustainability week and from questions on this subject in the annual employee satisfaction survey show that knowledge about and interest in this topic have increased. The group believes that creating a better understanding of sustainability in the organisation is a vital step towards incorporating this in the corporate culture and ensuring that sustain- ability is part of everything it does. As employees increase their understanding of sustainability, the group is experiencing improvements in the priority areas and sees greater progress towards its goals. Reporting standards and achievements The sustainability report for 2021 has been prepared in accordance with the core option in the Global Reporting Initiative (GRI) standards. Europris is updated on the new 2021 GRI standards. The recommendations of the task force on climate change (TCFD) are being used to identify, assess and mitigate the climate- related risks the group is exposed to. Since 2014, Europris has also incorporated reporting of its greenhouse gas (GHG) emissions in alignment with the GHG protocol in order to manage the climate impact of both its own operations and its value chain. The group is proud to be recognised for its sustain- ability work, with a B score for its climate reporting from the CDP, the global non-prot environmental organisation, for the third year in a row. Europris received an A- score for its 2020 sustain- ability report from the Governance Group following an evaluation of such presentations from the 100 E n v i r o m e n t Empowering customers and communities Responsible employer Sustainable value chain Resource-efcient business model Sustainability in all we do S o c i a l G o v e r n a n c e 2018 2019 2020 2021 C B B B 35 largest companies on the Oslo Stock Exchange. The group is very proud of this recognition and devotes great attention to increasing expertise on and knowledge about sustainability throughout its organisation. A focus on the most material sustainability aspects Europris has identied key sustainability impacts in its value chain. These were mapped in the materi- ality matrix (see next page). Where the position of each topic depends on its relevance to Europris and the group’s stakeholders. The most relevant stake - holders were identied through workshops with representatives from all parts of the organisation. Europris is in continuous dialogue with key stake- holders, both internal and external, as part of its daily operations. This gives it valuable input and knowledge about how to adapt the business even further in a sustainable direction in order to ensure that its sustainability goals are met. An illustration of key stakeholder groups, the type of dialogue Europris has with them and the frequency of the dialogue is presented below. Stakeholders Type of dialogue Frequency Employees Meetings Newsletters Committees on priority sustainability areas Sustainability week Employer survey Weekly/monthly Monthly Quarterly Annually Annually Customers Brand tracker survey Sustainability customer survey Newsletter Website and Social Media Annually Annually Weekly Daily Investors Roadshows Investor seminars Meetings Quarterly Two - four per year On request Other partners, such as Green Dot, Amfori, Norwegian Retailers’ Environment Fund, Ethical Trade Norway Meetings Information meetings Webinars, courses Semi-annually, annually Semi-annually, annually Bi-monthly/semi-annually as required (regulatory updates) Local community, such as charities and local partnerships Meetings Regularly Suppliers One-to-one meetings Vendor meetings Code of conduct At least twice a year, normally more often Annually Annually, related to contracts 36 Information acquired through communication with stakeholders is used to update the materiality matrix to show the sustainability effects which the various stakeholders have on the group’s sustainability focus. It also presents the direction being taken by Europris’ sustainability strategy and provides the foundation for the sustainability report. Adjustments from 2021 As a result of the updated stakeholder assessment and internal discussions, the material topic “satised customers” has been moved upwards in the matrix. Satised customers have been and will remain the top priority in all the work Europris does. At the same time, “data protection” and “business ethics and anti-corruption” have been removed from the matrix, since these topics are considered a prerequisite for good performance on customer satisfaction and ESG issues. Furthermore, “community engagement” and “local value creation” have been merged into “community engagement and local value creation”. ● Sustainable value chain: sourcing and providing sustainable products at affordable prices ▲Resource-efficient business model: more efficient operations and logistics to reduce the environmental footprint ■ Responsible employer: being an ethical, inclusive and safe workplace ★ Empowering customers and communities: contributing to local communities in order to foster long-lasting relationships Most important Inuence on stakeholder assessments and decisions Important Signicance of economic, environmental, and social impacts Most important Health and safety at the workplace ■ ■ ● ● ● ★ ★ Safe and good quality products Community engagement and local value creation Climate-friendly operations and locistics Sustainable products Responsible supply- chain management Equal opportunities and an inclusive work environment Satised customers Circular solutions and waste reduction ▲ ▲ 37 Sustainable value chain COMMITMENT: ensure that merchandise in all stores is produced and sourced in a sustainable manner and communicated clearly in order to encourage customers to make sustainable choices. 38 Europris’ main impact on ESG issues relates to the sourcing and production of products. Both the manufacturing processes and the raw materials may negatively affect forests, water supplies, local eco- systems and the people involved in the group’s supply chain. Europris seeks to decrease the environmental footprint of these products by con- tinuously improving its sourcing strategy in terms not only of responsible and ethical trade but also of the manufacturing processes, raw materials, the packaging used in the products, and the quality of the products sold by the group. Sustainable products As a leading retailer in Norway, Europris has the opportunity to inuence its customers to make more sustainable choices which are better for people and the planet. As a group selling thousands of products in many different product categories, Europris sees it as its responsibility to provide customers with more sustainable options. By offering these, and through clear communication to help shoppers nd such products in its stores, the group can make real changes together with its customers. Europris aims to achieve annual growth for sales of sustainable products in its stores. Turnover reported as sustainable is products veried by third-party certications. Twenty such certications have been considered relevant to the product range offered by the group with regard to the environment and/or ethical trade, quality and health. An updated list of these third-party certications can be found at Europris.no. Packaging Waste from packaging is an environmental issue worldwide, including in Norway. Every year, millions of tonnes of packaging end up in the oceans, and most of this stems from land. Europris sells thousands of products every year, enclosed in different types of packaging. As a large retailer in Norway, the group has a responsibility to ensure that the packaging used with its products is made from recycled or sustainable materials, and that this is reduced as much as possible. Europris´ consumers are demanding more sustainable packaging, and dialogue with other stakeholders has also made it very clear that this is a topic of great importance to them as well. Packaging is an important part of making Europris products more sustainable, but is not yet dened as a criterion to be communicated under the group´s sustainability symbol. The group has a responsibility to help customers increase recycling through proper labelling. Actions and results For the third year in a row, the group has increased the share of sustainable products in its total sales. They accounted for 7.8 per cent in 2021, a growth from 7.3 per cent in 2020 and 5.9 per cent in 2019. A corporate project was initiated at the end of 2021 with the aim of intensifying work on sustainable products and communication. Among other things, Since the group took the plastic pledge in 2019 through its membership of Green Dot Norway, the following three goals have been its priorities for directly sourced products: 1. reduce packaging used 2. increase the use of recycled plastic 3. design for recycling – which starts with the use of recyclable materials and proper labelling of products in order to increase the recycling rate at the end of the product’s lifecycle 39 this project will dene sustainability criteria in different categories, and develop and implement work processes and solutions which will facilitate a further increase in sustainable products. The group launched its own umbrella sustainability symbol in April 2021, covering twenty third party- certied products at 31 December 2021. The aim wis help customers nd sustainable products more easily, since these are marked with the sustainability symbol on shelves and in marketing material. Europris also signed the Norwegian Guide Against Greenwashing 1 , an initiative by several organisations to promote honest communication on sustainability. A signicant step in working with the group’s packaging and plastic goals in 2021 was the employ- ment of a packaging engineer to work on the dened priority areas for packaging. During 2021, the group used 445,132 kilograms of recycled plastic in its products and reduced the amount of plastic by 7,762 kilograms. In addition to the three initial goals in terms of packaging, the group has also selected increased lling rate in product packaging as an additional goal within this area. Targets and ambitions Europris’ overall aim is to continue work on increasing the sustainable options offered to customers year by year. The corporate project created to pursue sustainable products and commu - nication will be working regularly and in a dedicated way through workshops, sprints, pilots and regular reporting on outcomes and milestones to the management. Important ambitions for the group within this area in the coming year is to improve sustainability within its product categories, increase awareness of its umbrella sustainability symbol, improve its processes for optimising packaging for directly sourced goods and enhancing data quality for packaging. Safe and good quality products Europris takes its responsibility for customer safety seriously. The group works to ensure safe and good quality products, and has a dedicated product quality and safety department. All high-risk products are tested to ensure that they comply with international and national legislation. The group works diligently to avoid hazardous substances in products and to continue meeting high standards of quality, trans- parency and safety. This is particularly important as merchandise is sourced from a multitude of suppliers across the globe, which increases the risk that certain products may fail to meet national require- ments. Products are tested at the production site in accordance with Norwegian product regulations. In addition, all high-risk items, such as electrical products, toys, chemicals, food items, food contact materials and pet food, undergo strict checks by the quality assurance department before production can take place. The group wants to ensure that all its products are safe and of good quality and has zero tolerance for recalls and withdrawals. Actions and results The quality assurance department in Norway has concentrated attention on optimising routines and testing in collaboration with the quality team in the Shanghai ofce, the group´s joint sourcing ofce with Tokmanni in Asia. The quality team at the Shanghai ofce ensures pre-shipment inspections are carried out for products produced in Asia. Reports from these inspections must be approved by the quality assurance department at the head ofce in Norway before the shipment is released. This provides time for corrections to be made before products leave the production site and reduces the risk of faulty or defective products being transported to Norway. Increased attention has also been paid to improving quality on the basis of feedback on product defects through follow-up at regular meetings with product managers. In 2021, a total of 1,875 third-party quality inspections were carried out in 1 Guide Against Greenwashing (gronnvasking.no) Kilograms 2020 2021 Recycled plastic 491,256 445,132 Reduced amount of plastic 1,496 7,762 40 Asia (1,190 in 2020). No incidents of non-compliance were found concerning of products and services in 2021. Five incidents involving incorrect labelling of products occurred in 2021. These errors were detected and corrected by the quality assurance department before the products were sent to the stores� Europris has implemented a new system which enables improved tracking and reporting of customer complaints and product defects. Greater data accuracy will allow the group to work more efciently on reducing defects and improving quality. This is an important aspect for sustainability and will improve perceived quality for customers. The group has intensied the attention it devotes to suppliers of high-risk products or product categories which exceed a claim rate of three per cent over the year. This aims to improve the quality of unsatisfactory products. With time, it will improve the overall perception of the quality of Europris merchandise. Targets and ambitions Europris’ ambition is to continue improving its work on quality. The group aims to strengthen its reputation as a trustworthy and dependable retailer of discount variety merchandise, while making quality an important criterion for sustainability in specic categories. Responsible supply chain management Europris’ products are sourced from suppliers with production sites across the world. The group has a supplier code of conduct based on UN and Interna- tional Labour Organisation (ILO) conventions. Suppliers in the group´s identied risk areas are pre-screened to map whether they meet at least minimum criteria under the Europris code of conduct before it will do business with them. All suppliers are required to sign agreements and the Europris supplier code of conduct. In addition to upholding excellent standards for business ethics and anti-corruption, suppliers are required by this code to minimise adverse effects on human health, animals or the environment throughout their value chains. National and international environmental legislation must be respected. In the event of any violation, suppliers will be given a warning and remedial action will be followed up. If a supplier shows no intention of taking remedial action within the specied time frame, the contract will be terminated. The group’s code of conduct can be found at Europris.no. Actions and results Products sourced from east Asia are provided by about 45 per cent of total suppliers and account for some 40 per cent of Europris merchandise sales. Remaining merchandise comes from producers in Norway or Europe. Europris has identied Asia as the source of the group´s highest risk of failing to meet social and ethical standards. The group has imple- mented several important initiatives to reduce this risk and continues to work purposefully to improve in this area� The group´s inspection team works systematically on screening suppliers through Amfori or the supplier’s own inspections, and follows up suppliers with a low score. Europris’ ambition is that all goods sourced through the Shanghai ofce by the end of 2023 come from suppliers and factories which have been audited (Amfori BSCI 2 , for instance). Despite stricter measures and difculties in carrying out planned audits over the past two years because of the Covid-19 pandemic, Europris increased the proportion of its goods sourced from BSCI-audited factories by 12 percentage points, from 63 per cent in 2020 to 75 per cent in 2021. Europris maintains a whistle-blower system, available to all stakeholders via Europris.no, to make sure that important issues can be reported anonymously. This measure is aimed at managing potential problems related to breaches of the group’s ethical guidelines. Targets and ambitions Europris will continue to improve its approach to sustainable supply management and to raise environ - mental, labour and human rights standards among its suppliers in order to ensure that no harm is done in its supply chain. This will be achieved by continuing and improving the work already begun and through the collaboration with Amfori and Ethical Trade Norway. 2 Amfori BSCI is a monitor system that enables companies to trade with purpose by improving social performance in their supply chain. For more information, visit: https://www.amfori.org/content/amfori-bsci 41 42 43 The global climate challenge is growing more acute as emissions rise and changing climates cause negative effects around the globe. This inevitably presents new risks for business and for society at large – but also opportu- nities for those contributing to the green transition. Europris acknowledges that its operations have an impact on the environment and strives to reduce its environmental footprint by reducing waste and energy consumption in its own operations and by seeking ways to cut CO 2 emissions. Physical climate-related risks, such as increased frequency and severity of extreme weather events, can have a negative effect on the Europris value chain. Transitional and liability risks are linked to changing customer preferences. To mitigate the effect of the identied risks, Europris carries out ongoing assessments of its product portfolio and logistics operations. Regular dialogue with stake - holders is conducted to ensure that their expec- tations are met. Europris will also experience several climate- related opportunities such as increased market share by offering more sustainable products. Working on making its value chain more sustainable will result in reduced indirect emissions, for example Resource-efficient business model Europris has conducted a workshop to identify its most signicant climate-related risks and opportunities in accordance with the TCFD framework. A summary of the results is presented in the gure below. Opportunity Risk management and sustainability strategy Climate risk Physical • Disruptions in the supply chain • Reduced access to products and raw materials • Public regulation Transition • Changes in consumer preferences • Investor ESG demands • Employee and talent engagement Liability • Reputational risk New market for sustainability • Increased share of sustainable products • Reduced emissions from production • Increased low-emission transport solutions • Better operational control over supply chain • Attract new talent and employees COMMITMENT: limit the impact of the business through resource- ecient operations and logistics. Selected priority areas: · reduce energy use per square metre in stores by 15 per cent by the end of 2022, compared with 2018 · reach an overall recycling rate of 85 per cent for the group by the end of 2022 44 from the production of its products and through low-emission transport solutions. Sustainability is an important criteria also for existing employees. Working on these areas contributes to employee satisfaction which can contribute to employee retention and to attracting new talent and employees to the company. Climate-friendly operations and logistics To achieve its environmental strategy objectives, Europris measures and assesses its emissions and energy use and utilises the GHG protocol initiative to report its emissions. Its carbon inventory is divided into three main scopes of direct and indirect emissions. Scope 1 covers all direct emission sources, including all use of fossil fuels for stationary combustion or transport in owned, leased or rented assets. Where Europris is concerned, this represents vehicles purchased or leased for its employees. Scope 2 includes indirect emissions related to purchased energy – electricity and heating/cooling. Where Europris is concerned, this represents all energy consumed in its stores, head ofce and warehouses. Scope 3 includes indirect emissions resulting from the group’s upstream and downstream value chain activities which it does not control. Europris currently measures downstream transport and distribution, waste and business travel within this scope. Europris is pleased to see results from the action it has taken to cut energy consumption. The group has gone from ve to two warehouses, and has imple - mented energy efciency measures in stores. It has measurable specic activities for promoting sustain- able operations, technical solutions and optimised energy use. The group’s head ofce in Fredrikstad and its logistic centre are both Eco-Lighthouse certied. Its head ofce moved to new premises in 2019. This building is constructed with energy-saving measures such as good insulation, external sunshading, LED lighting, motion detectors to control lights, a venti- lation system which switches off after working hours, and solar panels. Actions and results Europris reduced its total GHG emissions (scopes 1 and 2, and selected scope 3 categories) by 1.9 per cent in 2021 despite opening additional stores during the same period. This decrease primarily reects energy efciency measures and lower energy consumption. The group has a target to reduce energy use per square metre in stores by 15 per cent in 2022, compared with the 2018 level. It reached a 19.8 per cent reduction in 2021. 2014 2015 2016 2017 2018 2019 2020 2021 6,500 5,228 5,119 5,033 4,480 3,843 3,197 ■  Energy ■Waste ■Business travel ■Own vehicles ■Fuel oil  2,783 Greenhouse gas emissions (tCO 2 e) 45 Total energy-related emissions decreased by 30 per cent from 2020 to 2021 as a result of targeted emission-reduction activities and using less fossil fuel in the energy mix. Goods transport, energy use and waste were the group’s main sources of carbon emissions during this period, while business travel and transport using own vehicles accounted for only 2.7 per cent. Own vehicles Europris updated its vehicle policy in June 2021. When the group enters into lease agreements for employee vehicles, zero-emission models will be the preferred option. Requirements which indicate that alternative-fuel vehicles need to be chosen must be approved by the departmental head from the management team. Seventy per cent of new cars leased in 2021 were electric. Non-electric vehicles were only used where required by the mileage/range needs of district managers. This cut scope 1 emissions in tCO 2 e by 6.9 per cent in 2021. Energy The group was very pleased to see the rst results from self-generated renewable electricity using solar panels at its head ofce in 2020. This represents a small but meaningful measure in efforts to reduce the group’s CO 2 footprint. The solar panels generated 45.2 MWh in 2021 (47.7 MWh in 2020). Europris warehouses achieved a 13 per cent cut in electricity consumption while consumption of district heating was reduced by 16 per cent. There was a drop in emissions from the warehouses of 33 per cent. The year 2021 saw much attention devoted to energy-saving measures in stores, with close monitoring of energy use and best practice shared across stores and districts. These efforts led to an 8 per cent drop in electricity consumption in the stores. Specic measures taken during 2021 to contribute to these results included: • better monitoring technology • improved routines for energy use and follow-up of saving measures in stores • additional LED light installation in 38 stores, bringing the total to 81 per cent of stores. Combined with emission reductions in the Nordic electricity grid, driven primarily by increased use of renewable energy, these efforts contributed to a reduction in scope 2 emissions of 30% in 2021. Through its partnership with Energima, Europris has embarked on a pilot project for storing electrical energy. This work is partly funded by Enova SF, a company owned by the Ministry of Climate and the Environment. The project will help to cut greenhouse gas emissions, develop energy and climate technology, and strengthen security of supply. The pilot aims to learn how to improve the lifecycle of both new and second-hand batteries, while handling peak load management (peak shifting) in a building’s power grid. An installation at Europris Råde will primarily be used for testing and optimising a cloud-based energy management system (EMS). This controls charging and discharging of the battery pack to avoid peak tariffs or to buy energy when prices are low over a 24-hour cycle. Using the batteries smoothens the load on the mains supply and reduces losses in the electrical transmission system. Local electrical capacity is effectively increased without the need to upgrade the building’s power intake. Pilot project with second-hand use of batteries for energy storage 46 Transport Emissions from transporting sourced goods were included in the climate report for the rst time in 2019, and showed that goods transport released more GHGs than Europris´ own direct emissions. The group recognises that it shares this impact with suppliers, and is working to nd efcient logistical solutions with low emissions. Monitoring emissions from transporting sourced goods provides a basis for further dialogue with partners on nding more sustainable solutions. Higher sales volumes and a larger number of stores have led to an increase in CO 2 emissions from transportation of goods from the warehouses to the stores. Initiatives have been taken to reduce the number of heavy goods vehicles (HGVs) on the road by expanding the size of modular semi-trailers. This removed an average of 350 HGVs from the road in 2021. Increasing the load factor on HGVs removed another 75 in 2021. Europris evaluates alternative transport methods where viable options are feasible. Emissions from upstream goods transport was included from 2019, resulting in a signicant increase in reported emissions of CO 2 . The total carbon footprint for Europris in 2021 was 9,246.4 tonnes of CO 2 e, including upstream goods transport. The table below shows CO 2 emissions, including goods transport. Targets and ambitions The group will continue to look at ways of reducing its emission from energy consumption and transport by identifying internal initiatives and by collaborating with external partners to reduce amounts emitted in these areas� Europris intends to set science-based targets (SBT) in 2021 approved by the SBT initiative. A workshop on scope 3 was conducted with an interdisciplinary group in 2021. This identied overcoming a lack of data as a rst step, and work on improvements here will start in 2022. A challenge in this area is the lack of existing information required to calculate emissions in the relevant indirect areas, especially for purchased goods. Ensuring reliable data will be the rst step towards establishing SBTs and establishing the basis for further strategic work on reducing direct and indirect CO 2 emissions. Circular solutions and waste reduction An expanding number of stores puts pressure on Europris to decouple business growth and environ- mental impact. This underlines the importance of waste management and circular solutions. The group is committed to reducing waste in its own operations. It will continue to seek solutions for reducing waste in its operations and for helping its customers to do the same� Europris has a partnership with Ragn-Sells to increase its efforts with waste management. This applies to all stores, the logistic centre and the head ofce. The aim is to reach a total recycling rate for the group of 85 per cent by the end of 2022. Actions and results Europris has signicantly reduced emissions from waste management by cutting the total weight of waste and increasing recycling. Emissions from waste in 2021 were up by 24 per cent compared with 2020, while the recycling rate rose from 73 to 75 per cent over the same period. The rise in emissions from waste reects the inclusion of estimates for the remaining stores where Europris does not have data and which have not been included previously. Excluding these estimates there was a reduction of 2 per cent. Recycling rate 2020 2021 Stores 73% 74% Warehouse 83% 86% Head ofce 53% 89% 9,246 9,427 8,758 2019 2020 2021 ■Own vehicles ■Fuel Oil ■Energy ■Business travel ■Waste ■Upstream transport Greenhouse gas emissions (tCO 2 e) 47 Recycling rate in the stores increased to 74 per cent during 2021, compared with 73 per cent in 2020. Europris understands that more attention needs to be devoted to further increasing the recycling rate and reducing waste in its stores, and this will be done in 2022. The central warehouse had a recycling rate of 86 per cent in 2021, up from 83 per cent in 2020, which demonstrates the high level of attention paid to waste management. Amongst the specic measures contributing to these results were an increased number of waste disposal points and the introduction of a compactor for cardboard� The Europris head ofce had a recycling rate of less than 45 per cent at the beginning of 2020. Subsequent measures contributed to a solid impro - vement, with a recycling rate of 53 per cent at the end of the 2020 and 89 per cent at the end of 2021. Among the specic measures contributing to these results were clear labelling and information about waste disposal on all bins as well as the installation of textile containers and strengthening the partnership with the local City Mission of the Church of Norway, which has reduced waste from product samples. Evaluation of the pilot project with Too-Good-To-Go revealed that other initiatives are more signicant in terms of reducing food waste, and greater attention will therefore be paid to these. When several stores were required to close temporarily because of the pandemic in 2021, the Too-Good-To-Go cooperation was benecial for minimising food waste. Targets and ambitions The group is pleased with the improvements made to the recycling rate at its warehouses and head ofce. It understands that reaching its total recycling rate of 85 per cent by 31 December 2022 requires a big concentration on nding solutions and further improvements. Europris will continue to increase efforts together with its waste management partner Ragn-Sells to achieve further gains in this area. GHG emission, tCO 2 e 2019 2020 2021 Change from previous year Scope 1 Transport total 210�6 163�3 152�1 (6.9%) Scope 2 Location-based electricity 2,150�0 2,038�3 1,425�7 (30.1%) Market-based electricity 11,246�3 13,075�9 10,403�3 (12.8%) District heating 15�1 3�6 4�2 16�7% Location based indirect energy consumption 2,165�1 2,041�9 1,429�9 (30.0%) Market based indirect energy consumption 11,261�4 13,078�5 11,409�6 (12.8%) Scope 3 Upstream transport and distribution 4,914�6 6,230�6 6,462�1 3�7% Waste 1,203�9 889�8 1,106�6 24�4% Business travel 262�9 101�6 95�7 (5.8%) Total location based GHG emissions 8,757.1 9,427.2 9,246.4 (1.9%) Total market based GHG emissions 17,853.4 20,463.8 19,226.1 (6.0%) Note: Europris reporting of GHG emissions and energy consumption accords with a corporate accounting and reporting standard. It takes account of the GHGs, all converted to CO 2 e: CO 2 , CH 4 , N 2 O, SF 6 , HFCs, PFCs and NF 3 . Statistics from the International Energy Agency (IEA Stat) provide electricity emission factors. These are based on either local averages in heating/cooling or average IEA statistics. GHG emissions are consolidated on the basis of where the group has operational control. 6% improvement of total GHG emissions 48 49 Responsible employer Dedicated employees are the groups most important asset. The workforce will be assured an inclusive and safe working environment, where personnel can develop and have long and meaningful careers. The group’s core values and business ethics are communicated regularly and clearly so that employees can use them as guide- lines in their working day. The policies and guide- lines in place apply to all employees, whether they are full-time, part-time, permanent, or temporary hires� The group maintains a whistle-blower system which is available to all stakeholders, both internal and external, via its website. This ensures that important matters can be reported anonymously – such as any breaches of the group’s ethical guidelines, including discrimination, harassment and sexual harassment. Five cases were reported in 2021, none involving discrimination. All incidents were handled and resolved by the HR and legal departments. Equal opportunities and an inclusive work environment The group believes in equal opportunities for all people, regardless of age, gender, religion, ethnicity, nationality, disability, sexual orientation, sexual identity, or stage of life. A separate policy on diversity and non-discrimination has been approved by the board. Previously this topic was covered in the ethical policy but has been separated to underline the importance of this area and to strengthen how Europris will work to prevent any harassment or discrimination and work for equality. The group has a working environment committee (AMU), which holds four meetings a year. It comprises representatives from the head ofce, the stores and the warehouses. AMU plays an important part when it comes to how the group works with i) investigating risk for discrimination, non-equality or risk within HSE, ii) analysing any causes for the identied risks, iii) suggest and ensure implementation of appropriate measures and iv) evaluate results from measures taken. AMU took part in drawing up the group’s improvement strategy for a health-promoting workplace. Through participation in workshops and meetings, employee representatives play a natural role in producing all processes or policies affecting the workforce. The annual employee engagement survey is also an important channel to receive feedback from employees. In order to map risks, safety hazards or breaches to policies the group uses an electronic deviation system and regularly performs employee interviews, risk assessments, conducts physical inspection rounds, and performs a climate survey and an employee satisfaction survey on an annual basis. Employees can also report work-related risks or any deviations/breaches via their managers, the HSE manager or the HR department. In addition, risk and deviations can be reported anonymously through the external whistle-blower system. The HSE managers, accompanied by the safety delegates and other employees, follow up any identied deviations. Actions and results Recruitment and promotion The group works with diversity through a trans- parent and open recruitment policy and has a zero- discrimination policy. The group works to provide all employees with the opportunity for growth in the organisation. Europris has an ambition that at least COMMITMENT: be an ethical and responsible business which develops and cares for its employees. 50 50 per cent of store managers are internally recruited. Internal recruitment of store managers was 85 per cent in 2021 (75 per cent in 2020). Although the group devotes attention to internal recruitment, every recru- itment process is advertised externally to ensure that all aspects of diversity are maintained. A new system for testing candidates was implemented in 2021 to ensure the candidates are ranked on the basis of their personal traits and skills and to reduce the risk of discrimination and unconscious prejudice during the recruitment process. Whenever possible, the aspiration is to have at least one candidate from each gender in the nal round of the recruiting process. Europris welcomed 1,147 new employees in 2021 (1,004 in 2020). The employee turnover rate was 19.8 per cent, down from 22.6 per cent in 2020. Europris collaborates with social welfare schemes such as the one run by the Norwegian Labour and Welfare Administration (NAV). The group welcomed 27 new employees under this scheme in 2021 (18 in 2020). This is an important partnership for Europris because it allows the group to contribute to an extended aspect of value creation by providing people with the opportunity to gain work experience and return to the workforce. Training and development The Europris Academy was revitalised in 2020 and provides relevant learning for employees across the organisation. A learning management system (LMS) was put in place to ensure that competence development and training are documented, followed up, systematised and available at all times. Store employees participate in training across a diverse range of areas during a year, both virtually and physically, depending on the topic to be covered. The main training given to store employees falls within the following categories: • Product, concept and seasonal execution • Leadership and store management • Onboarding of new employees • Health, Safety and Environment To ensure a good onboarding process for new store managers, Europris introduced a mentor programme in 2020 with the aim of inspiring and supporting such personnel. A total of 17 mentors had been trained at 31 December 2021� A new platform for virtual training was introduced for administrative personnel in 2021. It comprises a wide range of courses in several categories. All product managers underwent a certication course during 2021 in negotiating techniques, while IT personnel attended project management training. To prepare leaders for changing market trends, a combined strategy and leadership programme was developed and rolled out to all mid-level managers in 2021. This programme will continue in 2022 and 2023. Pay and working conditions The group devotes attention to its gender balance and strives to have at least one candidate of each gender in the nal round of all recruitment processes. Generally speaking, more women work in the stores and more men in the warehouses, which is represen - tative for this type of industry. So is the high proportion of part-time contracts. Europris has started to map involuntary part-time work and will address this topic more closely in the future. The pay gap for the group show that men are paid on average 12 per cent more than women. This reects a larger number of men in more senior positions and an age differential where men on average have greater seniority. The group monitors that employees with individual pay agreements receive equal pay for equal work. Any deviations must be explained by differences in education, training, competence, age or other relevant criteria. Should any inequitable pay gap be discovered, such differences will be handled on a case-by-case basis. Many employees are covered by collective pay agreements. This ensures equal pay for equal work for most of the personnel in the group. Targets and ambitions The group will continue to work towards constant improvement in fostering an inclusive and safe workplace, without discrimination or non-equality. The gender pay gap is part of the annual pay adjustment process, where any inequitable differences will be addressed. Diversity is taken into account in recruit- ment and promotion processes. The group will also maintain its partnership with NAV to continue including people who have dropped out of the working life. Turnover Women Men Total Group 19�7% 20�0% 19�8% 51 Gender balance, number of employees Temporary contracts Part-time contracts Involuntary part-time work Parental Leave (average weeks) Women Men Women Men Women Men Women Men Women Men 1,978 1,320 17% 12% 44% 22% 9% 3% 22 6 Share of women and men are based on the total numer of emplyees in the group. Gender balance and pay difference Number of women Number of men Pay difference men vs women Group 1 1,920 1,281 12�0% Executive management 2 2 6 NA Central management 8 35 10�7% Store managers 137 111 4�2% Remaining staff on individual pay agreements 77 92 17�3% Employees on collective agreements 1,696 1,037 1�7% Board of directors, age and gender distrubution Women Men Under 30 years - - 30-50 years - 1 Over 50 years 3 3 Employees, gender distribution Women Men Group 60�0% 40�0% Executive management 25�0% 75�0% Central management 18�6% 81�4% Store managers 55�2% 44�8% Remaining staff on individual pay agreements 45�6% 54�4% Employees on collective agreements 62�1% 37�9% Employees, age distribution Under 30 years 30-50 years Over 50 years Group 45�8% 40�9% 13�2% Executive management - 37�5% 62�5% Central management 2�3% 60�5% 37�2% Store managers 7�7% 68�5% 23�8% Remaining staff on individual pay agreements 11�8% 58�6% 29�6% Employees on collective agreements 52�2% 37�0% 10�8% 1 Excluding Lekekassen and Lunehjem. 2 Pay difference is not published as there is less than ve women in this group. 52 The group has established two projects to pursue further improvements in diversity and equal opportu- nities. One revolves around more accurate data for better analysis and for enabling the group to work more strategically on this topic. The other aims at a better structuring the work already being done in this eld. The group will work continuously on diversity, equality, non-discrimination and a healthy and safe working environment in the areas of recruitment, promotion, training and development, pay and working condtions, including unwanted part-time contracts, accommodation of special needs, stages of life, harass- ment and sexual harassment. Health and safety at the workplace Most of the group’s employees work in the stores and warehouses. Ensuring that the stores are welcoming and stocked with the merchandise customers want requires physical work, and the group’s employees are therefore prone to occupational injuries and illness. HSE measures are accordingly of central importance to Europris in promoting a safe working environment and preventing accidents. The group has a dedicated human resources (HR) department and two designated HSE managers who work conti- nuously to follow up any issues and to ensure learning and improvement. Actions and results The workplace must never pose health and/or safety hazards for employees. To ensure safe and healthy working conditions, the group devotes great efforts to preventative and rehabilitative measures – including e-training, in-house HSE courses and specialised courses for elected safety delegates. Preventive initiatives are important for creating a workplace which promotes good health. All employees are covered by a management system for human resources. This contains several modules which ensure easy management of employees and provide a solid foundation of secure master data on human resources in accordance with the general data protection regulation (GDPR). All employees have access to information, processes and routines in internal handbooks, which are updated in accor - dance with current laws and regulations. Work on strengthening the group as a health promoting workplace in 2021 involved increasing the awareness and training of employees in key roles. Other important priority areas encompass preventive, rehabili - tative and inclusive initiatives. The pandemic affected the level of sick leave in both 2020 and 2021. More employees caught Covid-19 in 2021 than the year before, which was in line with overall developments in society. Employees have done a tremendous job in handling all the quarantine-related absences, since working from home is not an option for the majority of the group’s workforce. A total of nine lost-time injuries was recorded for 2021, none resulting in long term absence. Targets and ambitions The group works continuously on being a safe and health promoting workplace. A signicant ambition up to 2025 is to improve attendance and reduce sick leave among employees. To achieve this, the group will facilitate HSE-related learning and training programmes for all managers and employees. It will conduct more ergonomic reviews and seek to identify the root causes of work-related sick leave. Specic initiatives targeting mental health are high on the agenda, since absences related to this cause have increased during the pandemic. Sick leave 2020 2021 Group 8�6% 8�8% 53 54 55 Europris cares about its customers and the local communities in which it operates. It engages with local communities through sponsorships, partnerships and other community-building activities, and with charities contributing to both social and environmental causes. Satised customers Europris’ works to strengthen and maintain its leading position in the Norwegian discount variety retail market. The group is dependent on a strong customer base and therefore strives to provide customers with a positive and welcoming shopping experience. Europris has conducted an annual market and customer survey since 2007 though an external agency (Mediacom brand tracker) to evalu- ate its performance on important parameters� Europris´ slogan “pay less – save more” promises to help customers save both time and money. When visiting an Europris store, customers should have a good shopping experience with helpful and friendly staff and the opportunity to choose between a wide range of products. Actions and results The group is pleased to see an increase in customer satisfaction in the annual market and customer survey from Mediacom in 2021. This is a result of the great attention paid to important areas such as price perception, deals/promotions, product quality, the shopping experience and service. Several categories, such as kitchen, home and interior, and chocolate and candy, have been upgraded in recent years. A shop-in-shop strategy, combined with reduced complexity through greater use of a basic range in campaigns, improves the shopping experience and makes it easier for customers, while being at the same time more efcient for the stores in maintaining a good operating standard. Several projects based on Lean methodology have also been run throughout the organisation in recent years. This improves the working day for employees. A project concentrated on centra - lising and improving customer service was launched in 2021. This involved more standardised procedures, updating customer system and increased training. Targets and ambitions The group will continue having customer satisfaction as a high priority in all areas of the organisation, with the aim of strengthening the positive perception of Europris each year. The road ahead will still involve analysing the results of customer surveys and customer data to keep ajour with evolving customer needs and expectations. Local value creation and community engagement Europris’ stores are located across Norway, including many in smaller communities. The group recognises its position as a local value creator, will always comply with local tax regulations and will strive to create value through local job creation and through supporting the local community via indirect Empowering customers and communities COMMITMENT: ensure the wellbeing and satisfaction of customers and give back to local communities. 56 value creation. Europris contributes to the latter by supporting local activities and organisations, such as sports clubs, humanitarian and charitable organisa- tions, cultural festivals and other events which take place in the areas where it has a presence. Through its agreement with the City Mission since 2016, the group provides annual nancial contribu - tions to help improve conditions for those in need. Europris also contributes to this partnership for instance through supplying products for specic projects at cost price, providing surplus products, distributing their marketing campaigns through the groups communication platforms, and placing clothes containers outside its stores. Europris has been a member of the Norwegian Retailers Environment Fund since 2018. All the members donated NOK 0.50 to the fund per plastic bag sold in 2021, and these proceeds are invested in local and global initiatives to reduce plastic waste, particularly in the sea. Actions and results Europris continued its efforts to raise awareness among its employees of the group’s main partnerships in this area. In addition, action taken locally by the stores has been highlighted and communicated to all employees. During the internal sustainability week, three store managers were invited to share what they do locally in order to inspire other store owners while helping to raise awareness and build a sense of pride in belonging to a group which contributes to the community. A monthly newsletter where store managers share stories on this topic is also distributed to all employees. A questionnaire sent to store employees showed that they regard helping the local community as motivating and important. They would like to increase their contribution to local communities instead of having it centralised. However, they want dened guidelines to help facilitate this work. The group has therefore created a corporate project starting in 2022 with the aim of standardising proce - dures and providing local store managers with tools which make them better able to serve the commu- nities they are part of. Moreover, Europris supplied products to several projects initiated locally by the City Mission, the Helping Heart and other local organisations, together with local sponsorship of sports clubs. Europris contributed NOK 8 million to the Norwegian Retailers Environment Fund in 2021. The fund has participated in several initiatives this year, including: • initiating Clean Norway, the country’s rst comprehensive national clean-up programme, in 10 counties • helping to clear away 1,000 tonnes of plastic waste from the natural environment • helping to clean up 5,000 kilometres of coastline • launching and conducting Norway’s largest campaign to address the use of plastic bags, which has already reached out to millions of Norwegians through many channels. Targets and ambitions Europris will continue to strengthen its local presence by establishing stores in new locations throughout Norway. This allows people to access products where they live, making their lives more convenient and providing sustainability for everyone. The group will continue to foster strategic partnerships with local initiatives, and thereby encourage social and environmental value creation outside its immediate operations. Its corporate project in this area will produce plans to create and provide a tool kit which enables local stores to achieve better results by positioning themselves as important contributors to their community. 57 Store openings in 2021 Jåttå, September Selbu, November Austevoll, March Xhibition, June 58 GRI section Description Comments Page Organisational prole 102-1 Name of the organisation Europris ASA - 102-2 Activities, brands, products and services In the directors´ report 10 102-3 Location of headquarters Dikeveien 57, 1661 Rolvsøy, Norway - 102-4 Location of operations In the directors´ report 10 102-5 Ownership and legal form In the directors´ report 10 102-6 Markets served In the directors´ report 10 102-7 Scale of the organisation In the directors´ report 10 102-8 Information on employees and other workers In the sustainability report 49 102-9 Supply chain In the directors´ report and sustainability report 10,37 102-10 Signicant changes to the organisation and its supply chain In the directors´ report 10 102-11 Precautionary principle or approach The precautionary principle is applied - 102-12 External initiatives In the sustainability report 55 102-13 Membership of associations In the sustainability report 55 Strategy 102-14 Statement from senior decision-maker Message from the CEO 9 Ethics and integrity 102-16 Values, principles, standards and norms of behaviour In the sustainability report 6,33 Governance 102-18 Governance structure In the corporate governance report 24 Stakeholder engagement 102-40 List of stakeholder groups Employees, customers, shareholders, investors & nancial community, local communities, NGOs, suppliers 35 102-41 Collective bargaining agreements In the consolidated nancial statements, note 8 85 102-42 Identifying and selecting stakeholders In the sustainability report 33 102-43 Approach to stakeholder engagement In the sustainability report 33 102-44 Key topics and concerns raised In the sustainability report 33 Reporting practice 102-45 Entities included in the consolidated nancial statements In the consolidated nancial statements, note 1.2 72 102-46 Dening report content and topic boundaries In the sustainability report 33 102-47 List of material topics In the sustainability report and GRI index 33,58-62 102-48 Restatements of information NA - 102-49 Changes in reporting NA - 102-50 Reporting period 01�01�21-31�12�21 - 102-51 Date of most recent report Annual Report 2020 - 102-52 Reporting cycle Anually - 102-53 Contact point for questions regarding the report Tatiana Gutierrez Eide - [email protected] - 102-54 C laims of reporting in accordance with the GRI Standards GRI standards core - 102-55 GRI content index Europris GRI index - 2021 58-62 General disclosures Global Reporting Initiative (GRI) is an independent international standards organisation which has developed the world’s most widely used framework for sustainability reporting. These guidelines consist of reporting principles, aspects and indicators which organisations can use to disclose information related to their nancial, environmental and social performance. This report has been prepared in accordance with the GRI Standards: core option. The table below shows Europris reporting relative to the GRI Standards. Europris GRI index 2021 59 Material topics GRI section Description Comments Page Sustainable value chain Sustainable products GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainability report, section "Sustainable value chain" 38 103-2 The management approach and its components In the sustainability report, section "Sustainable value chain" 38 103-3 Evaluation of the management approach In the sustainability report, section "Sustainable value chain" 38 G4 FP1- Procurement/sourcing practices FP1 Percentage of purchased volume from suppliers compliant with company’s sourcing policy Information not available - Europris will work on a sourcing policy in 2022 - G4 FP2 - Procurement/sourcing practices FP2 Percentage of purchased volume which is veried as being in accordance with credible, internationally recognised responsible production standards, broken down by standard In the sustainability report, section ”Sustainable value chain” 38 Responsible supply-chain management GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainability report, section ”Sustainable value chain” 40 103-2 The management approach and its components In the sustainability report, section ”Sustainable value chain” 40 103-3 Evaluation of the management approach In the sustainability report, section ”Sustainable value chain” 40 GRI 308 - Supplier environmental assessment 308-1 New suppliers which were screened using environmental criteria Information not available - Europris is currenly screening suppliers post contract signing, according to BSCI principles - GRI 414 - Supplier social assessment 414-1 New suppliers which were screened using social criteria Information not available - Europris is currenly screening suppliers post contract signing, according to BSCI principles - Safe and good quality products GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainibilty report, section ”Safe and good quality products” 39 103-2 The management approach and its components In the sustainibilty report, section ”Safe and good quality products” 39 103-3 Evaluation of the management approach In the sustainibilty report, section ”Safe and good quality products” 39 GRI 416 - Customer health and safety 416-1 Assessment of the health and safety impacts is done for all high risk products In the sustainibilty report, section ”Safe and good quality products” 39 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services In the sustainibilty report, section ”Safe and good quality products” 39 GRI 417 - Marketing and labelling 417-2 Incidents of non-compliance concerning products and service information labelling In the sustainibilty report, section ”Safe and good quality products” 39 60 GRI 306 - Efuents and waste (2016) 306-2 Waste by type and disposal method In the sustainability report, section ”Circular solutions and waste reduction” 46 Responsible employer Equal opportunities and an inclusive work environment GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainability report, section ”Responsible employer” 49 103-2 The management approach and its components In the sustainability report, section ”Responsible employer” 49 103-3 Evaluation of the management approach In the sustainability report, section ”Responsible employer” 49 GRI 401 - Employment 401-1 New employee hires and employee turnover In the sustainability report, section “Equal opportunities and an inclusive work environment” - “Recruitment and promotion” 49 401-3 Parental leave In the sustainability report, section “Equal opportunities and an inclusive work environment” 51 GRI 404 - Training and eductation 404-1 Average hours of training per year per employee “In the sustainability report, section “Equal opportunities and a constructive work environment”. Currently reporting type of training and participation rate” 50 GRI 405 - Diversity and equal opportunity 405-1 Diversity of governance bodies and employees In the sustainability report, section “Equal opportunities and an inclusive work environment” 51 405-2 Ratio of basic pay and remuneration of women to men In the sustainability report, section “Equal opportunities and an inclusive work environment” 51 GRI 406 - Non-discrimination 406-1 Incidents of discrimination and corrective actions taken In the sustainability report, section “Equal opportunities and an inclusive work environment” 49 GRI section Description Comments Page Resource-efcient business model Climate-friendly operations and logistics GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainability report, section ”Resource-efcient business model” 43 103-2 The management approach and its components In the sustainability report, section ”Resource-efcient business model” 43 103-3 Evaluation of the management approach In the sustainability report, section ”Resource-efcient business model” 43 GRI 302 - Energy 302-1 Energy consumption within the organisation Table ”GHG emissions” 47 GRI 305 - Emissions 305-1 Direct (scope 1) GHG emissions Table ”GHG emissions” 47 305-2 Energy indirect (scope 2) GHG emissions Table ”GHG emissions” 47 305-3 Other indirect (scope 3) GHG emissions Table ”GHG emissions” 47 Circular solutions and waste reduction GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainability report, section ”Resource-efcient business model” 43 103-2 The management approach and its components In the sustainability report, section ”Resource-efcient business model” 43 103-3 Evaluation of the management approach In the sustainability report, section ”Resource-efcient business model” 43 61 Health and safety at the workplace GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainability report, section ”Responsible employer” 52 103-2 The management approach and its components In the sustainability report, section ”Responsible employer” 52 103-3 Evaluation of the management approach In the sustainability report, section ”Responsible employer” 52 GRI 403 - Occupational health and safety (2016) 403-1 Occupational health and safety management system In the sustainability report, section “Health and safety at the workplace” 52 403-2 Hazard identication, risk assesment and incident investigation In the sustainability report, section "Health and safety at the workplace" 52 403-3 Occupational health services In the sustainability report, section “Health and safety at the workplace” 52 403-4 Worker participation, consultation and communication on occupational health and safety In the sustainability report, section “Health and safety at the workplace” 52 403-5 Worker training on occupational health and safety In the sustainability report, section “Health and safety at the workplace” 52 403-6 Promotion of worker health In the sustainability report, section “Health and safety at the workplace” 52 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships In the sustainability report, section “Health and safety at the workplace” 52 403-10 Work-related ill health In the sustainability report, section “Health and safety at the workplace” 52 GRI section Description Comments Page Empowering customers and communities Satised customers GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainibilty report, section ”Empowering customers and communities” 55 103-2 The management approach and its components In the sustainibilty report, section ”Empowering customers and communities” 55 103-3 Evaluation of the management approach In the sustainibilty report, section ”Empowering customers and communities” 55 Europris - own indicator 1 Mediacom customer survey results In the sustainibilty report, section ”Satised customers” 55 2 Number of customer complaints In the sustainibilty report, section ”Satised customers” 55 GRI 201 - Economic performance 201-1 Direct economic value generated and distributed In the sustainibilty report, section ”Local value creation and community engagement” 55 Europris - own indicator 3 Description of approach In the sustainibilty report, section ”Local value creation and community engagement” 55 Local value creation and community engagement GRI 103 - Management approach 103-1 Explanation of the material topic and its boundary In the sustainibilty report, section ”Empowering customers and communities” 55 103-2 The management approach and its components In the sustainibilty report, section ”Empowering customers and communities” 55 103-3 Evaluation of the management approach In the sustainibilty report, section ”Empowering customers and communities” 55 GRI section Description Comments Page 62 63 The management Espen Eldal was appointed CEO of Europris in April 2020. He has been the Chief Financial Ofcer of the company since 2014. Prior to his appointments in Europris, he served as managing director of Berendsen Tekstil Service AS, and Sales & Marketing Director and Finance Manager of PartnerTech, Norway. Prior to this, Mr Eldal worked as a Finance Manager in Travel Retail Norway, prior to which he held various executive positions in Gate Gourmet both in Scandina- via and in Switzerland. Mr Eldal holds a Bachelor in Finance and Administration from Oslo University College, is a certied auditor and has completed the Ofcers’ Training School. Mr Eldal is a Norwegian citizen and resides in Norway. Espen Eldal - CEO Stina Charlene Byre started as CFO of Europris in January 2021. Ms Byre came from the position as CFO of COWI AS, where she had been CFO since 2019. Prior to this, she spent 10 years in Orkla, holding various nancial management positions; CFO of Orkla Health Group, CFO of Pierre Robert Group, Financial Manager of Lilleborg and Financial Manager of Orkla Brands. Ms Byre started her career as a management consultant at McKinsey & Company. She holds a Master of Business and Economics from BI Norwegian Business School, including exchange program at Texas A&M University in the USA. Ms Byre is a Norwegian citizen and resides in Norway. Stina C Byre - CFO 64 About Europris �� 4 Key gures �� 7 Letter from the CEO �� 9 Directors’ report �� 10 The board �� 22 Corporate governance �� 24 Sustainability report �� 33 The management �� 63 Consolidated nancial statements �� 65 Income statement �� 67 Balance sheet �� 68 Statement of changes in equity �� 70 Statement of cash ows �� 71 Notes �� 72 Parent company �� 103 Income statement �� 104 Balance sheet �� 105 Statement of changes in equity �� 107 Statement of cash ows �� 108 Notes �� 109 Decleration to the annual report ��117 Alternative performance measures denitions ��118 Auditor’s report �� 120 Shareholder information �� 125 Content 65 EUROPRIS ASA GROUP 2021 66 67 Figures are stated in NOK 1,000 Note 2021 2020 Revenue 5 8,568,379 7,928,658 Other income 5 79,798 83,971 Total operating income 5 8,648,177 8,012,629 Cost of goods sold (COGS) 20 4,592,143 4,534,134 Employee benet expensees 6,7,8 1,230,303 1,138,193 Depreciation 12,13,14 571,223 539,927 Other operating expenses 6,9,14 742,749 634,794 Total operating expenses 7,136,420 6,847,049 Operating prot 1,511,758 1,165,580 Interest income 10 102 181 Other nancial income 10 28,253 11,227 Total nancial income 28,354 11,408 Interest expense 10,14 101,548 131,583 Other nancial expense 10 21,201 18,893 Total nancial expense 122,750 150,476 Net nancial income (expense) (94,395) (139,068) Prot/(loss) from associated companies 16 189 2,600 Prot before tax 1,417,551 1,029,112 Income tax expense 11 313,588 225,489 Prot for the year 18 1,103,963 803,624 Prot attributable to non-controlling interests 22,152 - Prot attributable to owners of the parent 1,081,811 803,624 Earnings per share (basic and diluted) – in NOK 18 6.72 4.86 Consolidated statement of comprehensive income Prot for the year 1,103,963 803,624 Other income and expense - - Total comprehensive income for the year 1,103,963 803,624 Prot attributable to non-controlling interests 17 22,152 - Prot attributable to owners of the parent 1,081,811 803,624 Notes 1 to 29 are an integral part of the consolidated nancial statements Consolidated income statement 68 Figures are stated in NOK 1,000 Note 31-12-2021 31-12-2020 ASSETS Non-current assets Software 12 65,421 58,030 Trademark 12 591,266 387,573 Goodwill 12,15 2,073,373 1,617,731 Land 13,15 46,190 24,966 Buildings 13,15 119,362 - Fixtures and ttings 13 328,520 301,400 Right-of-use assets 14 2,320,022 2,262,555 Investment in associated companies 16 128,844 128,487 Other investments 383 424 Other receivables 19,25 28,391 28,179 Derivatives 19,24,25 37,676 11,796 Total non-current assets 5,739,449 4,821,141 Current assets Inventories 20 1,997,312 1,633,927 Trade receivables 19,25 215,480 195,287 Other receivables 19,25 44,241 50,514 Provisions 19,25 60,816 37,302 Derivatives 19,24,25 11,494 - Cash 21,25 570,286 540,056 Total current assets 2,899,629 2,457,086 Total assets 8,639,078 7,278,227 Notes 1 to 29 are an integral part of the consolidated nancial statements Consolidated balance sheet 69 Figures are stated in NOK 1,000 Note 31-12-2021 31-12-2020 EQUITY AND LIABILITIES Equity Share capital and share premium 22 212,624 212,471 Other paid-in capital 22 20,718 17,475 Other equity 2,386,704 1,983,662 Total shareholders' equity 2,620,046 2,213,608 Non-controlling interests 17 268,680 - Total equity 2,888,726 2,213,608 Liabilities Non-current liabilities Deferred tax liability 11 52,332 4,726 Borrowings 2,23,25 1,091,521 995,082 Lease liabilities 14,23 1,913,555 1,850,561 Total non-current liabilities 3,057,407 2,850,369 Current liabilities Borrowings 2,23,25 5,000 - Current lease liabilities 14 490,164 473,739 Accounts payable 2,25 843,854 742,753 Tax payable 11 324,057 251,879 Public duties payable 25 376,023 323,511 Put option liability 2,15 246,528 - Other current liabilities 2,23 404,379 380,788 Derivatives 24,25 2,940 41,580 Total current liabilities 2,692,945 2,214,250 Total liabilities 5,750,352 5,064,619 Total equity and liabilities 8,639,078 7,278,227 Notes 1 to 29 are an integral part of the consolidated nancial statements Consolidated balance sheet Fredrikstad, 24 March 2022 THE BOARD OF DIRECTORS OF EUROPRIS ASA Claus Juel-Jensen Karl Svensson Espen Eldal CEO Tom Vidar Rygh Chair Hege Bømark Tone Fintland Pål Wibe Bente Sollid Storehaug 70 Notes 1 to 29 are an integral part of the consolidated nancial statements Figures are stated in NOK 1,000 Share capital Treasury shares Share premium Other paid-in capital Other equity Total Non- controlling interests Total equity Equity 01.01.2021 166 969 (6,150) 51,652 17,475 1,983,661 2,213,608 - 2,213,608 Prot for the period - - - - 1,081,811 1,081,811 22,152 1,103,963 Dividend - - - - (434,207) (434,207) - (434,207) Net purchase/sale of treasury shares - 153 - 3,243 3,874 7,270 - 7,270 Non-controlling interests on acquisition of subsidiary - - - - - - 246,528 246,528 Put option liability - - - - (246,528) (246,528) - (246,528) Translation differences - - - - (1,907) (1,907) - (1,907) Other comprehensive income - - - - - - - - Equity 31.12.2021 166,969 (5,997) 51,652 20,718 2,386,704 2,620,046 268,680 2,888,726 Equity 01.01.2020 166,969 (1,150) 51,652 17,475 1,742,923 1,977,870 - 1,977,870 Prot for the period - - - - 803,624 803,624 - 803,624 Dividend - - - - (323,346) (323,346) - (323,346) Net purchase/sale of treasury shares - (5,000) - - (239,539) (244,539) - (244,539) Other comprehensive income - - - - - - - - Equity 31.12.2020 166,969 (6,150) 51,652 17,475 1,983,661 2,213,608 - 2,213,608 In accordance with sections 9-4 and 9-5 of the Norwegian Public Limited Liability Companies Act, the board is mandated to acquire the company’s own shares subject to specic conditions. See note 22 for details of treasury shares. Consolidated statement of changes in equity 71 Figures are stated in NOK 1,000 Note 2021 2020 Cash ows from operating activities Prot before income tax 1,417,551 1,029,112 Adjusted for: – Depreciation xed assets 13,14 546,123 520,350 – Amortisation intangible assets 12 25,100 19,578 – Unrealised gain and loss on derivatives 10,17 (25,880) 11,191 – Net interest expense exclusive of change in fair value derivatives 10 124,877 144,608 – Prot from associated companies 16 (189) (2,600) Changes in net working capital (exclusive effect of acquistions): (138,706) 227,127 – Inventory (184,661) (63,509) – Accounts receivable and other current receivables (17,334) (40,969) – Accounts payable and other current debt 139,302 314,625 – Decrease/(increase) in nancial assets at fair value through prot or loss (76,013) 16,980 Interest received 102 181 Interest paid 10 (99,099) (127,809) Income tax paid 11 (258,529) (116,814) Net cash generated from operating activities 1,591,351 1,704,924 Cash ows from investing activities Proceeds from sale of xed assets 13 176 - Purchases of xed assets 13 (98,450) (72,238) Purchases of intangible assets 12 (32,490) (31,908) Acquisitions 15 (553,204) (7,979) Proceeds from sale of nancial assets 62 - Net cash used in investing activities (683,906) (112,125) Cash ows from nancing activities Proceeds from borrowings 2,636 1,000,000 Repayment of debt to nancial institutions (3,750) (1,651,675) Principal paid on lease liabilities 12 (449,162) (401,218) Dividend (434,207) (323,346) Sale/buy-back of treasury shares 7,270 (244,539) Net cash from nancing activities (877,214) (1,620,778) Net decrease/increase in cash 30,231 (27,979) Cash at beginning of year (01.01) 540,056 568,036 Cash at end of year (31.12) 570,286 540,056 Notes 1 to 29 are an integral part of the consolidated nancial statements Consolidated statements of cash flows 72 1.1 Basis of preparation The consolidated nancial statements for Europris ASA (”the group”) have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, as well as Norwegian disclosure requirements pursuant to section 3-9 of the Norwegian Accounting Act at 31 December 2021. The accounting policies adopted are consistent with those of the previous nancial year. The board approved the consolidated nancial statements on 24 March 2022. The consolidated nancial statements have been prepared on a historical cost basis with the following exceptions: • derivative instruments are recognised at fair value through prot and loss. The group has applied the going concern assumption in preparing its consolidated nancial statements. When assessing this assumption, management has assessed all available information regarding future expectations. The preparation of nancial statements in conformity with the IFRS requires the use of certain critical account- ing estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity or where the assumptions and estimates are signicant for the consolidated nancial statements are disclosed in note 3. 1.2 Consolidation The consolidated nancial statements include the parent company Europris ASA and all its subsidiaries. The group applies the acquisition method to account for business combinations. The consideration trans - ferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identi- able assets and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. Subse- quent changes to the fair value of the contingent consideration which is deemed to be an asset or liability is recognised in prot or loss. A contingent conside - ration which is classied as equity is not re-measured, and its subsequent settlement is accounted for within equity. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identiable net assets. Goodwill is initially measured as the excess of the aggregate consideration transferred and the amount of non-controlling interest over the net identiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsi - diary acquired, the difference is recognised in prot and loss. Intercompany transactions, balances, revenue and expenses arising from transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. The consolidated nancial statements include Europris ASA and its subsidiaries. The subsidiaries acquired by Europris AS in 2020 – Kilen Lavpris AS and Vågsbygd Lavpris AS – were both merged with Europris Butikkdrift AS at 1 January 2021. The Stjørdal Lavpris AS company was acquired by Europris AS at January 2021 and merged with Europris Butikkdrift AS with effect from 1 January 2021. Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through Note 1 Accounting principles Company Ownership/voting share Europris ASA parent company Europris Holding AS 100% Europris AS 100% Europris Butikkdrift AS 100% Lunehjem.no AS 67% Lekekassen Holding AS 67% 73 its power over the entity. Subsidiaries are fully consoli- dated from the date on which control is transferred to the group. They are de-consolidated from the date on which that control ceases. When the group ceases to have control, any remaining interest in the entity is re-mea- sured to its fair value at the date when control ceases, with the change in carrying amount recognised in prot and loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the remaining interest as an associate, joint venture or nancial asset. IFRS 10 Consolidated nancial statements is based on the principle of using the control term as the decisive criterion to decide whether a company should be included in the consolidated nancial statements. The application guidance to the standard provides guidance when determining whether an entity has control over a franchisee. Based on the guidance in IFRS 10, the group has determined that it does not control its franchisees and the franchises are therefore not consolidated. This is based on a judgement of the criteria in IFRS 10 as to whether or not Europris controls the franchises. 1.3 Investment in associates The group has investments in associates. Associates are entities over which the group has signicant inuence, but not control over nancial and operating management. The considerations made in determining whether the group has signicant inuence over an entity are similar to those necessary to determine control over subsidi - aries� Associates are accounted for using the equity method from the date when signicant inuence is achieved until such inuence ceases. Investments in an associate are initially recognised at cost. The contingent consideration is included in cost and changes in estimated contingent consideration will be recognised as an adjustment of cost. The carrying amount of the investment is adjusted to recognise changes in the group’s share of the net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impairment individually. The statement of prot or loss reects the group’s share of the results of operations of the associate. In addition, when there has been a change recognised directly in the equity of the associate, the group recog - nises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the group and the associate are eliminated to the extent of the interest in the associate. If there are indications that the investment in the associate is impaired, the group will perform an impair- ment test of the carrying amount of the investment. Any impairment losses are recognised as share of prot of an associate in the statement of prot or loss. If the group’s share of the loss surpasses the carrying amount of the associate, the carrying amount is set to zero and further loss is not recognised unless the group has an obligation to make up for the loss. Upon loss of signicant inuence over the associate, such that the equity method ceases to apply, the group measures and recognises any retained investment at its fair value. A new measurement of remaining ownership interests will not be performed if the equity method is still applicable. 1.4 Segment reporting The Europris group as a whole is dened and identied as one operating segment. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identied as the group management. Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. 1.5 Foreign currency translation Foreign currency transactions are translated into the functional currency of the respective group entity, using the exchange rates prevailing at the dates of the transac- tions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in the income statement. Non- monetary items are not re-translated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. 74 Non-monetary items which are measured at fair value in foreign currency are translated into the functional currency at the reporting date. Changes in exchange rates are recognised continuously in operating prot. The consolidated nancial statements are presented in NOK, which is the group’s presentation and functional currency. 1.6 Revenue from contracts with customers Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount which reects the consider- ation which the group expects to be entitled to in exchange for those goods or services. The group has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer. Revenue from the sale of goods The group operates a chain of stores in the discount variety retail sector and online stores which sells consumer goods, including sales to franchise stores. The group recognises revenue from the sale of goods at the point in time when control of the goods is trans - ferred to the customer. Control of an asset refers to the ability to direct the use of and obtain substantially all of the remaining benets from the asset, and the ability to prevent others from directing the use of and receiving the benets from the asset. Revenue is generally recognised on delivery of the goods. Revenue from the sale of goods over the internet is recognised at the point that control of the inventory have passed to the customer, which is the point of delivery. Retail sales are usually in cash or by debit or credit cards. Certain contracts provide a customer with a right to return the goods within a specied period. The group uses the expected value method to estimate the goods which will not be returned, because this method best predicts the amount of variable consideration to which the group will be entitled. Franchise fee The fees received from franchises are recorded as “other income”. 1.7 Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in Norway, where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated nancial statements. However, deferred tax liabilities are not recognised with regard to goodwill arising from business combinations. Deferred income tax is deter- mined using tax rates (and laws) which have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable prot will be available against which the temporary differences can be utilised. Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for the deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary diffe - rence will not reverse in the foreseeable future. Generally, the group is unable to control the reversal of the temporary difference for associates. Deferred income tax assets are recognised on deductible temporary differences arising from invest - ments in subsidiaries, associates and joint arrange- ments only to the extent that it is probable the temporary difference will reverse in the future and there 75 is sufcient taxable prot available against which the temporary difference can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis. 1.8 Property, plant and equipment Property, plant and equipment are recorded at historical cost less depreciation. Historical cost includes expenditure which is directly attributable to the acqui- sition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benets associated with the item will ow to the group and the cost of the item can be measured reliably. The carrying amount of replaced parts is derecognised when replaced. All other repairs and maintenance expenditures are recognised in prot and loss in the period when the expense is incurred. Depreciation of property, plant and equipment is calculated using the straight-line method to depreciate their cost to their residual value over the estimated useful lives, as follows: technical and electrical installations 5-15 years xture and ttings 7-10 years vehicles 5 years machinery and equipment 3 years IT equipment 3 years buildings 5-25 years land not depreciated The residual values and useful lives of the assets are reviewed and adjusted, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immedi - ately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. 1�9 Leases Identifying a lease At the inception of a contract, the group assesses whether the contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identied asset for a period of time in exchange for a consideration. The group as a lessee Separating components in the lease contract For contracts which constitute or contain a lease, the group separates lease components if it benets from the use of each underlying asset either on its own or together with other resources which are readily available, and the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. The group then accounts for each lease component in the contract as a lease separately from non-lease components of the contract. Recognition of leases and exemptions At the lease commencement date, the group recog - nises a lease liability and corresponding right-of-use asset for all lease agreements in which it is the lessee, except for the following exemptions applied: • short-term leases (dened as 12 months or less) • low-value assets For these leases, the group recognises the lease payments as other operating expenses in the statement of prot or loss when they are incurred. Lease liabilities The lease liability is recognised at the commen - cement date of the lease. The group measures the lease liability at the present value of the lease payments for the right to use the underlying asset during the lease term which were not paid at the commencement date. The lease term represents the non-cancellable period of the lease together with periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option. 76 The lease payments included in the measurement comprise: • xed lease payments (including in-substance xed payments), less any lease incentives receivable • variable lease payments which depend on an index or a rate, initially measured using the index or rate as at the commencement date • the exercise price of a purchase option, if the group is reasonably certain to exercise that option • payments of penalties for terminating the lease, if the lease term reects the group exercising an option to terminate the lease. The lease liability is subsequently measured by increasing the carrying amount to reect interest on the lease liability, reducing the carrying amount to reect the lease payments made and remeasuring the carrying amount to reect any reassessment or lease modica - tions, or to reect adjustments in lease payments due to an adjustment in an index or rate. The group does not include variable lease payments in the lease liability. Instead, the group recognises these variable lease expenses in prot or loss. The group presents its lease liabilities as separate line items in the statement of nancial position. Right-of-use assets The group measures the right-of use asset at cost, less any accumulated depreciation and impairment losses, adjusted for any remeasurement of lease liabi - lities. The cost of the right-of-use asset comprises: • the amount of the initial measurement of the lease liability recognised • any lease payments made at or before the commencement date, less any incentives received • any initial direct costs incurred by the group • an estimate of the costs to be incurred by the group in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The group applies the depreciation requirements in IAS 16 Property, Plant and Equipment in depreciating the right-of-use asset, except that the right-of-use asset is depreciated from the commencement date to the earlier of the lease term and the remaining useful life of the right-of-use asset. The group applies IAS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account for any impairment loss identied. Store protability is monitored on an ongoing basis and stores that deliver below expectations are followed up and necessary measures implemented. 1.10 Intangible assets Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value at the acquisition date of any previous equity interest in the acquiree over the fair value of the identiable net assets acquired. If the total consideration transferred, non-controlling interest recognised and previously held interest measured at fair value are less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the diffe- rence is recognised directly in the income statement. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the cash generating unit (CGU) which is expected to benet from the synergies of the combination. Each unit or group of units to which the goodwill is allocated repre - sents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are performed annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. Trademarks and contractual rights Separately acquired trademarks and contractual rights are recognised at cost. Trademarks and contractual 77 rights acquired in a business combination are recog- nised at fair value at the acquisition date. Trademarks (the brand name “Europris” and “Lekekassen”) are deemed to have an indenite lifetime and are not amortised as a consequence, but tested for impairment annually. Contractual rights and licences have a nite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of contractual rights over their estimated useful life. Software Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs which are directly attributable to the design and testing of identiable and unique software products controlled by the group are recognised as intangible assets when the following criteria are met: • it is technically feasible to complete the software product so that it will be available for use • management intends to complete the software product and use or sell it • there is an ability to use or sell the software product • it can be demonstrated how the software product will generate probable future economic benets • adequate technical, nancial and other resources to complete the development and to use or sell the software product are available • the expenditure attributable to the software product during its development can be reliably measured. Computer software development costs recognised as assets are amortised over their estimated useful lives of three years� 1.11 Financial instruments A nancial instrument is any contract which gives rise to a nancial asset of one entity and a nancial liability or equity instrument of another entity. Financial assets The group´s nancial assets are derivatives, trade receivables, other receivables and cash. The classication of nancial assets at initial recog - nition depends on the nancial asset’s contractual cash ow characteristics and the group’s business model for managing them. With the exception of trade receivables which do not contain a signicant nancing component, the group initially measures a nancial asset at its fair value plus, in the case of a nancial asset not at fair value through other comprehensive income, transaction costs� The group classies its nancial assets in these categories: • nancial assets at amortised cost • derivatives at fair value through prot and loss. The group does not apply hedge accounting. Financial assets at amortised cost The group measures nancial assets at amortised cost if both of the following conditions are met: • the nancial asset is held within a business model with the objective to hold nancial assets in order to collect contractual cash ows • the contractual terms of the nancial asset give rise on specied dates to cash ows which are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recog - nised in prot or loss when the asset is derecognised, modied or impaired. The group’s nancial assets at amortised cost include trade receivables and other current deposits. Trade receivables which do not contain a signicant nancing component are measured at the transaction price determined under IFRS 15 Revenue from contracts with customers. Receivables are subsequently measured at amortised cost using the EIR method minus provision for expected credit losses. Derivatives at fair value through prot and loss Derivatives at fair value are carried in the statement of nancial position at fair value with net changes in fair value in prot or loss. The category includes foreign exchange contracts and interest rate swaps. 78 Derecognition of nancial assets A nancial asset (or, where applicable, part of a nancial asset or part of a group of similar nancial assets) is primarily derecognised (in other words, removed from the group’s consolidated statement of nancial position) when: • the rights to receive cash ows from the asset have expired, or • the group has transferred its rights to receive cash ows from the asset or has assumed an obligation to pay the received cash ows in full without material delay to a third party under a ”pass-through” arrangement; and either a. the group has transferred substantially all the risks and rewards of the asset, or b. the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Financial liabilities Financial liabilities are classied, at initial recognition, as loans and borrowings, payables, or derivatives through prot and loss. Derivatives are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Derivatives are nancial liabilities when the fair value is negative, accounted for in the same way as derivatives as assets. Loans, borrowings and payables After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in prot or loss when the liabilities are derecognised as well as through the EIR amortisation process� Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs which are an integral part of the EIR. The EIR amorti - sation is included as nance costs in the statement of prot or loss. Payables are measured at their nominal amount when the effect of discounting is not material. Borrowings are classied as current unless the group has an unconditional right to delay the payment of the debt for more than 12 months from the reporting date. Derecognition of nancial liabilities A nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modied, such an exchange or modication is treated as the derecognition of the original liability and the recog - nition of a new liability. The difference in the respective carrying amounts is recognised in the statement of prot or loss. 1.12 Inventories and cost of goods sold Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated sales price for the goods. Historical cost is calculated using a weighted average historical cost and includes expenditures directly linked to getting the goods to their nal location and condition. Foreseeable obsolescence is assessed continuously. The group’s inventories consist solely of goods purchased for resale. Goods for sale are often purchased in currencies other than Norwegian kroner, and the purchase price in Norwegian kroner is locked in through the use of foreign currency derivative contracts. Both unrealised and realised gains or losses on the foreign currency deriva - tives which are economic hedges for inventory purchases are included as part of cost of goods sold (COGS). Similarly, unrealised foreign currency exchange gains and losses on inventory trade payables and realised foreign currency exchange gains or losses at the time of payment are also included as part of COGS. 1�13 Cash Cash includes cash in hand and bank deposits. Bank overdrafts are presented in the statement of cash ows less cash. 1�14 Treasury shares When treasury shares are repurchased, the purchase price including directly attributable costs is recognised in equity. Treasury shares are presented as a reduction in equity. Losses or gains on transactions involving treasury shares are not recognised in the statement of comprehensive income. 79 1.15 Post-employment benets The group has two post-employment schemes: one dened contribution and one contractual retirement scheme. The contractual retirement scheme is effective from 1 January 2011 and is deemed to be a dened benet multi-employer plan, but recognised as a dened contribution agreement since insufcient reliable infor- mation is available to estimate the group’s proportionate share of pension expense, liability and funds in the collective scheme. In a dened contribution arrangement, the group contributes to a public or private insurance plan. The group has no remaining liabilities after the contribution to the insurance plan has been made. The contributions are recognised as a personnel expense when they are incurred. 1.16 Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognised when the group has an existing legal or constructive obligation as a result of past events, it is probable that an outow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are recognised when the group has an existing obligation (legal or constructive) as a result of a past event, it is probable (more likely than not) that an outow of economic resources will be required from the group, and the amount can be estimated reliably. The timing or amount of the outow may still be uncertain. Provisions are measured at the estimated expenditure required to settle the existing obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the existing obligation. A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and an assessment of all possible outcomes and the accompanying probabi - lities. 1.17 Written put options over non-controlling interest The group has a written put option over a non- controlling interest in Lekekassen Holding AS (“Lekekassen”). The holder of the non-controlling shares is also the CEO of Lekekassen. If the CEO resigns, the group has a right and an obligation to purchase the shares in Lekekassen for a cash consideration. The consideration to be paid is based on a multiple of EBITDA. At initial recognition, a nancial liability is recognised for the present value of the redemption amount, with a corresponding charge directly to share - holders’ equity. The present value of the redemption amount is estimated to be no less than equal to the amount payable if the put option were exercised at the end of the period. The nancial liability is remeasured to reect changes in the estimated redemption amount, with a corresponding charge to shareholders’ equity. The non-controlling interest continues to be recog - nised, and is attributed its share of prot and loss and total comprehensive income. 1.18 Contingent liabilities and assets Contingent liabilities are not recognised in the nancial statements. In cases where the possible outow of economic resources as a result of existing obligations is considered improbable or remote, no liability is recognised. A contingent asset is not recognised in the nancial statements, but disclosed if it is probable that the benet will ow to the group. 1.19 Subsequent events New information after the reporting date regarding the group’s nancial position at the reporting date is taken into consideration in the consolidated nancial state- ments. Events after the reporting date which do not affect the group’s nancial position at the reporting date, but which will affect the nancial position of the group in the future, are noted if they are considered signicant. 1.20 New standards, amendments and interpretations not yet adopted by the group The group’s intention is to adopt the relevant new and amended standards and interpretations when they become effective. There are no IFRSs or IFRIC interpretations which are not yet effective which would be expected to have a material impact on the group. 80 2 Financial risk management The group’s core business is discount variety retail. This exposes the group to a variety of nancial risks: market (including currency, fair value interest-rate and price), credit and liquidity risk. The goal of the group’s overall risk management programme is to minimise potential adverse nancial performance effects of these risks, which result from unpredictable changes in capital markets. The group uses nancial derivatives to hedge against certain risks. Hedge accounting is not applied. The nancial risk management programme for the group is carried out by its central treasury department under policies approved and monitored by the board. The treasury department identies, evaluates, hedges and reports nancial risks in cooperation with the various operating units in the group. The board approves the principles of overall risk management as well as policies covering specic areas, such as currency exchange risk, interest-rate risk, credit risk, the use of nancial derivatives and liquidity management. 2.1 Market risk 2.1.a Currency exchange risk The group is exposed to currency exchange risk arising from the import of goods for sale. These trans- actions are mainly settled in USD and EUR. The group aims to achieve predictable cash outows in NOK by using forward contracts as a hedging strategy for its exposure to USD and EUR. The hedging strategy is based on an assessment of the possibilities and estimated time period required to adjust the business to the changes in foreign exchange rates. The following table illustrates the sensitivity of the group to potential currency changes. Hedge accounting is not applied. 2.1.b Price risk The group has limited exposure to price risk. 2.1.c Interest-rate risk The group’s exposure to interest-rate risk arises from its bank borrowings. The interest-bearing debt has oating rates, which means it is affected by changes in interest-rates. The group’s nancial policy includes a detailed descripton of hedging, and 60 per cent of the principal of the group’s bank loans is presently hedged. The current interest-rate swaps expire in July 2027 and 2030. Management monitors development in the market, and regularly assesses the exposure to interest-rate risk. The interest-rate risk which arises from loans with a oating interest rate is managed by using interest-rate swaps. The following table illustrates the sensitivity of the group to potential interest-rate changes. Hedge accounting is not applied. 2�2 Credit risk The group has limited exposure to credit risk, since most of its revenue transactions are settled by cash or debit cards. However, a small share of its revenue comes from franchise agreements, where each franchisee is granted credit. As a franchisor, the group monitors its franchisees closely to mitigate the credit risk. Losses on trade receivables have historically been limited. 2.3 Liquidity risk The treasury department prepares and monitors cash ow forecasts of the groups’s liquidity requirements to ensure that the group has sufcient cash to meet operational commitments, and to maintain sufcient exibility to meet unused credit facilitiy requirements (see note 23) without breaching nancial covenants. Foreign currency sensitivity Changes in currency Effect on post-tax prot 2021 2020 USD/NOK +10% -53,844 -48,471 -10% +53,844 +48,471 EUR/NOK +10% -14,364 -16,023 -10% +14,364 +16,016 Figures are stated in NOK 1,000 Interest-rate sensitivity Changes in interest rate Effect on post-tax prot 2021 +1% -3,890 -1% +3,890 2020 +1% -3,120 -1% +3,120 Figures are stated in NOK 1,000 Notes to the consolidated financial statements 81 2.4 Capital management risk The group’s objectives when managing capital are to ensure the ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital, including compliance with covenants in the loan agreements (see note 23 for further information). The long-term nancial ambition is a dividend policy of paying out 50-60 per cent of net prot while maintaining an efcient balance sheet. At 31 December 2021, the group’s equity totalled NOK 2,889 million, which corresponded to an equity ratio of 33.4 per cent. The board considers Europris’ capital structure to be adequate in relation to the group’s objectives, strategy and risk prole. 3 Critical accounting estimates and judgements Estimates and judgements are continuously evaluated and are based on historical experience and other factors, including expectations of future events which are believed to be reasonable. 3.1 Critical accounting estimates and assumptions The group prepares estimates and assumptions regarding future expectations. The resulting accounting estimates will by denition seldom equal the related actual results. Estimates and assumptions which represent a signicant risk of causing material adjust- ments to the book value of assets and liabilities within the next nancial year are discussed below. 3.1.a Provision for obsolescence The group makes provision for obsolescence. These provisions are based on a detailed assessment of the age distribution of inventory items and whether the goods are part of an active or expired product range. The assessment is made on each individual inventory item and the obsolescence provision increases the longer the item remains in stock. Goods older than three years have the highest write-down rate. Write-down for obsolescence is made when the cost of the goods is higher than the expected net sales value. These provisions are estimate-based and require in-depth knowledge about goods and market. The following table sets out the contractual maturities (representing undiscounted cash ows) of nancial liabilities. At 31.12.2021 Up to 6 months Between 6 and 12 months Between 1 and 2 years Between 2 and 5 years Total Accounts payable 843,854 - - - 843,854 Other current liabilities 404,379 - - - 404,379 Borrowings including interest 15,745 14,480 114,672 1,022,000 1,166,897 Put option liability 246,528 - - - 246,528 Derivatives 2,940 - - - 2,940 Total 1,263,978 14,480 114,672 1,022,000 2,415,130 At 31.12.2020 Up to 6 months Between 6 and 12 months Between 1 and 2 years Between 2 and 5 years Total Accounts payable 742,753 - - - 742,753 Other current liabilities 380,788 - - - 380,788 Borrowings including interest 11,000 11,000 22,000 1,017,082 1,061,082 Derivatives 41,580 - - - 41,580 Total 1,134,541 11,000 22,000 1,017,082 2,184,623 Figures are stated in NOK 1,000 Notes to the consolidated financial statements 82 3.1.b IFRS 16 Leases In determining the lease term for each contract, the group must continuously assess whether there are extension options and termination rights which should be taken into account when determining the rental period. The group has established guidelines for these assessments. Typically, lease contracts are renego- tiated at the end of the non-cancellable period, and a new contract is entered into on better terms in the form of both shorter duration and lower rent. This means that extension options in the lease contracts are not normally included in the IFRS 16 calculation. Determination of the discount rate as a basis for calculating the present value of future lease liabilities also involves the use of discretion. A xed methodology has also been established for this process. The approach is based on interval division of the leases according to the remaining term of the contracts. The basis for the discount rate calculation is a risk free interest rate plus a margin reecting the maturity of the contracts. 3.1.c Written put options over non- controlling interest The group has a written put option over a non- controlling interest in Lekekassen Holding AS (“Lekekassen”). The holder of the non-controlling shares is also the CEO of Lekekassen. If the CEO resigns, the group has a right and an obligation to purchase the shares in Lekekassen for a cash conside- ration. The consideration to be paid is based on a multiple of EBITDA. According to IAS 32 Financial Instruments: Presentation, a nancial liability should initially be recognised at the present value of the redemption amount with a corresponding charge to equity. The IFRS does not provide guidance on which component of equity should be charged, and on whether the non-controlling interest should continue to be recognised. The group has thus exercised judgement in developing its accounting policy. The group has considered that the present ownership interest of the non-controlling shares remains with the non-controlling shareholder. The group has thus considered it appropriate to continue to recognise the non-controlling interest in the statement of nancial position, and to attribute its share of prot and loss and other comprehensive income to the non-controlling interest. The nancial liability for the put option over the non-controlling interest is therefore recognised with a corresponding charge to shareholders’ equity. IAS 32 provides limited guidance on how the nancial liability for the written put option over the non-controlling interest should be measured when the purchase date and/or the redemption amount are/is not known, but subject to a formula. When developing an accounting principle, the group has considered guidance in other IFRSs, more specically the guidance in IFRS 13 Fair Value Measurement, which states that the fair value of a nancial liability with a demand feature is no less than the amount payable on demand, discounted from the rst date that the amount could be required to be paid. The group has established an accounting principle where the nancial liability is estimated to be no less than equal to the amount payable if the put option were exercised at the end of the period. The nancial liability for the put option over the non-controlling interest is remeasured to reect changes in the estimated redemption amount. The adjustment to the nancial liability is recorded with a corresponding charge to shareholders’ equity. When establishing the policy of recording the adjustment against equity, the group has considered the guidance in IFRS 10, which states that changes in a parent’s ownership interest in a subsidiary which do not result in the parent losing control of the subsidiary are equity transactions. 3.2. Judgements in applying the group’s accounting principles IFRS 10 (Consolidated nancial statements) requires entities to consolidate entities they control. The standard provides extended guidance to determine whether control is present. Franchising is explicitly mentioned in the standard. The franchises are not included in the consolidated nancial statements of Europris ASA. This is based on a judgement of the criteria in IFRS 10 of whether Europris controls the franchises. Through the franchise agreements, Europris essentially has control and rights related to protection of the brand name and the concept. Such rights are not sufcient to gain control under the provisions of IFRS 10. The decision-making rights which affect variable returns are primarily held by the franchisee and the nancial risk of the business lies with the franchisee. Based on an assessment of these criteria in IFRS 10, Europris does not control the franchises, and they are thus not consolidated. The group conrms that there have not been any other judgements which are deemed to have a signi - cant impact on the consolidated nancial statements. 83 4 Segment information The group manangement is the group’s chief operating decision-maker. Reporting to the group management, which is responsible for evaluating protability and achivements, is on a consolidated basis which forms the basis for the group management’s assessment of protability at a strategic level. The group as a whole is therefore dened and identied as one segment. 5 Total operating income The group operates a chain of stores in the discount variety retail sector and online stores which sells consumer goods, including sales to franchise stores. The group is required by Norwegian law to have a mandatory occupational pension plan. The group has a pension plan which fullls the legal requirements, which covers all employees and is a dened contribution plan. 6 Employee benet expenses and remuneration to auditor Figures are stated in NOK 1,000 2021 2020 Revenue 8,568,379 7,928,658 Income from franchise fees 78,404 79,381 Other income 1,395 4,590 Total other income 79,798 83,971 Total operating income 8,648,177 8,012,629 Figures are stated in NOK 1,000 2021 2020 Pay expenses 1,051,020 972,018 Social security costs 140,392 128,412 Pension expenses 24,560 21,496 Other benets 14,332 16,267 Total 1,230,303 1,138,193 Number of employees 3,298 3,120 Full-time employees 2,116 1,992 Discounted shares for employees In 2021, the group had a programme which gave employees, including the executive management, the opportunity to buy a limited number of shares at a discount in relation to the market price. Europris ASA sold in total 85,099 shares in this programme. The share price was NOK 45.65 per share, including a 25 per cent discount on the market price. The lock-in period for shares purchased in this programme is one year. The costs wof the employee share programme amounted to approximately NOK 1.3 million. 84 7 Management remuneration Remuneration of chief executive ofcer (CEO) and chief nancial ofcer (CFO) Remuneration statement The board will provide a statement on salary and other remuneration for senior executives to the annual general meeting on 21 April 2022. Remuneration guidelines The board has established guidelines for the remune- ration of the members of the executive management. The company’s policy is to offer the executive management competitive remuneration based on current market standards as well as on group and individual performance. The remuneration consists of a basic salary element combined with a performance- based bonus programme as set out below. The executive management participates in the company’s insurance policies and can be entitled to certain fringe benets. The remuneration committee is a sub- committee of the board which acts as a preparatory and advisory body in relation to the group’s remune- ration of the executive management and ensures thorough and independent preparation of matters relating to the compensation of executive personnel. Bonus programme Europris has established a bonus scheme for the executive management, which is based on nancial and operational performance. The maximum bonus grant for a nancial year under this scheme is 13.5 months of gross base salary for the CEO and up to nine months of gross base salary for the other executive manage- ment. Maximum bonus payment during any single nancial year is 12 months gross pay. Figures are stated in NOK 1,000 2021 2020 Auditor fees Audit services 1,684 1,206 Technical services related to nancial reporting 110 666 Total 1,794 1,873 Auditor fees are presented exclusive of VAT. No auditor fees have been recorded in equity in connection with equity transactions. Remuneration of the executive management group (eight individuals) NOK 13,809 in accrued bonus is recognised in the nancial statements for the executive management group for 2021 (NOK 9,636 in 2020). Figures are stated in NOK 1,000 Title Salary Bonus Pension Other Total Espen Eldal CEO 3,722 1,463 129 40 5,355 Stina Charlene Byre CFO 1,566 - 124 155 1,845 Figures are stated in NOK 1,000 2021 2020 Pay expenses, including bonuses 34,099 27,851 Social security costs 4,809 3,929 Pension expenses 1,191 1,044 Other benets 26 - Total 40,125 32,824 85 Sharebased remuneration In accordance with the renumeration guidelines, directors and senior executives may participate in a restricted share programme for an investment amount limited to NOK 500,000. This programme is subject to annual approval by the board. Shares acquired through this programme are subject to a two-year lock-up period. Each restricted share will be issued at a purchase price corresponding to the volume-weighted average price of the company’s shares on the Oslo Stock Exchange during the 10 trading days before the award, adjusted for the reduction in value from the two-year transfer restriction. The reduced value appli- cable to the programme run in 2021 was 19 per cent. Share purchases are borne by the participants, and the company does not provide credit or nancing. The share programme was run for the rst time in 2021 and completed on 16 September 2021. Europris ASA sold in total 68,941 shares in this programme. The market price for the shares, ie, the volume weighted average for the 10 trading days before the allocation 6 date (2-15 September 2021), was NOK 61.51. The purchase price, adjusted for the reduced value from the restrictions, was NOK 49�82� The executive management group is employed by the Europris Holding AS subsidiary. The CEO and the VP Commercial have severance packages of 12 and six months respectively. Apart from these, no members of the executive management group have severance packages. No loans or issued guarantees have been provided to the executive management group, the members of the board or other related parties. Remuneration of the board of directors Annual fees in 2021 for the board of directors: Through a related company, a director has received NOK 10,000 for digital services. 8 Pension liabilities Figures are stated in NOK 1,000 The group has a contractual retirement pension scheme (AFP). This is a multi-employer plan, and accounted for as a dened contribution plan. The annual premium is expensed. The entity pays a premium currently set at 2,5 per cent of the employee’s salary. Pension cost (premium) in 2021 was NOK 7,810 (2020: NOK 6,784). In addition, the group has a pension agreement with DNB Forsikring which fulllls the legal requirement under Norwegian law and covers all employees. The scheme is a dened contribution plan. Pension costs in 2021 were NOK 16,749 (2020: NOK 14,712). Both schemes had 2,116 members in 2021 (2020: 1,992). Board of directors Chair NOK 556,000 per year Director NOK 283,000 per year Audit committee Chair NOK 74,000 per year Member NOK 48,000 per year Remuneration committee Chair NOK 34,000 per year Member NOK 23,000 per year 9 Other operating expenses Figures are stated in NOK 1,000 2021 2020 Leasing and other cost of premises 83,703 88,054 Transport/distribution 246,047 196,293 Marketing and other expenses 412,999 350,447 Total 742,750 634,794 Leasing and other cost of premises relates to variable lease payments, in addition to payments for short-term leases and low-value assets. 86 The tax on the group’s pre-tax prot differs from the theoretical amount which would arise from using the weighted average tax rate applicable to the prots of the consolidated entities as follows. 10 Financial income and expenses 11 Income tax expense Financial expenses: Interest to nancial institutions 26,304 33,253 Leasing interest cost 72,702 92,245 Other interest expense 92 10 Amortised interest on bank loan 2,450 6,075 Other nancial expenses 21,201 18,893 Total 122,749 150,476 Net nancial income (expense) (94,395) (139,068) Figures are stated in NOK 1,000 2021 2020 Financial income: Other interest income 102 181 Other nancial income 2,373 36 Gain in fair value of nancial instruments – Unrealised interest-rate swap income 25,880 11,191 Total 28,354 11,408 Figures are stated in NOK 1,000 2021 2020 Tax payable Current tax on prot for the year 321,941 251,872 Tax from acquired companies 2,117 7 Total tax payable in the balance sheet 324,057 251,879 Deferred tax Change in temporary differences 47,631 (26,948) Change in temporary differences related to mergers and acquisitions (58,100) 558 Total deferred tax (10,469) (26,390) Total income tax expense 313,588 225,489 Figures are stated in NOK 1,000 2021 2020 Prot before tax 1,417,551 1,029,112 Tax calculated at domestic tax rates applicable to prots (22%) 311,861 226,405 Tax effects from: - Non-taxable income (15,898) (4,617) - Non-deductible expenses 1,019 7,527 - Other directly recognised differences 16,605 (3,826) Tax expense recognised in the income statement 313,588 225,489 Effective tax rate 22,1% 21,9% 87 2021 2020 The analysis of deferred tax assets and deferred tax liabilities is as follows Deferred tax assets - Deferred tax assets to be recovered later than 12 months (15,276) (16,648) - Deferred tax assets to be recovered within 12 months (79,980) (65,011) Deferred tax assets (95,257) (81,659) Deferred tax liabilities - Deferred tax liabilities to be recovered later than 12 months 137,430 92,924 - Deferred tax liabilities to be recovered within 12 months - - Deferred tax liabilities 137,430 92,924 Loss carried forward (12) (12) Deferred tax related to directly recognised differences 10,170 (6,552) Unrecognised deferred tax asset - 25 Deferred tax liabilities (net) 52,332 4,726 Deferred tax asset/liability rates 22% 22% Change in deferred tax liabilities recognised in the balance sheet Balance at 01.01 4,726 31,763 Change during the year recognised in the income statement 47,606 (27,038) Balance at 31.12 52,332 4,726 Specication of change in deferred tax liabilities/tax assets Figures are stated in NOK 1,000 Tangible xed assets Non- current debt Total Deferred tax liabilities Balance at 01.01.2020 103,826 1,759 105,584 Recognised deferred tax in prot for the period (11,983) (677) (12,660) Balance at 31.12.2020 91,843 1,082 92,924 Balance at 01.01.2021 91,843 1,082 92,924 Recognised deferred tax in prot for the period 44,824 (319) 44,505 Balance at 31.12.2021 136,667 763 137,430 Figures are stated in NOK 1,000 Inventories Receivables Provision for other liabilities Loss carried forward Total Deferred tax assets Balance at 01.01.2020 (64,521) (401) (6,185) (12) (71,118) Recognised deferred tax in prot for the period (71) (19) (10,463) - (10,553) Balance at 31.12.2020 (64,592) (420) (16,648) (12) (81,671) Balance at 31.12.2021 (64,592) (420) (16,648) (12) (81,671) Recognised deferred tax in prot for the period (14,968) (1) 1,371 - (13,598) Balance at 31.12.2021 (79,560) (421) (15,276) (12) (95,269) 88 Figures are stated in NOK 1,000 Software Trademark Contractual rights Goodwill Total Financial year 2020 Carrying amount at 01.01.2020 45,699 387,573 - 1,611,397 2,044,669 Additions 31,908 - - 6,334 38,242 Amortisation (19,578) - - - (19,578) Carrying amount at 31.12.2020 58,030 387,573 - 1,617,731 2,063,334 At 31.12.2020 Acquisition cost 215,572 411,352 250,700 1,617,731 2,495,355 Accumulated amortisation (157,542) (23,779 ) (172,356) - (353,677) Accumulated impairment - - (78,344) - (78,344) Net carrying amount 31.12.2020 58,030 387,573 - 1,617,731 2,063,334 Financial year 2021 Carrying amount at 01.01.2021 58,030 387,573 - 1,617,731 2,063,334 Additions through the acquisition of subsidiaries 2 203,694 - 455,641 659,337 Additions 32,490 - - - 32,490 Amortisation (25,100) - - - (25,100) Carrying amount at 31.12.2021 65,421 591,267 - 2,073,373 2,730,061 At 31.12.2021 Acquisition cost 237,887 622,140 250,700 2,073,373 3,184,099 Accumulated amortisation (172,466 ) (30,873) (172,356) - (375,695) Accumulated impairment - - (78,344) - (78,344) Net carrying amount 31.12.2021 65,421 591,267 - 2,073,373 2,730,061 12 Intangible assets The group’s trademarks is linked to the brand names ”Europris” and ”Lekekassen”. The ”Europris” name has existed for a long time and has shown a healthy development since its origination. The ”Lekekassen” name is a strong brand which is linked to the online store Lekekassen - Norway’s largest online toy store. There are clear intentions to retain and further develop both brand names for the forseeable future. As a conse- quence, the brand names are not depreciated, but tested for impairment annually. The contractual rights are related to franchise agree - ments. Goodwill comprises a number of elements which individually cannot be quantied. Most signicant is the well positioned business and the established reputation in the market. The skilled workforce, as well as supplier and customer relations (non-contractual), are also important elements. Impairment testing of goodwill and trademarks Goodwill and the trademarks are annually tested for impairment by comparing their carrying amount and recoverable amount (greater of fair value less costs to sell and value in use). Goodwill is allocated to the groups of cash-generating units which are expected to benet from the synergies of the combination. The group has one operating segment and goodwill is tested for impair- ment at this level, which represents the lowest level in the entity at which goodwill is monitored for internal management purposes. The recoverable amount of a cash-generating unit is calculated on the basis of the value which the asset will provide to the business (value in use). In this calculation, the forecasts of future cash ows are based on budgets and long-term plans approved by the management covering a ve-year period (2022-2026). The gross margin is stable in the period, and in range with the 89 historical performance. EBITDA percentages of sales are also stable in the 2022-2026 period. Cash ows beyond the ve-year period are calculated using the expected ination rate as a long-term growth rate. A market-based rate of return of 7.6 per cent (5.5 per cent in 2020) before tax is derived using the weighted average cost of capital (WACC) model. Lekekassen was acquired in 2021 and is dened as a separate cash-generating unit and the brand name Lekekassen will be tested for impairment at this level. The recoverable amount is signicantly above the carrying amount of the group’s goodwill and trademarks. 13 Property, plant and equipment Figures are stated in NOK 1,000 Land Buildings Fixtures and ttings Total Financial year 2020 Carrying amount at 01.01.2020 24,966 - 313,396 338,362 Financial leases (IAS 17) reclassied to leases IFRS 16 - - (14,102) (14,102) Additions through the acquisition of subsidiaries - - 2,605 2,605 Additions - - 72,242 72,242 Disposals - - (1,974) (1,974) Depreciation charge for the year - - (70,767) (70,767) Carrying amount at 31.12.2020 24,966 - 301,400 326,366 At 31.12.2020 Accumulated cost 24 966 - 839,921 864,887 Accumulated depreciation - - (538,512) (538,512) Net carrying amount 31.12.2020 24 966 - 301,400 326,366 Financial year 2021 Carrying amount at 01.01.2021 24,966 - 301,400 326,366 Additions through the acquisition of subsidiaries 21,224 118,776 3,787 143,787 Additions - 2,823 95,627 98,450 Disposals - - (176) (176) Depreciation charge for the year - (2,237) (72,118) (74,355) Carrying amount at 31.12.2021 46,190 119,362 328,520 494,072 At 31.12.2021 Accumulated cost 46,190 121,599 752,714 920,502 Disposals at cost - - (176) (176) Accumulated depreciation - (2,237) (424,018) (426,254) Net carrying amount 31.12.2021 46,190 119,362 328,520 494,072 90 14 Leases Figures are stated in NOK 1,000 Buildings Vehicles Fixtures and ttings Total Right-of-use assets Carrying amount at 01.01.2021 2,146,047 16,753 99,754 2,262,554 Additions 412,855 3,522 9 408 425,784 Additions through the acquisition of subsidiaries 18,242 - - 18,242 Adjustments (CPI) 85,210 - - 85,210 Depreciation (451,505) (4,842) (15,422) (471,769) Terminations - - - - Net carrying amount 31.12.2021 2,210,848 15,433 93,741 2,320,022 Lease liabilities 2021 2020 Carrying amount at 01.01. 2,324,300 2,418,081 Additions 425,129 267,302 Additions through the acquisition of subsidiaries 18,242 12,300 Adjustments (CPI) 85,210 27,212 Interest expense 72,702 90,560 Lease payments (521,864) (491,156) Net carrying amount 31.12. 2,403,718 2,324,300 Undiscounted lease liabilities and maturity of cash outows Less than one year 518,195 485,890 One-ve years 1,470,243 1,386,091 More than ve years 697,832 731,221 Total undiscounted lease liabilities at 31.12. 2,686,269 2,603,201 Lease expenses recognised in consolidated income statement Interest expense on lease liabilities 72,702 90,560 Variable lease payments 3,258 4,663 Operating expenses related to short-term leases 12,120 20,827 Operating expenses related to low-value assets 1,415 1,596 Payments in lease agreements 538,657 518,242 Current lease liabilities 490,164 473,739 Non-current lease liabilities 1,913,555 1,850,561 Total lease liabilities at 31.12. 2,403,718 2,324,300 91 Practical expedients applied The group also leases smaller machinery and equipment with contract terms of 1 to 3 years. The group has elected to apply the practical expedient of low value assets for some of these leases and does not recognise lease liabilities or right-of-use assets. The leases are instead expensed when they incur. The group has also applied the practical expedient to not recognise lease liabilities and right-of-use assets for short-term leases, presented in the table above. Variable lease payments In addition to the lease liabilities above, the group is committed to pay variable lease payments for some of their leases. The variable lease payments are expensed as incurred. Extension options The lease term represents the non-cancellable period of the lease together with periods covered by an option to extend the lease if the lessee is reasonably certain to excercise that option. Generally it is not considered reasonable certain that extension options will be exercised. Typically, lease contracts are renegotiated at the end of the non-cancellable period, and a new contract is entered into on better terms, in the form of both shorter duration and lower rent. This means that extension options in the lease contracts are not normally included in the IFRS 16 calculation. There are no indications of a need for impairment of right-of-use assets in 2021. 15 Acquisitions of companies On 30 June 2021, the group acquired 67 per cent of Lekekassen Holding AS (Lekekassen) – Norway’s largest player in online shopping for toys. Through this acquisition, Europris entered a strategically important product category and strengthened its expertise in e-commerce. Lekekassen is one of the fastest growing online retailers in Norway and entered the Swedish market with the ToySpace.se brand in May 2019 and Denmark with ToySpace.dk in September 2021. Synergies are expected from joint sourcing and development of products and services. Through this acquisition Europris will also improve its product offering, both in physical stores and online, with access to an improved and broader range of well-known brands within the toy category. The remaining 33 per cent of Lekekassen Holding AS is owned by Andreas Skalleberg through his company Andrino Invest AS. Andreas Skalleberg is employed as CEO of Lekekassen. Europris has a right and obligation to buy Skalleberg’s share if Skalleberg’s employment is terminated by either of the parties. The price to be paid is based on a multiple of EBITDA, and is consistent with the price formula used in the original purchase of 67 per cent. A nancial liability has been recognised for Europris obligation to purchase Skalleberg’s share if Skalleberg resignes, with a corresponding charge directly to shareholders equity. The liability shall be estimated at the present value of the redemption amount, which is estimated to the consideration to be paid if the employment is terminated at period end. In the statement of nancial position, the liability is recognised separately as put option liability. In March 2021, Europris acquired 67 per cent of the online player Lunehjem.no. Lunehjem.no is a pure e-commerce player established in 2005 which specialises in the high-growth interior segment. It offers a large selection of products in furniture, candles and interiors, with an emphasis on Scandinavian design. The acquisition contributes to revenue growth in a strategically important product category with strong online growth. It also provides attractive positioning towards younger and more quality-conscious customer segments. In addition, the acquisition will strengthen Europris’ expertise in online shopping. 92 Goodwill comprises a number of elements which individually cannot be quantied. Most signicant is the well positioned business and the established reputation in the market. The skilled workforce, as well as supplier and customer relations (non-contractual), are also important elements. 16 Investments in associated companies In June 2018, the group acquired 20 per cent of Runsvengruppen AB (ÖoB), a Swedish discount variety retailer. ÖoB has its headquarters in Skänninge and runs 93 stores across Sweden. The Europris group owns 20 per cent of the shares and voting rights in Runsvengruppen AS. Based on equity value, using a xed multiple of 7.7 on adjusted EBITDA for ÖoB in 2018, the purchase price was determined as NOK 115.2 million. NOK 4.3 million in transaction expenses has also been recognised as part of the acquisition cost, bringing the total investment to NOK 119.5 million. The vendor note issued when closing the deal is converted to 4,349,695 Europris shares, corresponding to 2.61 per cent of the share capital. Acquired companies Acquisitions Allocation of excess values After acquisition date Figures in NOK million Date of control Ownership and voting rights Acquisition cost Buildings Trademarks Deferred tax Goodwill Operating income Net prot Lekekassen Holding AS August 2021 67% 501 26 204 (51) 448 395 64 Lunehjem.no AS March 2021 67% 10 - - - 8 28 3 Both acquisitions are paid in cash. Acquired companies statement of nancial position Total fair value Total intangible assets 204 Total xed assets 160 Total nancial assets - Inventories 174 Receivables 12 Cash 95 Total assets 646 Provisions (51) Non-current liabilities (112) Current liabilities (165) Non-controlling interests (269) Net assets 48 Goodwill 456 Net asset acquired 31.12.2021 504 93 Figures in SEK million 2021 2020 Unaudited Audited Total operating income 3,899.0 4,186.0 Prot for the year NA 1�9 Current assets NA 847�1 Non-current assets NA 1,170.6 Current liabilities NA 740�0 Non-current liabilities NA 893�1 Equity NA 384�6 Book value 01.01 128�5 125�9 Estimated prot for the period 0�2 2�6 Book value 31.12 128.7 128.5 The group's share of equity 77�1 78�7 Goodwill 49�8 49�8 Goodwill adjustment 1�8 - Book value 31.12 128.7 128.5 A summary of the nancial information from Runsvengruppen AB group, based on 100 per cent gures: Europris holds an option to acquire the remaining 80 per cent of the shares in Runsvengruppen AB. Whether the option is to be exercised has been further delayed. The fair value of the option is considered immaterial and is not recognised in the balance sheet. 94 Figures are stated in NOK 1,000 2021 2020 Changes in non-controlling interests Non-controlling interests 01.01 - - Increase due to acquisitions in companies with non-controlling interests 246,528 - Non-controlling interests’ share of prot/loss 22,152 - Non-controlling interests 31.12 268,680 - Breakdown of non-controlling interests' share of prot/loss Lunehjem.no AS 1,086 - Lekekassen Holding AS 21,067 - Total non-controlling interests' share of prot/loss 22,152 - Breakdown of non-controlling interests Lunehjem.no AS 1,812 - Lekekassen Holding AS 266,868 - Total non-controlling interests 268,680 - 17 Non-controlling interests 18 Earnings per share Earnings per share are calculated by dividing prot attributable to ordinary shareholders by a weighted average of ordinary shares outstanding during the period. The average number of shares outstanding was adjusted to take account of the holding of treasury shares. Figures are stated in NOK 1,000, except per share amounts 2021 2020 Prot for the period 1,103,963 803,624 Prot available to holders of ordinary shares 1,081,811 803,624 Number of ordinary shares 166,969 166,969 Weighted average of ordinary shares outstanding 160,870 165,189 Earnings per ordinary share (basic) 6.72 4.86 Earnings per ordinary share (diluted) 6.72 4.86 95 Figures are stated in NOK 1,000 2021 2020 Trade receivables Trade receivables 216,080 195,887 Provision for impairment (600) (600) Net trade receivables 215,480 195,287 - Other receivables Unbilled receivables 38,242 48,267 Prepaid expenses 215 47 Other receivables 5,784 2,200 Other receivables 44,241 50,514 Provisions 60,816 37,302 Total 320,538 283,103 - Non-current receivables Deposits and loans to franchisees 28,391 28,179 Other receivables 28,391 28,179 Total current and non-current receivables 348,929 311,282 The carrying amount of trade receivables, prepayments and other receivables is assessed as not differing materially from fair value. Figures are stated in NOK 1,000 2021 2020 Provision for impairment of trade receivables At 01�01 600 600 Change in provision - - At 31.12 600 600 Ageing of trade receivables Not due 206,870 190,946 Due 8,610 4,342 Total 215,480 195,287 19 Trade receivables and other receivables Accounts receivable older than 90 days constituted an insignicant portion of overdue items at 31.12. This applies to both years. 96 Figures are stated in NOK 1,000 2021 2020 Inventories 2,025,769 1,669,210 - Provision for obsolescence (28,457) (35,283) Booked value 1,997,312 1,633,927 Provision for obsolescence At 01�01 (35,283) (32,171) Change in accruals 6,826 (3,112) Provision for impairment at 31.12 (28,457) (35,283) Carrying amount of inventory which has been impaired 323,854 404,865 The group makes provisions for impairment of inventory. These provisions are estimated and require in-depth knowledge of the goods and market conditions. See more details in note 3.1.a. Figures are stated in NOK 1,000 2021 2020 Cost of goods sold 4,638,884 4,494,243 Foreign exchange currency effects (46,741) 39,891 Net cost of goods sold 4,592,143 4,534,134 Figures are stated in NOK 1,000 2021 2020 Cash 570,286 540,056 Total 570,286 540,056 Figures are stated in NOK 1,000 2021 2020 Cash 567,347 539,780 Bank deposits restricted for employee tax witholdings 2,939 276 Net cash 570,286 540,056 21 Cash Unrealised gains and losses are classied as part of the cost of goods sold (COGS) in the prot or loss statement. Similarly, unrealised foreign currency exchange gains and losses on inventory trade payables are also included as part of COGS. All gains and losses, both realised and unrealised, related to the acquisition of inventory are included as part of COGS� Net cash in the consolidated statement of cash ows includes the following The group has established a guarantee for employee tax withholdings of a total of NOK 65 million. The group has overdraft facilities of NOK 1,425 million in all. See note 23 for further information. 20 Inventories and cost of goods sold 97 22 Share capital and shareholder information The share capital of Europris is NOK 166,968,888, consisting of 166,968,888 shares with a par value of NOK 1. The company’s share capital consists of one class of shares, where all shares have the same voting rights. Major shareholders at 31 December 2021 Number of shares Share of capital FOLKETRYGDFONDET 19,590,839 11�7% VERDIPAPIRFONDET ALFRED BERG GAMBA 6,554,850 3�9% THE BANK OF NEW YORK (ARCTIC FUNDS) Nominee 6,448,013 3�9% EUROPRIS ASA 5,997,376 3�6% RUNOR AS 4,349,695 2�6% STATE STREET BANK AND TRUST COMPANY Nominee 3,974,302 2�4% VERDIPAPIRFONDET STOREBRAND NORGE 3,164,738 1�9% STATE STREET BANK AND TRUST COMPANY Nominee 3,130,774 1�9% SKANDINAVISKA ENSKILDA BANKEN AB Nominee 2,850,000 1�7% VERDIPAPIRFONDET HOLBERG NORDEN 2,400,000 1�4% THE BANK OF NEW YORK MELLON Nominee 2,377,257 1�4% VERDIPAPIRFONDET ALFRED BERG NORGE 2,250,716 1�3% BROWN BROTHERS HARRIMAN & CO Nominee 2,250,000 1�3% THE NORTHERN TRUST COMPANY, LONDON Nominee 2,139,800 1�3% THE BANK OF NEW YORK MELLON Nominee 2,129,606 1�3% VPF DNB AM NORSKE AKSJER 2,036,069 1�2% VEVLEN GÅRD AS 2,000,000 1�2% STATE STREET BANK AND TRUST COMPANY Nominee 1,969,350 1�2% SKANDINAVISKA ENSKILDA BANKEN AB Nominee 1,926,927 1�2% VERDIPAPIRFONDET HOLBERG NORGE 1,900,000 1�1% OTHER SHAREHOLDERS 87,528,576 52�4% Total shares 166,968,888 100.0% Shares held by directors, CEO and CFO Title Number of shares Tom Vidar Rygh (directly and indirectly through Retiro AS) Chair 610,035 Pål Wibe (Nordkronen II AS) Director 408,572 Karl Svensson (directly and indirectly through RuNor AS) Director 281,891 Tone Fintland Director 10,808 Hege Bømark Director 8,129 Claus Juel-Jensen Director 7,112 Espen Eldal (directly and indirectly through Knipen AS) CEO 610,528 Stina C Byre CFO 10,528 98 Other non-current liabilities Lease liabilities 1,913,555 1,913,555 1,850,561 1,850,561 Sub-total 1,913,555 1,913,555 1,850,561 1,850,561 Total 3,005,075 3,013,544 2,845,643 2,850,561 The amortised cost of the bank debt is assessed as not differing materially from fair value. The term loan has been renanced in 2020, and the risk premium and the interest-rate margin would not be materially changed. Fair value is therefore assumed to be approximately equal to the carrying amount at the balance sheet date. The group’s business risk and credit risk have not changed signicantly in the period. Treasury shares have been deducted from equity at cost. The nominal value of the shares has been deducted from paid-in capital. Average cost price for treasury shares is NOK 44.47. Treasury shares at 31 December 2021 Nominal value Number of shares Fair value (NOK) Shares owned by Europris ASA 5,997,376 5,997,376 419,666,386 Change in number of treasury shares Treasury shares 1 January 2021 6,150,305 Buy-back of treasury shares 1,111 Sale of treasury shares to employees (85,099) Sale of treasury shares to senior execuitives and directors (68,941) Treasury shares 31 December 2021 5,997,376 23 Bank borrowings The group signed a new loan agreement in December 2019 and the nancing was in place in January 2020. The new loan agreement is a three-year term loan and revolving credit facility agreement with options for one plus one year. One option period is already expired and was not exercised, while the second option to extend for one year has been exercised and the loan agreement runs until January 2024. The loan is syndicated through three credit institutions: DNB Bank, Danske Bank and Nordea. 2021 2020 Figures are stated in NOK 1,000 Amortised cost Nominal value Amortised cost Nominal value Non-current liabilities Debt to nancial institutions 1,091,521 1,099,989 995,082 1,000,000 Sub-total 1,091,521 1,099,989 995,082 1,000,000 99 Covenants are measured and reported quarterly. In the bank agreement, the covenant (leverage ratio) will be at 3.25 for any test date in the remainder of the agreement period. The group was in compliance with nancial convenants in 2021. Figures are stated in NOK 1,000 2021 2020 Current liabilities First-year instalment non-current debt 5,000 - Overdraft facilities - off-balance sheet The loan facility includes an overdraft facility, which consists of Overdraft and multi-currency group account 225,000 200,000 Revolving facility loan 1,174,000 1,174,000 Guarantees 26,000 26,000 Total 1,425,000 1,400,000 Drawn guarantees 14,544 14,029 Undrawn overdraft facilities 1,410,456 1,385,971 Convenants related to bank agreement At 31.12.2021 Leverage ratio – net debt/adjusted EBITDA (according to the bank agreement) 3�25 Europris leverage ratio – net debt/adjusted EBITDA (according to the bank agreement) 0�34 See note 2.3 for the maturity structure of all nancial liabilities. No assets are currently pledged under the loan agreement. Maturity structure including interest 2021 2020 Within one year 30,225 22,000 One to two years 114,672 22,000 Two to ve years 1,022,000 1,017,082 After ve years - - Effective interest rate at 31.12 2021 2020 Term loan 2�04% 2�20% 100 24 Derivatives Figures are stated in NOK 1,000 2021 2020 Interest-rate swaps – expiring within one year - - Interest-rate swaps – expiring after ve years 37,676 11,796 Total derivatives - asset 37,676 11,796 Forward exchange contracts – expiring within one year 2,940 41,580 Total derivatives - liability 2,940 41,580 Net derivative asset (liability) 34,736 (29,784) Amount in NOK 1,000 Average exchange rate Termination Nominal principal forward contracts to purchase (USD) 466,399 8�64 Jan-May 2022 Nominal principal forward contracts to purchase (EUR) 105,803 10�12 Jan-May 2022 2021 2020 Lowest xed interest rate in interest-rate swap agreement 0�780% 0�780% Highest xed interest rate in interest-rate swap agreement 0�917% 0�917% Nominal principal in interest-rate swaps 600,000 600,000 Forward exchange contracts The group faces currency risk arising from purchases in foreign currencies. The group hedges currency uctua- tions by entering into forward exchange contracts. The group does not use hedge accounting. Forward exchange contracts are measured at fair value through prot and loss. Interest rate swaps The group has entered into interest-rate swap agreements of a total of NOK 600 million to hedge part of its interest-rate risk uctuations. Of these contracts, NOK 300 million expires in June 2027 and NOK 300 million in June 2030. With these contracts 60 per cent of the principal of the group’s bank loans is presently hedged. The group does not use hedge accounting. The interest-rate swaps are measured at fair value through prot and loss. 101 25 Financial instruments by category Figures are stated in NOK 1,000 2021 2020 Financial assets measured at amortised cost Non-current receivables 28,391 28,179 Trade receivables 215,480 195,287 Other receivables 44,241 50,514 Cash 570,286 540,056 Financial liabilities measured at amortised cost Non-current debt (1,091,521) (995,082) First year instalment non-current debt (5,000) - Accounts payable (843,854) (742,753) Put option liability (246,528) - Other current payables (780,402) (704,300) Assets/liabilities measured at fair value through prot and loss Derivatives - asset 49,169 11,796 Derivatives - liability (2,940) (41,580) Net nancial instruments (2,062,676) (1,657,882) All the group’s nancial instruments measured at fair value are classied as level 2. Level 2 consists of nancial instruments with no quoted prices in active markets for identical assets or liabilities which are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 2 assets and liabilities are measured by using valuation methods. These valuation methods utilise observed data and the group’s own estimates. If all signicant data required to measure the fair value of an instrument is observable data, then the instrument is classied as level 2. Special valuation methods which are being used to value nancial instruments include: - fair value of interest-rate swaps is measured as the net present value of estimated future cash ows based on the observable yield curve - fair value of forward exchange contracts is measured as the net present value of the difference between the contractual forward rate and the forward rate of the currency at the balance-sheet date, multiplied by the contractual volume in foreign currency. 102 26 Reconciliation of liabilities arising from nancing activities 27 Related parties The group’s related parties include its associates, key management personnel, directors and major shareholders. All subsidaries included in note 1.3 are related parties of Europris ASA. For management remuneration, refer to note 7 – Management remuneration. No signicant transactions were conducted with related parties in 2021. 28 Contingent liabilities There are no signicant contingent liabilities at 31.12.2021. 29 Events after the balance-sheet date There were no subsequent events after the balance sheet date and before the date of the approval of the nancial statements which provide new information about conditions which existed at the balance sheet date which are not currently reected in the nancial statements, or signicant events after the balance sheet date which require further disclosures. Figures are stated in NOK 1,000 Financial liabilities 01.01. Acquisition of subsidiaries Cash ows Leases Other changes Total 31.12 2021 Borrowings 995,082 102,553 (3,750) - 2,636 1,096,521 Current liabilities - - - - - - Lease liabilities 2,324,300 18,242 (449,162) 510,339 - 2,403,718 Financial liabilities 3,319,382 120,795 (452,912) 510,339 2,636 3,500,239 2020 Borrowings - - 1,000,000 - (4,918) 995,082 Current liabilities 1,642,007 - (1,651,675) - 9,668 - Lease liabilities 2,432,361 - (401,218) 306,814 (13,658) 2,324,300 Financial liabilities 4,074,368 (1,052,893) 306,814 (8,908) 3,319,382 Non-cash changes 103 EUROPRIS ASA PARENT COMPANY 2021 104 Figures are stated in NOK 1,000 Note 2021 2020 Total operating income - - Employee benets expense 2 2,869 2,111 Other operating expenses 2 9,754 7,152 Total operating expenses 12,623 9,263 Operating income (12,623) (9,263) Group contribution from subsidiary 5 659,264 702,172 Other interest income 1 393 Other nancial income - 4 Total nancial income 659,265 702,569 Other interest expense 1,813 3,764 Other nancial expenses 5,583 4,542 Total nancial expenses 7,397 8,306 Net nancial income (expenses) 651,868 694,263 Prot/(loss) from associated company 4 189 2 600 Prot before income tax 639,434 687,600 Income tax expense 6 - - Prot for the year 639,434 687,600 Statement of comprehensive income Prot for the year 639,434 687,600 Other comprehensive income - - Total comprehensive income for the year 639,434 687,600 Notes 1 to 10 are an integral part of the nancial statements. Income statement 105 Figures are stated in NOK 1,000 Note 31-12-2021 31-12-2020 ASSETS Non-current assets Investments in subsidiaries 3 925,500 925,500 Investment in associated companies 4 128,676 128,487 Total non-current assets 1,054,176 1,053,987 Current assets Receivable from group companies 5, 9 668,275 702,172 Other receivables 9 606 933 Cash 9 - 2 Total current assets 668,880 703,108 Total assets 1,723,056 1,757,095 Notes 1 to 10 are an integral part of the nancial statements. Balance sheet 106 Figures are stated in NOK 1,000 Note 31-12-2021 31-12-2020 EQUITY AND LIABILITIES Equity Share capital and share premium 212,623 212,471 Other paid-in capital 20,718 17,476 Other equity 1,486,081 1,276,979 Total shareholders' equity 1,719,422 1,506,925 Liabilities Current liabilities Accounts payable 9 1,061 853 Tax payable 6 - - Current debt to group companies 5,9 - 246,698 Other current liabilities 4,9 2,573 2,617 Total liabilities 3,634 250,169 Total equity and liabilities 1,723,056 1,757,095 Notes 1 to 10 are an integral part of the nancial statements. Balance sheet Fredrikstad, 24 March 2022 THE BOARD OF DIRECTORS OF EUROPRIS ASA Claus Juel-Jensen Karl Svensson Espen Eldal CEO Tom Vidar Rygh Chair Hege Bømark Tone Fintland Pål Wibe Bente Sollid Storehaug 107 In accordance with sections 9-4 and 9-5 of the Norwegian Public Limited Liability Companies Act, the board is mandated to acquire the company’s own shares on specic conditions. See note 7 for details of treasury shares. Figures are stated in NOK 1,000 Share capital Treasury shares Share premium Other paid-in capital Retained earnings Total Equity 01.01.2021 166,969 (6,150) 51,652 17,475 1,276,977 1,506,923 Prot for the period - - - - 639,434 639,434 Dividend - - - - (434,207) (434,207) Net purchase/sale of treasury shares - 153 - 3,243 3,874 7,270 Other comprehensive income - - - - - - Equity 31.12.2021 166,969 (5,997) 51,652 20,718 1,486,080 1,719,422 Equity 01.01.2020 166,969 (1,150) 51,652 17,475 1,152,264 1,387,210 Prot for the period - - - - 687,600 687,600 Dividend - - - - (323,346) (323,346) Net purchase/sale of treasury shares - (5,000) - - (239,539) (244,539) Other comprehensive income - - - - - - Equity 31.12.2020 166,969 (6,150) 51,652 17,475 1,276,977 1,506,923 Notes 1 to 10 are an integral part of the nancial statements. Statement of changes in equity 108 Figures are stated in NOK 1,000 2021 2020 Cash ows from operating activities Prot before income tax 639,434 687,600 Share of the (prot)/loss of associates (189) (2,600) Change in account payable 208 537 Change in other working capital (658,981) (701,656) Net cash from operating activities (19,529) (16,119) Cash ows from nancing activities Change in group cash pool deposits (255,292) 253,400 Payments from group companies (417) 417 Payments of group contribution 702,172 330,189 Dividend (434,207) (323,346) Sale/buy-back of treasury shares 7,270 (244,539) Net cash from nancing activities 19,526 16,120 Net increase in cash (2) - Cash at beginning of year (01.01) 2 2 Cash at end of year (31.12) - 2 Notes 1 to 10 are an integral part of the nancial statements. Statement of cash flows 109 Europris ASA is the parent company of the Europris group, consisting of Europris Holding AS and subsidi- aries� The nancial statements of Europris ASA have been prepared in accordance with the simplied IFRS pursuant to section 3-9 of the Norwegian Accounting Act and the directive on simplied IFRS issued by the Norwegian Ministry of Finance on 21 January 2008. The board approved the nancial statements on 24 March 2022. 1.1 Simplied IFRS The company has applied the following simplica- tions to the IFRS recognition and measurement principles: • IFRS 1 First-time adoption of IFRS no 7 regarding use of continuity of historical acquisition cost of investments in subsidiaries • dividends and group contributions are recognised as income in the same year as the dividend or group contribution is recognised in the nancial statements of the group company which pays the dividend or group contribution, in accordance with Norwegian generally accepted accounting principles. 1.2 Basis of preparation The nancial statements have been prepared in accordance with the historical cost convention. The company has applied the going concern assumption when preparing its nancial statements. 1.3 Investment in associates The company has investments in associates. Associates are entities over which the company has signicant inuence, but not control over nancial and operating management. The considerations made in determining whether the company has signicant inuence over an entity are similar to those necessary to determine control over subsidiaries� Associates are accounted for using the equity method from the date when signicant inuence is achieved until such inuence ceases. Investments in an associate are initially recognised at cost. The contingent consideration is included in cost and changes in estimated contingent consideration will be recognised as an adjustment of cost. The carrying amount of the investment is adjusted to recognise changes in the company’s share of the net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not tested for impair- ment individually. The statement of prot or loss reects the company’s share of the results of operations of the associate. In addition, when there has been a change recognised directly in the equity of the associate, the company recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the company and the associate are eliminated to the extent of the interest in the associate. If there are indications that the investment in the associate is impaired, the company will perform an impairment test of the carrying amount of the investment. Any impairment losses are recognised as share of prot of an associate in the statement of prot or loss. If the company’s share of the loss surpasses the carrying amount of the associate, the carrying amount is set to zero and further loss is not recognised unless the company has an obligation to make up for the loss. Upon loss of signicant inuence over the associate, such that the equity method ceases to apply, the company measures and recognises any retained investment at its fair value. A new measurement of remaining ownership interests will not be performed if the equity method is still applicable. 1.4 Revenue recognition Group contributions and dividends received from subsidiaries are recognised as income if the amount is within the net income of the subsidiary after the acquisition date. Group contributions and dividends which exceed the net income of the subsidiary after the acquisition date are recognised as a reduction of the carrying value of the subsidiary. When recognising income, the gross group contribution (before tax) is presented on a separate line in the income statement. Note 1 Accounting principles 110 Group contributions to subsidiaries from the company increase the carrying value of the investment. Group contributions to subsidiaries are recognised net, after tax. 1.5 Current and deferred income tax Tax expense for the period comprises current and deferred tax. Deferred tax/deferred tax asset is recog- nised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the nancial statements. Deferred income tax assets are recognised only to the extent that it is probable that future taxable prot will be available against which the temporary differences can be utilised. The company recognises previously deferred tax assets to the extent that it has become probable that the company can utilise the deferred tax asset. Similarly, the company will reduce deferred tax assets to the extent that the company no longer considers it probable that it can utilise the deferred tax asset� Deferred tax liabilities and deferred tax assets are measured on the basis of the anticipated future tax rate relating to items where the temporary difference has arisen. Deferred tax liabilities and deferred tax assets are recognised at nominal value and are classied as xed assets (non-current liabilities) in the balance sheet. Current tax and deferred tax are recognised directly in equity to the extent that the tax items relate to equity transactions or changes in accounting principles. 1�6 Cash Cash includes cash in hand and bank deposits. 1.7 Provisions Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable (more likely than not) that an outow of economic resources will be required from the company, and amounts can be estimated reliably. If the effect is material, provisions are calculated by discount- ing the expected future cash ows at a pre-tax discount rate which reects current market assessments of the time value of money and, if relevant, the risks specic to the liability. A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and an assessment of all possible outcomes and the accompanying proba - bilities. 1.8 Contingent liabilities and assets A contingent liability is recorded in the books of accounts only if the contingency is probable and the amount of the liability can be estimated. In cases where the possible outow of economic resources as a result of present obligations is considered improbable or remote, no liability is disclosed. A contingent asset is not recognised in the nancial statements, but disclosed if it is probable that the benet will ow to the company. 1.9 Subsequent events New information after the reporting date regarding the company’s nancial position at the reporting date is taken into consideration in the nancial statements. Events after the reporting date which do not affect the company’s nancial position at the reporting date, but which will affect the nancial position of the company in the future, are disclosed if they are considered to be signicant. 111 Note 2 Employees, pensions and remuneration to auditor The company has no employees. As a result, it has no obligation to have a pension scheme according to the Norwegian Act on mandatory occupational pensions. No salaries or other remunerations have been paid to the CEO. Compensation for directors is stipulated at NOK 2,869 in 2021. There are no obligations to pay the directors a settlement in the event of a termination of service. No loans or guarantees have been provided for any related parties. Note 3 Investments in subsidiaries Investments in subsidiaries are stated at acquisition cost and accounted for using the cost method. Figures are stated in NOK 1,000 2021 2020 Audit fees, divided by type of service (exclusive VAT) Statutory audit 373 186 Technical services related to nancial reporting 38 647 Total audit fees 410 833 Figures are stated in NOK 1,000 Registered ofce Ownership share Equity 31.12.2021 Net prot 2021 Carrying value Subsidiary Europris Holding AS Fredrikstad 100% 1,502,177 8,174 925,500 112 Europris holds an option to acquire the remaining 80 per cent of the shares in Runsvengruppen AB. Whether the option is to be exercised has been further delayed. The fair value of the option is considered immaterial and is not recognised in the balance sheet. Note 4 Investments in associated companies In June 2018, the group acquired 20 per cent of Runsvengruppen AB (ÖoB), a Swedish discount variety retailer. ÖoB has its headquarters in Skänninge and runs 93 stores across Sweden. The Europris group owns 20 per cent of the shares and voting rights in Runsvengruppen AS. Based on equity value, using a xed multiple of 7.7 on adjusted EBITDA for ÖoB in 2018, the purchase price was determined as NOK 115.2 million. NOK 4.3 million in transaction expenses has also been recognised as part of the acquisition cost, bringing the total investment to NOK 119.5 million. The vendor note issued when closing the deal is converted to 4,349,695 Europris shares, corresponding to 2.61 per cent of the share capital. A summary of the nancial information from Runsvengruppen AB group, based on 100 per cent gures: Figures are stated in SEK million 2021 2020 Unaudited Audited Total operating income 3,899.0 4,186.0 Prot for the year NA 1�9 Current assets NA 847�1 Non-current assets NA 1,170.6 Current liabilities NA 740�0 Non-current liabilities NA 893�1 Equity NA 384�6 Book value 01.01 128�5 125�9 Estimated prot for the period 0�2 2�6 Book value 31.12 128.7 128.5 The group's share of equity 77�1 78�7 Goodwill 49�8 49�8 Goodwill adjustment 1�8 - Book value 31.12 128.7 128.5 113 Note 5 Non-current liabilities and receivables to group companies Liabilities and receivables to group companies is included with the following amounts: Note 6 Income tax expense Liabilities and receivables to group companies is included with the following amounts: Figures are stated in NOK 1,000 2021 2020 Liabilities Debt in the group's cash pool agreement - 246,281 Other current debt to subsidiaries - 417 Total liabilities - 246,698 Receivables Group contribution 659,264 702,172 Deposits in the group's cash pool agreement 9,011 - Total receivables 668,275 702,172 Figures are stated in NOK 1,000 2021 2020 Basis for income tax expense and tax payable Prot before tax 639,434 687,600 Non-deductible expenses (639,434) (687,600) Basis for the tax expense - - Reconciliation of the income tax expense Tax payable (22% of the basis for tax payable in the income statement) 140,675 151,272 Income tax expense - - Difference (140,675) (151,272) Difference consists of: 22% of non-deductible expenses (140,675) (151,272) Total explained difference (140,675) (151,272) Tax payable in the balance sheet Tax payable in income tax expense - - Tax payable in balance sheet - - 114 Note 7 Share capital and shareholder information The share capital of Europris ASA is NOK 166,968,888, consisting of 166,968,888 shares with par value of NOK 1. The company’s share capital consists of one class of shares, whereby all shares have the same voting rights. Major shareholders at 31 December 2021 Number of shares Share of capital FOLKETRYGDFONDET 19,590,839 11�7% VERDIPAPIRFONDET ALFRED BERG GAMBA 6,554,850 3�9% THE BANK OF NEW YORK (ARCTIC FUNDS) Nominee 6,448,013 3�9% EUROPRIS ASA 5,997,376 3�6% RUNOR AS 4,349,695 2�6% STATE STREET BANK AND TRUST COMPANY Nominee 3,974,302 2�4% VERDIPAPIRFONDET STOREBRAND NORGE 3,164,738 1�9% STATE STREET BANK AND TRUST COMPANY Nominee 3,130,774 1�9% SKANDINAVISKA ENSKILDA BANKEN AB Nominee 2,850,000 1�7% VERDIPAPIRFONDET HOLBERG NORDEN 2,400,000 1�4% THE BANK OF NEW YORK MELLON Nominee 2,377,257 1�4% VERDIPAPIRFONDET ALFRED BERG NORGE 2,250,716 1�3% BROWN BROTHERS HARRIMAN & CO Nominee 2,250,000 1�3% THE NORTHERN TRUST COMPANY, LONDON Nominee 2,139,800 1�3% THE BANK OF NEW YORK MELLON Nominee 2,129,606 1�3% VPF DNB AM NORSKE AKSJER 2,036,069 1�2% VEVLEN GÅRD AS 2,000,000 1�2% STATE STREET BANK AND TRUST COMPANY Nominee 1,969,350 1�2% SKANDINAVISKA ENSKILDA BANKEN AB Nominee 1,926,927 1�2% VERDIPAPIRFONDET HOLBERG NORGE 1,900,000 1�1% OTHER SHAREHOLDERS 87,528,576 52�4% Total shares 166,968,888 100.0% Shares held by directors, CEO and CFO Title Number of shares Tom Vidar Rygh (directly and indirectly through Retiro AS) Chair 610,035 Pål Wibe (Nordkronen II AS) Director 408,572 Karl Svensson (directly and indirectly through RuNor AS) Director 281,891 Tone Fintland Director 10,808 Hege Bømark Director 8,129 Claus Juel-Jensen Director 7,112 Espen Eldal (directly and indirectly through Knipen AS) CEO 610,528 Stina C Byre CFO 10,528 115 Treasury shares at 31 December 2021 Nominal value Number of shares Fair value (NOK) Shares owned by Europris ASA 5,997,376 5,997,376 419,666,386 Figures are stated in NOK 1,000 2021 2020 Financial assets measured at amortised cost Other current receivables 668,880 703,106 Cash - 2 Financial liabilities measured at amortised cost Other current liabilities - (249,316) Accounts payable (1,061) (853) Net nancial instruments 667,819 452,939 Change in number of treasury shares Treasury shares 01�01�2021 6,150,305 Buy-back of treasury shares 1,111 Sale of treasury shares (85,099) Sale of treasury share to senior execuitives and directors (68,941) Treasury shares 31.12.2021 5,997,376 Note 8 Transactions with related parties Information regarding salaries of senior executives is disclosed in note 2. Information on intercompany receivables and liabilities is disclosed in note 5. No material transactions were conducted with related parties in 2021 other than the information included in the notes. Note 10 Subsequent events There were no subsequent events after the balance sheet date and before the date of the approval of the nancial statements which provide new information about conditions which existed at the balance sheet date which are not currently reected in the nancial statements), or signicant events after the balance sheet date which require further disclosures. Note 9 Financial instruments by category Treasury shares have been deducted from equity at cost. The nominal value of the shares has been deducted from paid-in capital. Average cost price for treasury shares is NOK 44.47. 116 Europris head ofce in Fredrikstad. 117 Responsibility statement We conrm, to the best of our knowledge, that the nancial statements for the period 1 january to 31 December 2021 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, nancial position and prot and loss of the entity and the group taken as a whole. We also conrm that the directors’ report includes a true and fair view of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group. Declaration to the annual report 2021 Fredrikstad, 24 March 2022 THE BOARD OF DIRECTORS OF EUROPRIS ASA Claus Juel-Jensen Karl Svensson Espen Eldal CEO Tom Vidar Rygh Chair Hege Bømark Tone Fintland Pål Wibe Bente Sollid Storehaug 118 APMs are used by Europris for annual and periodic nancial reporting in order to provide a better under- standing of the group’s nancial performance. APMs are considered as well-know and frequently used by users of the nancial statements and are also used in internal reporting and by management to measure operating performance. Gross prot / gross margin Gross prot is dened as Total operating income minus the cost of goods sold (COGS). The gross prot represents revenue that the group retains after incurring the direct costs associated with the purchase of the goods. Gross margin is dened as gross prot divided by total revenue and is useful for benchmarking direct costs associated with the purchase of the goods vs total revenues. Opex Operating expenses (Opex) is the sum of employee benets expense and other operating expenses. It is useful to look at cost of these two components combined, as they compose a large part of the xed operating costs. The Opex-to-sales ratio divides the Opex by Total operating income and is useful for benchmarking this cost base vs the development in sales. EBITDA / EBITDA margin EBITDA is earnings before interests, tax, depreciation of property, plant and equipment and right-of-use assets and amortisation of other intangibles. EBITDA is a well-known and widely used term among users of the nancial statements and is useful when evaluating operational efciency on a more variable cost basis as they exclude amortisation and depreciation expense related to capital expenditure. EBITDA margin is EBITDA divided by Total operating income and is useful for benchmarking this protability parameter vs the development in sales. EBIT EBIT is earnings before interest and taxes and is the same as the IFRS denition of operating prot. EBIT is a well-known and widely used term among the users of the nancial statements and is useful when evaluating operational protability. EBIT margin is EBIT divided by Total operating income, and thus the same as Operating prot divided by Total operating income. Working capital Working capital is the sum of inventories and trade receivables and other receivables less the sum of accounts payable and other current liabilities. Net change in working capital is the change in the mentioned parameters; i.e., net change in working capital is the sum of change in inventories and trade receivables and change in other receivables less the sum of change in accounts payable and other current liabilities. Net change in working capital is a well-known and widely used term among the users of the nancial statements and is useful for measuring the group’s liquidity, operational efciency and short-term nancial conditions. Capital expenditure Capital expenditure (Capex) is the sum of purchases of xed assets and intangible assets as used in the cash ow. Capex is a well-known and widely used term (Amounts in NOK million) FY 2021 FY 2020 Employee benets expense 1,230 1,138 + Other operating expenses 743 635 = OPEX 1,973 1,173 Opex-to-sales ratio 22�8% 21�1% (Amounts in NOK million) Definitions of Alternative Performance Measures (APM) FY 2021 FY 2020 Change in Inventory (185) (64) Change in accounts receivable and other current receivables (17) (41) Change in accounts payable and other current debt 139 315 Decrease/(increase) in nancial assets at fair value through prot og loss (76) 17 Net change in working capital (139) 227 (Amounts in NOK million) FY 2021 FY 2020 Operating prot 1,512 1,166 + Depreciation 571 540 = EBITDA 2,083 1,706 EBITDA margin 24�1% 21�3% (Amounts in NOK million) FY 2021 FY 2020 Total operating income 8,648 8,013 - Cost of goods sold 4,592 4,534 = Gross prot 4,056 3,478 Gross margin 46�9% 43�4% 119 among the users of the nancial statements and is a useful measure of investments made in the operations when evaluating the capital intensity. Financial debt Financial debt is the sum of borrowings and lease liabilities. Financial debt is useful to see total debt as dened by IFRS. Cash and liquidity reserves Cash liquidity reserves is dened as available cash plus available liquidity through overdraft and credit facilities. This measure is useful to see total funds available short term. Equity ratio Equity ratio is a nancial ratio indicating the relative proportion of equity used to nance a company’s assets; calculated as equity divided by total assets. Equity ratio is a well-known and widely used term among the users of the nancial statements and is useful when evaluating nancial robustness. Total chain sales Total chain sales are sales from all chain stores, that is both directly operated and franchise stores. This KPI is an important measure of the performance of the total Europris chain and considered useful in order to under- stand the development of the entire chain, regardless of ownership structure of stores. Denition of other terms used Directly operated store Directly operated store means a store owned and directly operated by the group. Franchise store Franchise store means a store operated by a franchisee under a franchise agreement with the group. Chain Chain means the sum of directly operated stores and franchise stores under the Europris brand name. Like-for-like sales growth Like-for-like growth is dened as the growth in total Europris chain sales for stores that have been open for every month of both the previous and the current calendar year. FY 2021 FY 2020 Sales directly operated stores 7,438 7,240 Sales franchise stores 1,131 1,148 = Total chain sales 8,569 8,388 (Amounts in NOK million) Definitions of Alternative Performance Measures (APM) FY 2021 FY 2020 Purchases of xed asets 98 72 Purchases of intangible assets 32 32 = Capital expenditure 131 104 (Amounts in NOK million) FY 2021 FY 2020 Borrowings 1,092 995 Current borrowings 5 - Lease liabilities 1,914 1,851 = Financial debt 3,010 2,846 (Amounts in NOK million) FY 2021 FY 2020 Cash 570 540 + Total facilities 1,425 1,400 - Total drawn (15) (14) = Cash and liquidity reserves 1,981 1,926 (Amounts in NOK million) FY 2021 FY 2020 Total shareholder´s equity 2,889 2,214 Total assets 8,639 7,248 = Equity ratio 33.4% 30.4% (Amounts in NOK million) 120 BDO AS Munkedamsveien 45 Postboks 1704 Vika 0121 Oslo Independent Auditor's Report Europris ASA - 2021 Page 1 of 5 Independent Auditor's Report To the General Meeting in Europris ASA Report on the Financial Statements Opinion We have audited the financial statements of Europris ASA. The financial statements comprise: • The financial statements of the parent company, which comprise the balance sheet as at 31 December 2021, income statement, statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and • The financial statements of the group, which comprise the balance sheet as at 31 December 2021, and income statement, statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion: • The financial statements comply with applicable statutory requirements, • The accompanying financial statements give a true and fair view of the financial position of the company as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act. • The accompanying financial statements give a true and fair view of the financial position of the group as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by laws and regulations and International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. BDO AS Munkedamsveien 45 Postboks 1704 Vika 0121 Oslo Independent Auditor's Report Europris ASA - 2021 Page 1 of 5 Independent Auditor's Report To the General Meeting in Europris ASA Report on the Financial Statements Opinion We have audited the financial statements of Europris ASA. The financial statements comprise: • The financial statements of the parent company, which comprise the balance sheet as at 31 December 2021, income statement, statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and • The financial statements of the group, which comprise the balance sheet as at 31 December 2021, and income statement, statement of comprehensive income, statement of changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion: • The financial statements comply with applicable statutory requirements, • The accompanying financial statements give a true and fair view of the financial position of the company as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act. • The accompanying financial statements give a true and fair view of the financial position of the group as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by laws and regulations and International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. 121 Independent Auditor's Report Europris ASA - 2021 Page 2 of 5 We have been the auditor of Europris ASA for 6 years from the election by the general meeting of the shareholders on May 13, 2016 for the accounting year 2016. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. 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. Description of the key audit matter How the key audit matter was addressed in the audit Valuation of inventory Inventory amounts to NOK 1 997 million in the Financial Statements for 2021. We refer to note 20 for more information on provisions for impairment on inventory. Inventory is measured at the lower of cost and net realisable value. When determining the provisions for impairment on inventory, judgements are applied to assess the items which may be ultimately sold below cost due to reduced customer demand, and in estimating the net realisable value of these items. Different categories are assessed individually and are subject to specific provisions for impairment based on information of historical and statistical sales data. These assessments are also based on management’s expectations for future sales. The complexity and the judgements involved has led us to define this as a high risk area for the audit. We have reviewed management’s policy for assessing the impairment of inventory and that management applies the impairment policies consistently year on year. We have also reviewed the documentation of obsolescence for both inventory in stores and in central warehouse, and evaluated the assumptions used, for reasonableness. We have also tested the arithmetical accuracy of the Group’s calculation of the profit margin on older goods. Our audit procedures included observing the stocktaking in a selection of stores and reviewing internal controls and procedures as well as performing re-counts. We have also tested internal controls and procedures related to stocktaking at the central warehouse. In addition, we have tested the calculation of cost of goods sold. Valuation of intangible assets Intangible assets include goodwill and trademark, amounting to NOK 2 073 million and NOK 591 million respectively. We refer to note 12 for more information. Under IFRS, the Group is required to test the amount of intangible assets for impairment annually. The impairment test was significant to our audit due to the complexity of the assessment process and the significant judgements and assumptions involved. The impairment test is Our audit procedures included, among others, reviewing management’s documentation of the group’s impairment assessment for intangible assets. We have reviewed the methodology used and assessed the WACC against the criteria in IAS 36. We have also compared the cash-flows used in the impairment test with the Group’s budget and business plan and considered if there are factors indicating that these estimates are not realistic. We have also tested the arithmetical 122 Independent Auditor's Report Europris ASA - 2021 Page 3 of 5 based on a value in use calculation for defined cash generating units. Value in use is calculated based on a pre-tax free cash flow and discounted with a pre-tax WACC. accuracy of the calculations in the impairment test. We have involved our internal valuation experts to assist us in evaluating the assumptions and methodologies applied by the Group. Purchase price allocation The group acquired 67% of the shares in Lekekassen Holding AS and 67% of the shares in Lunehjem.no AS during 2021. The total purchase price amounts to NOK 511 million in the Financial Statements of 2021. We refer to note 15 for more information. Under IFRS, the Group is required to allocate the purchase price to the identified assets and liabilities acquired. The purchase price allocation was significant to our audit due to the complexity involved in identifying all relevant assets and liabilities, and the significant judgements and assumptions involved in measuring the fair value of assets at the acquisition date. Our audit procedures included, among others, reviewing management’s documentation of the purchase price allocation. We have reviewed the methodology used and assessed the purchase price allocation against the criteria in IFRS 3. We have reviewed an external valuation related to the excess value for buildings. Moreover, we have assessed the relief from royalty valuation method applied by management for measuring fair value of trademarks. Our assessment included, among others, an assessment of forecasted cash flows, of royalty rate applied and of WACC discount rate used. We have also tested the arithmetical accuracy of the calculations in the purchase price allocation. We have involved our internal valuation experts to assist us in evaluating the assumptions and methodologies used by the Group. Other information The Board of Directors and the Managing Director (management) is responsible for the other information. The other information comprises the Board of Directors’ report and other information in the Annual Report, but does not include the financial statements and our auditor’s report thereon. The other information in the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Board of Directors. Independent Auditor's Report Europris ASA - 2021 Page 3 of 5 based on a value in use calculation for defined cash generating units. Value in use is calculated based on a pre-tax free cash flow and discounted with a pre-tax WACC. accuracy of the calculations in the impairment test. We have involved our internal valuation experts to assist us in evaluating the assumptions and methodologies applied by the Group. Purchase price allocation The group acquired 67% of the shares in Lekekassen Holding AS and 67% of the shares in Lunehjem.no AS during 2021. The total purchase price amounts to NOK 511 million in the Financial Statements of 2021. We refer to note 15 for more information. Under IFRS, the Group is required to allocate the purchase price to the identified assets and liabilities acquired. The purchase price allocation was significant to our audit due to the complexity involved in identifying all relevant assets and liabilities, and the significant judgements and assumptions involved in measuring the fair value of assets at the acquisition date. Our audit procedures included, among others, reviewing management’s documentation of the purchase price allocation. We have reviewed the methodology used and assessed the purchase price allocation against the criteria in IFRS 3. We have reviewed an external valuation related to the excess value for buildings. Moreover, we have assessed the relief from royalty valuation method applied by management for measuring fair value of trademarks. Our assessment included, among others, an assessment of forecasted cash flows, of royalty rate applied and of WACC discount rate used. We have also tested the arithmetical accuracy of the calculations in the purchase price allocation. We have involved our internal valuation experts to assist us in evaluating the assumptions and methodologies used by the Group. Other information The Board of Directors and the Managing Director (management) is responsible for the other information. The other information comprises the Board of Directors’ report and other information in the Annual Report, but does not include the financial statements and our auditor’s report thereon. The other information in the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Board of Directors. 123 Independent Auditor's Report Europris ASA - 2021 Page 4 of 5 Opinion on the Board of Director’s report Based on our knowledge obtained in the audit, in our opinion the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable legal requirements. Our opinion on the Board of Director’s report applies correspondingly for the statements on Corporate Governance and Corporate Social Responsibility. Responsibilities of the Board of Directors and the Managing Director for the Financial Statements Board of Directors and the Managing Director (management) are responsible for the preparation of financial statements that give a true and fair view, for in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act, and for the preparation and fair presentation of the financial statements of the group in accordance with International Financial Reporting Standards as adopted by the EU, 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 Company’s and the Group'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 Company or Group 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 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. For further description of Auditor’s Responsibilities for the Audit of the Financial Statements reference is made to: https://revisorforeningen.no/revisjonsberetninger Report on compliance with Regulation on European Single Electronic Format (ESEF) Opinion We have performed an assurance engagement to obtain reasonable assurance that the financial statements with file name 5967007LIEEXZXGA8G28-2021-12 -31-en.zip have been prepared in accordance with Section 5-5 of the Norwegian Securities Trading Act (Verdipapirhandelloven) and the accompanying Regulation on European Single Electronic Format (ESEF). In our opinion, the financial statements have been prepared, in all material respects, in accordance with the requirements of ESEF. 124 This document has been electronically signed, and therefore does not contain a handwritten signature. Independent Auditor's Report Europris ASA - 2021 Page 5 of 5 BDO AS, a Norwegian liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Management’s Responsibilities Management is responsible for preparing, tagging and publishing the financial statements in the single electronic reporting format required in ESEF. This responsibility comprises an adequate process and the internal control procedures which management determines is necessary for the preparation, tagging and publication of the financial statements. Auditor’s Responsibilities For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger BDO AS 24 March 2022 Roger Telle-Hansen State Authorised Public Accountant (This document is signed electronically) Independent Auditor's Report Europris ASA - 2021 Page 5 of 5 BDO AS, a Norwegian liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Management’s Responsibilities Management is responsible for preparing, tagging and publishing the financial statements in the single electronic reporting format required in ESEF. This responsibility comprises an adequate process and the internal control procedures which management determines is necessary for the preparation, tagging and publication of the financial statements. Auditor’s Responsibilities For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger BDO AS Roger Telle-Hansen State Authorised Public Accountant (This document is signed electronically) 125 Europris ASA was listed on the Oslo Stock Exchange in 2015. The share price closed year-end 2021 at NOK 69.98, which implies a market value of NOK 11.7 billion. The highest share price was NOK 70.50 and the lowest was NOK 47.14 in 2021. An ordinary dividend of NOK 2.20 per share and an additional dividend of NOK 0.50 per share to reect the strong nancial performance, was paid out in May 2021. Europris ASA had 12,395 registered shareholders in the Norwegian Central Securities Depository (VPS) at 31 December 2021. The company’s shareholders are located in 25 different countries together with Norway. About 97 per cent of the company’s shareholders are based in Norway, while 61 per cent of the shares are registered to foreign shareholders. Analyst coverage 10 equity analysts have covered Europris ASA in 2021: Financial calendar Europris publishes its quarterly result 07:00 am CET. The report and presentation will be available at the company’s web page and at Oslo Børs’ Newsweb. Share information Number of shares 166,968,888 Nominal value per share NOK 1�00 Ticker at Oslo Børs EPR ABG Sundal Collier Petter Nystrøm Andreas Lundberg [email protected] [email protected] Arctic Securities Carl Frederick Bjercke [email protected] Carnegie Eirik Rafdal [email protected] DNB Markets Ole Martin Westgaard Erik Lundby [email protected] [email protected] Handelsbanken Capital Markets Nicklas Skogman [email protected] Kepler Cheuvreux Markus Borge Heiberg [email protected] Nordea Kristoffer Pedersen [email protected] Pareto Securities Gard Aarvik [email protected] SEB Markus Bjerke Stefan Nelson [email protected] [email protected] Sparebank 1 Markets Øyvind Mossige [email protected] 21 April 2022 Annual General Meeting 28 April 2022 First quarter 2022 14 July 2022 Second quarter 2022 03 November 2022 Third quarter 2022 80 70 60 50 40 30 20 10 0 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec EPR share price development 2021 Shareholders information 126 Notes 127 Europris ASA Dikeveien 57, P O Box 1421 NO-1661 Rolvsøy Switchboard: +47 971 39 000 email: [email protected] www.europris.no 5967007LIEEXZXGA8G282021-01-012021-12-315967007LIEEXZXGA8G282020-01-012020-12-315967007LIEEXZXGA8G282021-12-315967007LIEEXZXGA8G282020-12-315967007LIEEXZXGA8G282020-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXGA8G282021-01-012021-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXGA8G282021-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXGA8G282020-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXGA8G282021-01-012021-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXGA8G282021-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXGA8G282020-12-31ifrs-full:SharePremiumMember5967007LIEEXZXGA8G282021-01-012021-12-31ifrs-full:SharePremiumMember5967007LIEEXZXGA8G282021-12-31ifrs-full:SharePremiumMember5967007LIEEXZXGA8G282020-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXGA8G282021-01-012021-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXGA8G282021-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXGA8G282020-12-31EUR:RetainedEarningsAndOtherReservesMember5967007LIEEXZXGA8G282021-01-012021-12-31EUR:RetainedEarningsAndOtherReservesMember5967007LIEEXZXGA8G282021-12-31EUR:RetainedEarningsAndOtherReservesMember5967007LIEEXZXGA8G282020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXGA8G282021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXGA8G282021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXGA8G282020-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXGA8G282021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXGA8G282021-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXGA8G282019-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXGA8G282020-01-012020-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXGA8G282019-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXGA8G282020-01-012020-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXGA8G282019-12-31ifrs-full:SharePremiumMember5967007LIEEXZXGA8G282020-01-012020-12-31ifrs-full:SharePremiumMember5967007LIEEXZXGA8G282019-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXGA8G282020-01-012020-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXGA8G282019-12-31EUR:RetainedEarningsAndOtherReservesMember5967007LIEEXZXGA8G282020-01-012020-12-31EUR:RetainedEarningsAndOtherReservesMember5967007LIEEXZXGA8G282019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXGA8G282020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember5967007LIEEXZXGA8G282019-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXGA8G282020-01-012020-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXGA8G282019-12-31iso4217:NOKiso4217:NOKxbrli:shares

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