Festi - Audit Report / Information 2021

Untitled

Consolidated Financial

Statements 2021

This is a translation of the Icelandic original. In the event of discrepancies

between the Icelandic language version and any translation thereof,

the icelandic languagge version will prevail.

Festi hf. | Dalvegi 10-14 | 201 Kópavogi | Iceland | Reg. no. 540206-2010

Page

Appendices - unaudited:

Non-Financial Information ......................................................................................................................................

Statement of Corporate Governance .....................................................................................................................

Quarterly Statement ...............................................................................................................................................

Contents

Endorsement and Statement by the Board of Directors and the CEO ...................................................................

Independent Auditors' Report .................................................................................................................................

Notes ......................................................................................................................................................................

Statement of Profit or Loss and Other Comprehensive Income .............................................................................

Statement of Financial Position ..............................................................................................................................

Statement of Changes in Equity .............................................................................................................................

Statement of Cash Flows .......................................................................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Board of Directors and Corporate Governance

Operations of the Group

Endorsement and Statement by the Board of Directors and the CEO

Festi owns and operates companies which are leading in the food market, fuel and service station market and electronic equipment and

smart devices market. Operation of properties, purchase and sale of securities are also part of the operations of the Group.

The parent company Festi (“the Company”) owns the subsidiaries Krónan, which operates grocery stores under the names Krónan and Kr,

N1, which operates service stations for fuel and electricity sales and various facilities related to lubrication and motor vehicle services,

ELKO, which is the largest electronic equipment store in the country, Festi fasteignir, which owns and operates the Group’s properties, and

Bakkinn vöruhótel, which specialises in warehouse services and distribution.

The Board of Directors of Festi has established rules of procedure whereby it endeavours to comply with the "Guidelines on corporate

governance" issued by the Iceland Chamber of Commerce, NASDAQ OMX Iceland and the Confederation of Icelandic Employers, which

was issued in revised edition on 1 July 2021. The guidelines are accessible on the website www.leidbeiningar.is.

Þórður Már Jóhannesson, the former Chairman of the Board of Directors of the Company, resigned from the Board of Directors on 6

January 2022. Following the resignation, the Board of Directors divided the duties among its members and Guðjón Reynisson succeeded

as Chairman. The Annual General Meeting will be held in March 2022 and until then the Board of Directors will comprise four members,

three females and one male. According to the Articles of Association, the members of the Board of Directors should be five. Further

information about the Board of Directors and corporate governance is provided in the Statement of Corporate Governance, which is an

appendix to the annual financial statements.

The Group´s operating revenue for the year 2021 amounted to ISK 101,052 million (2020: ISK 87,918 million) and increased by 14.9%

between years. Operating profit before depreciation, amortisation and changes in value for the year 2021 amounted to ISK 10,118 million

(2020: ISK 7,057 million) and increased by 43.3% between years. According to the statement of profit or loss and other comprehensive

income, the profit for the year amounted to ISK 4,972 million (2020: ISK 2,266 million) and total comprehensive income for the year ISK

6,557 million (2020: ISK 2,481 million). The Company´s equity at year-end amounted to ISK 33,910 million (2020: ISK 29,784 million),

including share capital in the nominal value of ISK 316 million. Reference is made to the statement of changes in equity regarding changes

in equity during the year. The Company´s equity ratio at year-end was 39.4% (2020: 35.7%).

In connection with the publication of its annual financial statements for the year 2020, the Company released on 24 February 2021 an

earnings forecast for the year 2021, where projected EBITDA was ISK 7,500 – 7,900 million. The actual EBITDA amounted to ISK 10,118

million, which is considerably better than the amount assumed in the earnings forecast. Increased business activities of all subsidiaries

explain the better earnings but also optimisation was achieved in various areas, which resulted in lower operating costs. Also, it was not

assumed in the initial earnings forecast a gain on sale of assets in the amount of ISK 569 million and a profit from oil and currency hedges

in the amount of ISK 598 million, which are recognised in the annual financial statements.

The full-time equivalent number of employees was 1,176 and the gender ratio (male/female) was 61/39. An increase in demand in global

markets and difficulties in important supply chains have lead to a shortage in product supply and higher prices in the last semesters, which

will increase inflation, which is a matter of concern. Festi has a strong financial position and the Company is well prepared to address the

challenges ahead.

The Company's Board of Directors proposes that a dividend of ISK 5 per share of nominal value will be paid during the year 2022 or

approximately ISK 1,581 million.

Operations in 2021

The effect of COVID-19 on operations during the year

The COVID-19 pandemic had a significant effect on the operations of the Group during the year. Sales increased significantly in the market

for convenience goods and electronic equipment while the sale of fuel and refreshments in the Company’s service stations around the

country was less than in a normal year due to fewer tourists. The Group’s entities did not utilise the governmental support schemes relating

to participation in salary expenses during the term of notice for layoffs, due to decrease in employment ratio or other measures which were

offered.

It is the Board’s and management opinion that the Group is well prepared to address the circumstances relating to the COVID-19

pandemic. Management believes that the Company has the strength to reach its financial goals regarding profit and growth in the future.

Further information about the effect on the Company’s operations is provided in the appendix to the annual financial statements on non-

financial information.

Consolidated Annual Financial Statements of Festi hf. 2021

Share Change

Share capital capital from

in thousands of ISK in % 2020 in %

46.500

14,7% 4,2%

33.474

10,6% -1,0%

31.100

9,8% -0,3%

20.430

6,5% 3,3%

18.592

5,9% -0,1%

15.219

4,8% -0,1%

14.862

4,7% -2,0%

14.038

4,4% -2,4%

11.459

3,6% 0,0%

9.263

2,9% 0,1%

8.156

2,6% -0,9%

8.024

2,5% -0,3%

7.613

2,4% 0,1%

5.777

1,8% 1,8%

6.101

1,9% -0,1%

5.646

1,8% 0,8%

5.313

1,7% 0,7%

5.000

1,6% 0,2%

5.000

1,6% 1,6%

3.999

1,3% -1,6%

275.566

87,2% 4,4%

40.552

12,8% -4,4%

316.118

100,0%

Brú, lífeyrissjóður starfsmanna sveitarfélaga .................................................................................

Shareholders

Lífeyrissjóður starfsmanna Reykjavíkurborgar ..............................................................................

Stormtré ehf. ..................................................................................................................................

Frjálsi lífeyrissjóðurinn ...................................................................................................................

Festa - lífeyrissjóður .......................................................................................................................

Stapi lífeyrissjóður ..........................................................................................................................

Landsbréf .......................................................................................................................................

Sjóvá-Almennar tryggingar hf. .......................................................................................................

Lífsverk lífeyrissjóður .....................................................................................................................

Sjávarsýn ehf. ................................................................................................................................

Stefnir .............................................................................................................................................

Other shareholders ........................................................................................................................

Brekka Retail ehf ...........................................................................................................................

Endorsement and Statement by the Board of Directors and the CEO, contd.

The Company´s shareholdes at the end of the year were 1,037, compared to 880 at the beginning of the year and thus their number

increased by 157 during the year. Following are the Company's 20 largest shareholders at year-end:

The Company’s listed share capital amounted to ISK 324 million at the end of the year and it was decreased by ISK 9 million during the year

by redemption of treasury shares. Outstanding at year-end 2021 were ISK 316 million (2020: ISK 323 million). All share capital is in one

class and all shareholders enjoy the same rights. At the Company’s Annual General Meeting on 22 March 2021 the Company was granted

authorisation to repurchase up to 10% of the nominal amount of outstanding shares in accordance with Chapter VIII of the Act no. 2/1995

on Limited Liability Companies. The company purchased a total of 7 million shares during the year, about 2,2% of outstanding share capital,

further in note 22. The company purhcased a total of ISK 7 million shares or 2.2% of the outstanding share capitalThe authorisation is

valid for up to 18 months. By approving this proposal, a similar authorisation was cancelled, which was approved at the Company’s Annual

General Meeting on 23 March 2020. An extension for this authorisation will be requested at the Company’s Annual General Meeting next

March.

Those who intend to run for election for the Board of Directors of the Company must notify so in writing to the Board of Directors with at

least five days notice before the beginning of the Annual General Meeting. The Company's Articles of Association can only be amended

with the approval of 2/3 of votes cast in a lawfully called shareholders' meeting, provided that the intended amendment is thoroughly

mentioned in the agenda for the meeting and what it consists of.

Festi hf. is a public interest entity. According to the Act on Annual Accounts, the Company shall provide information necessary to assess its

development, scope, position and influence in relation to environmental, social and personnel matters, its human rights policies, how it

counteracts corruption and briberies in addition to a concise description of its business model, and more. In order to describe the current

status of its social responsibilities the Company has for the past few years issued a GRI G4 "Core" report on social responsibilities. Starting

from the year 2018 a report has been issued on non-financial parameters in accordance with Nasdaq´s ESG guidelines, among other

things, in order to enable Festi to assess its standing on these matters as a Group, based on accepted standards. The policies and results

of the Company with respect to those matters are described in the appendix to the annual financial statements on non-financial information.

Kjálkanes ehf. ................................................................................................................................

Non-financial information

Hlutafé og samþykktir

Söfnunarsjóður lífeyrisréttinda .......................................................................................................

Íslandsbanki hf. ..............................................................................................................................

Birta lífeyrissjóður ..........................................................................................................................

Lífeyrissjóður verslunarmanna .......................................................................................................

Lífeyrissjóður starfsmanna ríkisins A -, B - og S - deild .................................................................

Almenni lífeyrissjóðurinn ................................................................................................................

Gildi - lífeyrissjóður ........................................................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Guðjón Karl Reynisson, Chairman

Margrét Guðmundsdóttir, Vice-Chairman

Kristín Guðmundsdóttir

Þórey G. Guðmundsdóttir

Eggert Þór Kristófersson

CEO

Board of Directors of Festi hf.

Kópavogur, 9 February 2022.

Statement by the Board of Directors and the CEO

Endorsement and Statement by the Board of Directors and the CEO, contd.

The Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as

adopted by the European Union and, as applicable, additional requirements of the Act on Annual Accounts.

According to the best of our knowledge, in our opinion the consolidated annual financial statements give a true and fair view of the

operating performance of the Group for the year 2021, its assets, liabilities and financial position as at 31 December 2021, and changes in

cash and cash equivalents during the year 2021.

Furthermore, in our opinion the consolidated annual financial statements and the statement and endorsement of the Board of Directors and

the CEO give a true and fair view of the development and results of the Group´s operations, its standing and describes the main risk factors

and uncertainty that the Group faces.

The Board of Directors and the CEO of Festi hf. have today discussed the Company's consolidated annual financial statements for the year

2021 and confirm them by means of their signatures. The Board of Directors and the CEO propose that the Annual General Meeting of the

Company approves the consolidated annual financial statements.

Consolidated Annual Financial Statements of Festi hf. 2021

To the Board of Directors and Shareholders of Festi hf.

Opinion

Basis for Opinion

Key Audit Matters

Key Audit Matters How the matter was addressed in our audit

Impairment of goodwill and trademarks

• Reviewed of variances from previous years budget.

• Assessed the discount rate for each unit.

No impairment loss has been recognized for intangible

assets. The trademark is amortized over 20 years.

Further information about goodwill and trademarks can

be found in notes 12 and 13 in the Consolidated Financial

Statement.

• We reviewed whether the methodology used in the

impairment test was in accordance with International

Financial Reporting Standards (IFRSs) and assessed the

adequacy of the disclosures for goodwill and trademarks.

Goodwill amounts to ISK 14.7 billion and the trademarks

of Krónan and Elko amount to ISK 3.4 billion.

In our audit of the valuation of goodwill and trademarks,

we and our valuation experts have examined the

company’s management impairment test. We examined

the methodology used in the impairment test and its

consistency with prior year. In our audit of the impairment

test, we performed the following work:

The value of goodwill and trademarks for the grocery and

electronic stores depend on key assumptions applied by

the management on estimated future cash flow of cash-

generating units, and other assumptions applied in the

discounting rate used in the valuation of the estimated

cash flow. The value of other goodwill depends on

management’s assumptions on fair value.

• Assessed the company’s valuation model and its

reliability.

• Assessed the assumptions in the management’s budget

that are used in calculations in the impairment test and

whether they are appropriate.

Goodwill and trademarks are significant items in the

consolidated balance sheet and depend on

management’s estimation and judgements. Due to the

importance of the valuation and its magnitude, we

consider goodwill and trademarks as key audit matter.

• Reviewed of assumptions for expected future growth

after the forecast period.

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the

Consolidated Financial Statements of the current period. These matters were addressed in the context of our audit of the

Consolidated Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate

opinion on these matters.

INDEPENDENT AUDITOR’S REPORT

We have audited the Consolidated Financial Statements of Festi hf. for the year ended December 31, 2021 which

comprise the statement of comprehensive income, the consolidated statement of financial position, the consolidated

statement of changes in equity, the consolidated statement of cash flows for the year then ended and the notes to the

consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying Consolidated Financial Statements give a true and fair view of the consolidated financial

position of Festi hf. as at December 31, 2021, and its consolidated financial performance and its consolidated cash flows

for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and

additional requirements in the Icelandic Financial Statement Act.

Our opinion in this report on the consolidated financial statements is consistent with the content of the additional report that

has been submitted to the parent company´s audit committee in accordance with the EU Audit Regulation 537/2014 Article

11.

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 consolidated Financial Statements

section of our report. We are independent of Festi hf. in accordance with the International Ethics Standards Board for

Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are

relevant to our audit of the financial statements in Iceland, and we have fulfilled our other ethical responsibilities in

accordance with these requirements and the IESBA Code. This includes that, based on the best of our knowledge and

belief, no prohibited services referred to in the EU Audit Regulation 537/2014 Article 5.1 has been provided to the audited

company or, where applicable, its parent company or its controlled companies within the EU . We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters How the matter was addressed in our audit

Valuation of real estate

Other information

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Revaluation of the Company’s real estate is dependent

on the management’s assessment of the assumptions in

the expected future cash flow and other assumptions

used in discounting the estimated future cash flow. As the

real estate are significant item in the company’s balance

sheet and its valuation is based on management

estimation, we consider real estate as key audit matter.

• We assessed the company’s policies and processes

concerning revaluation.

• We have examined the valuation methodology was in

accordance with IFRS.

• We assessed whether the notes include all necessary

information in accordance with accounting policies.

Further information regarding real estate, we refer to note

14 and 16 in the Consolidated Financial Statements.

Management is responsible for the other information. The other information consists of the Endorsement and statement by

the board of directors and the CEO, non-financial reporting, quarterly statements and corporate governance statement,

which an appendix to the Consolidated Financial Statement.

Our opinion on the Consolidated Financial Statements does not cover the other information and we do not express any

form of assurance conclusion thereon, except the confirmation regarding the Endorsement and statement by the board of

directors and the CEO as stated below.

In connection with our audit of the Consolidated 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.

In accordance with Paragraph 2 article 104 of the Icelandic Financial Statement Act no. 3/2006, we confirm to the best of

our knowledge that the accompanying report of the board of directors includes all information required by the Icelandic

Financial Statement Act that is not disclosed elsewhere in the Consolidated Financial Statements.

Management is responsible for the preparation and fair presentation of the Consolidated Financial Statements in

accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and additional requirements in

the Icelandic Financial Statement Act, and for such internal control as management determines is necessary to enable the

preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the Consolidated Financial Statements, management is responsible for assessing Festi hf.’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 to cease operations, or has no realistic

alternative but to do so. Those charged with governance are responsible for overseeing the Festi hf.’s financial reporting

process.

Real estate of the Group amounts to ISK 33 billion and

are classified on the balance sheet among property &

equipment and investment properties.

In our audit of the real estate valuation, we, and our

valuation experts have examined the management

valuation. We examined the methodology used in the

valuation and its consistency with prior year. In our audit

of the valuation, we performed the following work:

The investment properties that are part of Festi fasteignir

ehf., subsidiary of Festi hf., are those that are leased to

third parties. Investment properties are recognized at fair

value through profit or loss. The Group’s real estates,

those not classified as investment properties, are carried

at revalued amount.

• Assessed the company’s calculation model and its

reliability.

• Assessed the assumptions used in management’s

budget that are used in the calculations of the valuation

and whether they are appropriate.

Revaluation is performed on a regular basis, when

management assesses that its fair value has changed

significantly. The estimation of the value is based on

expected cash flow. The assets were revaluated at year-

end 2021.

• Assessed the assumptions and calculation of the

discount rate (WACC) and compared it to market

conditions.

Auditor’s Responsibilities for the Audit of the Financial Statements

Kópavogur, February, 9, 2022

Deloitte ehf.

Þorsteinn Pétur Guðjónsson Pétur Hansson

State Authorized Public Accountant State Authorized Public Accountant

Deloitte was appointed auditor of Festi hf. by the general meeting of shareholders on 22. march. 2021. Deloitte have been

elected since the general meeting 2019.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism

throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or

error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and

appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is

higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,

or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Festi hf.'s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit

evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on

the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to

draw attention in our auditor’s report to the related disclosures in the Consolidated Financial Statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the

date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going

concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the

disclosures, and whether the Consolidated Financial Statements represent the underlying transactions and events in a

manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within

the Group to express an opinion on the consolidated and separate financial statements. We are responsible for the

direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of

the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our

audit

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements

regarding independence, and to communicate with them all relationships and other matters that may reasonably be

thought to bear on our independence, and where applicable, related safeguards.

In addition to our work as the auditors of Festi hf., Deloitte has provided the firm with permitted additional services such as

consultation on accounting matters, other assurance engagements, consultation on finance matters.

From the matters communicated with those charged with governance, we determine those matters that were of most

significance in the audit of the financial statements of the current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or

when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the

adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such

communication.

Our objectives are to obtain reasonable assurance about whether the consolidated 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 consolidated financial statements.

Notes 2021 2020

98.736.012 86.259.698

74.090.382)( 65.575.588)(

24.645.630 20.684.110

2.316.371 1.658.297

11.658.879)( 10.520.930)(

5.185.508)( 4.764.935)(

14.528.016)( 13.627.568)(

10.117.614 7.056.542

3.193.261)( 2.867.889)(

736.006 240.028

7.660.359 4.428.681

89.856 102.110

1.956.700)( 2.043.975)(

66.952 23.279

300.702 267.662

1.499.190)( 1.650.924)(

6.161.169 2.777.757

1.189.055)( 511.454)(

4.972.114 2.266.303

Items that are or may be reclassified subsequently to profit or loss:

29.356)( 55.028

0 30.000

Effective portion of changes in fair value of cash flow hedges,

6.988)( 129.180

Items that will not be reclassified subsequently to profit or loss:

1.621.320 0

1.584.976 214.208

6.557.090 2.480.511

15,48 6,95

Translation difference arising from operations of a foreign

Profit for the year ..........................................................................................................

Revaluation of properties, net of income tax .........................................

Total comprehensive income for the year ..............................................................................................

Basic and diluted earnings per share in ISK ..........................................

The notes on pages 13 to 40 are an integral part of these annual financial statements

Net change in fair value of investments in shares .................................

net of income tax .................................................................................

Total other comprehensive income ..........................................................................

Other comprehensive income

associate ..............................................................................................

Changes in value of investment property ..............................................

Statement of Profit or Loss and Other Comprehensive Income

for the year 2021

Gross profit from sale of goods and services ................................................................................................................

Sale of goods and services ..................................................................

Cost of goods sold ................................................................................

Other operating income ........................................................................

Operating profit before depreciation, amortisation

Salaries and other personnel expenses ..............................................

Profit before income tax (EBT) ..........................................................................

Income tax .............................................................................................

Finance costs .......................................................................................

Share of profit of associates ................................................................

Other operating expenses ...................................................................

Finance income ...................................................................................

and changes in value (EBITDA) ...........................................................................................

and amortisation of intangible assets ..............................................

Depreciation of property and equipment and leased assets

Operating profit before finance items (EBIT) ...........................................................................................

Foreign currency differences ...............................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes 2021 2020

Assets

14.668.264 14.668.264

4.744.289 4.971.338

32.544.092 32.297.379

6.155.337 5.419.566

6.100.291 7.466.994

2.324.066 2.149.682

12.940 12.760

228.224 271.713

Non-current assets 66.777.503 67.257.696

9.545.341 7.668.262

4.757.286 4.923.709

888.911 951.935

4.002.716 2.562.942

Current assets 19.194.254 16.106.848

Total assets 85.971.757 83.364.544

Equity

316.118 323.091

10.824.306 12.278.381

12.549.269 7.593.335

10.220.702 9.588.818

Equity

33.910.395 29.783.625

Liabilities

25.929.521 29.074.806

5.868.744 5.180.547

5.590.021 4.663.668

Non-current liabilities 37.388.286 38.919.021

1.382.003 3.473.774

553.819 430.085

7.021.734 7.018.995

5.715.520 3.739.044

Current liabilities 14.673.076 14.661.898

Total liabilities 52.061.362 53.580.919

Total equity and liabilities 85.971.757 83.364.544

Lease liabilities .....................................................................................

Trade payables .....................................................................................

Other intangible assets .........................................................................

Shares in other companies ...................................................................

Trade receivables .................................................................................

Inventories ............................................................................................

Long-term receivables ..........................................................................

Shares in associates .............................................................................

Loans from credit institutions ................................................................

Cash and cash equivalents ...................................................................

Other restricted equity ..........................................................................

Deferred tax liability ..............................................................................

Share capital .........................................................................................

Other short-term liabilities .....................................................................

The notes on pages 13 to 40 are an integral part of these annual financial statements

Other short-term receivables ................................................................

Statement of Financial Position as at 31 December 2021

Goodwill ................................................................................................

Leased assets .......................................................................................

Investment properties ...........................................................................

Property and equipment .......................................................................

Share premium .....................................................................................

Retained earnings .................................................................................

Lease liabilities .....................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Unrealised

profit of Other

Share Share Statutory Revaluation subsidiaries restricted Retained Total

capital premium reserve reserve and associates accounts earnings equity

Year 2020

Equity 1.1.2020 .......................................................

328.574 13.010.171 82.144 3.400.963 2.399.183 67.129)( 9.534.338 28.688.244

Profit for the year ....................................................

2.266.303 2.266.303

Total other comprehensive income ........................

214.208 214.208

Restricted due to subsidiaries and associates ......

1.692.285 1.692.285)( 0

Dissolution of revaluation of an associate .............

20.804)( 20.804 0

Dissolution of revaluation of property and equip. ...

106.144)( 106.144 0

328.574 13.010.171 82.144 3.274.015 4.091.468 147.079 10.235.304 31.168.755

Transactions with shareholders:

Issued new share capital ........................................

3.126 403.265 406.391

Purchased own shares ..........................................

8.609)( 1.135.055)( 1.143.664)(

Transferred from statutory reserve ........................

1.371)( 1.371 0

Dividend paid to shareholders (ISK 2 per share) ....

647.857)( 647.857)(

Equity 31.12.2020 ...................................................

323.091 12.278.381 80.773 3.274.015 4.091.468 147.079 9.588.818 29.783.625

Total other restricted equity ...................................

7.593.335

Year 2021

Equity 1.1.2021 .......................................................

323.091 12.278.381 80.773 3.274.015 4.091.468 147.079 9.588.818 29.783.625

Profit for the year ....................................................

4.972.114 4.972.114

Total other comprehensive income ........................

1.621.320 66.344)( 30.000 1.584.976

Restricted due to subsidiaries and associates ......

3.470.315 3.470.315)( 0

Dissolution of revaluation of an associate .............

9.734)( 9.734 0

Dissolution of revaluation of property and equip. ...

57.879)( 57.879 0

323.091 12.278.381 80.773 4.827.722 7.561.783 80.735 11.188.230 36.340.715

Transactions with shareholders:

Purchased own shares ..........................................

6.973)( 1.454.075)( 1.461.048)(

Transferred from statutory reserve ........................

1.744)( 1.744 0

Dividend paid to shareholders (ISK 3 per share) ....

969.272)( 969.272)(

Equity 31.12.2021 ...................................................

316.118 10.824.306 79.029 4.827.722 7.561.783 80.735 10.220.702 33.910.395

Total other restricted equity ...................................

12.549.269

Statement of Changes in Equity for the year 2021

Other restricted equity

The notes on pages 13 to 40 are an integral part of these annual financial statements

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes 2021 2020

Cash flows from operating activities

10.117.614 7.056.542

Operating items not affecting cash flows:

569.112)( 2.192

3.933)( 0

9.544.569 7.058.734

Changes in operating assets and liabilities:

1.877.079)( 10.151

389.812 1.354.442)(

1.859.914 209.669

372.647 1.134.622)(

88.037 97.794

1.460.357)( 1.340.041)(

252.941)( 295.231)(

8.291.955 4.386.634

Cash flows from investing activities

0 76.094)(

524.218)( 952.924)(

1.844.071)( 2.830.394)(

2.182.859 230.881

13.027)( 59.025)(

2.115.736 186.527

68.181)( 29.111)(

214.962 134.261

39.480 17.833)(

2.103.540 3.413.712)(

Cash flows from financing activities

969.272)( 647.857)(

1.461.048)( 1.143.664)(

4.088.804)( 1.615.525)(

469.573)( 390.474)(

2.000.000)( 2.444)(

8.988.697)( 3.799.964)(

1.406.798 2.827.042)(

Foreign currency difference on cash and cash equivalents .................................................................................................................

32.976 21.230

2.562.942 5.368.754

4.002.716 2.562.942

Investing and financing activities not affecting cash flows

50.000)( 406.391)(

0 406.391

1.281.504)( 2.037.547)(

1.281.504 2.037.547

174.000)( 0

50.000 0

174.000 0

7.000.000 0

7.000.000)( 0

Interest received .......................................................................................

Income tax paid .........................................................................................

New lease contracts and their remeasurement .............................................

Net cash from operating activities

Purchased intangible assets .........................................................................

Purchased property and equipment ..............................................................

Net cash used in financing activities

Dividend paid .................................................................................................

Short-term loans, change ..............................................................................

Dividend received .........................................................................................

Net cash from (used in) investing activities

Sold property and equipment ........................................................................

Acquisition of subsidiary, net of cash acquired .............................................

Statement of Cash Flows for the year 2021

Changes in operating assets and liabilities

Profit before depreciation, amortisation and finance items .............................

Trade and other short-term receivables, decrease (increase) ...................

Inventories, (increase) decrease ................................................................

Trade and other short-term liabilities, increase ..........................................

(Gain) loss on sale of property and equipment ...........................................

Gain on sale of shares in companies .........................................................

Interest paid ..............................................................................................

Other short-term liabilities .............................................................................

New long-term loans ......................................................................................

Long-term receivables, change .....................................................................

Sale of investment properties .......................................................................

Purchase of investment properties ...............................................................

Repayment of lease liabilities ........................................................................

Change in shares in companies .....................................................................

Purchase of shares in companies ..................................................................

The notes on pages 13 to 40 are an integral part of these annual financial statements

Purchased own shares .................................................................................

New lease liabilities and their remeasurement ...............................................

Cash and cash equivalents at the beginning of the year .................................................................................................................

Cash and cash equivalents at the end of the year .................................................................................................................

Increase (decrease) in cash and cash equivalents .................................................................................................................

Repayment of long-term loans from credit institutions ..................................

Issued new share capital ..............................................................................

Repayment of long-term loans from credit institutions ..................................

Sold property and equipment ........................................................................

Trade and other short-term receivables .........................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Operations of the Group
Basis of preparation

2.1 Statement of compliance with International Financial Reporting Standards

2.2 Presentation of accounting policies and other notes

Standard

Note 4.

IFRS 8

Note 5.

IFRS 15

Note 12.

IAS 36

IFRS 13

Note 15.

IFRS 16

2.3 Change in accounting policies and change in presentation of operating revenue and expenses

2.4 Going concern

Notes

Festi hf. ("the Company" or "the Group") is an Icelandic limited liability company. The Group's headquarters are

located at Dalvegur 10-14, Kópavogur, Iceland. The main operations of the Group consist of sale of fuel, goods and

service to businesses, groceries and related products, sale of electronic equipment and leasing of buildings. These

consolidated annual financial statements consists of the annual financial statements of the Company and its

subsidiaries. Further information about individual companies within the Group and their operations is disclosed in

Note 3.

Item

Notes

Accounting policies are presented along with financial information in the notes for the applicable items. Management

believes that such presentation provides a clearer view and improved context between accounting policies and

financial information. As applicable, notes disclosing information that relate to both the Statement of Profit or Loss

and Other Comprehensive Income and the Statement of Financial Position are presented in conjunction, such as

income from sale of goods and trade receivables on the one hand, and income tax expense and deferred tax on the

other.

Operating segments

Impairment testing

Revenue from sale of goods and services

Management has evaluated the Group's going concern. It is the opinion of management that its operations is

ensured and that it is able to meet its obligations in the foreseeable future. Therefore, the financial statements are

presented on a going concern basis.

The classification of certain operating revenue and expenses was changed in the last quarter of the year 2020 to

harmonise the classification of operating revenue and expenses by the companies within the Group. The

comparison amounts in the interim financial statements for the year 2020 have been changed in accordance with the

new classification in the Quarterly Statement, which is an appendix to the annual financial statements. The change

has no effect on the financial results of the Group, assets, liabilities, equity or cash flows.

The Group has applied the same accounting policies during the years 2020 and 2021.

An overview of the Group's risk management is disclosed in a separate section (see Note 28). When relevant, cross

references are made between notes regarding individual items and notes on risk management applicable to those

same items. The Group endeavors to describe in these annual financial statements the accounting policies in a clear

manner instead of repeating the actual text of paragraphs in IFRS. The following accounting standards are the most

important ones for the Group:

The Company's consolidated annual financial statements have been prepared in accordance with International

Financial Reporting Standards (IFRS) as adopted by the European Union and, as applicable, additional

requirements of the Act on Annual Accounts.

The Board of Directors of Festi hf. approved the consolidated annual financial statements on 9 February 2022.

Operating segments

Operating revenue

Goodwill

Fair value measurement of properties and

investment properties

Notes 14. and 16.

Property and equipment and Investment

properties

Lease contracts

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

2.5 Basis of measurement

2.6 Presentation and functional currency

2.7 Use of estimates and judgements

Notes

12. and 13.

14.

15.

16.

28.

Group entities

Entities within the Group

The consolidated annual financial statements have been prepared on the historical cost basis, except for investment

properties, securities and derivative contracts, which are recognised at fair value, and properties, which are

recognised at revalued cost.

The consolidated annual financial statements are prepared and presented in Icelandic krona (ISK), which is the

Company's functional currency. All amounts are presented in thousands of Icelandic krona unless otherwise stated.

Notes, contd.:

The preparation of the consolidated annual financial statements in accordance with IFRS requires management to

make judgements, estimates and assumptions, which affect the application of accounting policies and the reported

amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Information

about judgements applied and estimation uncertainty, as applicable, is disclosed in the notes about the individual

accounting items. The following table specifies the items which are most challenging for the application of judgement

and use of estimates by management:

Item

Estimation of fair value of revalued properties, their useful lives

and residual values

Estimation of impairment of goodwill and other intangible

assets

Goodwill and other intangible

assets

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements.

The consolidated annual financial statements include the following entities. All subsidiaries are directly or indirectly

fully owned by the Parent Company, Festi.

Estimation of allowance for expected credit losses on trade

receivables

Property and equipment

Estimation of fair value of investment properties

Investment property

Determination of lease term and discount rates used in the

calculation of lease liabilities

Lease contracts

Risk management

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, and it has right

to, variable returns from its involvement with the entity and has the ability to affect those returns through its power

over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from

the date on which control commences until the date on which control ceases.

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Group entities, cont.:

Festi fasteignir ehf.

N1 Rafmagn ehf.

N1 Rafmagn is a company that purchases electricity on the

wholesale market and sells it on the retail market to individuals

and companies in Iceland.

Notes, contd.:

Krónan is a retail company that operates convenience stores in

Iceland. The company operates stores throughout the country

under the brand names of Krónan, Kr. and smart shop with

home deliveries.

Krónan ehf.

Festi is a holding company that specialises in operating

companies that are leading in the retail and fuel sale in Iceland.

Festi's role is to support its operating companies in fulfilling

customers´ demands so as to enable them to continue to be at

the forefront in providing goods and services across the country.

Festi provides its subsidiaries with supporting services, among

other things in the area of finance, operations and business

development.

Festi hf.

Company

Activity

N1 ehf.

N1 specialises in wholesale and retail of fuel, operation of

service stations, including tire and lubrication service stations

around the country. The Company’s service stations sell fuel in

addition to refreshments and sale of various convenience goods.

ELKO ehf.

Bakkinn vöruhótel specialises in product storage, packaging,

labelling and distribution of products for customers that elect to

outsource their warehouse activities.

Bakkinn vöruhótel ehf.

ELKO specialises in selling household appliances and electronic

equipment. The company operates stores in the capital region,

Akureyri and at the Leifur Eiríksson International Airport in

Keflavik, as well as an online shop.

Festi fasteignir specialises in leasing of non-residential real

estate to retail companies.

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

Operating segments

Other Segments

N1 Krónan ELKO companies total

Year 2021

External revenue .............................................. 37.437.574 46.784.415 15.430.741 1.399.653 101.052.383

Intra-group revenue .......................................... 317.796 39.714 13.640 5.868.089 6.239.239

Total segment revenue ..................................... 37.755.370 46.824.129 15.444.381 7.267.742 107.291.622

Operating profit before depreciation, amor-

tisation and changes in value (EBITDA) ..... 4.207.902 3.937.720 1.719.866 3.738.122 13.603.610

Segment depreciation and amortisation ........... 2.456.059)( 1.514.085)( 484.893)( 1.115.306)( 5.570.343)(

Changes in value of investment properties ...... 736.006 736.006

Operating profit of segments (EBIT) ................. 1.751.843 2.423.635 1.234.973 3.358.822 8.769.273

Net finance costs .............................................. 842.517)( 418.414)( 94.494)( 1.981.591)( 3.337.016)(

Share of profit of associates ............................ 300.702 300.702

Income tax ........................................................ 203.912)( 396.754)( 228.047)( 274.700)( 1.103.413)(

Profit for the year .............................................. 705.414 1.608.467 912.432 1.403.233 4.629.546

31 December 2021

Segment assets ................................................ 26.464.903 17.663.670 5.135.377 36.707.807 85.971.757

Segment capital expenditure ............................ 863.740 699.589 214.601 603.386 2.381.316

Segment liabilities ............................................. 16.479.933 12.622.608 3.552.606 19.406.215 52.061.362

The operating companies N1, Krónan and ELKO in the Group are individual operating segments and the Group´s

other entities comprise the fourth segment. That segment consists of the operations of the Parent Company, Festi,

Bakkinn vöruhótel and Festi fasteignir (see Note 3 for further information).

An operating segment is a component of the Group that engages in business activity from which it may earn revenue

and incur expenses, including revenue and expenses relating to transactions with other segments of the Group.

Segments are determined by the Company´s management, which regularly reviews the Group´s segments so as to

decide upon how assets are allocated as well as to monitor their performance.

Operating results of segments, their assets and liabilities consist of items directly attributable to individual segments

as well as those items which can be allocated to segment in a logical way. Capital expenditure of segments consist of

the total cost of acquisition of property and equipment and intangible assets. Transactions between segments are

priced on an arm's length basis.

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

Operating segments, contd.: Other Segments

N1 Krónan ELKO companies total

Year 2020

External revenue .............................................. 30.969.400 43.104.229 13.100.667 743.699 87.917.995

Intra-group revenue .......................................... 129.953 10.817 11.433 5.949.705 6.101.908

Total segment revenue ..................................... 31.099.353 43.115.046 13.112.100 6.693.404 94.019.903

Operating profit before depreciation, amor-

tisation and changes in value (EBITDA) ..... 2.968.709 3.067.053 1.167.547 3.193.016 10.396.325

Segment depreciation and amortisation ........... 2.317.039)( 1.463.866)( 382.665)( 1.028.739)( 5.192.309)(

Changes in value of investment properties ...... 240.028 240.028

Operating profit of segments (EBIT) ................. 651.670 1.603.187 784.882 2.404.305 5.444.044

Net finance costs .............................................. 926.281)( 461.848)( 103.478)( 2.028.586)( 3.520.193)(

Share of profit of associates and loss from

sale of shares .............................................. 267.662 267.662

Income tax ........................................................ 54.492 238.746)( 138.302)( 71.649)( 394.205)(

(Loss) profit for the year ................................... 220.119)( 902.593 543.102 571.732 1.797.308

31 December 2020

Segment assets ................................................ 28.889.584 15.663.519 4.971.425 33.840.016 83.364.544

Segment capital expenditure ............................ 909.704 1.417.822 313.858 1.200.959 3.842.343

Segment liabilities ............................................. 15.371.113 13.759.655 3.752.851 20.697.300 53.580.919

Year 2021 According to

Segments financial

total Eliminations statements

13.603.610 3.485.996)( 10.117.614

5.570.343)( 2.377.082 3.193.261)(

736.006 736.006

8.769.273 1.108.914)( 7.660.359

3.337.016)( 1.537.124 1.799.892)(

300.702 300.702

1.103.413)( 85.642)( 1.189.055)(

4.629.546 342.568 4.972.114

Year 2020

10.396.325 3.339.783)( 7.056.542

5.192.309)( 2.324.420 2.867.889)(

240.028 240.028

5.444.044 1.015.363)( 4.428.681

3.520.193)( 1.601.607 1.918.586)(

267.662 267.662

394.205)( 117.249)( 511.454)(

1.797.308 468.995 2.266.303

Share of profit of associates .........................................................................

changes in value (EBITDA) .....................................................................

and amortisation of intangible assets ......................................................

Changes in value of investment property ......................................................

Operating profit (EBIT) ..................................................................................

Net finance costs ...........................................................................................

Reconciliation of operating segments to revenue, profit and loss and other material items in the statement of

profit or loss

Operating profit before depreciation, amortisation and

Depreciation of property and equipment and leased assets

Income tax .....................................................................................................

Profit for the year ...........................................................................................

changes in value (EBITDA) .....................................................................

and amortisation of intangible assets ......................................................

Changes in value of investment property ......................................................

Operating profit (EBIT) ..................................................................................

Net finance costs ...........................................................................................

Share of profit of associates and loss from sale of shares ...........................

Income tax .....................................................................................................

Operating profit before depreciation, amortisation and

Depreciation of property and equipment and leased assets

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

Operating income

Operating income is specified as follows:

2021 2020

Sale of goods and services:

51.860.754 47.679.540

23.798.175 18.638.945

15.326.281 12.941.243

7.750.802 6.999.970

98.736.012 86.259.698

Other operating income:

742.204 751.180

394.047 337.585

316.960 260.985

569.112 0

294.048 308.547

2.316.371 1.658.297

101.052.383 87.917.995

Cost of goods sold

Gross profit from sale of goods and services is specified as follows:

2021 2020

12.334.098 10.615.585

5.233.813 3.997.070

3.984.579 3.141.057

3.093.140 2.930.398

24.645.630 20.684.110

Sale of goods and services

Sale of goods and services are recognised based on the fundamental principle of recognising revenue as or when control of

goods and services are transferred to the customer.

Lease income from properties

Properties leased to parties outside the Group are recognised as investment properties. Investment properties are properties

held to earn rentals or for capital appreciation. Investment properties are recognised at fair value. Fair value changes of

investment properties are presented separately in the statement of profit or loss, and therefore presented separately from

lease income from those same assets. Further information about investment properties is provided in Note 16.

Other operating income

Total other operating income .................................................................................................

Total operating revenue .........................................................................................................

Cost of goods sold consists of the purchase price of inventories sold as well as related transportation cost, excise tax, duties

and distribution costs. Any decrease of inventories to net realisable value is expensed as part of cost of goods sold.

Fuel and electricity .................................................................................................................

Convenience goods ...............................................................................................................

Electronic equipment ..............................................................................................................

Sale of other goods and services ...........................................................................................

Total sale of goods and services ............................................................................................

Lease income from properties ................................................................................................

Warehouse services ..............................................................................................................

Income from leases, warehouse services, commissions, gain on sale of property and equipment, market grants and other

income are presented in other operating income.

Fuel and electricity .................................................................................................................

Convenience goods ...............................................................................................................

Commissions ..........................................................................................................................

Gain on sale of property and equipment ................................................................................

Other operating income ..........................................................................................................

Other goods and services ......................................................................................................

Total gross profit from sale of goods and services ................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

2021 2020

9.182.394 8.247.000

1.160.710 1.050.591

811.287 767.170

504.488 456.169

11.658.879 10.520.930

1.956 1.819

1.176 1.117

61/39 64/36

Contributions to defined contribution pension plans

2021 2020

1.518.830 1.530.308

908.338 671.762

1.217.354 990.536

417.226 476.961

698.934 652.893

200.902 154.197

204.580 269.806

19.344 18.472

5.185.508 4.764.935

63.485 70.183

454 18.469

63.939 88.652

10.

Depreciation and amortisation

751.073 631.437

1.896.455 1.756.289

545.733 480.163

3.193.261 2.867.889

Amortisation of intangible assets, as per Note 13 ..................................................................

Other operating expenses are specified as follows:

Depreciation of property and equipment, as per Note 14 .......................................................

Depreciation of leased assets, as per Note 15 .......................................................................

Total depreciation and amortisation .......................................................................................

Other services ........................................................................................................................

Total fees to auditors ..............................................................................................................

The Company pays contributions to independent defined contribution pension funds due to its employees. The Company has

no responsibility for the funds' obligations. Contributions are expensed in the statement of profit or loss among salaries and

salary-related expenses when incurred.

Other operating expenses

Operating expenses of properties ..........................................................................................

Other salary-related expenses ...............................................................................................

Other personnel expenses .....................................................................................................

Total salaries and other personnel expenses .........................................................................

Average number of employees .............................................................................................

Average full-time equivalent number of employees ...............................................................

Employee gender ratio (males/females) .................................................................................

Salaries ..................................................................................................................................

Contributions to pension funds ...............................................................................................

Notes, contd.:

Information about salaries and benefits of the members of the Board of Directors and management is disclosed in Note 30 on

related parties.

Salaries and other personnel expenses

Total other operating expenses ..............................................................................................

Fees to auditors of the Group and subsidiaries

Fees to auditors are specified as follows:

Audit of annual financial statements .......................................................................................

Maintenance expenses ..........................................................................................................

Sales and marketing expenses ..............................................................................................

Office and administrative expenses, including fees to auditors ..............................................

Communication expenses ......................................................................................................

Other expenses ......................................................................................................................

Insurance and claims expenses .............................................................................................

annual financial statements for the year 2019) ..................................................................

Expenses due to acquisition of Hlekkur ehf. (see Note 4 in the consolidated

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

11.

Finance income is specified as follows:

2021 2020

23.776 38.307

62.146 57.203

3.934 0

0 6.600

89.856 102.110

1.609.516 1.649.809

298.001 281.630

49.183 112.536

1.956.700 2.043.975

12.

Gain on sale of shares in companies .....................................................................................

Interest income on cash and cash equivalents ......................................................................

Finance income and finance costs

Notes, contd.:

Interest expense and CPI-indexation on loans from credit institutions ..................................

Interest expense on lease liabilities ........................................................................................

Other interest expense ..........................................................................................................

Total finance costs ................................................................................................................

Foreign currency differences and assets and liabilities denominated in foreign currencies

Foreign currency differences arise from transactions in foreign currencies, predominantly USD. Transactions in foreign

currencies are recognised at the exchange rate at the dates of the transactions. Monetary assets and liabilities denominated

in foreign currencies are recognised at the exchange rate at year-end. The average ISK/USD exchange rate for the year 2021

was 127.05 (2020: 128.66) and the exchange rate at year-end 2021 was 130.38 (2020: 127.21).

Interest income on receivables ..............................................................................................

Dividend income .....................................................................................................................

Total finance income ..............................................................................................................

Finance costs are specified as follows:

Goodwill

The goodwill recognised in the consolidated annual financial statements resulted from the acquisition by the Company of

Hlekkur and its subsidiaries during the year 2018 and of Íslensk Orkumiðlun and the Krónan store located at Hallveigarstígur

in Reykjavík during the year 2020. For the purpose of impairment testing, goodwill is allocated to the cash-generating units it

relates to. Three cash-generating units were identified in the purchase price allocation and part of the goodwill was allocated

to grocery stores, electronic equipment stores and sale of electricity. The remaining goodwill is due to synergies and

optimisation arising from acquisition of different retail companies has now been changed and is now shown with each cash

generated unit.

Accounting policy

Goodwill is not amortised but tested annually for impairment or more often if there are any impairment indicators. When

testing for impairment goodwill is allocated to the cash-generating units it relates to.

Impairment test at year-end 2021

Goodwill was tested for impairment at year-end 2021. According to the results of the test there was no indication of

impairment. When testing for impairment the recoverable amount is estimated and the estimation was based on the value in

use of cash-generating units. Value in use is calculated by discounting the estimated future cash flows of cash-generating

units.

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

12.

Carrying

Year-end 2021

EBITDA- Terminal- Discount amount

growth growth rate at year-end

9,2% 3,5% 8,7%

11.468.284

6,9% 3,5% 10,9%

2.772.179

3,4% 3,5% 9,9%

427.801

14.668.264

Year-end 2020

6,4% 3,0% 8,3%

11.468.284

5,9% 3,0% 10,3%

2.772.179

5,3% 3,0% 9,2%

427.801

14.668.264

13.

Other intangible assets

Trademarks Software Total

Gross carrying amount

4.142.136 103.893 1.075.889 5.321.918

48.816 164.342 739.766 952.924

389.236)( 74.208)( 68.094)( 531.538)(

3.801.716 194.027 1.747.562 5.743.305

0 0 524.218 524.218

203.969)( 37.049)( 326.298)( 567.316)(

3.597.747 156.978 1.945.482 5.700.207

Amortisation

342.470 41.904 287.694 672.068

226.745 37.304 367.388 631.437

389.236)( 74.208)( 68.094)( 531.538)(

179.979 5.000 586.988 771.967

226.077 42.049 482.947 751.073

203.969)( 37.049)( 326.103)( 567.121)(

202.087 10.000 743.832 955.919

Carrying amount

3.799.666 61.989 788.195 4.649.850

3.621.737 189.027 1.160.575 4.971.338

3.395.660 146.978 1.201.650 4.744.289

5% 14% 20-33%

The following table specifies the key assumptions applied when estimating value in use. Estimated EBITDA-growth is the

average growth for the next five years.

Total goodwill ......................................................................................................................................................

Motor vehicle services and sale of electricity ..................

Accumulated amortisation 31.12.2020 ............................

Amortisation for the year .................................................

Sold and disposed of ......................................................

Gross carrying amount 31.12.2021 .................................

Accumulated amortisation 1.1.2020 ................................

Amortisation for the year .................................................

Sold and disposed of ......................................................

Gross carrying amount 1.1.2020 .....................................

Additions during the year ................................................

Sold and disposed of ......................................................

Gross carrying amount 31.12.2020 .................................

Additions during the year ................................................

Carrying amount 31.12.2021 ..........................................

Amortisation rates ...........................................................

Other intangible assets consist of the trademarks of Krónan and ELKO, trade agreements and software.

Accounting policy

The cost of purchased and acquired trademarks is capitalised and amortised on a straight line basis over 20 years. The

estimated useful life of trade agreements is 7 years. They are amortised on a straight line basis. Capitalised software licenses

are recognised at cost less accumulated amortisation. Software is amortised on a straight line basis over 3-5 years.

Trade agreements

Grocery stores ................................................................

Electronic equipment stores ............................................

Goodwill, contd.:

Electronic equipment stores ............................................

Sale of electricity .............................................................

Notes, contd.:

Grocery stores ................................................................

Total goodwill ......................................................................................................................................................

Sold and disposed of ......................................................

Accumulated amortisation 31.12.2021 ............................

Carrying amount 1.1.2020 ..............................................

Carrying amount 31.12.2020 ..........................................

Other intangible assets are specified as follows:

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

14.

50 years

3 - 20 years

Property and equipment

The Group´s property and equipment consists of properties, vehicles, machinery and equipment, cabinetry, signs and supply

tanks.

The cost of replacing single components of property and equipment is capitalised when it is considered likely that the benefits

associated with the asset will flow to the Company and the costs can be measured reliably. The carrying amount of the

replaced component is expensed. All other costs are expensed in the statement of profit or loss when incurred.

Depreciation

Other property and equipment ...........................................................................................................................

The Group recognises the properties for own use at revalued cost. A revaluation was carried out as at 31 December 2021.

According to the revaluation method an entity shall assess if there are any indicators of there being a significant difference

between fair value and carrying amount.

The Board of Directors of the Company has implemented a policy for the revaluation of property and equipment to ensure that

at any given time the carrying amount of revalued assets does not differ significantly from fair value. According to the policy, a

fair value measurement must be performed if there are indications that the difference between fair value and carrying amount

of revalued assets is in exceeds of the 10% benchmark of the Board of Directors. However, fair value shall be determined at

least every five years.

The gain on sale of property and equipment, which is the difference between their sale proceeds and carrying amount, is

recognised in the statement of profit or loss among other operating income and the loss on sale among other operating

expenses.

Accounting policy

The Group´s properties for own use, i.e. those which are not classified as investment properties, are recognised at revalued

cost amount but other property and equipment at cost less accumulated depreciation and impairment, if any.

When property and equipment consists of parts which have different useful lives, the parts are separated and depreciated

based on the useful life of each part.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and changed if appropriate.

Revaluation of properties

Revalued assets are recognised at the fair value on the date of revaluation. Fair value assessment is carried out on a regular

basis, so as to ensure that their carrying amount does not deviate significantly from fair value. The increase in carrying

amount due to revaluation is recognised in other comprehensive income, net of income tax. The revaluation reserve within

equity is decreased via transfer to retained earnings, the amount each year being equal to the annual depreciation of

revaluation recognised in profit or loss. If revaluation results in a decrease of carrying amount, the decrease is recognised in

profit or loss, except to the extent that the decrease reverses a previous increase due to revaluation, in which case the

downward revaluation is recognised in other comprehensive income.

Revaluation methods for properties

Depreciation is calculated based on the depreciable amount, which is the cost or revalued cost less estimated residual value.

Depreciation is calculated on a straight line basis over the estimated useful life of each component of property and equipment.

Estimated useful lives are specified as follows:

Properties ...........................................................................................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

14.

Increase Decrease

1.120.928 1.120.928)(

3.275.671)( 4.698.584

Other

Properties property and

and land equipment Total

Cost or assessed value

30.281.517 11.442.413 41.723.930

838.226 1.992.168 2.830.394

369.663)( 369.663 0

332.824)( 3.493.350)( 3.826.174)(

30.417.256 10.310.894 40.728.150

417.952 1.426.119 1.844.071

2.026.649 0 2.026.649

707.871)( 707.871 0

2.037.041)( 2.097.519)( 4.134.560)(

30.116.945 10.347.365 40.464.310

Depreciation

3.466.114 6.824.056 10.290.170

618.391 1.137.898 1.756.289

26.291)( 26.291 0

183.177)( 3.432.513)( 3.615.690)(

3.875.037 4.555.732 8.430.769

703.145 1.193.310 1.896.455

27.439)( 27.439 0

404.754)( 2.002.254)( 2.407.008)(

4.145.989 3.774.227 7.920.216

Reclassification ........................................................................................

Sold and disposed of during the year ......................................................

Accumulated depreciation 31.12.2020 ....................................................

Sold and disposed of during the year ......................................................

Cost 1.1.2020 ..........................................................................................

Property and equipment are specified as follows:

Property and equipment, contd.:

The main factors that management considers in the assessment of the need for revaluation are:

a. Depreciation of revalued assets since they were last revalued.

b. Sales price of assets similar to those revalued by the Group, if such information is available.

c. Inflation.

d. Changes in official real estate value, if applicable as a benchmark for similar revalued assets of the Group.

e. The assumptions upon which revaluation is based, e.g. growth or decline in sales of goods and changes in discount rates

due to changes in benchmark interest rates and/or risk margin.

Reclassification ........................................................................................

Revaluation during the year .....................................................................

The Company has revalued the properties at fair value at year-end 2021. Fair value in excess of carrying amount is

recognised in other comprehensive income. The revaluation resulted in an increase of ISK 2,026 million in properties, which is

recognised in other comprehensive income as revaluation to fair value. The Company’s equity increases by ISK 1,621 million

due to the revaluation.

Determination of fair value of properties

The Company´s measurement of the fair value of properties was determined with assistance from independent specialists.

The fair value measurement is based on discounted cash flows of individual assets. The cash flow model applied is based on

free cash flows, discounted by the weighted average cost of capital for individual assets (WACC). The projected cash flows in

the model are up to 50 years. The return on equity is estimated using the CAPM (Capital Asset Pricing Model), which is based

on risk-free inflation-adjusted interest rate with a premium added to reflect the risk of underlying operations. Interest rates on

borrowings are estimated considering the general terms for interest rates which are offered in the market. It is assumed a debt

ratio of 65% for the future and the expected weighted cost of investment (WACC) which is applied is in the range of 5.4% -

6.6% (weighted average 5.5%).

Cost or assessed value 31.12.2021 ........................................................

Accumulated depreciation 1.1.2020 ........................................................

Depreciation for the year .........................................................................

Additions during the year .........................................................................

Sold and disposed of during the year ......................................................

Cost or assessed value 31.12.2020 ........................................................

Additions during the year .........................................................................

Depreciation for the year .........................................................................

Sold and disposed of during the year ......................................................

Accumulated depreciation 31.12.2021 ....................................................

Reclassification ........................................................................................

Sensitivity analysis of fair value measurement at year-end 2021:

Increase / (decrease) of EBITDA from operations of properties by 5% .................................

(Increase) / decrease of return on equity and interest rates by 1.0%-point ............................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

14.

Property and equipment, contd.:

Properties

and land

Other

property and

equipment

Total

26.815.403

4.618.357

31.433.760

26.542.219

5.755.162

32.297.379

25.970.956

6.573.138

32.544.092

22.785.907

4.618.357

27.404.264

22.645.404

5.755.162

28.400.566

20.119.839

6.573.138

26.692.977

0 - 2%

5 - 33%

2021 2020

20.453.662 21.904.554

27.364.384 29.741.427

6.306.187 6.143.488

15.

The Group as lessee

Accounting policies

Insurance value of real estate ................................................................................................

At the inception date of a lease contract, the Group assesses whether a 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 identified asset for a period of time in exchange for

consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the

definition of a lease in IFRS 16.

Lease contracts

The Group leases buildings, land, machinery and equipment for its operations and the lease contracts extend up to the year

2068. The contracts are with various parties and are indexed to the consumer price index or not indexed.

At the commencement date of a lease contract, the Group recognises a leased asset and a lease liability in the statement of

financial position. On that date or upon modification of a contract that contains a lease component, the Group allocates the

consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has

elected not to recognise leased assets and lease liabilities for lease contracts whose lease term, determined in accordance

with IFRS 16 rules, is 12 months or less and for lease contracts for which the underlying asset is of low value. Lease

payments arising from these contracts are expensed in the income statement on a straight-line basis and included in other

operating expenses.

The Group determines the lease term as the non-cancellable period of a lease contract together with periods covered by

options to extend the lease if the Group is reasonably certain to exercise those options. If there are termination options for the

contracts, which the Group is certain to exercise, then they are taken into consideration

Carrying amount 31.12.2020 ...................................................................

Carrying amount 31.12.2021 ...................................................................

Depreciation rates ...................................................................................

Insurance value of machinery and equipment, cabinetry and vehicles ..................................

Carrying amount

Carrying amount 1.1.2020 .......................................................................

Insurance and official property value of property and equipment at year-end:

Official property value .............................................................................................................

The Company’s properties are pledged for debt which amounted to ISK 27,312 million at year-end 2021. Furthermore, there

is an amount of ISK 2,818 million in VAT encumbrance on the Group's properties. This encumbrance is not recognised as a

liability in the statement of financial position since it will only become payable if the properties would be used in operations

which are exempt of VAT or if they are sold without the buyer taking over the encumbrance.

Leased assets are initially measured at cost, which comprises the initial amount of the lease liability, plus any lease payments

made at or before the commencement date, plus initial direct costs and an estimate of costs of the Group to dismantle and

remove the underlying asset or the restore the underlying asset or the site on which it is located at the end of the lease

contract, less any lease incentives received.

Carrying amount excluding revaluation

Carrying amount 1.1.2020 .......................................................................

Carrying amount 31.12.2020 ...................................................................

Carrying amount 31.12.2021 ...................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

15.

Leased assets

Buildings

Land

Other

Total

3.374.147 488.035 0 3.862.182

977.249 0 236.405 1.213.654

24.659 799.199 35 823.893

436.277)( 26.888)( 16.998)( 480.163)(

3.939.778 1.260.346 219.442 5.419.566

1.622.220 0 76.143 1.698.363

259.416)( 166.616)( 9.173 416.859)(

477.082)( 19.647)( 49.004)( 545.733)(

4.825.500 1.074.083 255.754 6.155.337

The Group as lessor

Lease contracts, contd.:

Carrying amount 1.1.2020 ..............................................

of lease liabilities ........................................................

Leased assets are subsequently measured in accordance with the cost model. They are depreciated using the straight-line

method from the commencement date to the end of the lease term, unless the lease transfers ownership to the Group at the

end of the lease term or the cost of the leased assets reflects that the Group will exercise a purchase option of the underlying

assets. In that case the leased assets are depreciated over the useful life of the underlying assets, which is determined on the

same basis as those of property and equipment of the Group. The carrying amount of lease assets is reduced by impairment

losses, when applicable, and adjusted for certain remeasurements of the carrying amount of lease liabilities.

The lease payments included in the measurement of lease liabilities can be both fixed or variable that depend on an indices

or rates.

Subsequent to initial recognition the carrying amount of lease liabilities is increased by interest expense and decreased by

lease payments made. Furthermore, the carrying amount is remeasured when there is a change in future lease payments

arising from changes in indices or rates, in the estimate of the amount expected to be payable by the Group under residual

value guarantees, or as appropriate, changes in the assessment of whether it is reasonably certain that purchase options or

extension options will be exercised or termination options will not be exercised. When the carrying of lease liabilities is

remeasured in this way, the corresponding adjustment is made to the carrying amount of leased assets, or recognised in

income statement if the carrying amount of leased assets has been reduced to zero.

Leased assets are presented separately within non-current assets in the statement of financial position. Lease liabilities are

presented separately in the statement of financial position and split into non-current and current portions. Depreciation of

leased assets is presented in income statement under depreciation, as per Note 10. Interest expense on lease liabilities is

presented in income statement under finance costs, as per Note 11.

The Group leases buildings to many parties. The revenue from the leases is included in other revenue.

New lease contracts ........................................................

Change due to remeasurement

Depreciation for the year .................................................

Carrying amount 31.12.2020 ..........................................

New lease contracts ........................................................

Change due to remeasurement

Variable lease payments that depend on sales or usage of underlying assets are not included in the measurement of lease

liabilities, except to the extent that they are accrued and unpaid at the reporting date. Variable lease payments that depend on

sales or usage of underlying assets are expensed in the income statement as they accrue and included in the line other

operating expenses.

Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date

of the lease contracts, discounted using the interest rate implicit in the lease, if that rate can be readily determined. Otherwise,

the Group uses the incremental borrowing rate. The determination of the incremental borrowing rate is based on various

factors, in particular on the types of assets leased, their location and condition and the lease term.

Depreciation for the year .................................................

Carrying amount 31.12.2021 ..........................................

Leased assets are specified as follows:

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

16.

7.354.468

59.025

186.527)(

240.028

7.466.994

13.027

2.115.736)(

736.006

6.100.291

Increase

Decrease

305.015)( 305.015

877.444)( 1.258.152

373.350 373.350)(

994.263)( 1.384.681

The Company´s measurements of fair value for the years 2021 and 2020 were determined with assistance from independent

specialists. The measurement of investment properties is based on discounted cash flows of individual assets. The cash flow

model applied is based on free cash flows to the Group, discounted by the weighted average cost of capital for individual

assets (WACC). The projected cash flows in the model are up to 50 years. The return on equity is estimated using the CAPM

(Capital Asset Pricing Model), which is based on risk-free inflation-adjusted interest rate with a premium added to reflect the

risk of underlying operations. Interest rates on borrowings are estimated considering the general terms for interest rates which

are offered in the market. It is assumed a debt ratio of 65% (2020:70%) for the future and the expected weighted cost of

investment (WACC) which is applied is in the range of 5.4% - 6.6% (weighted average 5.6%) (2020: 4.9% - 6.1% and

weighted average 5.1%).

Estimated cash flows are based on lease income from existing lease contracts and their expected development. Each lease

contract is assessed and relevant risk factors are taken into account. Utilisation rate is estimated to be 95-96% after a lease

contract expires (2020: 95-96%). Estimated operating expenses are deducted from estimated lease income. In this way each

asset of the Company is assessed as an independent unit. The inputs of the valuation model are based on amounts

experienced in the operations of the Company as well as on a forecast of the development of key factors in the future.

The conclusion of the measurement at year-end 2021 was an increase in the value of investment properties in the amount of

ISK 736 million (2020: ISK 240 million), which is recognised in the statement of profit or loss.

Investment properties are specified as follows:

Carrying amount at 1 January 2020 ...................................................................................................................

Additions during the year ....................................................................................................................................

Sensitivity analysis of fair value measurement at year-end 2021:

Increase / (decrease) of EBITDA from operations of properties by 5% .................................

(Increase) / decrease of return on equity and interest rates by 1.0%-point ............................

Sensitivity analysis of fair value measurement at year-end 2020:

Sale during the year ..........................................................................................................................................

The fair value measurement of investment properties falls under level 3 in the fair value hierarchy of International Financial

Reporting Standards since the valuation is based on significant inputs other than market information. If the key inputs of the

fair value measurement, i.e. the assumptions regarding financing cost and EBITDA, were changed, it would change the

revaluation recognised in the statement of profit or loss as specified in the following table:

Investment properties

Properties intended for rent to third parties and for capital appreciation are classified as investment properties.

Accounting policies

Investment properties are recognised at fair value at the reporting date. Valuation changes of those assets are recognised in

profit or loss in the period in which they occur. Investment properties are not depreciated. Changes in fair value of investment

properties are presented seperately in the statement of profit or loss but lease income is presented as other operating income.

Determination of fair value of investment properties

Fair value change ...............................................................................................................................................

Carrying amount at 31 December 2020 .............................................................................................................

Additions during the year ....................................................................................................................................

Sale during the year ...........................................................................................................................................

Fair value change ...............................................................................................................................................

Carrying amount at 31 December 2021 .............................................................................................................

(Increase) / decrease of return on equity and interest rates by 1.0%-point ............................

Increase / (decrease) of EBITDA from operations of properties by 5% .................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

17.

Accounting policies

Ownership 2021 2020

60,0% 1.449.267 1.401.719

24,9% 515.451 511.472

33,3% 109.101 77.330

25,0% 133.921 128.057

116.326 31.104

2.324.066 2.149.682

2.149.682 1.952.349

0 19.007)(

300.702 267.662

214.962)( 134.261)(

118.000 27.911

29.356)( 55.028

2.324.066 2.149.682

Change in the carrying amount of associates during the year:

Carrying amount at the beginning of the year ........................................................................

Share of profit .........................................................................................................................

Dividend .................................................................................................................................

Following is financial information of the associates Olíudreifing ehf. and Malik Supply A/S. The information is based on their

annual financial statements by taking into account the unamortised premium paid upon acquisition of the share in Malik

Supply A/S.

Olíudreifing ehf. .......................................................................................

Malik Supply A/S, Danmörku ..................................................................

EAK ehf. ...................................................................................................

EBK ehf. ...................................................................................................

Shares in associates - 4 companies (2020: 3) .........................................

Total shares in associates at the end of the year ...................................................................

The Company had eight associates at year-end 2021, both domestic and foreign. The Company recognises in the annual

financial statements its share of profit or loss of those associates.

Associates are entities where the Company has significant influence, but not control, over the financial and operating policies.

Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting rights.

Associates are accounted for using the equity method and are recognised initially at cost. The Company's investment

includes the goodwill arising from the acquisition, if any, less impairment, if any. The annual financial statements include the

Company’s share of profit and equity movements of associates from the date that significant influence commences until the

date that significant influence ceases. When the Company’s share of losses exceeds its interest in an associate, the carrying

amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the

Company has provided guarantees in respect of the associate or has financed it. Unrealised profit arising on transactions with

associated companies is recognised as a reduction in their book value. Unrealised loss is recognised in the same way as

unrealised profit, but only to the extent that there is no indication of impairment of these companies.

The share of profit or loss of foreign associates is recognised at the average exchange rate of the year. The share in equity is

recognised at the exchange rate at the reporting date. Exchange differences arising from the translation to Icelandic Krona

are recognised as a separate line item in the statement of comprehensive income. When a foreign associate is sold, partially

or entirely, the related exchange difference is transferred to profit or loss.

Associates

Ownership in associates is specified as follows:

Purchase of shares ................................................................................................................

Merger at 1 January 2020 ......................................................................................................

Translation difference .............................................................................................................

Carrying amount at the end of the year ..................................................................................

On 1 February 2021 the Company acquired 45% of the shares in IMF ehf. for ISK 18 million. IMF ehf. specialises in

production of convenience goods sold in Krónan and N1 stores. The Company also participated in the increase in share

capital in Dropp ehf. for ISK 100 million. The Group’s share in profit or loss of associates amounted to ISK 301 million in 2021

(2020: ISK 268 million.)

Ownership in associates and share of profit or loss

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

17.

Olíudreifing ehf.

2021* 2020*

3.799.487 3.866.592

1.255.232 1.196.875

1.834.473)( 2.020.323)(

804.801)( 706.945)(

2.415.445 2.336.199

1.449.267 1.401.719

4.088.140 3.553.993

389.246 390.184

233.548 234.110

Malik Supply A/S

2021* 2020*

1.123.618 1.143.557

6.976.459 5.020.556

516.022)( 545.459)(

5.779.446)( 3.845.424)(

1.804.608 1.773.230

448.529 440.730

66.922 70.742

515.451 511.472

52.537.477 37.403.632

250.643 511.164

62.296 127.048

Profit (100%) ..........................................................................................................................

Share in equity .......................................................................................................................

Carrying amount at year-end 24.9% ......................................................................................

Revenue (100%) ....................................................................................................................

Premium .................................................................................................................................

Current liabilities .....................................................................................................................

Net assets (100%) ..................................................................................................................

Share in total comprehensive income (60%) ..........................................................................

* Draft annual financial statements

The Company owns 60% share in Olíudreifing ehf. The Company has not control over Olíudreifing ehf. which is therefore not

a subsidiary of the Company. This is because the Competition Authority decided that the company should have board

members independent from N1 hf. However the Company´s operations have significant influence on the operations of

Olíudreifing ehf. Accordingly the Company accounts for its ownership interest according to the equity method. The financial

statements of Olíudreifing ehf. are prepared in accordance with the Act on Annual Accounts and the established accounting

rules.

Non-current assets .................................................................................................................

Current assets ........................................................................................................................

Non-current liabilities ..............................................................................................................

Revenue (100%) ....................................................................................................................

Carrying amount at year-end (60%) .......................................................................................

Profit (100%) ..........................................................................................................................

Share in total comprehensive income 24.9% .........................................................................

* Draft annual financial statements

Malik Supply A/S was founded in 1989 to service the international fleet of trawlers on the waters of Greenland and in the

North Atlantic ocean with oil, lubricants and other products. N1 sells Malik fuel oil sold to major fisheries in Greenland. The

financial statements of Malik Supply A/S are prepared in accordance with the Danish Act on Annual Accounts and the

established accounting rules.

Non-current assets .................................................................................................................

Current assets ........................................................................................................................

Non-current liabilities ..............................................................................................................

Current liabilities .....................................................................................................................

Net assets (100%) ..................................................................................................................

Associates, contd.:

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

18.

Interest rates

at year-end 2021 2020

10%/10% 128.412 135.745

4%/4% 21.490 20.980

7% / 7% 120.832 155.333

0%/0% 30.000 50.000

300.734 362.058

72.510)( 90.345)(

228.224 271.713

- 90.345

72.510 143.333

102.500 2.500

125.724 125.880

300.734 362.058

19.

Accounting policy

2021 2020

3.080.438 2.907.083

2.599.583 1.065.752

2.282.174 2.232.116

1.583.146 1.463.311

9.545.341 7.668.262

10.489.709 8.510.122

Inventories at year-end are specified as follows:

The Group’s long-term receivables are denominated both in Icelandic and Danish krona. Receivables from related parties in

the amount of ISK 100 million are convertible into share capital of the corresponding company at a certain conversion ratio at

any time during the loan period. The following is an analysis of the Group´s long-term receivables.

Outstanding at year-end

Receivables from related parties in Danish krona ...................................

Other receivables in Danish krona ...........................................................

Receivables from related parties in Icelandic krona ................................

Other receivables in Icelandic krona ........................................................

Long-term receivables

Current portion .......................................................................................................................

Total long-term receivables ....................................................................................................

Year 2021 ...............................................................................................................................

Year 2022 ...............................................................................................................................

Year 2023 ...............................................................................................................................

Due in 2026 and later ............................................................................................................

Total long-term receivables ....................................................................................................

Insurance value of inventories ...............................................................................................

Electronic equipment ..............................................................................................................

Other goods ...........................................................................................................................

Total inventories .....................................................................................................................

Inventories are pledged as security for liabilities that was fully paid for during the year 2021 (2020: 2,000). The write-down of

inventories at year-end 2021 amounted to ISK 441 million (2020: 535) and decreased by ISK 93 million during the year (2020:

increase 148).

Inventories

The Group’s inventories consist of convenience goods, fuel, electronic equipment and inventory related to the Company’s

lubrication and motor vehicle services.

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out

rule, and includes expenditure incurred in acquiring the inventories and in bringing them to the location and condition in which

they are at the reporting date. Net realisable value is the estimated selling price in the ordinary course of business less the

estimated costs necessary to make the sale.

Fuel ........................................................................................................................................

Convenience goods ...............................................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

20.

2021 2020

82.132 144.517

117.663 327.504

174.000 0

13.410 9.697

152.740 161.475

72.510 90.345

276.456 218.397

888.911 951.935

21.

2021 2020

3.954.802 2.511.210

47.914 51.732

4.002.716 2.562.942

22.

Share capital

Share premium

Statutory reserve

Revaluation reserve

Unrealised profit of subsidiaries and associates

Translation reserve

Retained earnings

Cash and cash equivalents

Other short-term receivables at year-end are specified as follows:

Cash and cash equivalents at year-end are specified as follows:

Receivable due to sale of property and equipment ................................................................

Current portion of long-term receivables ................................................................................

Other short-term receivables ..................................................................................................

Total other short-term receivables .........................................................................................

Bank accounts ........................................................................................................................

Cash .......................................................................................................................................

Total cash and cash equivalents ............................................................................................

Equity and capital management

Share premium consists of the difference between the nominal value of share capital and the amount of paid-in share capital

at any given time, less the premium on acquisition of own shares.

In accordance with the Act on Limited Liability Companies, companies are required to retain a certain percentage of their

profit for the year in a statutory reserve, up to the limit of the reserve being in the amount of 25% of the nominal value of

share capital.

The revaluation of the Group's real estate as well as its share in the revaluation of real estate of an associate is recognised in

the revaluation reserve. The revaluation is dissolved in accordance with annual depreciation of the revaluation in the

statement of profit or loss. Dissolution of the revaluation is recognised in retained earnings.

If the share of profit of subsidiaries and associates which is recognised in the statement of profit or loss is in excess of the

dividends received from them, or the dividends that has been decided to distribute, the difference is to be transferred from

retained earnings to a restricted reserve among equity. If a company’s shareholding in its subsidiary or associate is sold or

written off the reserve is to be dissolved via transfer to retained earnings or accumulated deficit, as applicable.

Profit (loss) for the year is recognised as an increase (decrease) in retained earnings. Dividend payments are recognised as a

decrease in retained earnings. Dissolution of revaluation is recognised as an increase in retained earnings. The amount of

unrealised profit of subsidiaries and associates in excess of dividend payments is recognised in the restricted reserve as a

decrease in retained earnings.

Capital management and dividends

Translation reserve consists of exchange differences arising from the translation into Icelandic krona of the financial

statements of a foreign associate.

The Board of Directors of Festi has established a policy on the capital structure and dividend payments, according to which

dividend payments to shareholders or purchase of own shares should amount to at least 50% of the profit for each year. The

Board has also established a policy that EBITDA should be 35% of gross profit, net interest bearing liabilities should be 3.5 x

EBITDA and equity ratio should be between 30 - 35%. The Company´s loan covenants require a minimum equity ratio of

25%. The equity ratio at year-end 2021 was 39.4% (year-end 2020: 35.7%).

The Company's total share capital according to its Articles of Association amounts to ISK 324 million and it was decreased by

ISK 9 million during the year. One vote is attached to each share of ISK one in the Company. Shareholders in the Company

have the right to receive dividends in proportion to their shareholding upon dividend distribution. Costs directly associated with

issue of share capital are deducted from equity. Purchase price of treasury shares, including direct costs associated, are

deducted from equity. Equity is increased upon the sale of treasury shares. In accordance with the authorisation granted by

the annual general meetings of Festi hf. on 23 March 2020 and 22 March 2021, the Company continued to purchase own

shares during the year 2021. The Company purchased a total of ISK 7 million shares in nominal amount at the average share

price of 209.5 for a total of ISK 1,461 million or 2.2% of the outstanding share capital. The Company owns 7.4 million own

shares or 2.3% at year-end 2021.

Receivables from related parties ............................................................................................

Market value of forward contracts ..........................................................................................

Other short-term receivables

Prepaid expenses ...................................................................................................................

Receivables from the Icelandic State .....................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

23.

2021 2020

4.972.114 2.266.303

323.091 328.574

1.798)( 2.641)(

321.293 325.933

15,48 6,95

24.

2021 2020

Long-term loans

29.074.806 29.942.470

11.088.804)( 1.615.525)(

7.000.000 0

141.880 28.609

709.868 757.786

91.771 38.534)(

25.929.521 29.074.806

Short-term loans

1.382.003 1.473.774

0 2.000.000

1.382.003 3.473.774

27.311.524 32.548.580

2021 2020 2021 2022

3,9% 1,9% 23.739.246 8.791.278

2,2% 2,2% 3.572.278 21.757.302

2,4% 0 2.000.000

27.311.524 32.548.580

CPI-indexed loans on floating interest rates ...................

Total loans from credit institutions ..........................................................................................

Profit for the year ....................................................................................................................

Non-indexed loans on floating interest rates ...................

Loans from credit institutions

Earnings per share

Total loans from credit institutions ..........................................................................................

Outstanding at year-end

CPI-indexation ........................................................................................................................

Change in current portion .......................................................................................................

Balance at year-end ...............................................................................................................

Current portion of long-term loans .........................................................................................

Short-term loans from a bank .................................................................................................

Balance at year-end ...............................................................................................................

Interest rates at year-end

Basic and diluted earnings per share for ordinary shares in the Company are presented in the annual financial statements.

Basic earnings per share is based on the weighted average number of effective shares during the year. No share option

contracts have been made with employees nor have financial instruments been issued, such as convertible bonds, which

could lead to dilution of earnings per share. Diluted earnings per share is therefore the same as basic earnings per share.

All loans from credit institutions are denominated in Icelandic krona. The Company converted debt amounting to ISK 15,733

million from CPI-indexed loans to non-indexed loans during the year. The Company paid additional loan payments in the

amount of ISK 2,587 million due to sale of assets during the year. The balance of the loans at year-end is secured by pledge

in the properties of the Company. The loans are specified as follows:

Balance at the beginning of the year ......................................................................................

Repayments ...........................................................................................................................

New loans ...............................................................................................................................

Amortisation of borrowing costs .............................................................................................

Share capital at the beginning of the year ..............................................................................

Effect of changes in share capital ..........................................................................................

Weighted-average of outstanding shares ..............................................................................

Basic and diluted earnings per share in ISK ..........................................................................

Short-term loan on floating interest rates ........................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

24.

2021 2020

- 3.473.774

1.382.003 1.475.181

1.382.186 1.476.587

1.382.369 1.477.994

7.226.611 7.323.460

1.389.991 1.488.064

14.548.364 15.833.520

27.311.524 32.548.580

25.

5.610.632 3.963.559

1.698.363 1.213.654

416.859)( 823.893

469.573)( 390.474)(

6.422.563 5.610.632

553.819)( 430.085)(

5.868.744 5.180.547

- 430.085

553.819 457.779

557.450 443.346

565.654 458.912

585.575 477.403

561.075 496.220

3.598.990 2.846.887

6.422.563 5.610.632

26.

Accounting policy

Loans from credit institutions, contd.:

The maturities of the loans are specified as follows:

Total loans from credit institutions ..........................................................................................

Lease liabilities

Year 2022 ...............................................................................................................................

Year 2023 ...............................................................................................................................

Year 2024 ...............................................................................................................................

Year 2025 ...............................................................................................................................

Current tax is the income tax estimated to be payable next year in respect of the taxable income for the year, based on the tax

rate at the reporting date, besides adjustments to tax payable in respect of previous years, if any.

Year 2022 ...............................................................................................................................

Year 2023 ...............................................................................................................................

Year 2024 ...............................................................................................................................

Year 2025 ...............................................................................................................................

Due for payment onwards ......................................................................................................

Total .......................................................................................................................................

Year 2026 ...............................................................................................................................

Increase due to indexation of lease payments .......................................................................

Payment of lease liabilities during the year ............................................................................

Total lease liabilities ...............................................................................................................

Current portion .......................................................................................................................

Total non-current portion of lease liabilities ............................................................................

Year 2021 ...............................................................................................................................

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to

items recognised directly in equity or in other comprehensive income, in which case the income tax is recognised together

with those items.

Lease liabilities are specified as follows:

New lease contracts ...............................................................................................................

Carrying amount at the beginning of the year ........................................................................

Deferred tax is recognised using the balance sheet method in respect of temporary differences between, on the one hand, the

carrying amounts of assets and liabilities in the financial statements and, on the other hand, their tax bases. The amount of

deferred tax is based on the estimated realisation or settlement of the carrying amounts of assets and liabilities using the tax

rate in effect at the reporting date.

All lease liabilities are denominated in Icelandic krona.

Year 2026 ...............................................................................................................................

Due for payment onwards ......................................................................................................

Year 2021 ...............................................................................................................................

The maturity analysis of lease liabilities is specified as follows at year-end:

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

26.

Income tax recognised in the statement of profit or loss

The income tax in the statement of profit or loss is specified as follows:

2021 2020

6.161.169 2.777.757

20,0% 1.232.234 20,0% 555.551

0,0% 843 0,1% 1.485

1,0% )( 60.140)( 1,9% )( 53.532)(

0,3% 16.119 0,3% 7.949

19,3%

1.189.055 18,4% 511.454

Deferred tax liability

2021 2020

5.114.858 4.285.417

433.865 336.985

53.445)( 38.213)(

25.288 19.787

14.599 19.729)(

54.856 79.421

5.590.021 4.663.668

27.

1.326.378 1.172.390

2.682.535 1.666.546

680.785 268.524

82.923 55.345

241.059 262.529

701.840 313.710

5.715.520 3.739.044

28.

Risk management

Overview

* Liquidity risk

* Currency risk

* Operating risk

Inventories ..............................................................................................................................

Other items .............................................................................................................................

Effective income tax rate .................................................

Lease contracts ......................................................................................................................

Deferred tax liability ................................................................................................................

A deferred tax asset is recognised only to the extent that it is probable that it is possible to utilise future profits against the

asset. Deferred tax asset is reviewed at each reporting date and is reduced to the extent that it is considered that it will not be

utilised.

Intangible assets ....................................................................................................................

Deferred tax liability isspecified as follows at year-end:

Unpaid salaries and salary-related expenses ........................................................................

Unpaid accrued interest .........................................................................................................

Deferred income .....................................................................................................................

Other short-term liabilities are specified as follows at year-end:

Notes, contd.:

Income tax, contd.:

Profit before income tax ...........................................................................

Income tax based on current tax rate ..............................

Non-deductible expenses ................................................

Non-taxable income from shares ....................................

Other changes ................................................................

Market risk (price risk and interest rate risk)

Following is information about the Group‘s risks, objectives, policies and processes for measuring and managing the risk as

well as information regarding operating risk. The Company’s risk management objective is to minimise the risk it faces by

analysing the risk, measuring it and controlling it.

The following risks arise from the Group's financial instruments:

Credit risk

Other short-term liabilities ......................................................................................................

Total other short-term liabilities ..............................................................................................

Property and equipment and investment properties ...............................................................

Other short-term liabilities

Unpaid income tax ..................................................................................................................

Other unpaid taxes (VAT, tariffs, oil charge, gasoline charge, carbon charge) .....................

Trade receivables ...................................................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

28.

Risk management, contd.:

Credit risk

2021 2020

1.527.147 1.998.564

3.230.139 2.925.145

4.757.286 4.923.709

Nominal

Loss Carrying Allowance

Year 2021

amount

allowance amount ratio

4.530.100 56.490)( 4.473.610 1,2%

191.979 8.537)( 183.442 4,4%

43.958 6.761)( 37.197 15,4%

158.649 95.612)( 63.037 60,3%

4.924.686 167.400)( 4.757.286 3,4%

Year 2020

3.846.589 47.779)( 3.798.810 1,2%

738.971 16.965)( 722.006 2,3%

350.554 26.445)( 324.109 7,5%

197.315 118.531)( 78.784 60,1%

5.133.429 209.720)( 4.923.709 4,1%

Liquidity risk

Total trade receivables ...........................................................................................................

The age of trade receivables at year-end was specified as follows:

Not yet due ......................................................................

Past due by 30 days or less ............................................

Past due by 31 - 120 days ..............................................

Past due by more than 120 days ....................................

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its

contractual obligations. The Company's credit risk arises principally from trade receivables and other receivables.

Credit risk mainly depends on the age of trade receivables, the financial standing and operations of individual customers and

the standing of the industries in which the Company's biggest customers operate, which are transportation, fishing industry

and contractors. Approximately 24% (2020: 16%) of the Company's trade receivables at year-end is attributable to 30 of the

Company's biggest customers. Thereof, receivable from the biggest customer was 3% (2020: 2%).

The Group has established credit rules. All of the Company's customers with charge accounts have credit limits on their

account which they cannot exceed. Legal entities must in general provide a personal guarantee of the owner for an amount

corresponding to supplies for two months. This does however not apply to bigger customers which have good credit rating at

CreditInfo.

The Group establishes an allowance for expected credit losses on trade receivables and other receivables. The estimation of

the allowance is based on historical loss experience, the age of receivables, current economic conditions and future

prospects. During the year a new contract was entered into with a payment processor which delays the payment of credit card

receivables in exchange for lower fees. This explains the increase in credit card receivables between the years.

Credit card receivables ..........................................................................................................

Other trade receivables ..........................................................................................................

Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations that are settled by delivering

cash or other financial assets. The Group’s objective is to always have sufficient liquidity to meet its payment obligations as

they become due.

The Group's liquidity position at year-end 2021 was strong. The Group’s management considers that the Group is capable to

meet its financial obligations as they become due. The weighted-average repayment period of the Group’s long-term loans is

about 11 years and all loans are prepayable during the loan term. The Group also has access to lines of credit for up to next 8

months for a maximum amount of ISK 3,000 million. No amount was drawn at year-end 2021.

Further information about the Group's financial liabilities is disclosed in Note 29 about financial instruments.

Not yet due ......................................................................

Past due by 30 days or less ............................................

Past due by 31 - 120 days ..............................................

Past due by more than 120 days ....................................

The Company's trade receivables at year end are specified as follows:

Age analysis of trade receivables and impairment loss

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

28.

Risk management, contd.:

Market risk

Price risk

Interest rate risk

Currency risk

Other

Year 2021

USD EUR currencies Total

0 0 120.724 120.724

326.387 22.115 67.544 416.046

225.894 12.336 220.862 459.092

10.045)( 180.367)( 734.344)( 924.756)(

542.236 145.916)( 325.214)( 71.106

Árið 2020

0 0 125.880 125.880

106.320 20.365 112.581 239.266

146.509 1.368 63.226 211.103

6.291)( 88.937)( 342.101)( 437.329)(

246.538 67.204)( 40.414)( 138.920

Market risk consists of price risk, interest rate risk and currency risk. The Company's objective is to manage and confine

market risk within defined limits.

The Group is exposed to cash flow interest rate risk due to changes in interest rates of floating rate financial liabilities. In order

to diversify the risk, the Company’s financing is a mix of non-indexed and CPI-indexed loans.

An increase in interest rates at the reporting date by one percentage point (100 basis points) would decrease profit or loss

before income tax by ISK 273 million (2020: ISK 325 million) due to effects on the borrowings of the Company at floating

interest rates. The calculation is based on operating effect on an annual basis. A decrease by one percentage point would

have the same effect but in the opposite direction.

All of the Company's transactions denominated in foreign currencies give rise to currency risk. In evaluating currency risk both

payment risk and settlement risk is taken into account. The objective is to manage currency risk in order to best insure the

Company's benefits. The major part of imports is purchase of goods for resale from foreign suppliers denominated in USD

and EUR, but the sale is for the most part in ISK. Sales in ISK constitute 97% (2020: 96%), USD 2% (2020: 3%) and other

currencies 1% (2020: 1%).

Risk in the statement of financial position .......................

Long-term receivables ....................................................

Trade receivables ...........................................................

Cash and cash equivalents .............................................

Trade liabilities ................................................................

Assets and liabilities denominated in foreign currencies at year-end are specified as follows:

Long-term receivables ....................................................

Trade receivables ...........................................................

Cash and cash equivalents .............................................

Trade liabilities ................................................................

An important market risk of the Company is price risk due to changes in the oil price in the world market, which has been very

volatile in the past years. The price risk is reduced by means of specific agreements with the largest customers of the

Company but also by the Parent Company entering into derivative contracts to hedge part of the price risk arising from the

purchase of oil. The contracts have maturities of up to several months, whereas the oil price is fixed in foreign currency and

they cover the part of the Group’s oil purchases which is not hedged with specific agreements. The contracts are settled in

cash and are presented in the statement of profit or loss as part of the cost of oil to which they relate. The gain from oil

hedges amounted to ISK 532 million during the year (2020: loss of ISK 11 million). The fair value of derivatives recognised in

restricted reserves in equity amounted to ISK 122 million at year-end 2021 (2020: ISK 129 million).

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

28.

Risk management, contd.:

Sensitivity analysis

2021 2020

54.224 24.654

14.592)( 6.720)(

32.521)( 4.041)(

7.111 13.892

Operating risk

29.

Assets at fair value

Loans from credit institutions and other financial liabilities

In order to reduce operating risk, among other things, there has been established an appropriate segregation of duties and

transactions on charge accounts and compliance with laws are monitored. Furthermore, effective training activities are

performed with the objective of giving the necessary training to all employees relating to their work for the Company. Effective

work procedures and rules on back-up of IT systems have been implemented. Furthermore, effective operating budgets and

monthly statements are prepared for individual divisions and deviations from approved operating budgets are analysed.

Financial instruments and fair value

Securities are recognised at fair value. The fair value estimate is categorised in level 3 of the fair value hierarchy, since the

information about their fair value is based on the Company's own assumptions. Securities are an immaterial part of the

Group’s assets. The properties are recognised at revalued cost. This entails that their fair value is determined regularly to

ensure that book value does not differ significantly from fair value at any given time. Further information about the fair value

measurement of properties is disclosed in Note 14. Investment properties are recognised at fair value. Further information

about their fair value is disclosed in Note 16.

A 10% strengthening of the ISK against the following currencies at year-end would have increased (decreased) the

Company's profit before income tax by the following amounts.

USD ........................................................................................................................................

EUR ........................................................................................................................................

Other currencies .....................................................................................................................

Financial assets and liabilities are classified into certain categories. The classification of financial assets and financial

liabilities affects how the respective financial instruments are measured after initial recognition. The classification of financial

assets and financial liabilities of the Group and their measurement basis are specified in the following table.

Total .......................................................................................................................................

A 10% weakening of the ISK against these currencies would have the same effect but in the opposite direction.

Operating risk is the risk of direct or indirect loss due to various factors in the Group's operations. Among the risk factors are

employees’ work, technology and methods applied.

The Group's financial assets and liabilities include cash and cash equivalents, shares in other companies and long-term

receivables, trade and other receivables, derivative contracts, borrowings, trade payables and certain other current liabilities.

Financial instruments are initially recognised at fair value. They are recognised at the transaction date, which is the date the

Group becomes a party to the contractual provisions of the instrument. For financial instruments not recognised at fair value

through profit and loss all direct transaction costs are taken into account upon initial recognition.

The fair value of loans from credit institutions is the estimated future cash flows discounted at the market interest rate at the

reporting date. The loans from credit institutions are on market interest rates and therefore the difference between their

carrying amount and fair value is insignificant at any given time. Short-term liabilities are not discounted as the difference

between their fair value and their carrying amount is insignificant.

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

29.

Financial instrument

Cash and cash equivalents

4.002.716 2.562.942

5.564.065 5.731.127

Long-term receivables

228.224 271.713

Loans from credit institutions

27.311.524 32.548.580

12.496.195 10.495.510

Financial conditions

Maturity analysis

After more

Year-end 2021

Within a year After 1 - 3 years After 3 - 5 years then 5 years

2.566.909 4.586.253 9.980.124 16.694.480

900.780 1.696.166 1.589.874 5.537.354

7.021.734

2.682.535

680.785

2.111.141

15.963.884 6.282.419 11.569.998 22.231.834

Year-end 2020

4.102.427 4.113.067 9.805.639 18.862.451

722.094 1.402.116 1.336.716 5.347.133

7.018.995

1.666.546

268.524

1.541.445

15.320.031 5.515.183 11.142.355 24.209.584

Trade and other short-term

liabilities classified as financial

instruments

Financial liabilities at amortised cost

In the loan agreements there is the condition that the Group’s equity ratio must always be higher than 25% at the end of each

operating year. The equity ratio was 39.4% at year-end 2021 (year-end 2020: 35.7%) and the condition was fulfilled.

Financial instruments and fair value, contd.:

Carrying

amount at

year-end 2020

Loans from credit institutions ..........................................

Current tax liability ...........................................................

Payable to the Icelandic State .........................................

Trade payables ...............................................................

Other short-term liabilities ...............................................

Lease liabilities ................................................................

Current tax liability ...........................................................

Payable to the Icelandic State .........................................

Trade payables ...............................................................

Other short-term liabilities ...............................................

Lease liabilities ................................................................

The following table shows when the future payments of the Group's liabilities and income tax become due. The cash flow

includes estimated future interest payments where appropriate.

Loans from credit institutions ..........................................

Financial assets at amortised cost

Trade and other receivables

classified as financial

instruments, including

receivables from related parties

Financial assets at amortised cost

Financial liabilities at amortised cost

Classification of financial instruments and their measurement basis

The following table shows the classification of the Group's financial instruments, their measurement basis and where gains

and losses arising from them are recognised in the statement of profit or loss.

Carrying

amount at

year-end 2021

Classification

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

30.

Definition of related parties

Transactions with related companies

2021 2020

2.215.364 2.087.152

297.210 169.747

15.212 14.813

249.245 291.078

13.410 9.697

232.609 5.488

Board of Directors and key management personnel

Number

Performance-

of shares

2021

Salary

Benefits based salary

at year-end

Board of Directors

7.685 609.391

5.787 83.014

5.772 6.028

5.502

13.323 5.000.000

Key management personnel

50.548 4.116 4.200 600.000

173.926 16.682 8.529 384.902

262.543 20.798 12.729 6.683.335

2020

Board of Directors

11.635 4.345.463

6.905 349.391

5.577 6.028

8.068 22.014

3.411

Key management personnel

50.400 4.573 12.745 90.000

163.562 13.392 25.925 34.902

249.558 17.965 38.670 4.847.798

2021 2020

83/17 83/17

Key management personnel gender ratio (males/females) ....................................................

Total ................................................................................

The numbers above include shares owned by their spouses and companies controlled by the members of the Board of

Directors and key management personnel.

Þórey G. Guðmundsdóttir ...............................................

Eggert Þór Kristófersson, CEO .......................................

Five managing directors ..................................................

Long-term receivables at year-end ........................................................................................

Short-term receivables at year-end ........................................................................................

Trade receivables at year-end ...............................................................................................

Þórður Már Jóhannesson, Chairman

Guðjón Karl Reynisson, Vice-Chairman ..........................

Five managing directors...................................................

Total.................................................................................

The salaries and benefits of the members of the Board of Directors and key management personnel for their work for the

Group and the nominal amount of their shareholding at year-end is specified as follows:

Margrét Guðmundsdóttir, Vice-Chairman .......................

Þórður Már Jóhannesson, former Chairman ...................

Þórey G. Guðmundsdóttir ...............................................

Guðjón Karl Reynisson, Chairman

Related parties

The Company's related parties are large shareholders in the Company, associates, members of the Board of Directors and

management, their close family members and companies owned by them.

Purchased goods and services ..............................................................................................

Kristín Guðmundsdóttir ...................................................

Eggert Þór Kristófersson, CEO........................................

Sold goods and services ........................................................................................................

Interest revenue from receivables ..........................................................................................

of the Board of Directors ............................................

Transactions with related companies are specified as follows:

Kristín Guðmundsdóttir ...................................................

Margrét Guðmundsdóttir .................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

30.

Transactions with other related parties

Transactions with employees

31.

32.

In 2020, ELKO initiated at the District Court a litigation against the inspection fees levied by the Icelandic State for the import

of electronic equipment during the years 2016 – 2020. The District Court ruled the case in ELKO’s favor in November 2020.

The State appealed the case to the Court of Appeal and its ruling is expected in the first half of the year 2022. If the Court of

Appeal agrees with the District Court, ELKO will be repaid between ISK 30 – 40 million including penalty interests. No amount

is recognised in the annual financial statements with respect to this litigation.

In December 2020 the Competition Authority announced it would initiate an investigation on potential violations of the

settlement by Festi and requested information and further explanations from the Company regarding several aspects,

including the sale of the convenience store in Hella, which was subsequently answered. It the Company's view, all conditions

of the settlement have been fulfilled.

Related parties, contd:

There are no shareholders with significant influence at year-end 2021. Companies controlled by members of the Board of

Directors and key management personnel are five at year-end 2021 and they were defined as related parties. Transactions

with them during both years 2021 and 2020 were very insignificant and they consist of normal sales and purchases and the

pricing in such transactions is comparable to other transactions of Group companies.

The Group has granted loans to its employees due to general purchase of goods in the amount of ISK 8 million at year-end

2021 (2020: ISK 9 million). Other liabilities of employees amounted to ISK 1 million at year-end (2020: ISK 1 million).

Litigation and other claims

Festi hf. made a settlement with the Competition Authority on 30 July 2018 as a consequence of the acquisition by the

Company of Hlekkur hf. According to the settlement, Festi committed, amont other things, to selling five self-service stations

within the Capital Region and the convenient store Kjarval located in Hella. On 14 February 2019, Festi reached an

agreement for the sale of the self-service stations which was approved by the Competition Authority. The delivery of self-

service stations occurred on 28 February 2019. Festi completed the sale of the convenience store in the first half of the year

2021 as the sale was delayed because the store’s lessor did not accept the previous buyers.

Other matters

At year-end 2018 the Internal Revenue Board ruled that Festi had incorrectly classified certain fuel deliveries for custom

purposes during the years 2013 – 2018. Subsequently, the Revenue and Customs authority re-determined in December 2019

import duties for the years 2013-2014 and in March 2020 for the years 2015 – 2018. Consequently, the Company paid in total

ISK 110 million including charges and penalty interests. The Company appealed the case to the Internal Revenue Board,

which ruled in favor of the Company in December 2020. The Revenue and Customs authority accepted the ruling partially and

paid partial compensation of ISK 15 million in 2021 but it withheld the remaining ISK 95 million based on a re-determination.

The Company does not agree and has appealed again to the Internal Revenue Board, which is expected to rule in the second

half of 2022. The receivable is capitalised among other short-term receivables in the statement of financial position at year-

end 2021.

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Notes, contd.:

33.

Financial ratios

Operations

2021 2020

8,2 8,6

18,9 13,8

41,1% 34,1%

47,3% 50,9%

21,0% 23,0%

Financial position

1,31 1,10

0,66 0,58

2,30 4,25

39,4% 35,7%

15,6% 7,8%

Equity ratio: equity / total capital .............................................................................................

Return on equity: profit for the year / average balance of equity ............................................

Sales days in trade receivables:

Average balance of trade receivables during the year / goods and

Profit before depreciation, amortisation and finance items / gross profit ................................

Salaries and salary related expenses / gross profit ................................................................

Other operating expenses / gross profit .................................................................................

Current ratio: current assets / current liabilities ......................................................................

The Group's key financial ratios

Turnover rate of inventories

Utilisation of goods / average balance of inventories during the year ...............................

Liquidity ratio: (current assets - inventories) / current liabilities ..............................................

Leverage: net interest bearing liabilities / EBITDA .................................................................

services sold ................................................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

2021

Q1 Q2 Q3 Q4 Total

20.917.226 24.326.416 27.063.982 26.428.388 98.736.012

15.773.505)(

18.220.853)(

20.189.203)( 19.906.821)( 74.090.382)(

5.143.721 6.105.563 6.874.779 6.521.567 24.645.630

455.018 603.412 534.144 723.797 2.316.371

2.817.658)( 3.016.679)( 2.752.260)( 3.072.282)( 11.658.879)(

1.276.106)( 1.233.879)( 1.311.155)( 1.364.368)( 5.185.508)(

3.638.746)( 3.647.146)( 3.529.271)( 3.712.853)( 14.528.016)(

Operating profit before depreciation, amortisation

1.504.975 2.458.417 3.345.508 2.808.714 10.117.614

728.794)( 714.239)( 754.370)( 995.858)( 3.193.261)(

64.123)(

22.695

434.678 342.756

736.006

712.058 1.766.873 3.025.816 2.155.612 7.660.359

17.941

21.691

22.328 27.896

89.856

440.128)(

612.266)(

385.076)( 519.230)(

1.956.700)(

17.229

8.416)(

18.004 40.135

66.952

45.221 80.787 166.978 7.716

300.702

359.737)( 518.204)( 177.766)( 443.483)( 1.499.190)(

352.321 1.248.669 2.848.050 1.712.129 6.161.169

62.993)( 206.147)( 562.071)( 357.844)( 1.189.055)(

289.328 1.042.522 2.285.979 1.354.285 4.972.114

subsequently to profit or loss:

27.140)( 5.021)( 14.164 11.359)( 29.356)(

150.934 43.118 68.418)( 132.622)( 6.988)(

subsequently to profit or loss:

0 0 0 1.621.320 1.621.320

123.794 38.097 54.254)( 1.477.339 1.584.976

413.122 1.080.619 2.231.725 2.831.624 6.557.090

0,91 3,21 7,10 4,26 15,48

Profit before income tax (EBT) .....................................................................

Income tax ....................................................

Revaluation of properties, net of tax .............

Items that are or may be reclassified

for the period ..............................................................................................

Basic and diluted earnings per share in ISK .

operations of a foreign associate ...............

Total comprehensive income

Items that will not be reclassified

Share of profit of associates .........................

Sale of goods and services ..........................

Cost of goods sold .......................................

Gross profit from sale of goods and serv. ...........................................................................................

Other operating income ................................

Salaries and other personnel expenses .......

Foreign currency differences ........................

Other operating expenses ...........................

and changes in value (EBITDA) ...........................................................................................

Depreciation and amortisation ......................

The Group´s operations for the year 2021 is specified by quarters as follows:

Quarterly Statement - unaudited

Profit for the period ..........................................................................................................

Changes in fair value of cash flow hedges ....

Other comprehensive income

Total other comprehensive income ...........

Changes in value of investment properties ...

Operating profit (EBIT) ...........................................................................................

Translation difference arising from the

Finance income ............................................

Finance costs ...............................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

The Group´s operations for the year 2020 is specified by quarters as follows:

2020

Q1 Q2 Q3 Q4 Total

18.955.760 20.764.238 23.602.332 22.937.368 86.259.698

14.651.994)( 15.540.552)(

17.817.262)( 17.565.780)( 65.575.588)(

4.303.766 5.223.686 5.785.070 5.371.588 20.684.110

374.148 378.973 432.038 473.138 1.658.297

2.404.714)( 2.708.235)( 2.475.192)( 2.932.789)( 10.520.930)(

1.252.568)( 1.191.239)( 1.155.503)( 1.165.625)( 4.764.935)(

3.283.134)( 3.520.501)( 3.198.657)( 3.625.276)( 13.627.568)(

Operating profit before depreciation, amortisation

1.020.632 1.703.185 2.586.413 1.746.312 7.056.542

622.277)( 654.356)( 799.335)( 791.921)( 2.867.889)(

0 59.907 875)( 180.996 240.028

398.355 1.108.736 1.786.203 1.135.387 4.428.681

48.422 28.264 957

24.467 102.110

453.010)( 602.496)( 520.289)(

468.180)( 2.043.975)(

64.291 39.268 692)(

79.588)( 23.279

7.579 61.736 168.528 29.819 267.662

332.718)( 473.228)( 351.496)( 493.482)( 1.650.924)(

65.637 635.508 1.434.707 641.905 2.777.757

12.979)( 110.095)( 272.318)( 116.062)( 511.454)(

52.658 525.413 1.162.389 525.843 2.266.303

subsequently to profit or loss:

46.937 2.667 25.179 19.755)( 55.028

0 30.000 0 0 30.000

49.416 15.925 131.856)( 195.695 129.180

96.353 48.592 106.677)( 175.940 214.208

149.011 574.005 1.055.712 701.783 2.480.511

0,16 1,60 3,55 1,64 6,95

for the period ..............................................................................................

Other comprehensive income

Total other comprehensive income ...........

Total comprehensive income

in shares ....................................................

Changes in fair value of cash flow hedges ....

Change in fair value of investments

Basic and diluted earnings per share in ISK .

Finance costs ...............................................

Other operating expenses ...........................

Changes in value of investment properties ...

Operating profit (EBIT) ...........................................................................................

operations of a foreign associate ...............

Translation difference arising from the

Profit before income tax ..........................................................................

Income tax ....................................................

Profit for the period ..........................................................................................................

Items that are or may be reclassified

Depreciation and amortisation ......................

and changes in value (EBITDA) ...........................................................................................

Finance income ............................................

Share of profit of associates .........................

Foreign currency differences ........................

Salaries and other personnel expenses .......

Other operating income ................................

* The classification of revenue and expenses for the year 2020 has been changed in accordance with the presentation for the year

2021, see further information in Note 2.3.

Quarterly Statement - unaudited

Sale of goods and services ..........................

Cost of goods sold .......................................

Gross profit from sale of goods and serv. ...........................................................................................

Consolidated Annual Financial Statements of Festi hf. 2021

Amounts are in thousands of ISK

Board of Directors and Corporate Governance

Statement of Corporate Governance

Festi complies with the Guidelines on Corporate Governance, audited edition from 1 July 2021, issued by the

Icelandic Chamber of Commerce, Nasdaq Iceland and the Confederation of Icelandic Employers. The Guidelines

are available on www.leidbeiningar.is

The corporate governance of Festi is laid down in the rules of procedure of the Board of Directors, the

Company‘s Articles of Association and the Act on Public Limited Companies No. 2/1995. The current rules of

procedure of the Board of Directors were approved at a Board meeting on 28 April 2021. The rules are based on

provisions in Article 70, paragraph 4 in the Act on Public Limited Companies No. 2/1995 and Article 17,

paragraph 2 of the Company‘s Articles of Association. The Company‘s Articles of Association describe the

Company’s objective, its share capital, shareholders meetings, Board of Directors, CEO, accounting and audit.

The current remuneration policy for Festi was approved by the Annual General Meeting on 22 March 2021. The

policy applies to the terms of employment for the members of the Board of Directors, the CEO and the senior

management of the Company.

The Company’s rules of procedure for the Board of Directors, Articles of Association and information regarding

the remuneration policy are accessible on the Company’s website, www.festi.is/fjarfestatengsl. The Company’s

highest authority is with its shareholders. The Annual General Meeting of shareholders shall be held by the end

of August each year. The Board of Directors has the highest authority in the Company’s affairs between

shareholders meetings and is responsible for its operations. The Board of Directors executes an appraisal of its

performance annually. Communication between the Board and shareholders takes place at shareholders

meetings. Members of the Board are independent in their work and do not accept direct instructions from

shareholders in the Company or other stakeholders. Members of the Board must also observe confidentiality in

performing their duties and are not allowed to provide information to shareholders concerning the Company’s

finances or operations unless it is presented by the Board of Directors.

According to the Articles of Association of Festi, the Board of Directors of the Company shall consist of five

directors appointed annually at the Annual General Meeting. The Board of Directors now consists of three women

and one man whereas Þróður Már Jóhannesson, the former Chairman of the Board of Directors resigned on the

6 January 2022. The Board of Directors subsequently divided tasks between its remaining members and Guðjón

Reynisson took over as Chairman of the Board. The Annual General Meeting will be held in March 2022 and until

then four members will comprise the Board of Directors. Therefore, the Company does not, until then, comply

with the provisions of the Act on Public Limited Companies on gender ratios which entered into effect on 1

September 2013. Members of the Board have diverse education and extensive professional experience.

Those who intend to candidate at the election of the Board of Directors of the Company must notify so in writing

to the Board of Directors with at least five days notice before the beginning of the Annual General Meeting. The

Company's Articles of Association can only be amended with the approval of 2/3 of votes cast in a lawfully called

shareholders' meeting, provided that the intended amendment is thoroughly mentioned in the agenda to the

meeting as well as what it consists of.

The Board of Directors has laid down rules of procedure for the Board which are reviewed on an annual basis. In

the rules of procedure the competences of the Board and its purview with respect to the CEO are defined. The

rules contain, among other things, provisions on the appointment of Board members, communication with

shareholders, calling of meetings and quorum, minutes of meetings and their content, rules on Board members'

obligation of confidentiality and secrecy and rules on eligibility of Board members to participate in decision

making. The Board elects a Chairman and a Vice-Chairman for the Board in addition to appointing members of

sub-committees. Board meetings shall be called as often as necessary but in general no less than eight times per

year. Board meetings are held at the headquarters of Festi hf. at Dalvegur 10-14, 201 Kópavogur, and the

Chairman of the Board directs the meetings. The CEO attends Board meetings and may at the meetings discuss

matters and present motions, unless otherwise decided by the Board in specific matters. The Company's Board

of Directors determines among other things the CEO's terms of employment and meets regularly with the

Company's auditors. The Board of Directors has appointed an Audit Committee and a Remuneration Committee.

The Nomination Committee of the Company operates according to a mandate granted by the Annual General

Meeting.

Consolidated Annual Financial Statements of Festi hf. 2021

Board of Directors and Corporate Governance, contd.

Remuneration committee

Audit committee

The Board of Directors of Festi hf. has appointed an Audit Committee in accordance with provisions of the

Financial Statements Act. The Committee must consist of at least three members and the majority of the

members shall be independent from Festi. The Committee shall be appointed for a one year term at the first

Board meeting following the Annual General Meeting. The majority of Committee members shall be members of

the Board of Directors of Festi and the chairman of the Committee shall be appointed by the Company's Board of

Directors. Committee members must have qualifications and experience in accordance with the activities of the

Committee, and at least one member must have sufficient expertise in the field of accounting or auditing.

Employment terms of committee members shall be decided at the Annual General Meeting. The Committee shall

monitor the audit of the Company’s financial statements and evaluate the performance of the auditor to ensure

further safety and quality of work methods during the audit. According to the Committee's rules of procedure two

Board members shall be appointed to the Committee in addition to an external expert. The Committee shall meet

at least four times a year and additional meetings shall be called when deemed necessary by the Chairman. The

Committee consists of Þórey Guðmundsdóttir, member of Board of Directors, Kristín Guðmundsdóttir, member of

the Board of Directors, and Björgólfur Jóhannsson, Chairman of the Committee.

Statement of Corporate Governance, contd.

To ensure that the Company's financial statements are in accordance with International Financial Reporting

Standards the Company places emphasis on carefully defined responsibilities, appropriate segregation of duties

and regular reporting and transparency in its operations. The process of monthly reporting and review for

individual divisions is an important factor in the controls for earnings and other key aspects of the operation.

Monthly statements are prepared and presented to the Company's Board of Directors. The Company has

established work procedures to ensure controls for income recognition, operating expenses and other items

affecting the Company's operation. Risk management is reviewed on regular basis in order to reflect changes in

market conditions and the Company's operation. Through personnel training and work procedures the Company

aims at maintaining disciplined controls where all employees are aware of their roles and responsibilities.

Operating risk is addressed by monitoring transactions and compliance with law. The Board of Directors has

established an equity management policy to ensure a strong equity position and to support stability in the future

development of the company´s operations.

All members of the Board of Directors have provided personal information in order to enable an evaluation of

their qualification for membership on the Board. The information includes board membership in other companies,

shareholding in the Company, whether directly or indirectly through related parties, and possible conflict of

interest. All Board members are independent of both the Company and the large shareholders.

The Board of Directors has appointed a Remuneration Committee. The role of the Remuneration Committee is to

provide guidance to the Board of Directors regarding employment terms for Board members and Company's

management and advise on the Company's remuneration policy, which shall be reviewed every year and

presented to the Company's Annual General Meeting. Furthermore, the Committee shall monitor that employment

terms of senior management is within the framework of the Company's remuneration policy and report thereon to

the Board of Directors on an annual basis in relation to the Annual General Meeting. The Board of Directors shall

appoint three members tp the Remuneration Committee. Two of three members shall be independent from the

Company and its day-to-day managers. Neither the CEO nor other employees may be a member of the

Remuneration Committee. Independent Board members may be members of the Remuneration Committee.

Committee members should preferably have experience and knowledge of the criteria and customs that relate to

the determination of the employment terms of managers. The employment terms of the members of the

Committee shall be decided at the Annual General Meeting. The rules of procedure of the Board of Directors

shall stipulate the tasks of the Committee. The Committee consists of Margrét Guðmundsdóttir, Chairman of the

Committee, and Guðjón Karl Reynisson and Þórður Már Jóhannesson up until 6 January 2022.

The Audit Committee´s tasks are as follows:

• To monitor the financial reporting process.

• To monitor the organisation and effectiveness of Festi´s internal control, risk management and other control

procedures.

• To monitor the external audit of Festi´s financial statements.

• To make recommendation to the Board of Directors regarding the selection of auditors or audit firm.

• To evaluate the independence of external auditors or the audit firm and monitor other tasks performed by them.

Consolidated Annual Financial Statements of Festi hf. 2021

Nomination committee

Investment committee

The Board of Directors of Festi

Guðjón Reynisson, Chairman of the Board of Directors

Margrét Guðmundsdóttir, member of the Board of Directors

Statement of Corporate Governance, contd.

Festi has appointed a Nomination Committee, elected at the Annual General Meeting. The Nomination

Committee has an advisory role regarding the election of Board members and presents its recommendations to

the shareholder meeting where Board members are scheduled to be appointed. The Nomination Committee

presents a reasoned proposal for the election of Board members, taking into account their competency,

experience and knowledge with regards to the Guidelines on Corporate Governance and the results of the

Board's performance appraisal. The committee´s proposal shall be in accordance with provisions of the Act on

Limited Liability Companies and the company's Articles of Assocation regarding the appointment of the Board of

Directors.The Nomination Committee's recommendations shall be aimed at a Board composition of diverse

knowledge and experience that will serve well for setting the Company´s policies and for monitoring the business

environment of the Company at any given time. The Nomination Committee shall conduct its work with the overall

interests of all the shareholders of the Company in mind.

The Nomination Committee consists of three members that are appointed for a one-year term; two who are

elected at the Annual General Meeting and one member of the Board of Directors. The majority of Committee

members are independent from the Company and its day-to-day managers. The same guidelines are applied in

assessing the independence of Committee members as for assessing the independence of Board members, i.e.

the Guidelines on Corporate Governance issued by the Icelandic Chamber of Commerce, Nasdaq Iceland and

the Confederation of Icelandic Employers. At least one Committee member shall be independent from the

Company’s large shareholders.

The Nomination Committee consists of Sigrún Ragna Ólafsdóttir, Chairman of the Committee, Tryggvi Pálsson

and Margrét Guðmundsdóttir, Vice-Chairman of the Board of Directors. Any queries are received through e-mail,

[email protected].

The Board of Directors has appointed an Investment Committee. Its purpose is to provide the Board with analysis

and recommendations regarding investments. The Committee consists of Guðjón Reynisson, Chairman of the

Board of Directors, and Eggert Kristófersson, CEO.

During the year 2021, the Board of Directors held 18 meetings, the Audit Committee 9 meetings, the

Remuneration Committee 3 meetings. The majority of members of the Board of Directors, the Audit Committee,

the Remuneration Committee attended all meetings. The Audit Committee calls meetings with the Company's

auditors on a regular basis and auditors attend Board meetings when reviewed or audited financial statements

are discussed.

Guðjón Reynisson holds an MBA from the University of Iceland from 2002 and completed Operating- and

business studies from Endurmenntunarstofnuna Háskóla Íslands in 1999. Guðjón graduated with an athletic

education degree from Íþróttakennaraskóli Íslands in 1986. Currently, Guðjón is an independent investor and a

member of the Board of Directors. Between 2008 and 2017 he was the CEO of Hamleys of London. As CEO,

Guðjón was responsible to develop and implement the company's strategy which aimed at the business's

expansion from one store to becoming an international chain. He lead the sales process of the company in 2011

to 2012 and again in 2015 to 2016. Between 2003 and 2007 Guðjón was the executive director of 10-11

convenience stores. Prior to that, from 1998 to 2003, he was the executive director of sales at Tal. Guðjón has

been a member of the Board of Directors of Festi since 2014, of Kvika banki since 2018, of Securitas since 2018

and as chairman of Dropp since 2021.

Margrét holds a Cand. oecon. degree in Business Administration from the University of Iceland, Cand. merc.

degree from Copenhagen Business School and an Executive education from CEDEP Insead in France. Margrét

held the position of CEO of Austurbakki, later Icepharma hf., during the period from 2005 to 2016. Before that

she was an executive director at Skeljungur from 1995 to 2005, executive director at Kuwait Petroleum

(Danmark) A/S from 1986 to 1995 and the office director at Dansk ESSO, later Statoil, from 1982 to 1986. She

was the deputy CEO of AIESEC International Brussel from 1978 to 1979. Margrét is a member of the Board of

Directors of Eignarhaldsfélagið Lyng ehf., Hekla hf., Hekla Fasteignir ehf. and Paradís ehf. She was the chairman

of European Surgical Trade Association from 2011 to 2013 and sat on the Association’s Board of Directors from

2009 to 2015. She was the chairman of the Icelandic Federation of Trade. Margrét was also a member of the

Board of Directors at Reiknistofa bankanna from 2010 to 2011 and from 2016 to 2018, and a member of the

Board of Directors at ISAVIA from 2017 to 2018 and at SPRON 2008 to 2009. Margrét has also been a member

of the Board of the following companies: Skýrr hf., Frigg hf. and Q8 A/S in Denmark and Dansk Institut for

Personalerådgivning. Margrét has been a member of the Board of Directors of N1 from 2011. Margrét was the

Chairman of the Board of Directors of Festi until March 2020.

Consolidated Annual Financial Statements of Festi hf. 2021

The Board of Directors of Festi, contd.

Kristín Guðmundsdóttir, member of the Board of Directors

Þórey G. Guðmundsdóttir, member of the Board of Directors

Executive Board of Festi

Eggert Þór Kristófersson, CEO

Festi´s values, code of conduct and policy on social responsibility

Þórey holds a Cand.oecon. degree in Business Administartion from the University of Iceland. Þórey was the CFO

of Bláa Lónið hf. from 2013 to 2021. Þórey was the Head of the Economics Department of Samskip from 2012 to

2013 and the CFO of Straumur Fjárfestingabanki, which operated in four countries for a period, from 2004 to

She was the assistant and substitute for the Manager of Operations and Finance of Alþingi from 1999 to

2000 and worked for KPMG Endurskoðun hf. from 1995 to 1999. Þórey is a member of the Board of Directors of

DecideAct A/S which is listed on Nasdaq First North Danmark and sells software that supports corporations to

implement and follow their strategy. Þórey was elected to the Board of Directors of Festi in March 2020.

Statement of Corporate Governance, contd.

Kristín holds a Cand. oecon. degree in business administration from the University of Iceland and she is the CEO

of KG slf. In 2011 she was the CEO of Skipti hf. Prior she was the CFO of Síminn hf. and Skipti hf. from 2003 to

Kristín was the CFO of Grandi hf. from 1994 to 2002. Kristín was also for many years an executive at

Íslandsbanki and Iðnaðarbanki Íslands. Kristín has been a member of many Boards of Directors. She was the

Chairman of the Board of Directors of Sparisjóður Vestmannaeyja from 2011 to 2013, a member of the Board of

Directors of Síminn hf. and Míla ehf. from 2007 to 2011, a member of the Board of Directors of Straumur

investment bank from 2013 to 2015 and of Kvika bank from 2015 to 2016 and again in 2018 and on the board of

the Golf Association of Iceland 2013 - 2021. She has also been a member of the Board of Directors of the

following companies: Skjá miðlar, Fasteignafélagið Jörfi, Sjóminjasafnið, Farsímagreiðslur, Straumur,

Verslunarráð Íslands, Verðbréfaskráning Íslands and Lífeyrissjóður verkstjóra. She is a member of the Board of

Directors of Farice since 2013, Rvk Studios since 2015, Eyrir Venture Management since 2020 and Eyrir

Ventures since 2019. She has been a member of the Board of Directors of Eyrir Sprotar since 2020 and a

member of the investment committee of Eyrir Sprotar since 2015. Krístín was the president of Rótarý Reykjavík

Miðborg from 2013 to 2014. Kristín has been a member of the Board of Directors of N1 since 2011 and became a

member of the Board of Directors of Festi in 2018.

The Executive Board is comprised of the CEO and five managing directors of the Company, whereby each

managing director is responsible for a certain division towards the CEO.

Eggert was employed as a consultant in personal service at VÍB hf. from 1995 to 1997. He acted as the executive

director for sales and service at Lánasýsla ríkisins from 1997 to 1999 and Íslandsbanki hf. from 2000 to 2007,

first being responsible for bond positions and later he was the managing director of Islandsbanki's investment

funds. During the year 2008 Eggert acted as director of asset management at Glitnir bank in Iceland and in

Finland but a year later he joined the investment company Sjávarsýn ehf., where he acted as the CEO. Eggert

was the acting CFO of N1 from June 2011 and took over as CEO of N1 in February 2015. Eggert is the Chairman

of the Board of Directors at Malik Supply A/S and Nordic Marine Oil where Festi holds a 24% share and he is the

Chairman of the Board of Directors in Festi‘s subsidiaries. Eggerts holds a Cand. oecon. degree from the

accounting department at the University of Iceland and is also a certified securities trader.

Magnús Kristinn Ingason, CFO

Kolbeinn Finnsson, managing director of Operations

Ásta Sigríður Fjeldsted, CEO of Krónan

Hinrik Bjarnason, CEO of N1

Óttar Örn Sigurbergsson, CEO of ELKO

According to the Companie's Articles of Association, it is the role of the Board of Directors is to hire the CEO and

decide the terms on the employment contract. The Board of Directors and CEO are responsible for the

governance of the Company.

It should be noted that members of the Executive Board of Festi do not have share option agreements with the

Company. There are no conflicts of interest between members of the Executive Board and the Company’s main

customers, competitors or large shareholders.

Festi's values are:

Value

Cooperation

Trust

Consolidated Annual Financial Statements of Festi hf. 2021

Festi´s values, code of conduct and policy on social responsibility, contd.

Main components of internal control and the Company´s risk management

Company's Shareholders

The Company’s policy is to be a leader for the future, which includes being socially responsible. Concurrently to

the issue of the financial statements, a social report will be issued in accordance with the ESG Reporting Guide

2.0 from February 2022. Festi endeavours to minimise the environmental impact of its operations by relentlessly

applying disciplined and accepted measures. On 19 June 2015 Festi was granted VR´s certificate of equal salary

which all subsidiaries of Festi have been granted in accordance with the ÍST 85:2012 standard. The certificate

confirms that the Company´s employees working comparable jobs are not being discriminated against in

determination of their salaries. Every year a number of non-profit organisations and individuals ask the Company

for financial support for their good causes. Festi puts emphasis on preventative measures and sport activities.

Statement of Corporate Governance, contd.

Festi´s code of conduct was approved on 27 February 2020. The code of conduct is accessible on the

Company´s website.

Monitoring the main risks faced by the Company is an integral and ongoing part of the Company´s day-to-day

operations intended to secure its operational continuity and minimise risk.

The main components of internal control and risk management are reviewed by the Board of Directors annually.

The Company does not have an internal auditor. However, the Company´s auditors carry out limited reviews of its

processes.

The Company is a limited liability company. Information regarding its largest shareholders is disclosed on its

homepage, www.festi.is.

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Values of Festi:

Festi's policy includes:

Festi owns and operates companies that are leaders in the market for food products, sale of fuel and related services, electricity and electronic

equipment. The Company's operations regard investments in and provision of core services to its subsidiaries, the operation of real estate and

the purchasing and selling of shares. The subsidiaries are Bakkinn vöruhótel, ELKO, Festi fasteignir, Krónan and N1.

Festi is listed on the main market of the stock exchange of NASDAQ OMX Iceland and has approximately one thousand shareholders and

diverse ownership.

ESG Risk Assessment

A summary of Reitun's report can be found on Festi's website.

Festi's operations

Non-Financial Information

Non-Financial Information ESG

These annual accounts contain an excerpt from the Sustainability Report of Festi and its operating subsidiaries which will be published in detail

in a separate document. The sustainability performance of Bakkinn, ELKO, Krónan, and N1 will also be published.

The information in the Sustainability Report is produced by employees and experts in applicable divisions of Festi. The report is not audited or

reviewed by a third party. The report covers the entire operations of Festi and its operating subsidiaries based on the operating year 2021.

Since the merger of the companies, Festi hf. (Festi) has been publishing alongside the annual consolidated financial statements a

comprehensive sustainability report, based on the Nasdaq ESG Reporting guide for Iceland and the Nordic countries introduced in February

These guidelines reflect the existing recommendations issued in 2015 by the United Nations (UN) and its Sustainable Stock Exchanges

(SSE) initiative, the World Federation of Exchanges’ Sustainability Working Group.

Greenhouse gas emissions and other environmental metrics are provided by Klappir’s online solution. The metrics include the following

information: number of flights provided by each relevant airline company, fuel litres from N1 customers accounting systems, data on waste

disposal from the waste management companies, and data on energy and water usage from applicable utilities. Metrics for the years 2018 to

2020 are provided for comparison. However, the data provided for comparison may change between years if updated information has been

streamed through the database of Klappir.

Reitun prepared and issued a report on the ESG risk assessment for Festi in 2020 and 2021. The Group had a positive outcome from the risk

assessment with an improvement from grade B3 in 2020 to grade B2 in 2021 (i.e. from 68 to 72 points out of 100 possible).

The purpose of the assessment is to analyze and evaluate Festi's performance in selected main ESG aspects (environmental, social and

governance). In Icelandic, the term is UFS (umhverfismál, félagslegir þættir and stjórnarhættir). The risk of each factor, which are given different

weights, is assessed from the perspective of management and performance results. Festi's overall score is 72 points, category B2. At the time of

publication, this score was above the average of the 34 Icelandic companies which had been assessed by Reitun through similar ESG analysis.

Employees: We want to be an outstanding and sought after workplace by supporting career development and a healthy work culture.

Subsidiaries: We support our companies under management to grow and constantly seek new opportunities in efficient infrastructure services

for operations, financing, human resources, digital solutions and sustainability.

Partners: We build long-term business relationships with our customers, suppliers and other partners.

Shareholders: We create value for our shareholders with sustainable long-term investments.

The company’s policy is to manage investments, support value creation and develop new opportunities. Doing so will provide Festi's subsidiaries

with the necessary surpport so that they will stay at the forefront of services and product offerings in the whole of Iceland.

Value - Cooperation - Trust

Community: We have a positive impact on our community and local environment by being guided by sustainability in all of our decision-making.

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Vision of Festi:

Sustainable

Development

Goals

Reference

8 Policy Indicator 2019 2020 2021 ESG

Create value

for shareholder

Total segment

revenue ma. ISK

87 87 101 NA

Publish a

sustainability report

Krónan, Festi and

Festi, Bakkinn, ELKO, Krónan and N1

Festi, Bakkinn,

ELKO, Krónan

and N1

Grade A from Reitun B3 B2 G8

Festi’s daily operations are divided into operating of infrastructure services for the Group’s operating entities and investment operations. The

tasks associated with Festi’s operations include the Group’s IT, finance, including daily treasury and financing, human resources, the operations

of real estate, as well as quality management and security operations. The Executive Committee of Festi is an integrated part of the

management team of the Group’s operating entities. As such the Executive Committee of Festi participates in monthly management meetings of

its subsidiaries and the Boards of the operating entities consist of representatives of Festi.

We are trustworthy and sustainable leaders

We increase value, happiness and the quality of life

Non-Financial Information, continued:

Festi's operating subsidiaries

The Group operates more than 200 operating units around Iceland. Furthermore, it leases out real estate assets which are not used for own

operation. Most of the Group's companies are subject to operating permits, in addition to having have to comply to several laws and regulations

which are monitored. Operations subject to permits are annually reviewed by relevant supervisory bodies in relevant municipalities. Feedback

and comments by such supervisory bodies are addressed in cooperation with them.

Bakkinn vöruhús are two warehouses specialised in storage and distribution of products for customers who either partly or fully outsource their

warehousing operations, both within and outside of the conglomerate. Bakkinn's operations are an important link in the Group's supply chain

through the distribution and delivery of products for Festi's operating subsidiaries. Bakkinn emphasizes quality, safety and efficiency in both

services and processes. Bakkinn will publish its second sustainability report in accordance with the Nasdaq ESG Reporting guide in March 2022.

It will further describe operations, environmental goals, greenhouse gas emissions and goals related to the 17 UN Sustainable Development

Goals.

Festi's, and its subsidiaries', risk assessment is updated twice a year. The assessment covers all material risk issues in which both likelihood

and financial impact is assessed. Issues which have developed and progressed from last assessment are especially analyzed to further

decrease impacts of those risk issues. An action list is then updated which lists out actions until the next assessment. Festi's CFO is responsible

for the risk assessment.

Festi Target

Decent work

and Economic

growth

Promote good

business

practices

Festi Real Estate owns and operates the Group's real estate with the objective of return on investment and/or to support its core operation.

Elko is the largest electronics retail chain in the country and operates seven stores, including an online store. Elko's objectives are to offer

quality brand names in electronics at competitive prices, as well as to offer customers excellent services. Its supply agreement with Elkjöp helps

to provide the lowest prices for electronics in Iceland. Elko promotes environmental practices in multiple ways such as tacking back used

products, such as laptops and mobiles, for refurbishment and reselling in return for a voucher. Elko has received thousands of used electric

products from Icelandic consumers which have been resold or refurbished abroad. Other environmental practices include electronic invoicing,

waste management, and energy efficiency through investments in environmentally friendly tools and equipment.

Next March, ELKO will publish its second sustainability report prepared in accordance with the Nasdaq ESG Reporting guide in March 2022. It

further described its activities, environmental goals, CO2 emissions and its goals related to the UN Sustainable Development Goals.

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Sustainable

Development

Goals

Reference

12 Policy Indicator 2019 2020 2021 ESG

Positive impact

on the

community

90% of all waste

sorted by 2030

Percentage of

sorted waste

70,4%

Percentage of sorted waste 72,8%

Percentage of

sorted waste

75,8%

E1, E7

Positive impact

on the

community

Certifications,

internal reviews of

licensed operations

with the objective to

Swan Ecolabel at

2 Krónan stores,

18 N1 service

stations certified

Swan Ecolabel at all Krónan stores, 18 N1 service

stations certified ISO 14001, all tire service

stations certified by Michelin, Bakkinn Klettagarðar

certified by ExxonMobil, sales of Swan Eco Label

Swan Ecolabel at

all Krónan stores,

18 N1 service

stations certified

Non-Financial Information, continued:

N1 is energy supplier for the Group and provides people, households and companies with fuel, electricity, supplies, tires and lubrification

services, catering and leisure services at the service stations accross the country. The N1's objective is to enhance the mobility of society with a

customized service and a targeted product range that meets the requirements of customers in all circumstances. N1’s policy is to be a leader in

Icelandic transportation and to serve all types of clients regardless of whether they use petrol, diesel, eletricity or methane driven vehicles. N1

Rafmagn distributes eletricity to residential homes, corporations and common property. The electricity originates from renewable ernergy

sources. N1 operates 86 fuel service stations, 13 electricity service stations in its brand name N1 Rafmagn (12) or in collaboration with Telsa

(2), and one methane service station for vehicles. Out of these, 29 offer refreshments and healthy snacks under the brand names Nesti og Ísey

Bar, including offering pick-up for online purchases through the delivery service Dropp. 18 of N1’s stations are certified in line with the ISO

14001 standard on environmental management. N1 also runs 11 lubrication and tire service stations. All of the tire service stations have quality

assurances by Michelin. In addition, N1 operates 3 corporate stores, 6 corporate stores through agents, 5 tire service stations and 41 maritime

fuel pumps around the country.

N1 will publish its sustainability report prepared in accordance with the Nasdaq ESG Reporting guide in March 2022 for the third consecutive

year. It further describe its activities, environmental goals, grenhouse gas emissions and its goals related to the UN Sustainable Development

Goals. Since 2014, N1 has been publishing a corporate social responsibility report.

Society and Environment

Krónan is a discount super market which emphasizes fresh produce. Krónan runs 25 convenience stores under the brand names Krónan, Kr and

Krónan online store. Their objective is to provide a wide variety of products at low prices to its customers. All the stores have been the first in

Iceland to be awarded the Swan Ecolabel environmental certificate. The Swan Ecolabel for convenience stores covers all environmental aspects

of the stores' operations such as food waste, waste sorting, energy consumption and offer of organic and environmentally certified products.

Krónan supports the national campaign Þjóðþrif by collecting the recyclable plastic generated by its operations and sending it to Pure North

Recycling. The project promotes sustainability, aligns with the circular economy and ensures, through a certified process, that plastics are duly

recycled and not landfilled, incinerated or sent unprocessed to foreign countries.

Krónan will publish its third sustainability report, prepared in accordance with the Nasdaq ESG Reporting guide in March 2022, the first of which

was awarded CSR Report of the Year by Festa Center for Corporate Social Responsibility, Stjórnvisi and the Iceland Chamber of Commerce. It

further described its activities, environmental goals, CO2 emissions and its goals related to the UN Sustainable Development Goals.

It is Festi's policy to have positive impacts on society and the local environment by focusing on sustainability in all decison-making. Social

responsibility plays an important part in that journey. The company’s policy is to treat the environment with respect, minimize negative

externalities and seek to provide environmentally friendly products and services. Festi and its subsidiaries are all members to Festa , the center

for social responsibility in Iceland.

Festi's operating subsidiaries, continued:

Festi and its operating subsidiaries strive to operate in accordance with issued operating licenses, internationally certified standards and

approved methods. All of Krónan's convenient stores are certified by Swan Eco Label, 18 of N1 fuel service stations are certified pursuant to the

ISO 14001 standard on environmental management by Vottun hf. All nine N1 tire workshops are certified Michelin Quality Dealers by SCA in

Denmark. Bakkinn and lubrication oil service stations operate in accordance with the requirements of Exxon Mobil certified by Exxon Mobil.

Festi and its operating subsidiaries have in various ways reduced their environmental footprint, among other things through targets on waste

sorting, responsible procurement, product selection, innovation, services and training, and other measures. These activities are outlined in more

detail in the sustainability report of Festi and its subsidiaries with the annual report during the first quarter of the year.

Festi Target

Ensure

sustainable

consumption

and production

patterns

Festi and its operating subsidiaires work constantly to increase social responsibility accross the core activities of the companies. Social

responsibility is an increasingly important factor in the operations and covers all aspects of the Group. Various fields fall under the term, such as

environmental issues, codes of conduct, fair practices, communal activity, and development and relations with the society. Festi and its

subsidiaries are developing a Community and climate policy which supports and strengthens the existing policies of Festi. It is estimated that the

policy will be presented during the first quarter of 2022.

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Sustainable

Development

Goals

Reference

13 Policy Indicator 2019 2020 2021 ESG

Energy insenty

kWh/FTE

44,3 43,1 42,0 E4

Energy intensity

kWh/m2

505,0 459,4 474,6 E4

Emissions

kgCO2/million ISK

19,1 19,6 15,7 E2

Emissions

tCOs/FTE

1,43 1,49 1,34 E2

Carbon offsetts

through reforestation

Signature of

contract with the

Carbon neutrality by

2035

Offset Scope 1

emissions

tCO2e 441,8

Offset Scope 1 emissions tCO2e 470,5

Carbon offsets for

Scope 1, 2 og 3

tCO2e .583,0

Procurement policy

Preparing for

presentation in

2022

S9, S10

Supplier

assessment on the

largest suppliers of

Festi and its

subsidiaries

Not yet started Preparing S9, S10

Eletricity provider

Purchase of

share of Íslensk

Orkumiðlun

Purchase of all remaining shares of Íslensk

Orkumiðlun

N1 Rafmagn E10

Non-Financial Information, continued:

This year, all of Festi's subsidiaries will publish their second sustainability report including non-financial information, environmental and waste

management , as well as their goals in connection with the 17 United Nations Sustainable Development Goals. Those reports are part of the

commitments of Festi, Krónan, Bakkinn and ELKO under their signature for the Climate Declaration of Festa (Loftlagsyfirlýsing Festa) and the

city of Reykjavík this year. N1 signed the declaration in 2015.

Since the merger, Festi has offset the direct emissions of the day-to-day operations of the conglomerate (Scope 1 emissions). For the year

2021, Festi hf. has also offset indirect emissions, including from energy use, flights and waste (Scope 2 and 3). Information on the source of the

data from suppliers is traceable through Klappir's software.

The report is not audited by a third party in accordance with paragraph 66.d. of act 3/2006 on annual accounts but there are plans to do so in

2022.

During the year of 2021, Festi hf was the first of all companies in Iceland to register its carbon sequestration in the Icelandic Climate Register in

accordance with the requirements of the Skógarkolefni quality system by signing a contract with the Icelandic Climate Register and Skógrækt.

The project is transparent, measurable and will be confirmed and certified by an independent party. Responsible carbon offsetting is an

important part of Festi's and its operating companies' policy and part of the journey towards the Group's carbon neutrality in 2035.

Society and Environment, continued:

The project starts in 2022 with the certified planting of about half a million trees over the next three to four years at Fjarðarhorn in Hrútafjörður.

With this first project, it is estimated that over the next 50 years Festi's carbon sequestration will amount to 70,000 tonnes of Co2, which

comprises ca. 85% of expected emissions due to the operations of Festi and its subsidiaries during the same period. Festi's investment related

to this one project is around 100 million ISK, but the aim is to invest in further projects related to forestry in each part of the country. In this way,

Festi hf not only aims to develop new forests, but also to strengthen the level of employment in the areas where the new forests will rise. The

forests are also designed to promote exercise and outdoor life with benches, tables and outdoor recreation facilities for people all around the

country.

Festi Target

Take urgent

action to

combat climate

change and its

impacts

We have a

positive impact

on our

community and

local

environment by

being guided by

sustainability in

all decision-

making.

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Unit 2019 2020 2021

X:1 - -

Outcome of pay analysis - Festi % - 0,79% 0,35%

Outcome of equal pay certification - Bakkinn % 4,3% 0,11% 1,31%

Outcome of equal pay certification - ELKO % 2,51% 0,67% 0,64%

Outcome of equal pay certification - Krónan % 3,59% 0,71% 0,2%

Outcome of equal pay certification - N1 % 1,1% 0,33% 0,95%

Non-Financial Information, continued:

Numerous non-profits, humanitarian organizations and individuals contact the Group annually with enquiries for all sorts of support to its causes

and projects. Festi emphasizes support to preventional activities and sports. Further details on these activities will be detailed in the Group's

individual subsidiaries' sustainability reports.

Cleaning measures on behalf of N1 ehf. and Festi hf. due to a leak from a fuel tank at the N1 self-service station at Suðurbraut 9 in Hofsós have

been going on since 2020 and are still in progress. The precautionary measures and proposals were preceded by extensive research into soil,

soil air, indoor air as well as regular monitoring of organic compounds in defined areas in accordance with the instructions of the Environment

and Food Agency. N1 nor Festi are not authorized to undertake any actions in the area except on the basis of instructions from the Environment

Agency and with the consent of the municipality and the relevant site owner. Work is now underway to comply with instructions for improvements

issued by the Environment Agency on 22 November 2021. To prevent a similar incidence like the one in Hofsós, N1 has implemented a special

tank measurement and monitoring system at 85 service points that measures and reports the smallest deviations in the fuel tank contents to

prevent any accidents like this in the future.

Human resources

Festi's policy is to attract and retain qualified and trustworthy employees. This strategy involves creating a positive and motivating work

environment for employees as well as empowering and supporting them through purposeful training and career development. Emphasis is put

on the awareness and knowledge of employees on the respective company's role and responsibility, policy and values in order to achieve

greater success.

The procurement policy of Festi and its subsidiaries is being formulated. It is estimated that it will be published and implemented in 2022.

Krónan requires its suppliers to certify that their products are manufactured in accordance with laws and regulations, to respect the protection of

international human rights and to assure no human rights violations have been taken place. This provision is further described in Krónan's

procurement rules in its sustainability report. Suppliers who service ISO 14001 certified N1 establishments have undergone supplier assessment

in accordance with the requirements of N1 and the standard. Some N1 suppliers make reciprocal requirements for N1 to meet certain conditions

in order to obtain a license to sell their products, such as the training of N1 staff in accordance with their standards but also the fulfillment of their

requirements for environmental, safety and security, personnel and health issues. These processes are reviewed annually.

This year, Festi and its subsidiaries harmonized their equal pay system in accordance with IST 85: 2012 and the criteria of the Ministry of

Welfare for equal salary. The equal pay certification was reviewed by Icert in January 2021. No deviations were identified.

Results of salary gap at Festi and its subsidiaries:

Gender Pay Ratio

Human resources, non-discrimination, and equal pay policies that apply to Festi and its subsidiaries are available on the relevant websites.

Festi places great emphasis on ensuring that employees performing the same or equivalent jobs are not discriminated against in terms of pay or

pay by gender or other factors, thus supporting UN SDG 5 on Gender Equality and UN SDG 10 on Inequality.

In January 2021, the equal pay system of Festi and its subsidiaries, based on the IST 85:2012 standard and the requirements of the Ministry of

Welfare on equal pay certifications, was evaluated by Icert in January of 2021. No issues were identified during the assessment.

The results of the pay analysis for Festi and its subsidiaries;

Median total compensation for men (X) to median total

compensation for women

In 2019 Festi and its subsidiaries were the first companies to enter into contract with the ethics platform of Hagvangur (Hagvangur's

Siðferðisgátt). The objective is to provide employees of companies and institution a platform to report to an independent party any misconduct

or harassment at the workplace. Promotion of this co-operation is available on the companies internal workpage, and promotional cards are

available at all establishments where there is no easy access to Relysis' internal or educational website. One notification was received through

the portal in the year 2020. In 2021 they were 8 notifications for the entire Group. Not all of them were related to misconduct, bullying or

harassment but all received notifications were resolved.

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Sustainable

Development

Goals

Reference

5 and 10 Policy Indicator 2019 2020 2021 ESG

Equal pay for similar

and equally valuable

jobs

Gender Pay Gap 0,73%

Gender Pay Gap

0,35%

Equal pay

certification for Festi

and its subsidiaires

Launch of the

project

Project completed

No deviation

found in the

review of the

equal pay

certification

Equal gender ratio

at board level

50% women 66% women 60% women G1

Increase the

proportion of women

in senior

management

Senior

management

Festi 17%

Women (1 of 6)

Senior management Festi 17% Women (1 of 6)

Senior

management

Festi 17%

Women (1 of 6)

Increase the

proportion of women

in senior

management

Head of divisions

Festi 80% women

(4 of 5)

Head of divisions Festi 80% women (4 of 5)

Head of divisions

Festi 83% women

(5 of 6)

Anti-harassment

Agreement with

Siðferðisgáttin

One notification received through the system

Eight notifications

received through

the system

S6 S7 S10

2021

Svar-

hlutfall

2020

Svar- hlutfall

Total 4,07 73,7% 4,21 67%

Festi 4,27 94,1% 4,34 91%

Bakkinn 3,87 85,7% 4,03 69%

ELKO 4,17 77,1% 4,17 90%

Krónan 4,04 69,9% 4,15 58%

N1 4,08 74,1% 4,33 72%

Non-Financial Information, continued:

Festi has a zero-accident policy. Safety and occupational safety courses are held annually as it is important to strengthen the safety and health

awareness of employees. Emphasis is placed on safety in the work environment and attention is drawn to health and exercise. Courses and

educational lectures are e.g. related to first aid, fire protection, chemicals and chemical products, quality, environment and security issues,

responses to robbery and theft, threatening behavior and degradation as well as lectures on health, discrimination, bullying and harassment.

The goal of the human resource department is to increase the e-learning in order to provide better access to all of the Group’s employees

throughout the country and as a key element in the on-boarding process of new employees. Through these measures, Festi believes that the

Group’s employees become more powerful and employee turnover ratio will decrease. A new Relysis electronic training and communication

system is currently being implemented with good promise. Educational material is tailored to operations and can be used by all of the Group's

companies.

Festi Target

Achieve gender

equality and

empower all

women and girls

We want to be

an outstanding

and sought

after workplace

by supporting

career

development

and a healthy

work culture.

Reduce

inequality within

and among

countries

A big step was taken towards a holistic approach regarding the wellbeing of employees this year through the implementation of Festi's and its

subsidiaries' wellbeing package (Velferðarpakki). The package offers all full time employees a range of different services. The services include

therapy sessions, sport grants, the ethics platform (siðferðisgátt), retirement courses, trauma care, counseling of various professionals such as

with a nutritionist or social worker. An agreement between the Group and the Health Protection Agency on the registration of illness and health-

related counseling is also in force.

Human resources, continued:

Satisfied employees are the foundation for outstanding services. In co-operation with Gallup, Festi, and its subsidiaries perform an annual

workplace analysis. The purpose is to measure the well-being and employee satisfaction. Gallup´s Q12 questionaire is used in addition selected

question from Festi. Ratings range from 1 to 5 (5 being the highest). Once available, the results are analysed, compared to previous years, to

peers or to the other companies of the Group. Then, the results are reviewed by the management and presented to the employees. Potential

actions are taken if appropriate.

The employee satisfaction assessment was conducted in October 2021.

The workplace analysis was last conducted in October 2021;

Results of the work satisfaction survey

Overall satisfaction

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Operational parameters

Unit 2018 2019 2020 2021

Total Revenue ISK thousands 59.700.000 86.700.000 87.392.899 101.052.383

Total Equity ISK thousands 26.000.000 28.700.000 29.783.625 33.910.395

Number of full time equivalent employee FTEs 764 1.158 1.145 1.176

Total space for own operation m² 112.000 101.644 107.423 104.144

Unit 2018 2019 2020 2021

kgCO₂e/MWh 40,1 32,3 34,7 32

kgCO₂e/FTEs

2.438,23 1.430,8 1.495,99 1.346,08

GhG emissions per unit of revenue

kgCO₂e/ISK

thousands

0,03 0,02 0,02 0,02

GhG emissions per unit of equity

kgCO₂e/ISK

thousands

0,07 0,06 0,06 0,05

GhG emissions per unit of space (m²) kgCO₂e/m² 16,63 16,3 15,95 15,2

Nasdaq: E2

Unit 2018 2019 2020 2021

kWh/FTEs 60.795,8 44.327,7 43.101,7 42.026,7

Energy per unit of revenue

kWh/ISK thousands

0,8 0,6 0,6 0,5

Energy per square meter kWh/m² 414,7 505 459,4 474,6

Unit 2018 2019 2020 2021

kg/FTEs 5.632 3.594,2 3.728 3.423,6

Total waste per unit of revenue

kg/ISK thousands

0,1 0 0 0

Accounting of emissions

Unit 2018 2019 2020 2021

Total emissions offset tCO₂e 509 441,8 470,8 1.583

Emissions offset by forestry tCO₂e 509 441,8 470,8 1.583

tCO₂e 0 0 0 0

Other emissions offset tCO₂e 0 0 0 0

Unit 2018 2019 2020 2021

Scope 1 tCO₂e 535,1 441,8 470,5 474,8

Scope 2 (location-based) tCO₂e 401,1 462,6 459,8 456,8

Scope 1 and 2 tCO₂e 936,2 904,5 930,3 931,6

Scope 3 tCO₂e 926,6 752,4 782,6 651,4

tCO₂e 1.862,8 1.656,9 1.712,9 1.583

FESTI HF. - ESG Statement 2021

Operational Parameters

Non-Financial Information, continued:

Anti-corruption and bribery policy

In accordance with Act no. 40/2020 on the Protection of Whistleblowers the e-mail addresses [email protected], [email protected],

[email protected], [email protected], [email protected] are active and the Company's privacy representative receives the notifications.

Everyone can proposed suggestions to the company through Festi's website, www.festi.is. External suggestions are recorded, managed and

resolved by the responsible party.

Festi and its subsidiaries are aware of their impact on the society. Festi acknowledges that the reputation of Festi and its subsidiaries is one of

the most valuable asset of the Company. The Code of Conduct of Festi, approved on 27 February 2020, applies to all activities of the Group, all

employees, its board of directors as well as contractors which perform tasks for the Companies. The Code of Conduct is available on the

Company's website, www.festi.is.

Energy per full-time equivalent (FTEe)

employee

Nasdaq: E4

Waste Intensity

Total waste per full-time equivalent (FTEe)

employee

GHG emissions

GhG emissions per megawatt-hour consumed

GhG emissions per full-time equivalent (FTEe)

employee

Energy Intensity

Emissions neutralized by carbon offset projects

Mitigation efforts through wetland restoration

Greenhouse Gases

Greenhouse Gas Emissions

Nasdaq: E1

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Unit 2018 2019 2020 2021

Total emissions tCO₂e 535,1 441,8 470,5 474,8

Fuel consumption of vehicles

tCO₂e 525,2 422,2 412 439,1

Unit 2018 2019 2020 2021

Total emissions tCO₂e 401,1 462,6 459,8 456,8

Electricity tCO₂e 225,8 244,5 253,8 231,2

Heating tCO₂e 175,3 218,1 206,1 225,6

Unit 2018 2019 2020 2021

Total emissions tCO₂e 879,1 727,5 766,5 634

tCO₂e 879,1 727,5 766,5 634

Total emissions tCO₂e 47,5 24,9 16,1 17,4

Flights tCO₂e 47,5 24,9 16,1 17,4

Environmental parameters

Unit 2018 2019 2020 2021

Total energy consumption kWh 46.447.974 51.331.534 49.351.456 49.423.451

Of which energy from fossil fuel kWh 2.099.645 1.734.360 1.898.995 1.909.942

Of which energy from bio fuel kWh 497 2.921 3.759 2.992

Of which energy from electricity kWh 24.541.146 24.952.973 24.168.116 22.021.289

Of which energy from hot water kWh 19.806.686 24.641.280 23.280.586 25.489.228

Direct Energy Consumption kWh 2.100.142 1.737.281 1.902.754 1.912.934

Indirect Energy Consumption kWh 44.347.832 49.594.253 47.448.702 47.510.517

Unit 2018 2019 2020 2021

Total energy consumption kWh 46.447.974 51.331.534 49.351.456 49.423.451

Fossil Fuel % 4,5% 3,4% 3,8% 3,9%

Renewable Energy % 95,5% 96,6% 96,2% 96,1%

Nuclear % 0% 0% 0% 0%

Unit 2018 2019 2020 2021

Total fuel consumption liters 214.180,6 177.258,2 193.964,5 194.123,6

Petroleum liters 62.859 53.021 59.279 50.171

Diesel oil liters 150.968,8 123.709,6 134.342,4 143.679,2

Methane liters 48 266 343 273

Unit 2018 2019 2020 2021

Total water consumption m³ 571.255,9 693.312,1 633.565,4 672.492,3

Cold water m³ 229.761,3 268.462,5 232.175,9 233.022,8

Hot water m³ 341.494,6 424.849,7 401.389,4 439.469,5

Unit 2018 2019 2020 2021

Total electricity use kWh 24.541.145,8 24.952.972,5 24.168.115,8 22.021.288,9

Fossil fuels % 0% 0% 0% 0%

Renewable energy % 100% 100% 100% 100%

Nuclear % 0% 0% 0% 0%

Unit 2018 2019 2020 2021

Total waste generated kg 4.302.852 4.162.058 4.268.519 4.026.164

Of which sorted waste kg 2.699.675 2.923.957 3.107.779 3.051.870

Of which unsorted waste kg 1.507.642 1.238.101 1.160.740 971.748

Recycled/recovery kg 2.668.603 2.806.409 2.944.355 2.248.371

Landfill/disposal kg 1.623.906 1.355.649 1.324.164 1.775.247

Percentage of sorted waste % 62,7% 70,3% 72,8% 75,8%

Percentage of recycled waste % 62% 67,4% 69% 55,8%

Non-Financial Information, continued:

Scope 1 - Composition of emissions

Scope 2 - Composition of emissions

Scope 3 - Composition of emissions

Category 5: Waste generated in operations

Energy Mix

Nasdaq: E5

Fuel consumption

Water Usage

Nasdaq: E6

Transport, disposal and treatment

Category 6: Business travel

Energy Usage

Nasdaq: E3

Electricity Mix

Waste Management

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Unit 2018 2019 2020 2021

Total distance km 489.624 281.715 154.034 197.113

Flights km 489.624 281.715 154.034 197.113

Unit 2018 2019 2020 2021

yes/no yes yes yes -

yes/no - - - -

yes/no no no no no

Environmental Management

Unit 2018 2019 2020 2021

yes/no - no no no

Unit 2018 2019 2020 2021

ISK thousands - - - 230.670,3

Social parameters

Unit 2018 2019 2020 2021

X:1 - - - -

yes/no - no no no

Unit 2018 2019 2020 2021

X:1 - - - -

Outcome of pay analysis - Festi % - - 0,79% 0,35%

Outcome of equal pay certification - Bakkinn % - 4,3% 0,11% 1,31%

Outcome of equal pay certification - ELKO % - 2,51% 0,67% 0,64%

Outcome of equal pay certification - Krónan % - 3,59% 0,71% 0,2%

Outcome of equal pay certification - N1 % - 1,1% 0,33% 0,95%

Unit 2018 2019 2020 2021

% - - 4,5% 5,6%

Employee turnover women % - - - 2,8%

Employee turnover men % - - - 2,8%

% - - 29,1% 27,1%

Employee turnover women % - - - 1,1%

Employee turnover men % - - - 26%

% - - 21,5% 23,5%

Employee turnover women % - - - 7,9%

Employee turnover men % - - - 15,6%

Non-Financial Information, continued:

Environmental Operations

Does your company follow a formal

Environmental Policy?

Does your company follow specific waste,

water, energy, and/or recycling policies?

Does your company use a recognized energy

management system?

Nasdaq: E7

Business travel

Total annual investment in climate-related

infrastructure, resilience, and product

development

Nasdaq: E10

CEO Pay Ratio

CEO Salary & Bonus (X) to median FTE Salary

Does your company report this metric in

regulatory filings?

Nasdaq: S1

Climate Oversight / Board

Does your Executive Management oversee

and/or manage climate-related risk?

Does your Board of Directors oversee and/or

manage climate-related risk?

Nasdaq: E8, E9

Climate Risk Mitigation

Nasdaq: S2

Year-over-year change for full-time

employees- Festi

Year-over-year change for full-time

employees- Bakkinn

Year-over-year change for full-time

employees- ELKO

Gender Pay Ratio

Median total compensation for men (X) to

median total compensation for women

Nasdaq: S2

Employee Turnover

Full-time Employees

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Unit 2018 2019 2020 2021

% - - 87,6% 58,4%

Employee turnover women % - - - 22,7%

Employee turnover men % - - - 35,6%

% - - 26,2% 38,2%

Employee turnover women % - - - 22,6%

Employee turnover men % - - - 15,6%

Unit 2018 2019 2020 2021

Percentage of women in enterprise % - 34% 36% 39%

Festi % - - - 53%

Bakkinn % - - - 10%

ELKO % - - - 29%

Krónan % - - - 41%

N1 % - - - 43%

Percentage of women on executive board % - - - 17%

Festi % - - - 0%

Bakkinn % - - - 0%

ELKO % - - - 0%

Krónan % - - - 100%

N1 % - - - 0%

% - - - 42%

Festi % - - - 83%

Bakkinn % - - - 0%

ELKO % - - - 17%

Krónan % - - - 67%

N1 % - - - 38%

% - - - 28%

Bakkinn % - - - 0%

ELKO % - - - 20%

Krónan % - - - 33%

N1 % - - - 30%

Units 2018 2019 2020 2021

% - - - 0%

% - - - 0,4%

Unit 2018 2019 2020 2021

yes/no - yes yes yes

Non-Financial Information, continued:

Employee Turnover, cont.

Full-time Employees

Year-over-year change for full-time

employees- Krónan

Management team

Percentage of women in senior- and executive-

level positions

Other management positions

Percentage of women with other

management positions

Nasdaq: S4

Year-over-year change for full-time

employees- N1

Nasdaq: S3

Gender Diversity

Enterprise Headcount

Executive Board

Nasdaq: S6

Temporary Worker Ratio

Total enterprise headcount held by part-time

employees

Total enterprise headcount held by

contractors and/or consultants

Nasdaq: S5

Non-Discrimination

Does your company follow a sexual

harrassment and/or non-discriminatory policy?

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Unit 2018 2019 2020 2021

% - - 0% 0%

% - - 0,09% 0%

% - - 0,06% 0%

% - - 0,03% 0,2%

% - - 0,09% 0,28%

Unit 2018 2019 2020 2021

yes/no yes yes yes yes

X:1 - - - 0,015

X:1 - - - 0,029

X:1 - - - 0,03

X:1 - - - 0,028

X:1 - - - 0,035

Units 2018 2019 2020 2021

yes/no - yes yes yes

yes/no - no no no

Units 2018 2019 2020 2021

yes/no yes yes yes yes

yes/no - - no no

Governance parameters

Units 2018 2019 2020 2021

% - 50% 66% 60%

% - 75% 100% 33%

Units 2018 2019 2020 2021

yes/no - yes yes yes

% - 100% 100% 100%

Injury Rate

Total number of injuries and fatalities, relative

to the total workforce - Festi

Total number of injuries and fatalities, relative

to the total workforce - Bakkinn

Total number of injuries and fatalities, relative

to the total workforce - ELKO

Total number of injuries and fatalities, relative

to the total workforce - Krónan

Non-Financial Information, continued:

Absence from work due to illness (X) as a

percentage of all employees' working hours -

ELKO

Absence from work due to illness (X) as a

percentage of all employees' working hours -

Krónan

Absence from work due to illness (X) as a

percentage of all employees' working hours -

Nasdaq: S8

Child & Forced Labor

Does your company follow a child labor policy?

Total number of injuries and fatalities, relative

to the total workforce - N1

Nasdaq: S7

Global Health & Safety

Does your Company publish and follow an

occupational health and/or global health &

safety policy

Absence from work due to illness (X) as a

percentage of all employees' working hours -

Festi

Absence from work due to illness (X) as a

percentage of all employees' working hours -

Bakkinn

If yes, does your human rights policy cover

suppliers and vendors?

Nasdaq: S10

Board Diversity

Total board seats occupied by women (as

compared to men)

Committee chairs occupied by women (as

compared to men)

Does your company follow a forced labor

policy?

If yes, do your child and/or forced labor policy

cover suppliers and vendors?

Nasdaq: S9

Human Rights

Does your company publish and follow a

human rights policy?

Nasdaq: G1

Board Independence

Does the company prohibit CEO from serving

as board chair?

Total board seats occupied by independents

Nasdaq: G2

Consolidated Annual Financial Statements of Festi hf. 2021

_______________________________________________________________________________________________

Units 2018 2019 2020 2021

yes/no yes no no no

Units 2018 2019 2020 2021

% - 86 99 100

Units 2018 2019 2020 2021

yes/no - no no no

% - - - -

Units 2018 2019 2020 2021

yes/no -

% - - - -

Units 2018 2019 2020 2021

Does your company follow a Data Privacy policy?

yes/no - yes yes yes

Units 2018 2019 2020 2021

yes/no yes yes yes yes

yes/no - - yes yes

Units 2018 2019 2020 2021

yes/no - no no no

yes/no - yes yes yes

External Assurance Units 2018 2019 2020 2021

yes/no - no no no

Are executives formally incentivized to

perform on sustainability

Nasdaq: G3

Collective Bargaining

Total enterprise headcount covered by

collective bargaining agreements (X) to the

total employee population

Nasdaq: G4

Supplier Code of Conduct

Incentivized Pay

Non-Financial Information, continued:

Nasdaq: G6

Data Privacy

Has your company taken steps to comply with

Nasdaq: G7

ESG Reporting

Are your vendors or suppliers required to

follow a Code of Conduct

If yes, what percentage of your suppliers have

formally certified their compliance with the

code?

Nasdaq: G5

Ethics & Anti-Corruption

Does your company follow an Ethics and/or

Anti-Corruption policy?

If yes, what percentage of your workforce has

formally certified its compliance with the

Does your company set targets and report

progress on the UN SDGs?

Nasdaq: G9

Are your sustainability disclosures assured or

validated by a third party?

Nasdaq: G10

Does your company publish a sustainability

report?

Is sustainability data included in your

regulatory filings?

Nasdaq: G8

Disclosure Practices

Does your company provide sustainability

Does your company focus on specific UN

Sustainable Development Goals (SDGs)?

Consolidated Annual Financial Statements of Festi hf. 2021

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