Annual Report (ESEF) • Apr 7, 2022
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Download Source FileUntitled FRØY ASA | ANNUAL REPORT 2021 129 ANNUAL REPORT 2021 CONTENTS CONTENT 2 FRØY ASA | ANNUAL REPORT 2021 Contents 2 This is Frøy 3 Letter from the CEO 4 Solutions for the Ocean Space 6 Our People are our Greatest Strength 8 Fleet Overview 10 Revenue Model and Backlog 12 Our History 14 Board of Directors 16 Executive Management 18 Targets and Policies 20 Shareholder Information 22 Board of Directors’ Report 24 Sustainability in Frøy 30 Corporate Governance 50 Equality Statement 56 Financial Statements - Frøy Group 61 Financial Statements - Frøy ASA 109 Auditors Report 123 FRØY ASA | ANNUAL REPORT 2021 3 Frøy is an integrated aqua service com- pany, delivering a wide range of day-to-day farming services to Nordic aquaculture companies. Frøy install sh farms and per- form regular maintenance on farming sites at sea, carry out biological treatments and transport live sh and sh feed. Frøy has an operational track-record of more than 20 years and a modern and well invested eet. The Frøy team include 733 specialized aqua service professionals, 18 wellboats, 60 aqua service vessels, 3 feed transport vessels and 13 local oces along the Norwegian coast. Frøy ASA is a holding company with head- quarters at Frøya, Norway, and with operat- ing subsidiaries along the Norwegian coast. Frøy ASA was listed on Oslo Stock Exchange in March 2021. NTS ASA is the majority shareholder, holding 72,11% of the shares as of 31 December 2021. Head Quarters Oces THIS IS FRØY Storslett Finnsnes Haugesund Bergen Måløy Ulsteinvik Namsos Rørvik Dønna Frøya Ålesund Trondheim Sogn FRØY ASA | ANNUAL REPORT 20214 Looking back on 2021, it was a year of great changes to our organization and to our eet. The integration of Frøy and the former NTS wellboat and sea transport companies brought together two of the global leading competence hubs within aqua services. It also gave Frøy a broad footprint all along the Norwegian coastline. With the capital raised in the IPO we have a sound nancial platform that gives us exibility to continue building towards our mission – to be the leading and preferred provider of sustain- able aqua services. Going into 2022 we will continue to grow our eet based on long term contracts with sh farmers. 10 newbuilds are scheduled to be delivered in the next two years, substantially increasing our earnings capacity, strength- ening our eciency and competitiveness. A critical pillar for maintaining a sustained position as a leading and preferred provider to sh farmers is to continuously reduce our carbon footprint. All Frøy wellboat newbuilds ordered after 2019 have been equipped with either diesel electric, hybrid electric pro- pulsion systems and/or battery packages. Frøy will continue working on reducing our carbon footprint in the years to come. Frøy will also accelerate its use and focus on digital solutions and data to reduce costs and improve eciency. Leveraging digital solutions to eciently share best practice across vessels, teams and segments is a signicant opportunity. Frøy has a unique competence platform with 733 dedicated aqua service professionals that specialize in sh welfare and ecient operations. Collecting and making use of data to support our teams on site may further enhance our service oering. Our people are our greatest strength, our systems shall support and strengthen our solutions to clients and our collective know-how. On a nal note, I want to thank all stakehold- ers for the trust you have placed in Frøy. We will continue to seek ways to cement that trust. We remain optimistic about the outlook for the industry and are condent that Frøy is well positioned to deliver value for all stakeholders in the years to come. We are pleased to present Frøy ’s rst annual report as a listed company and our rst report that address our mate- rial economic, environmental, and social impacts. Delivering solutions that improve sh welfare, reduce the risk of escapes and improves eciency in operations for the aquaculture industry has been at the core for Frøy for more than 20 years. Taking good care of the sh and our people are our key priorities. Both are prerequisites to operate and key drivers for our growth. This annual report marks the rst step towards a structured reporting on how we integrate sustainability into our business strategy. LETTER FROM THE CEO Dear fellow shareholders FRØY ASA | ANNUAL REPORT 2021 5 FRØY ASA | ANNUAL REPORT 20216 Frøy shall be a leading and preferred pro- vider of sustainable aquaculture services. Through our expertise we shall create added value for our customers. Frøy ’s vision “solutions for the ocean space” forms the basis for our business idea. Our ambition is to grow through delivering best in class solutions for sh farmers’ day to day needs at sea. A key pillar to achieve this ambition is to continuously develop our ser- vice oering through ecient utilization of in house competence and innovation. Frøy ’s business and service oering has gradually developed together with the indus- trialization of the Norwegian sh farming industry. Today, Frøy assist sh farmers throughout the full production cycle at sea. Our service oering range from installation of new farming sites, transport of live sh from smolt facilities to sh farming sites at sea, inspection and maintenance, biological treatments, transport of live sh from the farming sites to the processing facilities and disinfection of the farming site after the production cycle is nished. SOLUTIONS FOR THE OCEAN SPACE LARGE SERVICE VESSEL Installation and mainte- nance of sh farms WELL-BOAT Transport of smolt to sh farms DIVING VESSEL Installation and mainte- nance of sh farms SEA TRANSPORT VESSEL Feed and cargo transport SMOLT FACILITY FRØY ASA | ANNUAL REPORT 2021 7 DELOUSING TREATMENT VESSEL Sea lice removal SMALL SERVICE VESSEL Installation and maintenance of sh farms NET CLEANING VESSEL Cleaning of sh farming nets WELL-BOAT Transport of live sh to processing facilities PROCESSING FACILITY FRØY ASA | ANNUAL REPORT 20218 The Frøy team include 733 specialized aqua service professionals located all along the Norwegian coastline. Our people are essential to success- ful delivery of the Frøy strategy and to sustaining business performance over time. The 733 aqua service professionals represent a unique competence platform. Frøy develop and deliver solutions that have signicant impact on sh farmers’ performance and results with operations in harsh environments and with advanced heavy machinery. Solveig Gaasø Director Fish Welfare 26 years experience “Frøy assist sh farmers with plan- ning and executing complex farming operations every day. I’m impressed by all the dedicated and experienced people we have on our vessels. Their hands-on experience from farming sites all along the Norwegian coast- line is unique. I work to support our local expert teams with analytics and sh health competence, making sure that we learn from our experiences and that we uniformly deliver high quality sh welfare solutions across the organization.” Linn Holmen Director Quality & HSE 14 years experience “Frøy operates under a range of reg- ulatory frameworks, we are regulated by the Norwegian Maritime Authority, the Norwegian Food Safety Authority, the Directory of Fisheries, and we follow sh farmers internal operating requirements and certications. We also comply with important industry standard such as Global G.A.P. and NS 9415:2021. Documentation of procedures, compliance and learning from deviations is key to ensure best practice, a safe workplace and to minimize the impact on our surroundings.” Kristin Sugustad Director Maritime Stang 2 years experience “Frøy shall be the leading compe- tence hub for aqua services globally. Recruitment of young talent and internal training is the backbone of Frøy ’s recruitment strategy. Putting together teams with comple- mentary strengths and experience is the best guarantee for ecient deliv- ery of sustained high-quality services to our clients and to ensure continu- ation of a strong Frøy culture.” OUR PEOPLE ARE OUR GREATEST STRENGTH Håvard Olsen Captain on MS Gåsø Høvding 12 years experience “Wellboats are technologically advanced vessels where as much as 2/3 of the construction costs relates to the treatment and sh transpor- tation systems. New technology enables us to monitor all sh coming in and out of the vessel, and to con- trol the water quality when the sh is on board. On board Gåsø Høvding we have advanced desalination technology that allows us to produce fresh water on board the vessel. This substantially improve eciency and reduce the costs on removal of sea lice with the use of fresh water. Handling and treatment of sh are complicated operations that requires biological, technological, and operational knowhow. The crew on board are crucial to secure good sh welfare and to reduce the risk of biological complications.” FRØY ASA | ANNUAL REPORT 2021 9 Performing competitively and sustainably in the evolving aqua service landscape requires competent and empowered peo- ple working safely together. It also requires a team with complementary strengths ranging from sh welfare to risk manage- ment, technical and maritime competence. Our employees strive every day to make a dierence to our customers. Close collab- oration and specialist know-how is key to make that dierence. We call it “teamwork at sea”. Ronny Helland Grønnli Captain on diving vessel MS Tamina Experience: 11 years “When I came to Frøy, the rst thing I noticed was how incredibly good working environment it was among colleagues. Everyone gets along very well. This leads to the work being carried out in a more ecient way. There is also a pride in being able to deliver at least as good work as the person next to you. Diving safety has always been of utmost importance. You feel well taken care of when working underwater with competent people around.” Reidar Antonsen Captain on small service vessel 13 years experience “In an industry in great development in many areas, it is important for us as a service team to nd solutions to new challenges that arise. We hope that our experience in the eld, and the sharing of knowhow with our customers, helps to develop new standards and contribute to sustain- able operations. Even though the aquaculture industry is experiencing major changes, precise work in line with the customer’s requests and needs never goes out of style. Satis- ed customers are and always will be a driving force for us.“ Ronny Solem Captain on MS Rubin 11 years experience “Back in 2011, when I started on MS Sar, we transported feed in bigbags and we used pallet lifts and trucks to load and unload the feed. Today, at MS Rubin we load/unload feed with the use of cranes to silos on board the vessel, signicantly increasing speed and eciency. MS Rubin car- ries approx. 80.000 tons of sh feed every year. With the DP (dynamic positioning) system on the vessel we can unload directly at the salmon farms’ feed station at sea increasing eciency and reducing costs for our clients.” Tauri Tensing Captain on MS Frøygutt 13 years experience Cleaned +10.000 nets “During the thirteen years I have been in Frøy I have witnessed many innovations in net cleaning technol- ogy. With new technology and tuning of our operational model we have reduced the cost of cleaning nets with more than 50% per m2. We are now facing a new revolution in the form of digitalization and automa- tion. In this industry you are never fully taught, we strive to make new improvements every day.” FRØY ASA | ANNUAL REPORT 202110 Modern and eective tools are pre-req- uisites to deliver ecient and sustainable solutions. Frøy has a modern and well invested eet of vessels with large capac- ity which facilitates ecient operations combined with gentle sh handling. In 2019 Frøy made a strategic decision to reduce greenhouse gas emissions from its eet by investing in more climate friendly vessels. Since 2019 all wellboat new builds have been ordered with either diesel electric or hybrid propulsion machinery. At the end FLEET OVERVIEW SERVICE SEGMENT NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL 10 large service vessels (including newbuilds) Average age 4 years Fleet overview 3 large delousing vessels Average age 7 years (age based on rebuild date) 20 small service vessels (including newbuilds) Average age 6 years 16 net cleaning vessels Average age 6 years 9 diving vessels Average age 5 years Vessel length: 16-25 meters Fitted with cranes for heavy duty operations & ROV’s for underwater operations Some tted with mechanical delousing equipment Fleet info Vessel length: 35-80 meters Mechanical delousing equipment Vessel length: 15 meters Fitted with cranes for lighter duty operations Vessel length: > 15 meters Fitted with single or double net cleaning ROV systems Vessel length: > 15 meters Combination of fast moving and regular diving vessels Equipped with diving equipment Towing and installation of new sites including mooring, nets, pens and other site infrastructure Biological treatments and removal of sea lice using mechanical or thermal delousing equipment Key operations Biological treatments and removal of sea lice using mechanical delousing equipment Installation and maintenance of sea based farming sites, including mooring, nets, pens and other site infrastructure Disinfection of sites after the end of the production cycle Regular cleaning of sh farming nets to remove marine fouling is done to maintain high ow through of water and optimal living conditions for the sh Installation and maintenance of salmon farming sites, including mooring, nets, pens and other site infrastructure NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL FRØY ASA | ANNUAL REPORT 2021 11 of 2021, 21 % of our wellboats and cargo vessels have diesel electric or hybrid propul- sion machinery installed, 80 % of our larger service vessels have diesel electric or hybrid propulsion machinery, and 3 % of our smaller service vessels have diesel electric or hybrid propulsion machinery. The goal is to increase the percentage of vessels with technology contributing to lower carbon emissions. WELLBOAT SEGMENT SEA TRANSPORT SEGMENT NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL NET CLEANING VESSEL DIVING VESSEL WELL-BOAT BIG SERVICE VESSEL SMALL SERVICE VESSEL DELOUSING TREATMENT VESSEL SEA TRANSPORT VESSEL 18 wellboats1 (incl. newbuilds) Average age 6 years (owned vessels) 3 Sea transport vessels Average age 13 years Fleet overview Fleet overview 6 small wellboats > 2500 m3 well capacity 9 medium sized wellboats 2500- 4000 m3 well capacity 3 large wellboats < 4000 m3 well capacity 2500 – 3200 DWT 2 multi-purpose vessels tted with cranes and freezing capabilities 1 specialized feed transport vessel Fleet info Fleet info Transport of live sh and biological treatments Transport of sh feed from feed suppliers to salmon farmers Transport of frozen seafood Key operations Key operations FRØY ASA | ANNUAL REPORT 202112 REVENUE MODEL AND BACKLOG REVENUE MODEL Frøy oer specialized aqua service person- nel and specialized aqua service vessels on a combination of long-term time charter agreements, framework agreements and spot agreements. Frøy target a high share of long-term contracts and framework agree- ments to maximize visibility and to reduce volatility of earnings. 2021 REVENUE SPLIT (excluding reinvoiced costs and other revenues) CONTRACT BACKLOG Contract backlog is dened as the aggregate value of work on signed customer contracts, including options. Framework agreements and other agreements without xed commit- ments or minimum value clauses are not included in the backlog gures. Management believes that the order backlog is a useful measure in that it provides an indication of the amount of committed activity in the coming period. Total backlog As of 31.12.21 the total backlog amounted to approx. NOK 6.2 billion including options Fixed backlog Total xed revenue commitments of approx. NOK 3.7 billion Options Most xed time charter contracts include extension options Total options of approx. NOK 2.5 billion Time charter 60% Framework agreements 23% Spot 17% BACKLOG (NOKm) 996 1 002 856 673 575 497 412 407 360 271 111 29 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-1 3 Option Fixed Year 996 1 002 856 673 575 497 412 407 360 271 111 29 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 FRØY ASA | ANNUAL REPORT 2021 13 FRØY ASA | ANNUAL REPORT 202114 Frøy acquired West Dykker Service AS, Møredykk AS and Sunnfjord Dykkerser- vice AS, and merged the companies into a new entity called Frøy Vest. NTS enters the wellboat business through investment in Norsk Fisketransport NTS enters the sea transport segment through acquisition of Folla Sjøtransport Frøy Akvaressurs established with the intention to operate large service vessels 1997 Frøy is established on Frøya, Norway Namsos Damp- skipsselskap is established 1879 2013 2014 2008 Expansion from local to regional service provider Frøy ASA was created in 2020 through a combination of the aqua service entities in NTS ASA and Frøygruppen AS. The rst Frøy company was created in 1997. Originating from the aquaculture hub around Frøya, the group expanded its oper- ations through a combination of organic growth and M&A. NTS ASA entered into the wellboat business in 2008 through an investment into Norsk Fisketransport AS. Norsk Fisketransport was built out of the aquaculture hub in the Nam- dal-Helgeland area in mid-Norway. OUR HISTORY 2015 FRØY ASA | ANNUAL REPORT 2021 15 NTS ASA announce transaction to acquire Frøygruppen AS with payment in NTS ASA shares. All aqua service companies are combined into Frøy during 2020 Delivery of 2 new high capacity wellboats Frøy Vest AS acquired Seadive AS and Askøy. Frøy Nord was established through acquisition of NCS AS, NCD AS and NCE AS. Frøy acquired Stava Sjø AS expanding Frøy ’s footprint in south-west Norway Frøy ASA is listed on Oslo Stock Exchange 2017 20212019 2018 Fully integrated service provider In 2019 Frøygruppen AS and NTS ASA announced their intention to combine, creating a leading integrated aqua service company with footprint all along the Norwe- gian coast. In 2021 Frøy was listed separately at Oslo Stock Exchange. FRØY ASA | ANNUAL REPORT 202116 SVEIN SIVERTSEN Chairman The Chairman of the Board, Svein Sivertsen (1951), was appointed to the Board of Direc- tors by the extraordinary general meeting on 26 February 2021. Mr. Svein Sivertsen has extensive experience from directorships within maritime elds, covering sectors of aquaculture, oil service, construction and shipping, amongst others. Mr. Sivertsen holds a degree in Master of Science, Chemical Engineering from the Norwegian University of Science and Tech- nology. The directorships of Mr. Sivertsen include current positions as chairman in Aalesundsk Holding AS and Arctic Fish (Iceland) as well as previous directorships in Axess AS, Aker Yards ASA and Hydrotech Gruppen AS. Mr. Sivertsen has also held executive positions as CEO of Fokus Bank AS and CEO of Nidar Bergene AS, as well as served as Deputy CEO of SINTEF Gruppen. Mr. Sivertsen owns 20.000 shares in Frøy ASA. HEGE VEISETH Board Member Board member Hege Veiseth (1977) was elected to the Board of Directors by the extraordinary general meeting on 26 Febru- ary 2021. Ms. Hege Veiseth has held executive nan- cial positions in the Norwegian oil industry since 2007, and currently serves as CFO of Polaris Media ASA, entailing overall respon- sibility for the group’s nance function with reporting to the stock exchange and group board. Ms. Veiseth’s experience includes serving as IFRS Compliance Director, Group Controller and CFO of EMGS ASA. Ms. Veiseth holds several directorships in the media sector, inter alia in Polaris Media Midt-Norge AS and Polar Media Nord-Norge AS. Ms. Veiseth acquired her Master of Business Administration from Norges Han- delshøyskole (2000), and, through further studies at BI Norwegian Business School became a Certied Public Accountant in 2004. Ms. Veiseth owns 0 shares in Frøy ASA. PAUL BIRGER TORGNES Board member Board member Paul Birger Torgnes (1954) was elected to the Board of Directors by the extraordinary general meeting on 23 March 2022. Mr. Torgnes has broad seafood sector experience and extensive background from board positions and management of stock exchange listed companies, including Torghatten ASA, Fjord Seafood ASA and NorAqua AS (Today EWOS). Mr. Torgnes is currently CEO of Fjord Marin Holding AS. In addition, Mr. Torgnes hold multiple board positions in the seafood industry, including Chairman of the Board in The Norwegian Seafood Federation, Aquaculture Innovation and Campus Blue. Trøndelag Helgeland Invest AS and Torghat- ten Aqua AS, close associates to Paul Birger Torgnes owns 702.011 and 570.000 shares in Frøy ASA respectively. BOARD OF DIRECTORS FRØY ASA | ANNUAL REPORT 2021 17 IVAR SIGMUND WILLIKSEN Board member Board member Ivar Sigmund Williksen (1960) was elected to the Board of Directors by the extraordinary general meeting on 23 March 2022. Mr. Williksen is currently CEO of Vikna Invest AS and board member in Salmonor AS. Mr. Williksen has previously served as board member in Frøy ’s subsidiary Norsk Fisketransport AS and has broad experience from management and board of stock exchange listed companies. Vikna Invest AS, a close associate to Ivar Sigmund Williksen owns 200 shares in Frøy ASA. LINDA JOHNSEN Board member Mrs. Johnsen has 20 years of experience from tax authorities, including as tax asses- sor for Nærøy, Vikna and Leka municipality. She also has experience from BDO, with special focus on the sheries sector. Mrs. Johnsen is currently working as a nan- cial consultant in Williksen Fangst AS. Mrs. Johnsen owns 0 shares in Frøy. FRØY ASA | ANNUAL REPORT 202118 EXECUTIVE MANAGEMENT TONJE FOSS CEO Tonje Foss (1971) is the CEO of Frøy ASA, a role she has had since January 2022. Before this, she held the position as Strategy Direc- tor at Enova, and Regional Director of Atea from 2017 to 2020. Mrs. Foss has 19 years of experience from various positions and com- panies in the oil industry, including Kværner, Schlumberger and Aker BP. Foss has been board member of Det norske oljeselskap and SalMar, and are currently holding a board member seat of Sparebank 1 SMN. Tø AS, a close associate to Tonje Foss owns 10.000 shares in Frøy ASA. TORE HELGESEN Interim CFO Tore Helgesen joined Frøy as interim CFO in October 2021. Tore has worked for almost 30 years in auditing, consulting and banking. In the period 2001-2007, Tore worked as a bank manager at DNB, with responsibility for large corporate customers in Trøndelag. In the period 2007-2017 Tore was a partner in PwC responsible for a number of large and medium-sized companies in Central Norway. T. Helgesen Invest AS and Teigesen Savings AS, close associates to Tore Helgesen owns in total 3.800 shares in Frøy ASA. ANDERS GÅSØ Head of Service Anders Gåsø (1986) joined Frøy in 2017 and has today the position as its Chief Operating and Marketing Ocer. Prior of joining the Group, Mr. Gåsø held a leading position at Sparebank 1 SMN, the largest bank in region of Middle Norway. Gåsø Næringsutvikling AS, a close associate to Anders Gåsø owns 819.672 shares in Frøy ASA and 45,516,416 shares in NTS ASA. FRØY ASA | ANNUAL REPORT 2021 19 ODDLEIF WIGDAHL Head of Wellboats Oddleif Wigdahl (1983) started his current position as Head of Wellboats during the merger between NTS and Frøy in April 2020. Mr. Wigdahl has approximately 20 years’ industry experience, and held dierent positions as Safety Manager, Technical Man- ager, Operational Ocer, and CEO of Norsk Fisketransport AS. In addition, he has held leading positions at Seaworks AS, and has served as technical manager for Norwegian Defence Research Establishment. Oddleif Wigdahl owns 482 shares in Frøy ASA. BJARNE JOHANNESSEN Head of Sea Transportation Bjarne Johannessen (1969) is the Group’s Head of Sea Transportation, which includes the wholly owned subsidiary NTS Shipping AS. He joined NTS in 2018, after a period of approximately 30 years within seafood and transportation. Mr. Johannessen was the owner and CEO of Sjøtransport Rotsund AS from 1997, a company that was sold to NTS in 2018. BJJ Holding AS, a close associate to Bjarne Johannessen owns 100,000 shares in Frøy ASA. FRØY ASA | ANNUAL REPORT 202120 PROFITABILITY Frøy targets return on equity of minimum 10-18% depending on client, project struc- ture and contract length (risk). GROWTH Frøy has disciplined focus on long-term contracts for new wellboats. New growth projects are subject to satisfactory return prole in line with or above the targeted protability level. CAPITAL STRUCTURE The company target an overall leverage at or below NIBD/EBITDA 3.5x on a fully invested basis. Frøy will take into consideration the expected earnings from newbuilds when assessing the fully invested NIBD/EBITDA. Frøy ’s primary source of debt nancing is long term bank loans. Frøy has a strategy of nancing its vessels and equipment with 5-year term loans with repayment proles depending on vessel or equipment and contract coverage. DIVIDEND POLICY: Frøy ’s ambition is to maximize long term value for its shareholders through positive share price development and a growing dividend based on long term earnings. Frøy intend to pay out minimum 50% of net prot as dividend provided that the Com- pany ’s nancial gearing, at a fully invested basis is at or below the targeted debt level of NIBD/EBITDA 3.5x and that the Com- pany has sucient liquidity to meet future obligations. Frøy ’s nancial targets and capital allo- cation strategy provides a framework for allocation of capital to new investments, dividends and debt. TARGETS AND POLICIES FRØY ASA | ANNUAL REPORT 2021 21 FRØY ASA | ANNUAL REPORT 202122 SHAREHOLDER INFORMATION Frøy intends to communicate actively and openly with shareholders, potential inves- tors, analysts and other participants in the nancial market. Frøy intends to follow the Oslo Stock Exchange ‘ s recommendation on reporting IR-information. Our goal is to ensure that all participants in the nancial markets are treated equally with regards to access to nancial and other information. DIVIDEND POLICY Frøy ‘ s ambition is that the company share- holders will achieve a competitive return on their investment over time through a com- bination of dividends and an appreciation of the value of the company ’s shares. The Company has dened the long-term dividend policy of intending to pay out mini- mum 50% of net prot as dividend provided that the Company ’s nancial gearing, at a fully-invested basis, is at or below the tar- geted debt level of NIBD/EBITDA 3.5x. Frøy ASA has not paid any dividends since its incorporation. The Board of Directors of Frøy ASA has decided to propose to the Annual General Meeting an ordinary dividend for 2021 of NOK 1.5 per share. SHARES AND SHARE CAPITAL As of 31 December 2021, Frøy ASA has 86 348 605 ordinary shares; each share has a par value of NOK 1. As of 31 December 2021, Frøy had 4 398 shareholders. 8.8%, of the total share capital were owned by non-Norwegian shareholders. Frøy has a single share class. Each share is entitled to one vote. Frøy does not hold any treasury shares as of 31 December 2021. STOCK EXCHANGE LISTING Frøy ASA was listed on Oslo Stock Exchange on 29 March 2021 (ticker: FROY). The FROY shares are registered in the Norwegian Central Securities Depository. The shares have the securities registration number ISIN NO0010936792. Nordea Bank Abp, Norway Branch is FROY ‘ s registrar. MAJORITY SHAREHOLDER Frøy ‘ s majority shareholder is NTS ASA. Companies that are a part of NTS ASA are legally and nancially independent units. NTS ASA exercise active ownership in order to systematically create value for all Frøy shareholders. From time to time, agreements are entered into between Frøy and one or more com- panies owned by NTS ASA. The Board of Directors and management of Frøy are all critically aware of the need to handle such matters in the best interest of the involved companies, in accordance with good corpo- rate governance practice. INVESTOR RELATIONS Frøy intends to communicate actively and openly with shareholders, potential inves- tors, analysts and other participants in the nancial market. Frøy investor relations information, including nancial calendar, quarterly and annual reports, investor presentations, articles of association, investor relations policy and cor- porate governance policies are available at the Company ‘ s website www.froygruppen. no/investor. Shareholders can contact the Company at [email protected] ELECTRONIC INTERIM AND ANNUAL REPORTS Annual reports are published on the Com- pany ’s website at the same time as they are made available via website release by the Oslo Stock Exchange: www.newsweb. no (ticker: FROY). Subscribers to this service receive annual reports in PDF format by email. Shareholders, who are unable to receive the electronic version of interim and annual reports, may subscribe to the printed version by contacting Frøy ‘ s investor relations sta. NOMINATION COMMITTEE The Company ’s Articles of Association pro- vide for a nomination committee elected by the general meeting. The nomination com- mittee shall at the outset consists of mini- mum two members, elected for a term of two years. Frøy ‘ s nomination committee has the following members: Are Brekk (chair), Hans M. Storø (member) and Solveig Gaasø (member). The members of the nomination committee are appointed until the 2023 annual general meeting of the Company. Shareholders who wish to contact Frøy ‘ s nomination committee may do so using the following address: Nomination Committee of Frøy ASA Siholmen 34 N-7260, Norway ANNUAL SHAREHOLDERS’ MEETING A written notication will be sent to all shareholders individually or to shareholders’ nominees. SHAREHOLDER INFORMATION FRØY ASA | ANNUAL REPORT 2021 23 20 LARGEST SHAREHOLDERS Name Number of shares held Ownership % NTS ASA 62 269 112 72.1 % State Street Bank and Trust Comp 4 127 910 4.8 % HSBC Bank Plc 1 019 098 1.2 % Skandinaviska Enskilda Banken AB 1 001 000 1.2 % GÅSØ NÆRINGSUTVIKLING AS 819 672 0.9 % TRØNDELAG HELGELAND INVEST AS 698 503 0.8 % AMBLE INVESTMENT AS 631 147 0.7 % VERDIPAPIRFONDET PARETO INVESTMENT 630 901 0.7 % TORGHATTEN AQUA AS 570 000 0.7 % SKIPSINVEST AS 564 626 0.7 % VERDIPAPIRFONDET FONDSFINANS NORGE 504 256 0.6 % VERDIPAPIRFONDET ALFRED BERG NORGE 502 208 0.6 % BNP Paribas Securities Services 497 707 0.6 % RIIBER HOLDING AS 462 437 0.5 % GH HOLDING AS 427 868 0.5 % AARS AS 418 844 0.5 % The Bank of New York Mellon SA/NV 395 602 0.5 % LIN AS 327 868 0.4 % VERDIPAPIRFONDET ALFRED BERG AKTIV 317 730 0.4 % LINDVARD INVEST AS 262 295 0.3 % Total 20 largest shareholders 76 448 784 89 % Other shareholders 9 899 819 11.5 % Total 86 348 603 100.0 % SHARE PRICE DEVELOPMENT Share price data from the rst day of listing March 2021 - December 2021. 70 NOK per share 65 60 55 50 45 40 March 2021 June 2021 Sept. 2021 Dec. 2021 FRØY ASA | ANNUAL REPORT 202124 Frøy ASA is a public limited company whose purpose is to provide services to the aqua- culture industry, such as wellboat services, service vessel and maritime transport in gen- eral. The Company ’s headquarter is located at Sistranda in Frøya municipality. Frøy ASA and subsidiaries (“Frøy” or “the group”) are the result of a merger of the wellboat, service and sea transport operations in NTS ASA and the wellboat and service vessel operations in the former Frøy Gruppen AS which was completed in April 2020. Frøy ASA was listed on Oslo Børs Euronext ® in April 2021 under the ticker FROY. Frøy ’s vision is Solutions for the Ocean Space. Frøy shall be the leading and preferred provider of sustainable aquaculture services. Taking good care of the sh and people has been core focus in Frøy for more than 20 years. Delivering solutions that improve e- ciency and sustainability for clients is both a prerequisite to operate and a key driver for Frøy ’s growth going forward. During 2021 Frøy has taken its rst steps towards a struc- tured reporting on how to integrate sustain- ability into the overall business strategy. treatments such as scrubbing, thermal wash and freshwater bath. The sh is pumped into the wellboat and treated in a closed and controlled environment which minimize risk of emissions to sea and cross contami- nation of sea lice from one pen to another. After biological treatments the sea lice is contained and disposed in accordance with regulatory requirements. The wellboat activity has generally been good throughout 2021, and as a result of the majority of the eet being employed on long-term contracts, a positive development is expected as new wellboats are taken into use. The wellboat segment generated total reve- nues of NOK 876.0 million (2020: NOK 628.0 million) and an operating prot of NOK 244.7 million (2020: NOK 135.4 million). SERVICE Frøy has 49 service vessels of dierent sizes. Frøy service segment oers diving, inspec- tion, biological risk mitigation services and infrastructure integrity services to salmon farmers. With specialized aqua service pro- fessionals and modern service vessels, Frøy assist salmon farmers with maintenance of the salmon farming site infrastructure and assistance with removal of sea lice and other biological challenges. During 2021, the Frøy has signed several large framework agreements in the service segment that make a positive contribution in terms of visibility of operations. A large part of the eet is working on long-term contracts. During the year 2021, Frøy put three new- builds into operation and sold six vessels in line with a strategy of renewal and change in eet composition. In 2022, Frøy will include six new vessels in the service segment. The Service segment generated total reve- nues of NOK 774.6 million (2020: NOK 591.1 million) and an operating prot of NOK 132.5 million (2020: NOK 143.4 million). Frøy ’s business and service oering has gradually developed together with the indus- trialization of the Norwegian sh farming industry. Today, Frøy assist sh farmers throughout the full production cycle at sea. The service oering is reported through three operating segments : Wellboat: Frøy is one of the leading well- boat companies in Norway and has its primary geographical area of operation from Western Norway to Finnmark. Service: Frøy ’s service vessel eet primar- ily operates along the Norwegian coast from Rogaland in the south to Finnmark in the north, providing a wide range of services to the aquaculture industry. Sea transport: Frøy ’s sea transport ves- sels provide transport services mainly on the Norwegian coast, as well as transport of refrigerated cargo to the Baltics and Poland. WELLBOAT At the end of 2021, Frøy owned a total of 16 wellboats, and leased one wellboat on a bareboat agreement. In addition, Frøy has two wellboats under construction, of which one will be delivered in 2022 and one in 2023. In 2021, Frøy has received four new well- boats, Reisa (January), Kristiansund (June), Åsværfjord (November) and Gåsø Høvding (November). The wellboat Veidnes was sold in December. The new vessels have entered into long-term TC agreements. Key services oered in Frøy ’s wellboat segment are transportation and biological services. The Group’s wellboats are used for gentle and safe transportation of smolts (juvenile salmon) from smolt facilities on shore to farming sites in sea, and of live harvest ready salmon from production sites to harvesting facilities. Furthermore, wellboats are used as supportive infrastructure for salmon farmers under biological operations during the production phase at sea. Wellboats can perform a wide range of dierent sea lice BOARD OF DIRECTORS’ REPORT FRØY ASA | ANNUAL REPORT 2021 25 There are no employees in part-time posi- tions in Frøy. About 10% of all employees per 31.12.2021 are temporary employ- ees. These are substitutes related to sick leave, or apprentices/ cadets, who are on a time-limited training agreement. The average number of weeks of parental leave in 2021 was 9.4 weeks for men and 28 weeks for women. Frøy ’s principles, procedures and standards for equality are rooted in Frøy ’s various strategies, tools and guidelines. In 2021, Frøy has prepared a separate guide for dealing with discrimination and developed a routine for dealing with sexual harassment. There is also a routine for internal notication of matters worthy of criticism in place. Considerations of equality and non-discrim- ination are also included in the personnel policy. A separate report has been prepared, Equality Statement, which describes Frøy ’s work on gender equality and diversity in more detail. The report is provided in a sep- arate section of the Annual Report. SUSTAINABILITY Frøy intends to communicate actively and openly with investors, customers, govern- ment institutions and other stakeholders regarding our sustainability focus and strategy. During 2021, Frøy has taken its rst steps towards a structured reporting on how we integrate sustainability into the overall business strategy. This reporting will be further rened during 2022. In 2019 Frøy made a strategic decision to reduce greenhouse gas emissions from its eet by investing in more climate friendly vessels. Since 2019 all wellboat newbuilds have been ordered with either diesel electric or hybrid propulsion machinery. At the end of 2021, 21 % of the wellboats and cargo vessels have diesel electric or hybrid propul- sion machinery installed, 80 % of the larger service vessels have diesel electric or hybrid SEA TRANSPORT Frøy operates three vessels in the sea transport segment, one of which is on a TC agreement. MS Rubin transports sh feed mainly in the northern regions Troms and Finnmark. MS Rotsund mainly transports fro- zen cargo between Norway and the Baltics / Poland and sh feed on a TC agreement. At the turn of the year 2020/2021, Frøy entered into an agreement for the purchase of the cooling and freezing vessel Silver Lake. Upon takeover in February 2021, the ship was agged in the Norwegian Ship Register, and renamed MS Folla. The ship has mainly transported freezer loads between Norway and the Baltics. Northbound loads have been sh feed from Aberdeen to Norway. Increasing bunker prices throughout 2021 has been a signicant challenge for the vessels that operate in the spot market. MS Sar was sold in 2021. The Sea transport segment generated total revenues of NOK 134.1 million (2020: NOK 110.4 million) and an operating prot of NOK 19.2 million (2020: NOK 6.6 million). EMPLOYEES As of 31.12.2021, there were a total of 814 employees (including temporary employees) in Frøy. These are divided into 285 employ- ees in the wellboat segment, 426 employees in the service segment, 58 employees in the maritime transport segment and 45 employ- ees in Frøy ASA. The proportion of women per 31.12.2021 was 5%. At the end of 2021, Frøy ’s management group consisted of 14 % women, while the expanded management group consisted of 40 % women. The group has a continu- ous focus on equality and providing equal opportunities for all employees regardless of gender, pregnancy, maternity leave or adop- tion, care tasks, ethnicity, religion, outlook on life, disability, sexual orientation, gender identity and gender expression. propulsion machinery, and 3 % of the smaller service vessels have diesel electric or hybrid propulsion machinery. The goal is to increase the percentage of vessels with technology contributing to lower carbon emissions. A separate Sustainability Report has been prepared which describes Frøy ’s work and priorities on sustainability in more detail. The report has been prepared in line with the World Economic Forums reporting frame- work for Measuring Stakeholder Capital; WEF IBC Common Metrics. The report is provided in a separate section of the Annual Report. HEALTH AND SAFETY The average sickness absence for the group was 5.21% in 2021, compared to 5.39% in 2020. 4.61% of the absence is long-term absence. Follow-up of sick leave and facilitation for people on sick leave has been a focus area in 2021. In 2021, there have been 20 minor injuries and one serious personal injury in the group that has resulted in sick leave beyond the employer period. Routines and procedures are reviewed in connection with each individual injury case. The working environment in the group is considered satisfactory. FINANCIAL REVIEW AND KEY RISK FACTORS Frøy ’s business largely consists of service deliveries to the aquaculture industry. The demand for the services provided by the group will therefore to a large extent be linked to the level of activity in the aquacul- ture industry. Furthermore, demand may be aected by natural variations in weather, sea temperature and sh health in the aquacul- ture industry. The operations in Frøy are capital-intensive, and the focus on employment of each indi- vidual vessel in the group’s eet is crucial for achieving a satisfactory return on invested capital. FRØY ASA | ANNUAL REPORT 202126 Variable operating costs mainly consist of personnel costs, fuel costs and costs for repair and maintenance of the eet. Credit risk Frøy ’s credit risk represents the risk for counterparties not being able to full their obligations to the group as they fall due. The credit risk is considered low and stable in the markets in which the group operates. Losses on receivables were insignicant in both 2021 and the year before. No set-o agreements or other nancial instruments have been entered into to reduce the credit risk in the group. Market risk Frøy ’s income and operating expenses are mainly denominated in Norwegian kroner and are therefore to a small extent directly exposed to currency risk. The Sea Trans- port segment has a signicant part of its revenues in EUR and USD. This currency exposure is partially oset by bunker costs nominated in USD. When contracting new vessels at shipyards abroad, the contract price will be denomi- nated in a foreign currency. Frøy ’s cost price for newbuilds - and subsequent depreciation costs after the vessel has been delivered - will therefore be exposed to currency risk. Currency risk associated with new buildings is continuously monitored and currency derivatives can be applied to reduce the risk. The company is exposed to changes in inter- est rates, as parts of the group’s debt have oating interest rates. Furthermore, changes in interest rates may aect investment opportunities in future periods. Long-term interest rate hedging agreements have been entered into for parts of the debt in order to reduce interest rate risk. Tax risk Frøy has received notication of a change in the tax assessment for 2019 and 2020 concerning the tonnage tax scheme and reim- 2021 of NOK 738 million (2020: NOK 149 million) and available credit facilities of NOK 39 million (2020: NOK 43 million). The group’s liquidity on the balance sheet date is considered satisfactory. SHAREHOLDER INFORMATION The company ’s largest shareholder is NTS ASA, which as of 31.12.2021 owns 72.1% in Frøy ASA. The 20 largest shareholders at the end of 2021 were as follows: The number of shareholders as of 31.12.2021 was 4,398 compared to 1 share- holder as of 31.12.2020 (NTS ASA). bursements through the net salary scheme for one of the group’s subsidiaries. Frøy dis- putes the tax authorities’ views and the case is unresolved on the date of publication of this report. Refer to note 5.1 in the consolidated nancial statement for further details. Liquidity risk Liquidity risk is a risk that Frøy will not be able to service its nancial obligations as they fall due. In 2021, Frøy had a positive cash ow from operating activities of NOK million 499 (2020: NOK million 622). The group’s investments in newbuilds are nanced with equity and long-term loan facilities from credit institutions before newbuilds are committed. Furthermore, Frøy has a portfolio of cash and cash equivalents at the end of Shareholder No. of shares Ownership % Shareholder No. of shares Ownership % NTS ASA 62 269 112 72,1 % State Street Bank and Trust Comp 4 127 910 4,8 % HSBC Bank Plc 1 019 098 1,2 % Skandinaviska Enskilda Banken AB 1 001 000 1,2 % Gåsø Næringsutvikling AS 819 672 0,9 % Trøndelag Helgeland Invest AS 698 503 0,8 % Amble Investment AS 631 147 0,7 % Verdipapirfondet Pareto Investment 630 901 0,7 % Torghatten Aqua AS 570 000 0,7 % Skipsinvest AS 564 626 0,7 % Verdipapirfondet Fondsnans Norge 504 256 0,6 % Verdipapirfondet Alfred Berg Norge 502 208 0,6 % BNP Paribas Securities Services 497 707 0,6 % Riiber Holding AS 462 437 0,5 % GH Holding AS 427 868 0,5 % Aars AS 418 844 0,5 % The Bank of New York Mellon SA/NV 395 602 0,5 % LIN AS 327 868 0,4 % Verdipapirfondet Alfred Berg Aktiv 317 730 0,4 % Lindvard Invest AS 262 295 0,3 % Total top 20 shareholders 76 448 784 89 % Other shareholders 9 899 819 11,5 % Total 86 348 603 100,0 % FRØY ASA | ANNUAL REPORT 2021 27 The consolidated nancial statements have been prepared in accordance with Interna- tional Financial Reporting Standards (IFRS), which have been adopted by the EU. In the parent company, the operating prot was NOK -21.6 million compared to NOK -13.6 in 2020. Prot before tax ended at NOK -0.3 million compared to NOK 29.2 million in 2020. Other operating expenses in 2021 are signicantly aected by profes- sional fees in connection with the IPO of the company. The comparable nancial gures for the parent company represents the company ’s rst year of operation. The ramp-up of the organization in the merged Frøy ASA took place during this period. For this reason, the parent company ’s accounting gures for 2020 are to a limited extent relevant as comparative gures for 2021. The parent company accounts have been prepared in accordance with the Accounting Act of 1998 and generally accepted accounting princi- ples in Norway. INVESTMENTS Investments are mainly related to the group’s newbuild program. In 2021, NOK 1,705 million has been invested in the wellboat segment, NOK 230 million in the service segment, NOK 123 million in the maritime transport segment and NOK 33 million in other investments. At the end of 2021, remaining investments under the current investment program amounts to approx. NOK 940 million. These investments are expected to accrue with NOK 770 million in 2022 and NOK 170 million in 2023. Newbuild contracts are xed price agreements. GOING CONCERN The annual accounts have been prepared under the going concern assumption. There are no circumstances that indicate that this assumption is not present. The board there- fore conrms that the precondition for going concern is present. COMPOSITION OF THE BOARD The board consists of ve board members including the chairperson – two women and three men. CORPORATE GOVERNANCE Frøy complies in all material respects with the Norwegian Code of Practice for Corpo- rate Governance (NUES). The only deviation is the chairperson of the board also being the chair of the general meeting. A separate Corporate Governance Report has been prepared which describes Frøy ’s priorities on corporate governance in more detail. The report is provided in a separate section of the Annual Report. THE ANNUAL ACCOUNTS The group’s operating revenues amounted to NOK 1,787 million in 2021 compared to NOK 1,332 million in 2020. In 2021, the group had an operating prot of NOK 378 million compared to NOK 290 million in 2020. Growth in both revenues and operating prot is primarily attributable to the increase in Frøy ’s eet of vessels during 2021. In addition, Frøy sold vessels in all segments with a total gain of NOK 91 million. These sales were carried out as part of the group’s strategy for continuous renewal of the eet. Ordinary prot before tax ended at NOK 300 million compared to NOK 251 million in 2020. Annual prot for continuing opera- tions ended at NOK 284 million compared to NOK 230 million in 2020. Total assets increased from NOK 5,241 million at the end of 2020 to NOK 7,657 million at the end of 2021. The equity ratio of the group as of 31.12.2021 was 41.6% compared to 37.6% the previous year. The equity ratio increased despite a signicant increase in total assets. This increased sol- vency comes as a result of capital issue and retained earnings in 2021. OUTLOOK Frøy is a leading integrated service provider to the Norwegian aquaculture industry. The group has adopted an investment program to build additional capacity, primarily within the wellboat and service segments. The wellboat segment has two new vessels under construction. MS Gåsø Odin is expected to be delivered in the third quarter of 2022 and MS Veidnes is expected to be delivered during the summer of 2023. The service segment took delivery of MS Frøy Challenger in February 2022. MS Frøy Challenger is a specialised vessel for delous- ing operations. During 2022, the Service segment will put another six vessels into operation. Furthermore, the segment has two large service vessels under construction with planned delivery in 2023. The sea transport segment will carry out a rebuild of MS Folla in the second quarter of 2022. The rebuild is expected to take approx. six weeks. The global corona virus pandemic has had an impact on the group’s operations in 2021, especially related to delays in the delivery of newbuilds, and this situation has led to high workload on personnel at some shipyards. The group has also incurred additional expenses to mitigate the eect of work schedules that have been negatively aected by the pandemic. The war in Ukraine has created considerable unrest in several commodity markets. For Frøy, it is primarily the price increase on bunkers that aects the ongoing operations. However, a signicant proportion of the group’s contract portfolio has provisions that to a large extent give us the right to re-invoice the fuel costs to our customers. The price of steel has also risen signicantly since the conict broke out, and if this price picture persists, it will imply that the cost price of new buildings will increase. Existing newbuild contracts are xed price agree- FRØY ASA | ANNUAL REPORT 202128 ments and is not expected to be aected by the price increases. However, it may be a risk that the war in Ukraine may lead to logistical challenges and delayed delivery of newbuilds. CORPORATE SOCIAL RESPONSIBILITY Frøy denes social responsibility as achieving business protability in line with basic ethical and sustainable values and with respect for people, the environment and society. Business protability is a prerequisite for the group to be able to focus on development and at the same time make a positive contri- bution to society in general. Frøy has a set of ethical guidelines, and these are communicated in the organiza- tion through managers in subsidiaries and are available to all employees through the group’s management systems. The group strives to comply with the follow- ing core values for work ethic and sustain- ability: Safe: In Frøy we talk to each other, not about each other. We have respect and humility towards our customers, employ- ees and surroundings - and we have HSE in focus. Flexible: In Frøy we are agile and willing to change. We will always contribute with solutions for the customer’s best. Engaged: In Frøy, we care about both employees and customers. We are for- ward-looking and create ownership. Responsible: In Frøy, we are concerned with and live up to our sustainability strategy. The core values are the basis for our ethical guidelines, which focus on how the group’s employees treat each other and society in general. The group has implemented internal control routines aimed to uncover corruption. and has served as CEO since that time. Tonje took on her position in January 2022. Operations in Frøy have proceeded as nor- mal after the balance sheet date. The board is therefore not aware of any signicant events in the period form 1 January 2022 to the date of this report. Prot allocation The board has proposed a dividend for 2021 of NOK 1.50 per share. Prot after tax in the parent company, Frøy ASA, ended at NOK -251.993 which the board proposes to allocate as follows (num- bers in NOK): Dividend 129 522 905 Transferred from share premium reserve - 104 402 836 Transferred from other equity - 25 372 061 Total prot allocation: - 251 993 In 2021, the group has also been an import- ant supporter and contributor to teams and associations in the local communities of which the companies are a part. RESEARCH AND DEVELOPMENT Throughout 2022, Frøy has collaborated with external actors on research and devel- opment projects that are relevant to the group’s activities, including Project Coastal emergency preparedness Machine learning to improve hole detec- tion under net inspection Live streaming and uploading of video recordings from note inspections Frøy has also collaborated on two stu- dent assignments from NTNU as follows: Master’s thesis NTNU - Faculty of Information Technology and Electronics, Department of Technical Cybernetics: «Robust Fish Cage Net Analysis utilizing Advanced Computer Vision Techniques». Master’s thesis NTNU - Faculty of Information Technology and Electronics, Department of Technical Cybernetics: «Localization of defects in aquaculture sh cages». LIABILITY INSURANCE FOR THE CEO AND BOARD MEMBERS Frøy has taken out a board and manage- ment liability insurance. The insurance applies to members of the board, mem- bers of Frøy ’s management team or other employees who have been assigned independent management responsibilities. The insurance covers the insured’s per- sonal liability for economic loss caused to someone in their capacity as a director or an employee. EVENTS AFTER THE BALANCE SHEET DATE Tonje Foss was appointed CEO of Frøy in November 2021. She succeeded Helge Gåsø, who founded the Company in 1997 FRØY ASA | ANNUAL REPORT 2021 29 Furthermore, we conrm, to the best of our knowledge, that the consolidated nancial statements include a fair view of important events that have occurred during the nan- cial year and their impact on the nancial statements, a description of the principal risks and uncertainties, and major related party transactions. The board wishes to thank all employees for their good work in 2021. RESPONSIBILITY STATEMENT FROM THE BOARD OF DIRECTORS AND CEO We conrm, to the best of our knowledge, that the consolidated nancial statements for the year ended 31 December 2021 have been prepared in accordance with Interna- tional Financial Reporting Standards (“IFRS”) as adopted by The European Union (“EU”) and give a true and fair view of Frøy ’s assets, liabilities, nancial position and prots and loss for the period. Frøya, 7 April 2022 Board of Directors Frøy ASA Svein Sivertsen Chairman Paul Birger Torgnes Board Member Ivar Sigmund Williksen Board Member Hege Veiseth Board Member Linda Johnsen Board Member Tonje Foss Chief Executive Ocer FRØY ASA | ANNUAL REPORT 202130 Frøy ‘ s vision is solutions for the ocean space. Our ambition is to be the leading and preferred provider of sustainable aquaculture services. Delivering solutions that improve sh welfare and reduce the risk of escapes has been at the core for Frøy for more than 20 years. Taking good care of the sh and our people are our key priorities. Both are prereq- uisites to operate and key drivers for our growth. Our core values forms the basis for how we shall conduct our business: Safe – The safety of our people, and the integrity of our operations, are our top priorities Natural forces, harsh weather conditions and operation of complex equipment are key risks to the safety of our sta. Safe and healthy working conditions that is adapted to the physical environment in which we operate are fundamental requirements in all our operations. Flexible – We strive to be agile in every- thing we do for the benet of Frøy and our stakeholders Through our activities, we shall contribute to sustainable food production. Key focus areas for sustainable production of farmed sh are sh welfare, avoidance of sh escapes and continuous reduction of the carbon footprint. As an integrated provider of solutions to sh farmers, Frøy is in close contact with all these factors and thus has the potential to make a signicant impact on the sustainability of the nal product. Committed – We are committed to provide continuous improvements. For Frøy, sustainability means to always improve and work to become better at what we do. We seek to develop our strategies and operations to ensure that our nancial success does not come at the expense of the wellbeing of people, marine life and the environment. Responsible – We act responsibly in the environment and the communities we are a part of Frøy acknowledges that we have a responsi- bility to reduce our environmental footprint and climate gas emissions, and we contin- ually invest in new vessels and equipment that are more energy ecient. An important aspect of our sustainability work is to improve our routines to collect and communicate our non-nancial data to our stakeholders and the general public. This is why we have completed our rst sustainability report for 2021. Through the reporting process, we are both challenged and stimulated for achieving a better understanding of how we want to work with social and environmental challenges going forward. The UN Sustainable Development Goals In shaping our sustainability commitment, we have selected the UN Sustainable Devel- opment Goals (SDGs) we consider to be of particular relevance both to us in Frøy and to the maritime and aquaculture industry on a general level. These are the goals where we can have the most positive impact and where our operations are at risk of having negative impact on both the environment, marine life and people. In Frøy, “The Frøy Culture” is described through a number of statements, which clearly point in the SUSTAINABILITY IN FRØY GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t FRØY ASA | ANNUAL REPORT 2021 31 direction of several SDGs. Hence, using these statements as a backdrop for selecting relevant goals was for us a natural way for us to connect to the SDGs to our operations: GOAL 3 – Good health and quality of life GOAL 8 – Decent work and economic growth GOAL 9 – Industry, Innovation, and Infrastructure GOAL 11 – Sustainable cities and communities GOAL 14 – Life in the Sea GOAL 17 – Work together to achieve your goals While the SDGs remain our guiding prin- ciples, going forward we will increase our focus on the aspects we have identied as most material for our operation. We have identied important topics and paths for improvement within the areas Governance, People, Planet and Prosperity, and will build on this as these targets can be more special- ized for Frøy ’s needs and opportunities. ABOUT THE REPORT The report has been prepared in line with the World Economic Forums reporting framework for Measuring Stakeholder Capi- tal; WEF IBC Common Metrics. The reporting period is from January 1st 2021 to Decem- ber 31st 2021. The WEF-framework includes 21 indicators divided into four sustainability aspects: governance, people, planet, and prosper- ity. Each aspect is covered by a separate chapter in the report. The WEF-indicators are in line with key indicators from leading reporting standards within sustainability, the GRI and SASB standards. 13 oce locations spread along the entire Norwegian coast from Haugesund in the south to Storslett in the north. 814 employees 12 nationalities 5% women in total REDUCING CARBON FOOTPRINT FROM THE FLEET EMISSIONS 95 074 tonnes CO2 825 929 tonnes NOX Diesel electric or hybrid powered 19% Conven- tional powered 81% Larger service vessels 61% Wellboat and shipping 31% Smaller service vessels 8% FRØY ASA | ANNUAL REPORT 202132 Frøy intends to communicate actively and openly with investors, customers, government bodies and other stake- holders regarding our sustainability focus and strategy. Good corporate governance is important to ensure stakeholder condence, and it is a prerequisite for growth and long- term value creation for Frøy. SUSTAINABILITY IN MANAGEMENT The CEO is ultimately responsible for Frøy ’s work for sustainability and the environmental footprint of our operations. The respon- sibility for sustainability work is delegated down to the operations directors for each operational area with support from the QA-department and other necessary sta resources. We recognize that ensuring and promoting sustainability is a considerable investment where more dedicated resources will be necessary to reach our goals. Frøy management systems is certied to comply with the Management System Requirements of the ISO 9001:2015 and 14001:2015 standards by the accredited certication company Kiwa AS. Frøy complies with the Norwegian Code of Practice for Corporate Governance for the nancial year 2021. The company has adopted the «follow or explain principle» with respect to the Code ‘ s application in the Frøy Code of Practice of Corporate Governance. Please nd Frøy ‘ s full corporate governance policy in the chapter ‘Corporate Governance’ in the annual report. GOVERNANCE Organization Chart Frøy management Chief Executive Ocer QA Economy/Finance Operating Director Service vessels Operating Director Wellboats HR/Crew Technical Operating Director Large service vessels Operating Director Sea transport GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t FRØY ASA | ANNUAL REPORT 2021 33 MATERIAL ASPECTS AND STAKEHOLDER ENGAGEMENT In 2021 we carried out a materiality analysis with the aim of identifying material aspects within the areas of Planet, People, Gover- nance and Prosperity. Some of the aspects are operational, while other are more strate- gic. Further, some of the aspects were iden- tied as especially important and labeled “leading” to establish that these will make up Frøy ’s key sustainability focus. The material aspects are listed in the table below and the color codes show within which category and chapter the individual aspects will be discussed in more detail later in the report: Operational GHG emission Minimize our own environmental impact Security at work Responsible value chain Strategic Gender equality and diversity Local Contributor Sustainability in management Transparency in reporting and communication Leading Fish welfare and biodiversity Technological development Attractive employer As an integrated service and solutions provider to the aquaculture industry, Frøy engage with both sh farmers, equipment manufacturers and government bodies throughout the year as a part of how we conduct our business so that we understand their priorities and how our business impact them. Other important stakeholder groups include our employees, shareholders and the communities in which we operate. Among all the material aspects, we consider sh welfare and biodiversity, technologi- cal development and being an attractive employer, to be the leading aspects for our business. Fish welfare and biodiversity Fish welfare and biodiversity are fundamen- tally important aspects for all stakeholders in the aquaculture value chain. Reducing the risk of escapes and maintaining good sh welfare is vital also for all of Frøy ‘ s services. Frøy regard taking good care of the sh and the surrounding environment as prerequi- sites to operate and key growth drivers for our business. Technological development Stringent focus on innovation, development of equipment, digitalization and making use of data is key to improve sustainability in the aqua service industry. Reducing the carbon footprint require investments in new vessels with lower carbon emissions and eventu- ally zero carbon vessels. Delivering new solutions that reduce the risk of escapes and improve sh welfare require ecient sharing of best practice and technological development. Attractive employer Frøy ‘ s most important stakeholders are our employees. The competence and experi- ence of our employees are fundamental to deliver continuous improvements and to maintain the position as the leading and pre- ferred provider of aquaculture services. SUSTAINABILITY STRATEGY Frøy is in a process of integrating our sus- tainability strategy into the overall business strategy. In 2021, Frøy started the initial structuring of the Groups sustainability work. Frøy has established and are in the process of implementing KPIs with a focus on sustainability and HSE for each opera- tional area for 2022. Our ESG KPIs are: Reduction in CO2 emissions Reduction in NOX emissions Electrication of eet Reportable incidents of poor sh welfare Incidents of sh escape Biosafety incidents with serious conse- quence Our HSE KPIs are: Lost Time Injury frequency Days since last incident with absence Severe incidents or near miss incidents with potential Discharge at sea The key gures will be systematically fol- lowed up in regular operational and depart- ment meetings throughout the organization and measures will be taken when necessary to adjust the course to achieve our goals. An important aspect of our sustainability management will also be to establish clear guidelines and policies for how to convey strategies and measures decided by the BoD and management team to all employees. ETHICAL BUSINESS CONDUCT It is essential for Frøy to promote ethical business conduct across all levels of our organization. This will both ensure good working conditions and cooperation inter- nally, as well as a good reputation amongst our stakeholders. We have established several policies and guidelines for ethical conduct and continuously adapt and take active steps to make sure our operations follow national and international regulations and standards. THE FRØY CULTURE For us, the Frøy culture is a guideline for quality, safety, and well-being. For our customers, the Frøy culture is the noticeable dierence in a collaboration with us. FRØY ASA | ANNUAL REPORT 202134 Our culture is summarized in seven state- ments ensuring uniform quality in everything from HSE work to the standard of vessels and equipment: The seven statements of the Frøy Culture 1 HSE in everything we do. 2 We will facilitate well-being. 3 Our ownership and expertise are our joint success. 4 No task is too large or too small. 5 The best solution is yet to be found. 6 Satised customers create growth. 7 We’re going to be the most preferred. Further information on the seven state- ments of the Frøy Culture can be found on our website. ETHICAL GUIDELINES For Frøy to be recognized as an ethical com- pany we depend on sound and responsible actions from all our employees. Therefore, we have established ethical guidelines that we expect everyone associated with Frøy to follow. The ethical guidelines for Frøy ASA are based on requirements set out in SA8000:2014 and describe how Frøy as an employer and how our employees should act. The guidelines cover several topics connected to work environment, health and safety, discrimination, child labor, environ- mental impact, use of social media, animal welfare, and condentiality and information processing. The guidelines are available to all employees through our management systems. In the event of breaches of our ethical principles or deviation from our security routines all our employees are encouraged to le a complaint. We have established routines for collecting and dealing with notications of breaches, in which our Especially important is our shareholders, to whom we seek to provide comprehensive and fully updated information. Completing this sustainability report is an important step for making non-nancial disclosures more accessible and transparent. We acknowl- edge that there still are many challenges nding and disclosing data on all aspects of our operations concerning social and environmental impact, and we will invest in establishing new procedures for data collec- tion for the coming years. RESPONSIBLE VALUE CHAIN Frøy is part of a comprehensive value chain, and we depend on a wide set of suppliers. To ensure that our products and services are truly responsibly created, both consid- ering social and environmental impact, we are gradually increasing our supply chain engagement focusing on transparency and more active cooperation and manage- ment. The wellboat segment have partly implemented purchase order systems that impose requirements to our subcontractors related to social responsibility. Both nationally and internationally, new regulations and requirements for transpar- ency of the supply chain are developed and established that will aect how we work with risk management and due diligence going forward. Most importantly we will update our procedures to comply with the Trans- parency Act developed by the Norwegian government, which will enter into force on July 1st 2022. The new law requires due diligence of decent work conditions in the supply chain, risk of breaches of human and labor rights, and further reporting and trans- parency on measures taken. We will imple- ment new routines to ensure compliance and continue to work to further strengthen our sustainability commitment. THE WAY FORWARD – PLANS FOR 2022 The preparation of an overall strategy for the Frøy Group has a high focus in 2022 and is well anchored in both the board and the company ’s management. The establishment of a corporate strategy for sustainability employees may remain anonymous, and they have, if desired, the opportunity to have the complaint handled through an inde- pendent third party. In the event of adverse events our management team take action to prevent similar events to recurring. In 2021 zero complaints were led through our whistleblower channel. ANTI-CORRUPTION POLICIES Frøy opposes all forms of corruption, and we will work actively to ensure that corruption does not occur in our business activities. All personnel are prohibited from planning, per- forming, or facilitating any corrupt activity, in the public or private sector, also in cases where Frøy or its personnel do not benet directly. In line with the listing of the com- pany ’s shares on Oslo Børs in March 2021, there were prepared guidelines for anti-cor- ruption, “Frøy Group: Policy for anti-corrup- tion and sanctions compliance”. The Policy provides key principles and requirements to reect and implement Frøy ’s zero tolerance against corruption and breach of sanctions requirements. All permanent and tempo- rary employees of Frøy, members of Frøy ’s Board of Directors, as well as hired person- nel, consultants and any other party who have authority to act on Frøy ’s behalf, are responsible for complying with this policy. This applies regardless of geographical location. Frøy ’s top management members are responsible for ensuring implementa- tion of this policy in each group company. All members of the Board of Directors have been trained in these guidelines. No incidents related to corruption were registered in Frøy in 2021. TRANSPARENCY IN REPORTING AND COMMUNICATION Transparency in reporting and communi- cation is identied as an important aspect in our sustainability work. This relates both to areas where we have room for improvements and to incidents that occur in connection with our operations. We intend to make information of interest accessible and communicate it to all stakeholders. FRØY ASA | ANNUAL REPORT 2021 35 will be an integral part of this strategy work. Another important area of the strategy process is that the company will be more data driven and digitized during 2022 and a pre-project has already been initiated to map what data the company holds and how we can better utilize this data for optimi- zation, market development, innovation or other strategic or operational measures. This is also important in the context of sus- tainability and implementing transparency as a key principle in our corporate governance policy, as this work is entirely dependent on a high-quality data base. At the end of 2021 there were established Key Performance Indicator Areas for both Sustainability and HSE, se chapter ‘Sustain- ability Strategy ’ for details. Target values were set for some of the areas, but not all, due to the lack of experience data which is crucial to determine reasonable target values. Going forward this work will continue through 2022 and target values will be determined for all KPI’s. Going forward we will also develop man- datory training for all employees in our anti-corruption regulations. During 2022 we are gradually increasing our supply chain engagement focusing on transparency and more active cooperation and management, and when entering new supplier agreements, we will prefer suppliers which holds ISO 9001:2015 and 14001:2015 certicates, as well as requesting a state- ment of their social responsibilities. FRØY ASA | ANNUAL REPORT 202136 As part of the aquaculture indus- try, Frøy faces many of the same challenges as sh farming compa- nies regarding the climate and envi- ronmental footprint our business leaves behind. Our operations are carried out at sea and our vessels emit greenhouse gases in connection with the movement, transport, processing, and execu- tion of various service assignments for our customers. We perform services that ensure the production of farmed sh, and it is important to us that our contribution moves this production in a sustainable direction. Based on the relatively low CO2 emissions, low water consumption and limited extent of land use, farmed sh is one of the most energy ecient and environmentally friendly ways to produce healthy animal protein. However, the fact still remains that food production overall is estimated to account for almost 40 % of the world’s greenhouse gas emissions (i). Frøy is therefore commit- ted to contributing to reduce greenhouse gas emissions associated with sh farming through adapting to and investing in new vessels and equipment that contribute to lower carbon footprint. Fish welfare is on top of the agenda in all sh farming activities. Research shows that during their life cycle, farmed sh are exposed to the most stress and negative inuence in connection with handling of the sh in connection with transport, delousing and other treatments, and various activities in the farming cages. As an integrated ser- vice provider in all these areas, Frøy wants to actively contribute to continuously improve the sh welfare in connection with these activities. Frøy contributes to ensuring biodiversity in the ocean through delivering services to sh farmers that reduce the risk of escapes. Frøy deliver both inspection services and documentation that are key to maintain the integrity of the farming site and to reduce risk if an incident occurs. Escaped farmed salmon and trout have a negative impact on Norwegian wild salmon populations through genetic crossing, and due to this, measures to prevent escapes have a high focus in Frøy and in the industry. Frøy is also aware of the importance to minimize any other environmental impact on marine life from our activities. FISH WELFARE AND BIODIVERSITY Despite a high awareness to ensure that our operations are executed in a manner that ensures good sh welfare and do not lead to escapes, incidents may still happen. In 2021, we experienced the following incidents in regard to poor sh welfare and escapes. Category Incidents 2021 Reportable incidents of poor sh welfare (ii) 5 Incidents of sh escaping 2 Biosafety incidents with serious consequence 0 When undetermined increased mortality occurs on farmed sh or conditions that have led to serious welfare consequences for the farmed sh, the sh farmer is required to notify the Norwegian Food Safety Authority immediately. If the elevated mortality rate or welfare consequences may be due to conditions on board one of our wellboats, the Norwegian Food Safety Authority will request documentation from Frøy to clarify possible causalities. In 2021, documentation was requested from us in ENVIRONMENT GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t FRØY ASA | ANNUAL REPORT 2021 37 connection with 5 cases of elevated mor- tality subsequent transports or treatments carried out by one of Frøy ’s wellboats. None of the incidents have resulted in any formal sanctions being made against Frøy from the Norwegian Food Safety Authority. There has been one case of possible escape of sh from our vessels in 2021. The possi- ble escape occurred in connection with the unloading of sh to harvesting facility where the coupling between vessel and the har- vesting facility was ejected by mistake. Large amounts of water and sh came out on deck before pumping was interrupted, and sh could potentially have come through safety nets along the ship’s side since weaknesses were uncovered in the aftermath of the incident. The incident was notied to the Directorate of Fisheries and had no conse- quences for Frøy. An experience transfer report was sent out to all wellboats and delousing vessels to ensure that all barriers used in connection with escape protection were checked to be in order. In addition, we had one case where inade- quate inspection of nets as well as inad- equate documentation of the inspection carried out by one of Frøy ’s service vessels may have been instrumental in a major escape incident from a sh farm. The escape incident has been reported to the Director- ate of Fisheries by the sh farmer and the Directorate of Fisheries has requested the necessary documentation from Frøy related to the incident. The Directorate of Fisheries’ handling of the case is currently ongoing and any conclusion of misconduct by Frøy in con- nection with the incident have been taken. Fish health and welfare Frøy has a dedicated Director of sh welfare with veterinary background that support our local crews with analytics and sh health competence. The Director works across the organization to share best practice and to ensure experience transfer and training throughout the organization. Eective shar- ing of best practice and veterinary support is key to uniformly deliver high quality sh welfare solutions and to build sh health competence across the organization. Frøy ’s goal is for all employees on board our vessels to have theoretical and practical training in sh welfare through attending “Fish welfare courses” according to Norwe- gian Food Safety Authority requirements. The training will ensure that our under- stands which factors is important in their line of work to execute the activities ensur- ing good sh welfare. The training is to be repeated every ve years. Wellboat and delousing vessel Frøy provides services within a number of delousing methods, both medicinal and non-medicinal. Delivering solutions that ensure that the delousing is carried out eciently and with good sh welfare is key for the client and business critical for Frøy. Fish welfare competence and ecient tools (equipment and vessels) are prerequisites to operate eciently and sustainability. More information about the delousing methods Frøy provides can be found on our website. Frøy work closely with equipment suppliers to develop new equipment that support Frøy with improving sh welfare. Gentle handling of sh from the farming pens through Frøy ’s vessels and ecient monitoring and control of the water chemistry are key focus areas. In November 2021 Frøy took delivery of the worlds largest wellboat Gåsø Høvding. The vessel is equipped with a range of new equipment and technology that may contrib- ute to improved sh welfare. As an example, the vessel is equipped with a fresh water production unit on board which enables the reuse of fresh water up to 10 times. Reusing the water multiple times without compro- mising on sh welfare requires the right equipment and skilled crew with sh welfare competence and knowhow how to optimize the equipment. Removal of sea lice with the use of fresh water is time consuming and entails repeated handling of the sh. The onboard production of fresh water on Gåsø Høvding may signicantly reduce cost and time spent on the delousing operation, as well as contributing to better sh welfare. The large size of the vessel also contributes to quicker delousing which reduce the risk of cross contamination across the farming pens. Frøy also contribute with keeping the population of sea lice down by reducing the release of residual material after delousing which can contain live sea lice. Residual material and sea lice are collected on all wellboats and delousing vessels. In this way, we reduce the spread of live sea lice to other nearby sh farms or wild salmon. Service vessels Our vessels contribute to good sh welfare while the sh are in the pens. Our net wash- ing vessels ush the nets clean of growth since a clean net is crucial to ensure optimal ow through of water in the pens. Net cleaning is carried out in a gentle manner by using double systems (iii) extensively to reduce the time the net cleaner stays in nets and hence disturb the sh. Where possi- ble, we equip our net washing vessels with battery-driven aggregates to reduce noise in and near the cages, which again leads to less disturbance of the sh. Our procedures also describe measures to ensure good sh welfare for cleaner sh in connection with operations in cages. Biosecurity Frøy ’s Director of sh welfare is available for consultation by the vessels in case of doubt regarding applicable regulations for biosecu- rity, or if there is need of sh health person- nel to conrm that the cleaning carried out on board is in accordance with the require- ments. The in-house veterinarian also regulates the vessels cleaning plans which describe how to clean and disinfect the vessel and its equipment to comply by the regulations and provide necessary training to the crew in how to perform cleaning and FRØY ASA | ANNUAL REPORT 202138 disinfection when needed. Through these measures Frøy reduce the risk of spreading infectious sh diseases. Frøy operate both under the Norwegian Food Safety Authority regulations and the customers’ internal biosecurity regulations. All vessels in Frøy use disinfectants approved by the Norwegian Food Safety Authority as primary disinfection of vessels and equipment between assignments and for disinfecting aquaculture equipment (for example rings and eets for the sh farmers). Disinfectants approved by the Norwegian Food Safety Authority have documented sucient ecacy to kill bac- teria and viruses that can cause disease in sh. In some cases, we carry out so-called cross-disinfection at the requirements of our customers. In case of cross-disin- fection, a primary disinfectant is used in combination with a secondary disinfectant. In those cases, it is not a requirement that the secondary disinfectant should be on the Norwegian Food Safety Authority ’s list of approved disinfectants since the primary disinfectant are approved. Escape of sh Through measures to prevent the escape of sh in connection with their own operations or from our customers’ sh farms through the services we provide to them, Frøy contributes to ensuring biodiversity in the ocean. Escaped farmed salmon and trout have a negative impact on Norwegian wild salmon populations through genetic cross- ing, and due to this, measures to prevent escapes have a high focus in Frøy and in the industry. Frøy is represented in the authorities’ escape forum, established in 2019 by the then Minister of Trade, Industry and Fisheries, “Forum for Escape Safety in the Aquaculture Industry”. The forum consists of representatives from relevant trade associa- tions aliated with the aquaculture industry. The forum has received clear orders from the Ministry: Be a forum for discussing strategy and priorities in the escape safety work Discuss and follow up on current escape questions Facilitate good cooperation between the business organizations and the author- ities. Be an information arena for new projects that are, or are planned to be initiated by the industry or the authorities Identify key issues jointly, based on expe- riences and trends, and nd solutions to these Actively contribute to disseminating knowledge and experiences across the industry Frøy has also provided input in connec- tion with the revision of the standard for oating aquaculture facilities NS 9415:2009 and has improvised changes after the revised standard NS 9415:2021 came into force in the autumn of 2021. Together with the NYTEK Regulations, NS 9415:202, regulates the construction, installation, operation and maintenance of oating aquaculture facilities to prevent the escape of farmed sh. Wellboat and delousing vessels According to the FHF-funded (Norwegian Seafood Research Fund) SINTEF project “Knowledge and methods for preventing escapes”, the escape of sh from wellboats or delousing vessels is mainly by: Propeller in net in connection with mooring Hit-and-run (fault navigation or strong current/wind) Failure of hoses or hose couplings Grating ooding Pumping of sh to deck or to sea Through risk analyses, risk-reducing mea- sures and barriers have been identied to prevent escapes caused by or from any of our vessels. Examples include: Net at the end of all sh handling pipes and hoses when not in use Use of nets or grating in front of scup- pers to ensure that sh that end up on deck do not fall into the sea Map of the location with marked sailing rout to the cage, as well as contacting the location manager if unfamiliar with current conditions at the location. Service vessels According to the same project referred to at the last paragraph, the escape of sh from sh farms mainly is caused by: Holes in the net Net under sea level Handling of sh Environmental and weather conditions Various working operations An important part of Frøy ’s core business is the inspection of nets to nd and locate any holes in the net and other defects in the cage components or mooring system. Inspections are carried out either by divers or by using ROV or net cleaning robot (when inspection are carried out as an integrated part of the net cleaning). In this work Frøy is investing in new technology in the form of machine learning to support our operators who carry out inspections in the work on detecting holes. FRØY ASA | ANNUAL REPORT 2021 39 Frøy also works closely with suppliers of net cleaning robots to reduce net line wear which could lead to holes in connection with washing. In addition, Frøy also works closely with subcontractors to develop better camera technology to better uncover any deviations for all types of inspection (ROV/ diver/net cleaner). If holes are uncovered in connection with inspection carried out by divers, all holes will be immediately rectied by divers with expertise in net repair in accordance with the net user manual. Another important part of Frøy ’s core busi- ness is the installation of moorings for oat- ing aquaculture facilities. Our employees’ expertise in this area helps to ensure that facilities are moored correctly according to the plant certicate and thus helps prevent the escape of sh. Frøy is certied by the accredited certi- cation company Aquastructures AS as an organization that performs the following services in accordance with require- ments of the NYTEK Regulations and NS 9415:2009: Installation of mooring for oating aqua- culture facilities Temporary repair of nets (repair of nets in the sea) Food safety In connection with all contact with sh that are part of food production, Frøy is concerned that our business should not contribute to deteriorating the quality of the product and thus ensure good food safety. Cleaning chemicals are stored in accordance with government and customer require- ments, and cleaning of vessels is carried out at a reassuring distance from aquaculture sites where there are sh. Frøy has in 2021 started work on transition- ing to food-approved hydraulic oils on our vessels where any leakage of the hydraulic oil may come into contact with sh. Any spillage of hydraulic oil that is not food-ap- proved which come in contact with the sh could contaminate the entire batch and the end product would not be approved for human consumption. This is an extensive work and will be carried out successively by scheduled replacement of hydraulic oil according to the vessels maintenance programs. Our routines are intended to ensure that there will be no emissions of diesel fuel, or oil when operating in and around aquacul- ture sites. Frøy is a veried supplier according to the Global G.A.P. Aquaculture standard and holds a DoC (Declaration of Compliance) issued by DNV. This means that our entire business is audited annually by a third party (DNV) to ensure that we comply with the elements of the standard relevant to our business, thereby ensuring that our Global G.A.P certied customers that by using our services they will be in accordance with the requirements of the standard. Global G.A.P is an internationally recognized standard for farm production and have a sub-standard aimed at aquaculture, the GLOBAL G.A.P. Aquaculture Standard. The standard sets strict criteria for: Legal compliance Food safety Workers’ occupational health & safety GLOBAL G.A.P. Risk Assessment on Social Practice (GRASP) Animal welfare Environmental and ecological care Frøy is also regularly audited by a selection of customers according to relevant elements within the Aquaculture Stewardship Council (ASC) standard. The ASC standards focus on both the environmental and social impact of farming: Environmentally: farms must show that they actively minimize their impact on the surrounding natural environment. This extends to careful management of the sh health and resources. Socially: farms must be a good and con- scientious neighbor; that means oper- ating their farm in a socially responsible manner, caring for their employees and working with the local community. FRØY ASA | ANNUAL REPORT 202140 PGHG EMISSIONS Scope 1 CO2 emissions [tonnes] (iv) 95 063 Scope 2 Electrical power (v) consume [kWh] 1 330 285,59 CO2e (vi) [tonnes] 10,64 Total CO2 + CO2e [tonnes] 95 074 ELECTRIFICATION OF VEHICLES Wellboat Larger Smaller and service- service- Vessels (xiv) Shipping vessels vessels Percentage of vessels with diesel power 79 % 20 % 97 % Percentage of vessels with diesel-electrical power 16 % 60 % 0 % Percentage of vessels with hybrid power (vii) 5 % 20 % 3 % Percentage of vessels prepared for hybrid power (viii) 0 % 20 % 0 % Company cars (ix) Percentage of company cars with diesel power 100 % Percentage of company cars with hybrid power 0 % Percentage of company cars with electrical power 0 % GREENHOUSE GAS EMISSIONS We recognize the impact our operations have on the climate and aim to reduce our carbon footprint. As a rst step in this pro- cess, we have started mapping out climate emissions as inspired by the GHG Account- ing Protocol. The climate account presents a general overview of the company ’s greenhouse gas emissions in the form of the greenhouse gas CO2 in relation to Scope 1 and 2, i.e., the parts of the business where Frøy has operational control. Reduced greenhouse gas emissions through electrication of the eet The larger contributor to Frøy ’s carbon foot- print is the emission of greenhouse gases from our eet. In 2019 Frøy therefore made a strategic decision to reduce greenhouse gas emissions from the eet by investing in more climate friendly vessels, and from then on, all wellboat newbuilds have been ordered with either diesel electric or hybrid propulsion machinery. At the end of 2021, 21 % of our wellboats and cargo vessels, 80 % of our larger service vessels, and 3 % of our smaller service vessels have diesel elec- tric or hybrid propulsion machinery installed. Reduced greenhouse gas emissions through greater operational utilization Greater operational utilization leads to reduced energy consumption which further leads to reduced fuel consumption and then again to reduced greenhouse gas emissions. One example of operational utilization to reduce greenhouse gas emissions is that our logistics managers focus on achieving as good a level of coverage as possible for any transport assignment for our sea transport vessels. If goods are transported from A to B, goods must also be transported from B to A. This leads to a reduction of fuel consump- tion per ton freight transported. Another example is that in connection with freshwater delousing, the need for the num- ber of transport stages for the replacement of fresh water will be reduced by building well boats with larger well volumes. Fewer transport stages lead to reduced fuel con- sumption per delousing operation. In addi- tion, a larger proportion of the sh in cages can be processed per assignment which again reduces the total energy consumption for the delousing operation. When produc- ing fresh water on board the wellboat, this need will be further reduced. Frøy ’s newest well boat and the largest well boat in the world, Gåsø Høvding, is an example of Frøy ’s advances in this area. Reduced greenhouse gas emissions through increased use of remote inspections In the case of remote inspections, we reduce transport, which will contribute to a reduction in greenhouse gas emissions in connection with transport to and from land. There are clearly dened requirements for cleaning, washing and disinfection of vessels and equipment used at aquaculture sites. The requirements have dierent levels depending on the status of the sh and are dened in the Aquaculture Operations Reg- ulations and the various disease regulations. Where there are requirements for control of the object before further operation, it is authorized sh health personnel (veterinari- ans and sh health biologists) who carry out such inspections. Cleaning inspection can be carried out either “on site” or by “remote” inspections. Remote inspections are carried out by crew performing the physical part of the inspection while being monitored by an inspector in real time. As well as transport, remote inspections reduce time for the object and for the inspector. Frøy uses FRØY ASA | ANNUAL REPORT 2021 41 remote inspections where it can be used and aims to use it to a greater extent in the future, as the regulations allow for it. MINIMIZE OUR ENVIRONMENTAL IMPACT As reected in our ethical guidelines Frøy ’s goal is that the environmental impact from our activities is to be kept to a minimum and we have a zero tolerance for spillage of oil at sea. Pollution from ships is regulated by the International Convention for the Prevention of Pollution from Ships (MARPOL 73/76). The MARPOL regulations consist of six annexes that regulate various forms of pollution from ships. All our vessels are equipped with oil collec- tion equipment in accordance with MARPOL - Annex I. Several of our vessels participate in the oil spill preparedness drills along the entire Norwegian coast, either under the direction of the Norwegian Coastal Administration or the Norwegian Clean Seas Association for Operating Companies (NOFO), in order to ensure good handling of potential major oil spills that could threaten our coastline. POLLUTION Oil pollution Oil spillage to sea [number of incidents] 3 Air pollution NOX emissions [tonnes] 845 929 Percentage of vessels with SCR (x) 20 % In 2021 Frøy had one major incident of overlling of diesel fuel which led to spillage of 200 liters of diesel to sea. Cause analy- sis showed that the overlling was due to violations of internal procedures and the incident was reported to the NMA. Imme- diate measures were taken to collect the diesel waste using oil booms, in addition to a number of preventive measures were taken related to the review of internal procedures as well as experience transfer to prevent the reoccurrence of similar incidents. Frøy was ned for negligence by the Norwegian Maritime Authority after the incident. In addition, Frøy had two minor incidents of leakage of hydraulic oil on deck which led to some of the hydraulic oil running overboard and creating a minor oil lm at sea. Both these spillages were during maintenance at dock and was quickly contained with oil absorbing mats on deck to minimize the amount of overboard oil spills. Pollution to air is regulated by MARPOL – annex VI which sets limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances; designated emission control areas set more stringent standards for SOx, NOx and particulate matter. A chapter adopted in 2011 covers mandatory technical and operational energy eciency measures aimed at reducing greenhouse gas emissions from ships. As a measure to accommodate these regulations and contribute to reducing the environmental impact from exhaust gases Frøy has installed SCR equipment on several of our vessels. None of Frøy ’s operations in 2021 were sub- ject to any emission permit requirements. Waste disposal All our vessels have prepared their own Waste Management Plan describing procedures for handling dierent types of waste. Handling of waste from our ships at operation is mainly regulated by Annex V of the MARPOL regulations which deals with dierent types of garbage and species the distances from land and the manner in which they may be disposed of; the most important feature of the Annex is the com- plete ban imposed on the disposal into the sea of all forms of plastics. Measures to prevent microplastics in the ocean As mentioned over the MARPOL – annex V regulates a complete ban on the disposal of all forms of plastic to the sea. All forms of plastic must therefore be sorted on board and disposed of at approved waste disposal facilities ashore. In addition are packaging and used plant parts such as rings, nets and moorings from the aquaculture industry which may contain of plastic materials supplied to the sh farmer whom in turn disposes of it to enterprises that reuse the materials if possible. A large part of Frøy Shipping’s transport assignments are based on the transport of sh feed. Fish feed is delivered in large plastic bags, and these are delivered for recycling when they are empty. In addition, all plastic barrels and IBC plastic containers are delivered for recycling from all parts of our business. To reduce the amount of microplastics and other waste in the sea Frøy acts as a spon- sor for beach and shoreline cleanup opera- tions in the local communities we operate. Water consumption For 2021 it has not been possible to retrieve data for total water consumption for Frøy ’s operations, but Frøy is not a major con- sumer of fresh water in connection with our operations. Overall Water Risk - cutouts from Water Risk Atlas, www.wri.org FRØY ASA | ANNUAL REPORT 202142 We need access to fresh water in con- nection with freshwater treatment on our wellboats in addition to access to drinking water on board our vessels and at our oce locations. Drinking water is mainly bunkered from approved drinking water facilities in our areas of operation. Frøy only uses fresh water from areas with a low or low-medium risk of water shortages or poor water quality. A reverse osmosis plant has been installed on board the wellboat Gåsø Høvding for the production of fresh water from seawater, which will reduce the freshwater consump- tion in connection with freshwater delousing operations. This initiative will be imple- mented on other new builds in the future if appropriate. Impact on other marine life As mentioned, gentle ushing of nets is an important focus area for Frøy regarding sh welfare, but gentle ushing is also import- ant in terms of reducing the discharge of Cu-holding impregnation to sea. Our wash- ing robots meet the maximum permissible ushing pressure requirements for ASC certied locations. All vessels in Frøy that fall under the ballast water treatment regulations have facilities for treatment of ballast water that meet the requirements of the IMO’s Ballast Water Management Convention. Treatment of ballast water is an important measure to prevent the undesirable spread of marine organisms because the transferred species may survive to establish a reproductive pop- ulation in the host environment, becoming invasive, out-competing native species and multiplying into pest proportions. All wellboats in Frøy except one comply with the regulations on disinfection of transport water in accordance with Section 22 of the Transport Regulations. The vessel that has not approved facilities for disinfection of transport water has a limited transport permit in Norway and has mainly carried out assignments outside Norway in 2021. Disinfection of transport water is a measure to prevent the spread of infectious sh dis- eases between plants and production zones along the Norwegian coast. The wellboats in Frøy use UV illumination as a method for disinfecting the transport water. When using medicines for the treatment of sh against sea lice on board our wellboats, we comply with the requirements of the Transport Regulations that the treatment water consisting of medicine residue should not be emptied closer than 500 meters from shrimp elds or spawning grounds speci- ed in the Directorate of Fisheries’ online mapping tool. THE WAY FORWARD – PLANS FOR 2022 Going forward, we aim to expand our GHG reporting as we are able to collect more data from our operations and our value chain. We also will take necessary measures to collect data for water consumption of our operations. As mentioned in the report an important measure to reduce the climate footprint and specically the GHG emissions from our operations is to shift to more environmen- tally friendly vessels. The goal is to increase this percentage of vessels with either diesel electric or hybrid power over the coming year as a result of eet renewal. Frøy also aims to use remote biosecurity inspections to a greater extent moving for- ward, as the regulations allow for it. Another important measure to reduce the environmental impact of our operations is to continue the modications of the vessel’ engines by installing SCR units to reduce the NOX emissions from the engine exhaust. In 2022 Frøy has taken the necessary measures to modify 2 vessels by SCR-instal- lation which one of the modications will be commissioned in 2022 and the other modication may prolong in to 2023. All new-builds must comply with the regulations for NOX reducing measures described in the MARPOL – annex VI from day one. Frøy will also in the coming years sustain supporting initiatives for beach and shore- line clean-up operations in addition to other initiatives which will contribute to reducing plastic waste in the ocean. FRØY ASA | ANNUAL REPORT 2021 43 Skilled employees are Frøy ’s most important resource. Their hard work and competence are crucial for delivering good services and for the overall development of our company. Employee motivation and engagement are important for achieving our strategic goals and implementing sustainability in our daily operations. For Frøy it is particularly important to ensure the safety of all our sta. There are considerable risks connected to many of the services our team execute every day. Prosperity relates to Frøy ’s role in local com- munities and other societal contributions. For Frøy, prosperity involves securing the best people, local value creation through job creation and activities in coastal communi- ties, payment of taxes to local governments and fair payment of dividends to sharehold- ers. Furthermore, to ensure we stay up to date and ahead of the curve, we actively engage in projects relating to technological development. Please nd the complete overview of nan- cial gures in the annual accounts section in the annual report. SECURITY AT WORK At Frøy, the safety of our employees is our main priority, and all our vessels have a Safety Management System to ensure safe operations at sea. All vessels in Frøy covered by certication requirements have valid SMC/MLC/ISPS certicates and underlie a shipping company with a valid DoC (Docu- ment of Compliance) in accordance with the ISM code. Vessels that are not covered by certication requirements meet the Safety Management System requirements issued by the Norwegian Maritime Authority (NMA). Research conducted by both SINTEF and the NMA show that workers at sea and in the aquaculture industry is one of the most at-risk occupational groups in Norway. The aquaculture industry is one of the riskiest industries in the Norway in terms of personal injuries and accidents, while at the same time it is an industry with a high proportion of work-related sickness absence as a result of musculoskeletal disorders. In 2021, we had 3 serious incidents that resulted in damage to either vessels or critical equipment. One incident involved the cargo falling from the crane during the lifting of a 200 kg heavy module from dock to boat. The load shifted and fell 15-20 cm down on the deck due to miscalculation with regard to the strap method. The second incident involved the rudder locking up at speed due to technical failure and the vessel having to emergency maneuverer to dock. The third incident involved major damage to the pump due to accidental seawater intrusion into the pump room during maintenance work. The seawater intrusion is due to inadequate compliance with procedures for insulation of SOCIAL RESPONSIBILITY GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t GHG emission Minimize our own environmental impact Fish welfare and biodiversity Security at work Gender equality and diversity Attractive employer Local contributor Technological developement Responsible value chain Sustainability in management Transparency in reporting and communication P l a n e t G o v e r n a n c e P r o s p e r i t y P e o p l e r e s p o n s i b i l i t y S o c i a l G o v e r n a n c e E n v i r o n m e n t Category Incidents 2021 Work related injuries Number of hours worked 1 492 971 Lost time injuries frequency (LTI) (xi) 9,38 High-consequence LTI (xii) 3,35 Number of work-related fatalities 0 Main categories of work related injuries 1. Fall injuries (33 %) 2. Crush injuries (23 %) 3. Cut injuries (13 %) Other safety related incidents Damage to vessel or critical equipment 3 Groundings or collisions with potential 1 Near miss incidents with potential 5 FRØY ASA | ANNUAL REPORT 202144 equipment in connection with maintenance. All three incidents resulted in only material damage and no injuries, but all incidents had a high potential for a more serious outcome both materially and with regard to injuries to personnel. Experience reports have been sent out to all vessels to ensure learning from the events across the organisation in addition to corrective measures being taken to rectify technical errors and deciencies where applicable. We also had one grounding with serious potential in 2021. The grounding itself did not cause any serious damage beyond water penetration through a hole in the hull, but due to the grounding, serious safety decien- cies were uncovered in relation to non-com- pliance with safety procedures and require- ments for safety equipment on board. The accident was reported to the NMA and Frøy was ned as a result of the safety concerns. Measures have been taken to ensure that similar safety deciencies do not occur again. All near miss incidents with potential are analyzed to uncover causalities and nec- essary measures are taken to avoid similar incidents. Internal experience transfer Frøy observes that the number of personal injuries increase in correlation with the activity level and especially the number of minor injuries that do not lead to absence, such as crush injuries, fall injuries and cut injuries. These are injuries that with small margins could lead to more severe injuries in our line of work, so we work systematically with improvement and experience transfer across the organization to prevent similar incidents to happen again. Review of nonconformities last period is a xed agenda item in all meetings in the operational line, from safety and security meetings on board the vessels to reviews in board and management meetings. In addition, all incidents are reviewed weekly by the QA-department, to identify if immediate or preventive measures are to be taken throughout the organization to prevent sim- ilar incidents down the line. Based on cause analysis and preventive measures identied, experience transfer is sent out to all relevant vessels either via monthly HSE newsletter or by using the internal form Experience Report. By these measures, we ensure the learning of incidents at all stages of the company. In the event of high-consequence vi incidents, investigations are carried out. Our observations are conrmed by the Norwegian Maritime Authorities. The NMA chose to have “Safety culture and risk understanding” as the focus area in 2021 and has chosen to continue this focus area also in 2022 as it takes time to build a good safety culture. As described above, Frøy has taken several measures to accommodate the ndings from both the NMA and internal statistics. Knowledge transfer and dialogue with the industry An important instrument the NMA has for experience transfer and dialogue with the industry is the Maritime Safety Conference. At the Maritime Safety Conference 2021, a representative from Frøy ’s QA-department was asked to contribute to a panel to shed light on how we have handled the challenges of safety and risk understanding among crew members of the smaller service vessels in the aquaculture industry. Among other things were the importance of the introduction of requirements for competence requirements for masters on smaller vessels that will come into force on 1st of January 2024 addressed. Frøy observes that the understanding of the need for safety routines, and not least documentation of compliance with safety procedures, is more prevalent among certied crew members than among crew members who have no qualication requirements related to the master role. This is not unnatural as training in safety and risk understanding at sea is provided in accordance with international rules for good seamanship in connection with the issuance of the new certicate of competence. Frøy therefore welcomes the new competence certicate for masters on cargo ships of 8 meters in overall length or more, and is already well underway with the training of crew on our smaller vessels to meet the new requirements. The importance of having good routines for on-boarding of new crew members and introducing them to the company ’s safety routines were also addressed by Frøy ’s representative. In high season, the activity level is high on the vessels and it is easy that eciency and deliveries become the focus both in the land administration and among the crew on the vessels. It is therefore very important that it is communicated at all levels that safety comes rst and shortcuts should not be taken. HSE-training of new employees In connection with on-boarding, all new crew members must review the safety checklists for familiarization before they can start work. The familiarization checklist consists of checkpoints for, among other things, the placement of emergency and rescue equip- ment, muster point, the alarm instructions, and the general review of the company ’s safety management system. They will also have a review by one of their senior crew members of HSE procedures including pro- cedures for use and handling of chemicals, in addition to risk assessments for relevant job operations they are to carry out in their job. The HSE training also includes training in the use of equipment which may entail a risk of injury. In 2021, work was started to digitalize docu- mentation of all training for all employees as this has previously been done on dierent platforms in the dierent subsidiaries. Facilitation in Frøy All employees, with the exception of a seg- ment of smaller service boats, have Safety Insurance in accordance with NHO Shipping. As a result of mergers, there are dier- ences between the companies. Treatment FRØY ASA | ANNUAL REPORT 2021 45 insurance currently applies only to parts of the organization. In connection with sickness absence follow-up, various private services are used to get employees back to work faster. GENDER EQUALITY AND DIVERSITY The Frøy Group has announced clear attitudes towards safeguarding diversity and gender equality in our ethical guidelines. We want all our employees to feel included and respected for who they are and Frøy has a zero-discrimination policy. The policy estab- lished clear guidelines for limiting discrimi- nation in our company and is based on The Equality and Anti-Discrimination Act. If incidents occur, it can be reported through our whistleblower channel. No discrimina- tion cases were received in 2021. Our employees consist of 12 dierent nationalities. Our management systems are mainly available in Norwegian as it is a requirement from our customers that our employees should be able to communicate in Norwegian. Measures have therefore been taken to oer Norwegian language courses to employees which do not have Norwegian as their rst language. Gender Equality At the end of 2021 Frøy had a total of 814 employees, including temporary employees. 776 were men and 38 were women. Rela- tively speaking, the female employees are mainly employed in the onshore administra- tion, 38% of the total onshore employees are female. There are relatively few women employed as crew members on our vessels. Only 3% of the employees on our vessels are female. Of these, no one is employed in ocer positions on board. The aquaculture and shipping industry has traditionally been seen as a male dominated occupation and there have been few female applicants when positions are advertised. The proportion of women employed at the middle management level in the onshore administration are also low (6%), but the proportion of women is higher at the top management level. At the end of 2021, Frøy ’s management group consisted of 14% women, while the expanded management group (xvi) consisted of 40% women. In the transition to 2022, the share of women increased to 29% and 47% respectively following the employment of a new female CEO. The Board of Directors of Frøy consists of representatives with broad experience and competence and has a female share of 43%. Up until now we have not implemented systematic measures designed to increase the proportion of women on board our vessels or at the middle management level. However, going into 2022 we will be explor- ing ways to improve the share of females in the organization. Attracting a higher share of women increase the addressable talent pool for Frøy. Attracting the best talents and creating a innovative environment requires a diverse set of talents which is needed to create a sustainable position as a leading competence hub within aqua services. In line with the duty of activity and reporting, an “ARP: Gender Equality Statement for Frøy ASA” has been issued. We refer to this for a more detailed description of how Frøy works for gender equality and against discrimina- tion related to gender, pregnancy, maternity leave or adoption, care taking tasks, ethnic- ity, religion, beliefs, disability, sexual orienta- tion, gender identity and gender expression and combinations of these foundations. ATTRACTIVE EMPLOYER Employees In 2021 Frøy had 814 employees, and all our employees have full-time positions. During Number of employees Women Men Total number of employees 38 776 Age group 16-30 years (xiii) 15 354 30-40 years 5 196 40-50 years 7 112 50-60 years 7 94 60-70+ years 2 28 Occupational groups Level 1 (xiv) 1 4 Level 2 17 305 Level 3 14 383 Level 4 6 84 Women’s average salary as a percentage of men’s average salary per occupational group Level 1 81 % Level 2 74 % Level 3 85 % Level 4 57 % (xv) Parental leave Percentage number of persons on parental leave 2 % 4,6 % Average number of weeks of parental leave 28 9,4 FRØY ASA | ANNUAL REPORT 202146 2021, Frøy welcomed 200 new employees to our team and there was a turnover rate of 15%. Number of employees 814 Full-time employees (%) 100 % Part-time employees (%) 0 % Number of substitutes (xvii) 81 Number of new hires 200 Turnover rate 15 % The job market in 2021 was categorized by signicant changes in working patterns as a result of the Covid-19 pandemic, and this also aected our business. Several of our divers are homebound outside of Norway and Covid-19 regulation caused at times diculties for them to maintain their employment in Frøy despite the fact that we implemented several measures to retain our foreign employees. Frøy also competes with several stakeholders for competent labor in the aquaculture industry, including our competitors and our customers. Concerning candidates with aquaculture expertise, the labor market is very tight, which sometimes makes it challenging to recruit new employ- ees. All these factors resulted, as previously mentioned, in a turnover rate of 15% in 2021. While we hired 200 new employees, 120 people chose to leave our company. As described in the chapter ‘People’, our people are our greatest assets and we will continue to do what we can to attract and retain the best people in the industry. In Frøy, all per- manent employees are employed full time and we choose not to hire people in part- time positions unless explicitly requested by the employee. Employee wellbeing and engagement For Frøy, it is very important to be an attractive employer for our employees. Our employees should feel that Frøy is a safe and responsible employer who cares about them and their mental and physical health. We oer competitive wages and facilitate to provide good working conditions for all our employees, where they are allowed to thrive and develop professionally. An important part of our wellbeing work is the implementation of a “Mental Health Strategy”. This initiative was developed in 2021 to facilitate an inclusive and safeguard- ing culture, thereby contributing to wellbeing and community. In addition, a “Policy for drug and alcohol use and gambling” was also drawn up in 2021 to maintain a drug and alcohol free and good working environment. In this work we cooperate with the local “Fol- low-up Service”, which is a service under the direction of the municipal Health and Care Services for people who, for mental reasons and or because of drug or alcohol problems, need assistance in everyday life. We want all employees to be proud to wear the Frøy logo on their chest and feel that they are part of The Frøy Culture. Following the merger with NTS ASA the companies Norsk Fisketransport AS, NTS Shipping AS and NTS Management AS, a workgroup was established to work actively on measures to ensure a common corporate culture and a sense of unity among all employees of the new combined company. To ensure a good ow of information across your organization, newsletters are sent out from the administration to all employees every two months with updates in large and small matters since the last time. In addition, separate letters of infor- mation are sent out in special news stories. Frøy also has a closed internal Facebook group which is used as a more informal information channel to our employees, as well as a channel for community building and communication between crew on the dierent vessels. Training and development We have competence matrices for all posi- tions at sea in Frøy. These matrices describe both legal requirements in relation to quali- cations expected for each position, as well as Frøy ’s standard for desired qualications for the position beyond regulatory require- ments. In connection with harmonization of competence requirements for the individual position and implementation of joint HR systems, we initiated the work to further develop these matrices in the late 2021. In connection with on boarding of new employees, they receive, among other things, a review of the company ’s quality systems incl. safety management systems. In connec- tion with this review, they will be introduced to Frøy ’s “Ethical Guidelines” as well as the shipping company ’s “Policy for Safety and Environmental protection”. When the work of developing its own sustainability practices for Frøy has been completed, it will become an integral part of the company ’s management systems and employees will be introduced into this in the same way as other manage- ment documents and procedures. Historically, there have been few formal competence requirements for crew mem- bers on our service vessels related to the tasks they perform, but this is constantly being sharpened both from the authorities and from our customers. For example, with the revision of the NYTEK-Regulations and the associated standard NS 9415:2021, the competence requirements regarding inspections of nets, repair of net when in sea and installation of mooring for aquacul- ture facilities, etc. are now more formalized. One challenge in this context is that there is no specialized educational program that meets these competence requirements. Frøy has therefore taken measures to ensure on-the-job training consisting of both theoretical and practical training on board. The preparation of e-learning courses has been initiated for the most important tasks as part of a training plan for the given work task. Frøy ’s internal education programs The expertise and experience of our employees is one of most important assets. It is therefore important for Frøy to give our employees good opportunities for pro- fessional development and advancement internally in Frøy. In 2021, we established Frøy ’s internal education program. The goal is to ensure that all employees at all levels, through a tailor-made program, have good FRØY ASA | ANNUAL REPORT 2021 47 basic knowledge of Frøy ’s operations, man- agement, and culture. The program is built around the following structure: The management team and the senior management group - Strategy process, implementation of strategy, vision and goals - Ensure cultural understanding, aware- ness of management responsibilities, anchoring of the program Middle management programs - Are carried out for our operations managers. - Ensure that everyone who has a leading role is given a basic leadership knowledge and cultural understanding Frøy internal education program - Training programs for all new employ- ees, mainly at the operational level. - Combination of digital solutions/physi- cal assemblies - Emphasis on culture, how do we do it with us - Academic content; operations, economy, management, sh health, system, etc. Talent development program - Develop further young and ambitious talents/employees. Work in the management team was initiated through a strategy process in the spring of 2021. A collaboration was later entered into with the Centre for Management for the implementation of the middle management program. Collaborations with educational institutions Frøy actively contributes to educating skilled workers and hires several apprentices every year. In 2021 we welcomed 35 new appren- tices in Frøy which resulted in a total of 70 apprentices distributed on our vessels. We cooperate with the “blue” educations at both upper secondary and university college level, with Ungt Entrepenørskap (Young Entrepre- neurship), Blått Kompetansesenter (Center for Blue Competence), NTNU and SINTEF. These initiatives are further described in the chapter about ‘Technological Development and R&D’. LOCAL CONTRIBUTOR As an active industry player in Norwegian coastal areas, Frøy is a major contributor in local communities through job creation that contributes to upholding sustainable coastal communities in areas that are generally seeing a population decline. Economic contribution [NOK] Community investment 393 617 Frøy employs more than 800 people who reside in communities along the entire Nor- wegian coast. We create important jobs for these communities, and we contribute signif- icant tax revenues to local governments. In Seafood Norway ’s report “Aquaculture 2030”, they have, among other things, looked at the aquaculture industry ’s impact on local value creation in coastal commu- nities along the Norwegian coast. In the report, they conclude that Norwegian value creation related to aquaculture will double by 2030. This will contribute to increased tax revenues and more jobs, and that the aquaculture industry will have dialogue at the local level to ensure that the needs and concerns of the communities are taken care of as much as possible. As a leading supplier to the aquaculture industry along the Nor- wegian coast, these factors will also apply extensively to Frøy ’s activities. In addition, we contribute by supporting local initiatives in the form of children’s sports and cultural activities in the com- munities in which we operate. We also work with local upper secondary schools to maintain and grant local vocational edu- cation programs, in addition to supporting initiatives that ensure higher education in aquaculture-related education. TECHNOLOGICAL DEVELOPMENTS Frøy wants to be a leader in the develop- ment of technology and services that con- tribute to more sustainable development. As part of this work, we collaborate in R&D proj- ects with suppliers, customers, universities and research communities that stimulate to the creation of more sustainable solutions to the industry ’s challenges. Economic contribution [NOK] Total R&D costs 8 241 981 In-house projects Animal testing Frøy eld trials with sh were approved in August 2020. The Norwegian Food Safety Authority states that: “Farmed sh are entitled to good welfare. Therefore, the con- sequences and suitability of methods and equipment must be documented before they can be used”. There is a great need for labo- ratory animal enterprises that have expertise in the use of equipment for non-drug delous- ing and other similar operations that involve handling live sh in the Norwegian aquacul- ture industry. With the laboratory animal activities, Frøy, together with our customers, have the tools to further develop and initiate new methods for sh welfare-prudent han- dling (delousing, sorting, displacement) of live sh, in line with the Norwegian regulations. In close cooperation with our customers, we have applied for and carried out several trials and experiments where we have doc- umented better ecacy and improved sh welfare in the development of new methods in 2021. It is required by law to uncover and document welfare consequences before new equipment is marketed and put into commercial use. Currently, we still have sev- eral trials in process, and we strongly believe that this work is necessary to quality assure and systematize the improvement work for the benet of the sh’s welfare and health. In connection with rebuilding the former supply ship Frøy Challenger to a delousing vessel, Frøy together with one of our custom- ers decided to install and test out a new type of sh pump in connection with the delous- ing unit. Frøy`s eld trial department, the pump owner, and the customer applied the Food Safety Authority for tests to ensure sh welfare. To document sh welfare, we used both individual and group welfare indicators. The intention of the project is to improve FRØY ASA | ANNUAL REPORT 202148 sh welfare by reducing wounds and injuries inicted on the sh by the sh pumps, and preliminary results look promising. Collaboration projects Coastal Preparedness The project “Coastal Preparedness” is an innovation project for the business sector part-funded by the Research Council of Nor- way which extends from 2020 to 2022. The project’s vision is “Increased safety in coastal waters through strengthened operational preparedness” and is a collaborative project between various actors in the business sector and the research institution SINTEF Ocean, where Frøy have the role as project owner on behalf of its primary owner NTS ASA. The background for the project is that aquaculture at sea requires signicantly greater focus on emergency preparedness and has the following themes: GAP analysis risk and emergency pre- paredness Emergency response vessel Environmental and algae monitoring Operational emergency response sup- port/operations center Simulator-based training Frøy primary contribute in connection with the development of an emergency ves- sel and operational emergency response support. Improved detection and positioning of ndings in connection with inspections of nets In 2021, Frøy has initiated two collaborative projects aimed at improving the detection and positioning of holes and other ndings in connection with net inspections. Together with ABB we looked at the possibility of using machine learning for improving detection of holes in the net during net inspections, and together with Posicom we looked at the possibilities of automatic uploading of video recordings from inspections, both mooring and net inspections, to a cloud solution as well as tagging point of interest (POI), for example holes, in order to better position any ndings in video and thus in nets. Both these project will contribute to better quality in our inspections and supply the sh farmer with better overview of their plant integrity, and thus lead to fewer incidents of sh escapes. We also had two students from NTNU and the Faculty for information engineering and electrical engineering, Department of Tech- nical Cybertechnology writing their Master thesises (xviii) regarding the same theme. Innovation projects aimed at the education and research sector Frøy also participates in innovation projects aimed at both lower secondary school, upper secondary school, universities and research institutions. In Trøndelag, we work closely with The Blue Competence Centre at Frøya in relation to both “Blue Innovation Camp” and the “Bridgehead Conference”. “Blue Innovation Camp” is an aquacul- ture-oriented innovation camp focusing on the blue industry that is part of the Trøn- delag UE (Young Entrepreneurship) initiative where pupils in 10th grade at junior high schools come up with proposals for solu- tions to some of the industry ’s issues, and in 2021 Frøy was one of three companies from the blue industry that contributed with an issue from our every-day work. “The Bridgehead Conference” is a meeting place for businesses, students, researchers, pupils, teachers and comitted social actors that are held twice a year. Frøy participated in the conference during the fall of 2021 to make contacts with researchers and students which could be potential future collaboration partners. Both these initiatives are important to ensure sustainable research and innovation in an ever-evolving industry. THE WAY FORWARD – PLANS FOR 2022 An important goal for 2022 is to ensure a greater degree of gender diversity in those areas of our organization were this is required, such as among crew members on the vessels and especially among ocers, or in the middle management level on shore. We are therefore in the process of improv- ing our focus on female recruitment and the goal is to recruit at least one female master on our service vessels. Training and educating our employees are an essential strategic area to uphold our position as a competent and reliable provider of services to the aquaculture industry. To succeed in this area, it is essential to have control over our employee’s competence and experience, and ensure that the crew mem- bers have the sucient qualications for the job they are executing. Therefore, the work of further developing and harmonizing the com- pany competence matrixes will continue in 2022, as well as harmonizing the digitization of the competence documentation. We will continue the work with ensuring a common corporate culture in 2022 hoping that the easing in Covid-19 regulations will allow the planned physical gatherings for all employees during the fall to proceed as planned. The wellbeing of our employees is important to us, and we will continue the preventive initiatives we started in 2021 regarding drug and alcohol abuse, gaming and mental health issues. The collaboration with the Centre for Management for the implementation of the middle management program will be carried out with gatherings throughout 2022, and the work on content and digitalization of the Frøy internal education program will be started in 2022 and is planned to be completed in 2023. We will ensure that the middle management program will incorpo- rate the training in the following areas: Ethical guidelines Anti-corruption policy Guidelines for discrimination Policy for drug and alcohol abuse and gaming Strategy for mental health FRØY ASA | ANNUAL REPORT 2021 49 The goal is also to determine a start-up date for Frøy ’s talent development program during 2022. In 2022 Frøy plan to take delivery of the well- boat MS Gåsø Odin and continue to invest in the vessel MS Veidnes that is scheduled for delivery during 2023. Both vessels will be built with battery packages and diesel electric propulsion. MS Veidnes will be built with a DC plant that may reduce the total energy con- sumption with up to 8% and a heat recovery system from cooling water and exhaust. In the service segment Frøy will plan to deliv- ery of 6 new vessels in 2022. 4 of the vessels will be installed with diesel electric or diesel hybrid propulsion systems. In addition, the company will invest in 2 large service vessels that are scheduled for delivery in 2023. The vessels will be equipped with diesel-electric propulsion systems and extra-large battery packages of 1,000 kilowatts which will greatly reduce emissions and diesel consumption compared to conventional diesel systems. In 2022 Frøy will continue all our initiatives where we are contributing to local growth and development. We will participate at both the “Blue innovation Camp” and the “Bridgehead Conference” in 2022 to stim- ulate pupils to take an interest to the blue industry and help us solve our future prob- lems with sustainability at mind, and to seek opportunities to cooperate with higher level students in future student assignments. As a part of the ongoing development of an overall sustainability strategy Frøy will also strengthen and bring together the com- pany ’s innovation processes to ensure that necessary means are taken to nd good sustainable solutions to the issues we meet in our day-to-day line of work. END NOTES (i) Source: https://www.newscientist.com/ article/2290068-food-production-emis- sions-make-up-more-than-a-third-of- global-total/ (ii) To the Norwegian Food Safety Authority (iii) Use of 2 washing robots at the same time in the net (iv) Missing substrate data from 2 large service boats and 1 smaller service boat, so the gure represents 94% of emissions from service vessels and 100% of emissions from wellboats and freighters (v) Hydropower generated (vi) CO2 factor for electrical power: 8 grams CO2e/kWh (nve.no) (vii) Diesel electrical with battery pack (viii) Diesel electrical adapted for retrotting battery pack (ix) Owned or leased by Frøy (x) Selective catalytic reduction: Using a catalyst to convert NOX to N2 and H2O. (xi) Rate of recordable work-related injuries = [Number of recordable work-related injuries/Number of hours worked]x1.000.000 (xii) Rate of high-consequence work-related injuries = [Number of high-conse- quence work-related injuries (excluding fatalities)/Number of hours worked] x1.000.000 High-consequence injuries: Serious injuries that either led to hospitaliza- tion or absence > 16 weeks, or injuries that with a minor change in circum- stances could have resulted in serious injury. (xiii) Including apprentices (xiv) The employee level is based on a weight of criteria within competence, responsibility, and working conditions and eorts related to the position: Level 1: CEO, Operating Directors Level 2: Group Managers, Sta Func- tions, Operational Coordina- tors, Ocers (Machine/Bridge), Vessel Managers Level 3: Deck personnel with and with- out a certicate Level 4: Cadets and apprentices (xv) The big salary gap can be explained by the fact that there is a larger portion of men that are cadets in this positions level vs. the proportion of women who are apprentices, and cadets generally have a higher salary than apprentices (xvi) Including corporate managers for sta functions (xvii) Substitutes as a result of absence, or apprentices/cadets, who are on a time-limited training agreement (xviii) «Robust Fish Cage Net Analysis utilizing Advanced Computer Vision Tech- niques» and «Localization of defects in aquaculture sh cages». FRØY ASA | ANNUAL REPORT 202150 CORPORATE GOVERNANCE This chapter provides an overview of the manner in which Frøy ASA (“Frøy” or the “Company”) complies the Norwegian Code of Practice for Corporate Governance of 2021 (“NUES”), as well as the information which Frøy is required to provide under the Norwegian Accounting Act Section 3.3b. Deviations from the Norwegian Code of Practice for Corporate Governance In the assessment of the board of directors (the “Board”), Frøy has the following devia- tions from NUES: The general meeting is chaired by the chairperson of the Board, which con- stitutes a deviation from NUES section 6, last bullet point. It is the opinion of Frøy that the chairperson of the Board is deemed to be most well informed of the Company ’s activities and is therefore best suited to chair the general meeting. 3. EQUITY AND DIVIDEND In the opinion of the Board, Frøy ’s equity capital is appropriate to the Company ’s objectives, strategy and risk prole. The Board’s ambition is that the Company shareholders will achieve a competitive return on their investment over time through a combination of dividends and an appreciation of the value of the company ’s shares. The Board has dened the following long-term dividend policy: The Company has an intention to pay out minimum 50% of net prot as dividend, pro- vided that the Company ’s nancial gearing, at a fully-invested basis, is at or below the targeted debt level of NIBD/EBITDA 3.5x. In calculating the NIBD/EBITDA on a fully invested basis, the Company will take into account any debt and full year earnings from potential new builds. In its dividend pro- posal, the Board will also take into account future liquidity requirements. The Board may obtain authorisation from the general meeting of shareholders to buy back Frøy shares in the market. In such cases, the Board will normally request that the shares are acquired in the open market, and that the authority lasts no longer than until the next general meeting. When the general meeting of shareholders considers whether or not to authorise the Board to carry out share capital increases for dierent purposes, the specic purpose must be considered separately by the meet- ing. Such authorisation will be limited in time and will last no longer than until the date of the next general meeting. Authorisation granted to the Board is restricted to specic purposes. See also item 4. 1. STATEMENT OF CORPORATE GOVERNANCE Frøy complies with the Norwegian Code of Practice for Corporate Governance for the nancial year 2021 with such deviations as set out herein. 2. FRØY ’S BUSINESS Frøy is a Norwegian provider of busi- ness-critical aquaculture services. Frøy assists sh farmers with maintaining ecient day-to-day farming operations at sea. The service of Frøy includes transpor- tation of sh, sorting, counting, cleaning, treatment, inspection, installation and main- tenance of sites. Frøy ’s team includes 733 specialised aqua service professionals and 13 local oces along the Norwegian coast. The eet is modern and well invested and consists of wellboats, service and transport vessels. Frøy has a management and organ- isation with seafood sector background and proven aqua service track record. Frøy is positioned as the largest fully integrated provider of competence and infrastructure services to the Norwegian aquaculture industry. The key services provided by Frøy are: a) Installation and maintenance of sh farming sites b) Safe and ecient transportation of smolt and feed c) Sorting, counting and bio- logical treatment of salmon, and d) Harvest and transport of sh. The Company ’s objectives, as stated in its articles of association, [is to own shares in companies within sheries and aquaculture services, as well as anything related to the foregoing, including business and develop- ment assistance activities. The Company may also participate in other companies through share ownership or in other ways.]. The Board evaluates the Company ’s objectives, strategies and risk prole at least annually and reports on these matter in the Board report. FRØY ASA | ANNUAL REPORT 2021 51 The Company has implemented guidelines to ensure that the members of the Board and executive personnel shall notify the Board if they have any material direct or indirect interest in any transaction entered into by the Company. Sales of shares to employees in Norway may be conducted at a discount to market prices. See also item 6. Contact between the Board and the inves- tors is normally conducted via the man- agement. Under special circumstances the Board, represented by the chairperson, may conduct dialogue directly with investors. 5. FREELY NEGOTIABLE SHARES The shares of Frøy are in the process of being listed on the Oslo Børs and are freely tradable. There is no form of restriction on negotiability included in the Company ’s articles of association. The Board is not aware of any agreements which may secure any shareholder benecial rights to own or trade shares at the expense of other shareholders. The shares of Frøy are registered in the Nor- wegian Central Securities Depository (VPS). 6. GENERAL MEETING OF SHAREHOLDERS Notice of a general meeting of shareholders with supporting information is normally published on www.froygruppen.no more than 21 days in advance, and is sent to the shareholders at least 21 days before the meeting is held. Up to the next annual general meeting, the Company can call for an extraordinary general meeting with two weeks’ notice, provided that the sharehold- ers can participate electronically. Notice of a general meeting of shareholders provides information on the procedures which shareholders must observe in order to participate in and vote at the meetings. Such notice also details: 4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES Frøy has one share class. Each share in the Company carries one vote, and all shares carry equal rights, including the right to participate in general meetings. The Company emphasises that the interests of the shareholders is advanced and that all shareholders, in accordance with the requirements of the Norwegian Securities Trading Act, is treated on an equal basis, unless there is a factual and legal basis for discrimination. Should it be necessary to waive the pre-emption rights of existing shareholders when increasing the share capital, such waiver must be justied by the common interest of the Company and the shareholders and explained by the Board in a separate stock exchange notice. Transac- tions involving own shares are normally exe- cuted on Oslo Børs. Buybacks of own shares will ordinarily be carried out at prevailing market prices. Shareholders who are registered in the Norwegian Central Securities Depository (VPS) may vote in person or by proxy at the general meeting of shareholders. Invitations are sent to the shareholders or to the bank/ broker where the shareholder’s securities account is held. Any transaction which is not immaterial between the Company and any shareholder, Board member, leading employees or any closely related party of such persons should be examined by an external third party before they are entered into. This does not apply for any agreement approved by the Board according to the Norwegian Public Limited Companies Act. Independent valu- ations should also be arranged in respect of transactions between companies in the same Group where any of the companies involved have minority shareholders. the procedure for representation by proxy, including the use of a form of proxy the right of shareholders to propose res- olutions for consideration by the general meeting of shareholders the website where the notice of the meeting and other supporting docu- ments will be made available The following information is available at www.froygruppen.no: information on the right of shareholders to propose matters for consideration by the general meeting of shareholders how to make proposals for resolutions for consideration by the general meeting or how to comment on matters for which no resolution is proposed form of proxy Our aim is that proposals for resolutions and supporting information that are distrib- uted are suciently detailed and compre- hensive to enable shareholders to reach decisions on the matters to be considered at the meeting. The notication deadline for shareholders wishing to attend the general meeting of shareholders is maximum ve days prior to the meeting. The notication deadline may be extended or shortened, and will in all cases be evident from the notice of the general meeting. In accordance with the Company ’s articles of association, share- holders that do not provide a notication of attendance to the general meeting within the deadline are not entitled to vote over matters raised in the general meeting. FRØY ASA | ANNUAL REPORT 202152 In general, only shareholders registered in the VPS are entitled to voting rights. Bene- cial owners of shares that are registered in the name of a nominee, are generally not entitled to vote under Norwegian law, nor is any person who is designated in the VPS register as the holder of such Shares as nominees. Although there are varying opinions as to the interpretation of the right to vote on nominee registered shares, the Company maintains that if shares are registered in the VPS through a nominee on a nominee account, cf. Section 4-10 of the Norwegian Public Limited Companies Act, and the benecial owner wishes to attend and vote at a general meeting, in person or by proxy, the benecial owner must provide written conrmation from the nominee that he or she is the real shareholder, as well as declaration from the benecial owner themselves, that they are the rightful owner of such shares. If such documentation cannot be provided, shares registered in a nominee account must be re-registered in the Norwegian Central Securities Depository (VPS) and be registered in the VPS on the fth working day before the general meeting of share- holders in order to obtain voting rights. Shareholders who are unable to attend in person may vote by proxy. Frøy will nominate a person who will be available to vote on behalf of shareholders as their proxy or facilitate that each shareholder can nominate a person to vote on behalf of the shareholder as their personal proxy. The Company shall facilitate that the general meeting of shareholders votes for each can- didate nominated for election to the Com- pany ’s Board and nomination committee. The Nomination Committee shall prepare for the general meeting of the sharehold- ers appointment of shareholder-elected Board members. The recommendations of the Nomination Committee shall include details on the candidates’ background and independence. The Nomination Committee ensures that due attention is paid to the interests of the shareholder community and the Company ’s requirements for competence, capacity and diversity. The Nomination Committee also takes account of relevant statutory require- ments regarding the composition of the Company ’s governing bodies. According to its mandate, the Nomination Committee shall be receptive to external views and shall ensure that any deadlines for proposals regarding members of the Nomination Committee and the Board are published well in advance on the Company ’s website. In carrying out its duties the Nom- ination Committee should actively maintain contact with the shareholder community and should ensure that its recommenda- tions are anchored with major shareholders. The Company aims to appoint members to the Nomination Committee who are independent of Frøy ’s Board, chief executive ocer and other executive management sta. 8. BOARD: COMPOSITION AND INDEPENDENCE Ivar Sigmund Williksen is a signicant share- holder in NTS ASA, and is not independent from the Company ’s main shareholder. The remaining board members are consid- ered as independent. To the extent possible, the form of proxy will facilitate separate voting instructions for each matter to be considered by the meeting and for each of the candidates nominated for election. It is possible to vote electronically in advance. The general meeting of shareholders is chaired by the chairperson of the Board. This is a deviation from the NUES, but it is in the opinion of Frøy that the chairperson of the Board is deemed to be most well informed of the Company ’s activities and is therefore best suited to chair the general meeting. The chairperson of the Board, minimum one nomination committee repre- sentative, and the CEO, and the auditor shall attend the general meeting. 7. NOMINATION COMMITTEE In accordance with Frøy ’s articles of associa- tion, the Company has appointed a Nomina- tion Committee. This Nomination Committee is comprised of minimum two members, maximum four who are either shareholders or shareholder representatives. The Nomi- nation Committee’s chairperson and mem- bers are appointed by the general meeting of shareholders. If the chairperson resigns as member of the Nomination Committee during the electoral period, the Nomination Committee shall elect among its members a new chairperson for the remainder of the new chairperson’s electoral period. The guidelines for the Nomination Com- mittee have been approved by the general meeting of shareholders, which also deter- mines the remuneration of the Nomination Committee. All shareholders may propose candidates for the Nomination Committee at any time. In order to be considered at the next ordinary election, proposals must be submitted by the end of November in the year before the election year. FRØY ASA | ANNUAL REPORT 2021 53 monitoring and reviewing the annual and interim nancial reporting, assessing the performance of internal control and external auditors and overseeing legal and regulatory compliance; taking deci- sions, endorsing decisions or authorising decisions to be taken, as appropriate, in matters that are of an unusual nature or of importance to the Company; and assessing the eectiveness of the Company ’s policies on ethics, conicts of interest and compliance with competition law. The Board has established procedures for its own work and that of the Company ’s management, with particular emphasis on clear internal division of responsibilities whereby the board has responsibility for supervising and administrating the Com- pany, and the Company ’s management has responsibility for the general operation of the group. Frøy ’s Board of directors’ instruction con- tains guidelines for, among other things, how conicts of interests that may arise should be dealt with. The instruction applies to all Board members of Frøy. If the chairperson of the Board is or has been actively involved in a given case, for example in negotiations on mergers, acqui- sitions etc. and another board director will normally lead discussions concerning that particular case. The Board conducts an annual self-assess- ment of its work, competence and coop- eration with management and a separate assessment of the chairperson of the Board. In addition, the Audit Committee performs a self-assessment. The assessment results are submitted to the Nomination Committee, which in turn assesses the Board’s composi- tion and competence. The majority of the members of the Board and members of the Board committees are independent of the Company ’s executive management and material business relation- ships. The nomination committee aims to achieve a board composition whereby the members complement each other professionally and the Board is able to function as a corporate body. 9. THE WORK OF THE BOARD The Board endeavours to schedule in advance a number of regular [physical] meetings to be held during the calendar year, minimum four meetings per year, depending on the level of activity of the Company. Interim meetings may be con- vened if a director, or the administration, so requires. The Board meetings are chaired by the Chairman unless otherwise agreed by a majority of the directors attending. If the Chairman is not present or cannot lead the meeting, the meeting will be chaired by a board member elected by and among the directors present. The work of the Board includes, without limitation: identifying and establishing the Com- pany ’s overriding goals, objectives and strategies, including approval and endorsement of plans and budgets; determining policies, monitoring and supervising the day-to-day management of the Company and the business carried out by the Company; ensuring that the business of the Com- pany, the accounts and the manage- ment of the assets of the Company are subject to adequate supervision and are conducted in accordance with applicable legislation; 10. AUDIT COMMITTEE In connection with the IPO in 2021, Frøy established an Audit Committee. The Audit Committee had 3 members, Dagnn Elis- assen, Anne-Soe Utne and Hege Veiseth. Eliassen and Utne were not considered independent of the main shareholder of the Company and Utne were not independent from the executive management either cf. section 8. Veiseth was considered inde- pendent and had together with Utne the required accounting competence. On March 23 2022 an extraordinary general meeting of the Company elected a new Board of Directors, where Utne and Eliassen were no longer Board members. Frøy will elect new members of the audit committee to replace Utne and Eliassen. In the opinion of the Board, the Audit Com- mittee met the Norwegian requirements regarding independence and competence. The Board will also seek to meet the requirements regarding independence and competence for the new amended Audit Committee. The Audit Committee shall function as an advisory and preparatory working commit- tee to the Board. The Audit Committee shall (a) inform the Board of the results of the audit, and explain how the audit process impacted upon the Company ’s accounting reports and their integrity, as well as inform on the Audit Committee’s role in terms of preparation of the accounting reports; (b) prepare the Board’s follow-up of the process with accounting reporting; (c) monitor and supervise the Company ’s systems for internal control and risk management; (d) regularly be in contact with the Company ’s auditor regarding audit of the annual accounts; (e) supervise and review the auditor’s independence and (f) prepare for the Company ’s election of its auditor, and provide a recommendation in this respect. FRØY ASA | ANNUAL REPORT 202154 11. RISK MANAGEMENT AND INTERNAL CONTROLS The Board ensures that the Company has sound internal controls and appropriate risk management systems through, for example, an annual review of the key risk areas and the Company ’s internal controls. Internal audit corporate reports directly to the Board, but is for administrative purposes placed under the purview of the chief nan- cial ocer. Frøy ’s internal control system includes all parts of our corporate directives, HSE and corporate social responsibility requirements. 12. REMUNERATION OF THE BOARD The board directors elected by the share- holders perform no duties for the Company other than their board duties. Remuneration is determined by the general meeting of the shareholders, based on the recommendation of the Nomination Committee. The Nomination Committee rec- ommends compensation with the intention that it should reect the board’s responsi- bility, competence and time commitment as well as the Company ’s complexity and global activities compared with the general level of directors’ fees in Norway. Remuneration of the Board is based neither on performance nor on shares or share options. The remuneration of the directors are dis- closed in the notes to the annual accounts. If directors receive other compensation from the Company on an exceptional basis, detailed information will be provided in the nancial statement. 14. INFORMATION AND COMMUNICATION Frøy has established guidelines for the Com- pany ’s reporting of nancial and extra-- nancial information based on transparency and with regard to the requirement of equal treatment of all parties in the securities market. This also pertains to contact with shareholders outside of the general meeting of shareholders. Shareholder information is available at www. froygruppen.no. The nancial statements and annual report are sent free of charge to shareholders on request. Notice of general meeting of shareholders is sent directly to shareholders with known addresses unless they have consented to receive these docu- ments electronically. All information sent to the shareholders is made available at [www. froygruppen.no] when distributed. Presen- tation of the quarterly reports as well as the annual shareholder meeting are simultane- ously broadcasted through web casts. All relevant information is sent to Oslo Børs electronically for public storage. 15. TAKEOVERS In the event of a take-over bid being made for the Company, the Board will follow the overriding principle of equal treatment for all shareholders, and will seek to ensure that the Company ’s business activities are not disrupted unnecessarily. The Board will strive to ensure that shareholders are given sucient information and time to form a view of the oer. The Corporate Governance Policy provides that the Board shall not seek to prevent or obstruct takeover bids for the Company ’s activities or shares, unless there are partic- ular reasons for such actions. In the event of a takeover bid for the shares in the Com- pany, the Board shall not exercise mandates 13. REMUNERATION OF THE EXECUTIVE MANAGEMENT The Board has established guidelines for remuneration of members of the executive management, including the CEO, other members of the management and employ- ees who are members of the Board. The guidelines are binding for the Board. The Board can only deviate from the guide- lines under special circumstances. The guidelines shall be approved by the ordinary general meeting of the sharehold- ers at least every fourth year and in any event if a signicant change to the guide- lines. The current guidelines were approved by the extraordinary general meeting in 2021. The guidelines for determining remunera- tion of the executive management are based on the main principles for Frøy ’s remuner- ation policy, which is that Frøy shall pay its employees a total compensation package that is competitive, but not among the high- est, and in line with good industry standards locally. Where appropriate, compensation packages should also include a perfor- mance-based component, and the basic salary should reect individual performance. The guidelines are also intended to contrib- ute to long-term value creation for the Com- pany ’s shareholders. A ceiling has been set on performance-based compensation. The Company is in the process of establishing a share-based long-term incentive program. In addition, the Company shall prepare a report on salaries and remuneration to the management. This report shall be presented at the ordinary general meeting of the shareholders for an advisory vote. The report shall contain a comprehensive overview of paid and outstanding salaries and remuneration to the management. The report shall be published on the webpages of Frøy. The Board has established a remu- neration committee. FRØY ASA | ANNUAL REPORT 2021 55 In the event of a take-over bid, the Board will obtain a valuation from an independent expert. The valuation should include an explanation, and should be made public no later than at the time of the public disclosure of the board statement, or the independent statement mentioned above. If any member of the Board or the management, or close associates of such persons, or anyone who has recently held such a position, is either the bidder or has a similar particular inter- est in the bid, the Board shall in any case arrange an independent valuation. This shall also apply if the bidder is a major share- holder in the Company. Any such valuation should be either attached to the Board’s statement, be reproduced in the statement or be referred to in the statement. Any agreement with the bidder that acts to limit the Company ’s ability to arrange other bids for the Company ’s shares should only be entered into where it is self-evident that such an agreement is in the common interest of the Company and the sharehold- ers. The same applies to any agreement on payment of nancial compensation to the bidder if the bid does not proceed. Any nancial compensation should be limited to the costs the bidder has incurred in making the bid. 16. AUDITOR The auditor participates in Board meetings for approval of the annual accounts. The Company ’s auditor shall present an annual plan for its audit work to the audit committee. The external auditor shall participate in relevant agenda points at all meetings of the audit committee. In addition, the auditor shall present a review of the Company ’s internal control procedures, with identication of weak- nesses and proposals for improvement. The Board shall at least yearly have a meeting with the auditor without presence of corpo- rate management. or pass any resolutions with the intention of obstructing the takeover bid unless this it believes that the interests of the Company and the shareholders justify such actions. The Board will not execute mandates or pass any resolutions with the intention of obstructing any take-over bid unless this is approved by the general meeting following the announcement of the bid. Any trans- action that is in eect a disposal of the Company ’s activities will be submitted to the general meeting for its approval. During the course of a takeover process, the Board will use their best eorts to ensure that all the shareholders of the Company are treated equally. The Board shall also use its best eorts to ensure that sucient information to assess the takeover bid is provided to the shareholders. Pursuant to the Norwegian Securities Trad- ing Act, any person who through acquisition becomes the holder of shares representing more than one-third of the voting rights in the capital of the Company is obliged to make an unconditional oer at a fair price for the purchase of the balance of the issued shares in the capital of the Company. The mandatory oer must be made within four weeks after the threshold was passed. If an oer is made for the shares in the Company, the Board shall issue a statement evaluating the oer and make a recommendation as to whether the shareholders should accept the oer. If the Board nds itself unable to provide such a recommendation, it shall explain the background. The Board’s state- ment on a bid shall make clear whether the views expressed are unanimous, and if this is not the case, it shall explain the basis on which members of the Board have excluded themselves from the Board’s statement. Compensation of the auditor for auditing and other services is presented to the ordi- nary general meeting of the shareholders and is included in the notes to the annual accounts note 5. The Board continuously evaluates the need for written guidelines concerning the executive management use of the auditor for other services than the audit. The Board nds that the auditor’s independence of the Company ’s executive management is ensured. The auditor shall give a yearly written conrmation stating the auditor’s independence. The Board shall establish guidelines in respect of the use of the auditor by the Company ’s Executive Management for ser- vices other than the audit. Frøy places importance on independence and has clear guidelines regarding the use of services from external auditors. All use of services from an external auditor, includ- ing non-audit services, is subject to prior approval as dened by the audit committee. FRØY ASA | ANNUAL REPORT 202156 We work for gender equality and against discrimination related to gender, preg- nancy, parental leave at birth or adoption, caretaking tasks, ethnicity, religion, beliefs, disability, sexual orientation, gender iden- tity and gender expression, and combina- tions of these foundations This report includes all the companies in the Frøy ASA group. The Group has a line/ sta organization, where the sta functions in Frøy ASA serve all Frøy ’s companies. The work we describe below apply to all Frøy ’s companies. PART 1: GENDER EQUALITY Position levels and salary In the calculation of wage dierences, we have assessed xed pay and various addi- tions, bonuses and benets for the 2021 nancial year. We have also considered equal work and work of equal value in the design of the position levels. The design of the position levels is based on existing job categories in the company and an assess- ment of which positions are included in the dierent levels. Involuntary part-time There are very few part-time employees in our companies. As such the potential issue with number of involuntary part-time employees is regarded to be very limited. Findings from the survey Of Frøy ’s 9 companies, it is only the parent company, Frøy ASA, that has a proportion of women large enough to highlight wage dierences. For Frøy ASA the survey shows that women have a xed salary that on aver- age accounts for about 83% of men’s xed salary. The dierence is partly due to the fact that there is a relatively large proportion of women in accounting functions where the salary on average is lower than in other positions in Frøy ASA. In the other companies in the Group, the proportion of women is so low that it is not possible to publish ndings from the survey in an anonymized manner. At least 5 of each gender is required at the position/group level. As wages are regulated by collective agreements in these companies, there is lit- tle room for discrimination between women and men. The proportion of women in Frøy overall is 5 % as of 31.12.2021. In the operating companies that have employees at sea the number is 2-4%. The low number of female employees at sea is considered to be a result of a combination of several factors, EQUALITY STATEMENT Number of employees in Frøy as at 31.12.21. (gures from the payroll mapping/payroll system) Total Proportion Temporary permanent Company Women Men of women Total employees employees Frøy Akvaressurs 5 137 4% 142 19 123 Frøy Nord 1 60 2% 61 16 45 Frøy Akvaservice 5 127 4% 132 22 110 Frøy Vest 2 89 2% 91 10 81 Service total 13 413 426 67 359 Frøy Rederi 2 93 2% 95 3 92 Norsk Fisketransport 5 174 3% 179 2 177 Fisketransport - 11 0% 11 4 7 Wellboat total 7 278 285 9 276 Frøy Shipping 1 57 2% 58 5 53 Shipping total 1 57 58 5 53 Frøy ASA 17 28 38% 45 0 45 TOTAL 38 776 5% 814 81 733 The table shows an overview of the proportion of women in the Group, by company, as well as the number of temporary employees/substitutes. FRØY ASA | ANNUAL REPORT 2021 57 including culture/tradition, working hours and shift work. In Frøy ASA, the share of female employees is 38%. Frøy ASA’s board of directors consists of 5 members, of whom 2 board members are women. The Board of Directors is aware of the company ’s gender equality obligations In Frøy ’s management team, which consists of 14 employees, there are 7 women. Frøy ASA has a female CEO. There are few employees in part-time positions in Frøy ’s companies. About 10% of all employees as of 31.12.21 are temporary employees. These are substitutes as a result of absence, or apprentices/cadets, who are on a time-limited training agreement. The average number of weeks of parental leave in 2021 is 9.4 weeks for men and 28 weeks for women. PART 2: FRØY ’S WORK FOR GENDER EQUALITY AND AGAINST DISCRIMINATION Description of Frøy ’s principles, proce- dures and standards Our gender equality work is rooted in Frøy ’s strategies, tools and guidelines. In 2021, Frøy has prepared guidelines for dealing with discrimination. In 2021, Frøy has developed a routine for dealing with sexual harassment. Frøy has developed internal routines for whistle blowing Frøy ’s considerations with regards to equality and non-discrimination are further reected in Frøy ’s general personnel policy. The structure of gender equality work in Frøy Frøy ’s HR/stang department (crew dept.), shall ensure that managers at all levels take care of Frøy ’s gender equality work, as well as provide advice and guidance related to this. The department holds weekly meetings, and works with both prevention and possibly incidents related to this topic. The department works directly with all Frøy’s companies in general, and more specically with an internal work distribution against each company. The department is headed by Director of Maritime Stang, who is also a regular member of the Frøy ’s management team. The Director of HR/ Administration is also actively part of the group, and a participant in the Frøy ’s management team. The Director of Maritime Stang con- ducts meetings with union representa- tives, where , among other things, gender equality is the topic. Every two weeks, management meetings are held, where gender equality work is up for discussion if necessary. The crew department’s sta regularly attend meetings with operations man- agers in the various companies where recruitment and employee follow-up are topics. Frøy ’s work to investigate discrimination risks and barriers to equality Frøy ’s guidelines in the various personnel policy areas have been reviewed and improved during 2021. Mapping of gender equality and wage conditions has been carried out for 2021 Gender equality and non-discrimination have been addressed at several depart- mental meetings throughout the year, as well as in meetings with operations managers in the various companies. Description of risks In Frøy, the vast majority of our employees work shift work at sea. This means that work is being performed at the vessels for 2, 3 or 4 weeks continuously (some variations on shifts), with corresponding free periods. This makes it possible to combine working life and family life in the form of longer free periods. On the other hand, it is dicult to facilitate shorter days, or reduced work week, as a result of the shift work. Neverthe- less, there are good opportunities to take parental leave in line with regulations. To commence service on board Frøy ’s vessels, you need to have a valid medical certicate. This means that there is little room for facilitation for disabled people in our sea-related jobs. No survey of ethnicity, religion and beliefs has been carried out among our employees. In the wage survey, we found some dier- ence between women’s and men’s wages. This shows a risk of discrimination in our wage policy. For employees at sea, wages are regulated by collective agreements, minimizing the risk of discrimination between women and men. Shipping supplements, which are negotiated in local negotiations, are based on positions and are not individual. For employees of Frøy ASA, there are no collective agreements regulating wages. As Frøy currently consists of several merged companies, there is some dierence in pay in equal positions. Eorts are being made to put in place a more detailed wage policy for administrative positions, to smooth dierences in positions with equal work, and prevent future discrimination FRØY ASA | ANNUAL REPORT 202158 Possible causes of risks and hazards Shift work can be a reason for the low number of women among sea employees A lack of guidelines for wage determina- tion for onshore employees. Although we have guidelines against harassment and discrimination, too few people may have sucient knowledge of these. Norwegian as a working language on our vessels can be an obstacle to a diverse workplace, especially for foreign job seekers. It is a risk that have a challenge with culture, attitudes and the jargon in the workplace. Description of actions In 2021, Frøy has reviewed guidelines and routine descriptions creating the basis for attitude and competence building. Awareness is continuously being made when designing job advertisements in order to ensure that image use and choice of words should not be discrim- inatory. We also require diversity and non-discriminatory/professional recruit- ment processes when using recruitment agencies. We have arranged for the use of home oces for our onshore employees, and we have a high degree of exibility for this group in order to more easily com- bine work with family life. Measures we plan in the year ahead We will be active at education fairs etc. for students and work particularly actively to attract female apprentices and cadets. We will focus on putting the same team/ shift on board our vessels that make it more attractive to women, for example by having more than one woman on the same team/shift. We will work actively to have female employees at all levels of the organiza- tion, and through this ensure good role models for young newly qualied women. An employee survey will be carried out for all employees during 2022, in collabo- ration with Senter for Ledelse. In 2022, a management program for the middle management level in Frøy will be implemented, in collaboration with Senter for Ledelse. Here, among other things, work on recruitment and corpo- rate culture will be central topics. Frøy ’s culture and desired attitudes from its employees to be claried in Frøy ’s onboarding routines. The result of the measures Frøy has had positive feedback from female applicants after job advertise- ments in its onshore operations. Visibility and participation in training institutions have increased interest and increased the number of applications to our apprenticeships. FRØY ASA | ANNUAL REPORT 2021 59 FRØY ASA | ANNUAL REPORT 202160 CONTENT FRØY GROUP 2021 FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income 61 Consolidated Statement of Financial Position 62 Consolidated Statement of Cash Flows 64 Consolidated Statement of Changes in Equity 65 Notes to the Financial Statements 66 1.1 Signicant accounting policies 66 2.1 Operating Segments 68 2.2 Revenue 71 2.3 Other income 73 2.4 Other expenses and Inventory 73 2.5 Employee benet expenses 74 2.6 Other operating expenses 75 2.7 Trade and other receivables 76 2.8 Trade payables and other current liabilities 77 3.1 Property, vessels and equipment 78 3.2 Goodwill 79 3.3 Right-of-use assets and lease liabilities 80 3.4 Impairment considerations 82 4.1 Overview of nancial instruments 84 4.2 Interest-bearing liabilities 86 4.3 Ageing of nancial liabilities 87 4.4 Cash and cash equivalents 88 4.5 Financial income and expenses 88 4.6 Fair value measurement 89 4.7 Capital management and nancial risk 90 4.8 Share capital and shareholder information 92 4.9 Earnings per share 93 4.10 Derivative nancial instruments 94 5.1 Taxes 95 6.1 Consolidated entities 97 6.2 Business combinations 99 6.3 Associated entities 102 7.1 Remuneration to Management and the Board 104 7.2 Related party transactions 105 7.3 Subsequent events 106 7.4 Dened benet plans 106 8.1 Changes in IFRS and new standards 107 FRØY ASA | ANNUAL REPORT 2021 61 06.12.2019 Amounts in NOK thousands Note 2021 - 31.12.2020 Revenue 2.2 1 695 789 1 327 920 Other income 2.3 90 777 4 530 Total revenue 1 786 566 1 332 450 Direct expenses (goods/services delivered) 2.4 287 211 193 551 Employee benet expenses 2.5 499 830 375 796 Other operating expenses 2.6 307 975 248 735 Depreciation 3.1, 3.3 313 793 224 133 Operating prot 377 758 290 235 Financial income 4.5 7 737 2 662 Financial expenses 4.5 -89 292 -68 214 Gain/loss on shares at fair value 4.5 25 604 Share of prot (loss) from associates 6.3 3 341 766 Prot (loss) before tax 299 544 251 054 Taxes 5.1 -15 991 -21 029 Prot (loss) for the period 283 553 230 025 Prot or loss for the period attributable to: Equity holders of the parent 283 553 191 347 Non-controlling interests 38 678 Total 283 553 230 025 Earnings per share Basic, prot for the year attributable to ordinary equity holders of the parent (NOK) 4.9 4.27 106.93 Diluted, prot for the year attributable to ordinary equity holders of the parent (NOK) 4.9 4.27 106.93 Other comprehensive income Net gain (loss) on cash ow hedges 4.10 11 595 -13 921 Total comprehensive income for the period 295 148 216 104 Total comprehensive income for the period attributable to: Equity holders of the parent 295 148 177 426 Non-controlling interests 38 678 Total 295 148 216 104 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FINANCIAL STATEMENTS - FRØY GROUP FRØY ASA | ANNUAL REPORT 202162 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December Amounts in NOK thousands Note 2021 2020 ASSETS Non-current assets Goodwill and other intangible assets 3.2 687 612 687 361 Property, vessel and equipment 3.1 5 447 138 3 617 546 Right-of-use assets 3.3 455 410 536 414 Pension assets 2.5 586 7 531 Investments in associates 6.3 28 053 24 712 Other nancial assets 4.1 16 464 4 830 Total non-current assets 6 635 262 4 878 394 Current assets Inventory 2.4 11 488 8 193 Trade receivables 2.7 187 908 156 176 Other receivables 2.7 83 706 49 078 Cash and cash equivalents 4.4 738 462 148 811 Total current assets 1 021 564 362 258 TOTAL ASSETS 7 656 827 5 240 653 FRØY ASA | ANNUAL REPORT 2021 63 Amounts in NOK thousands Note 2021 2020 EQUITY AND LIABILITIES Equity Paid-in equity Share capital 4.8 86 350 69 955 Share premium 4.8 2 289 751 1 328 578 Total paid-in equity 2 376 101 1 398 533 Other equity 809 880 547 311 Non-controlling interests 6.1 - 25 567 Total equity 3 185 981 1 971 411 Liabilities Non-current liabilities Non-current interest-bearing liabilities 4.1, 4.2, 4.3, 4.7 3 370 397 1 831 656 Non-current lease liabilities 3.3 269 423 371 571 Deferred tax liabilities 5.1 40 528 22 516 Total non-current liabilities 3 680 349 2 225 742 Current liabilities Current interest-bearing liabilities 4.1, 4.2, 4.3, 4.7 474 259 648 675 Current lease liabilities 3.3 92 918 103 493 Subordinated loan related parties 7.2 985 Trade payables and other current liabilities 2.8 223 259 281 721 Taxes payable 5.1 61 8 625 Total current liabilities 790 497 1 043 500 Total liabilities 4 470 846 3 269 242 TOTAL EQUITY AND LIABILITIES 7 656 827 5 240 653 Frøya, 7 April 2022 Board of Directors Frøy ASA Svein Sivertsen Chairman Paul Birger Torgnes Board Member Ivar Sigmund Williksen Board Member Hege Veiseth Board Member Linda Johnsen Board Member Tonje Foss Chief Executive Ocer FRØY ASA | ANNUAL REPORT 202164 CONSOLIDATED STATEMENT OF CASH FLOWS 06.12.2019 Amounts in NOK thousands Note 2021 - 31.12.2020 Cash ows from operating activities Prot or loss before tax 299 544 251 054 Income taxes paid 5.1 -8 625 -11 203 Gain/loss on disposal of property, vessels and equipment 2.3 -90 777 4 530 Gain/loss on disposal of nancial assets 4.5 -26 250 Depreciation and impairment 3.1, 3.3 313 793 224 133 Pension cost without cash eect 7.4 Finance income 4.5 -7 737 -28 267 Finance expenses 4.5 89 292 68 214 Changes in inventories, trade receivables, trade payables and other current liabilities 2.4, 2.7, 2.8 -96 660 139 827 Net cash ows from operating activities 498 830 622 038 Cash ows from investing activities Purchase of property, plant and equipment 3.1 -2 089 528 -440 213 Purchase of intangible assets 3.2 -250 Purchase of nancial assets 4.1 -62 -1 800 Acquisition of a subsidiary, net of cash acquired 6.2 55 253 Proceeds from sale of property, vessels and equipment 162 349 38 901 Dividends Interest received 4.5 6 535 465 Net cash ow from investing activities -1 920 956 -347 393 Cash ow from nancing activities Proceeds from borrowings 4.3 2 488 785 323 168 Repayment of borrowings 4.3 -1 124 460 -173 965 Issue of Share Capital 4.8 1 000 000 Transactions cost 4.8 -22 433 Acquisition of non-controlling interest 6.1 -86 000 -58 500 Payments for the principal portion of the lease liability 4.3 -131 914 -98 324 Interest paid 4.5 -81 555 -68 214 Payments of dividends 4.8 -30 646 -50 000 Net cash ow from nancing activities 2 011 778 -125 834 Net change in cash and cash equivalents 589 652 148 811 Eect of change in exchange rate on cash and cash equivalents 4.5 Cash and cash equivalents, beginning of period 4.4 148 811 Cash and cash equivalents, end of period 738 462 148 811 The consolidated statements of cash ows are prepared using the indirect method. Acquisition of non-controlling interest have been restated from investing activities to nancing activities. FRØY ASA | ANNUAL REPORT 2021 65 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to the equity holders of the parent Net gain Total (loss) on Non con- Share Share paid-in Retained cash ow Other trolling Total Amounts in NOK thousands Note capital premium equity earnings hedges equity interest equity Equity as at 01.01.2021 69 955 1 328 578 1 398 533 563 096 -15 786 547 310 25 568 1 971 411 Prot or loss for the period - 283 553 283 553 283 553 Other comprehensive income - 11 595 11 595 11 595 Total comprehensive income - - - 283 553 11 595 295 148 - 295 148 Acquisition of non-controlling interests - -2 578 -2 578 -24 922 -27 500 Issue of Share Capital 4.8 16 395 983 605 1 000 000 - 1 000 000 Transaction cost -22 433 -22 433 - -22 433 Group Contribution - -30 000 -30 000 -30 000 Dividends paid to minority in subsidiary - - -646 -646 Equity as at 31.12.2021 86 350 2 289 751 2 376 101 814 071 -4 191 809 880 - 3 185 981 Attributable to the equity holders of the parent Net gain Total (loss) on Non con- Share Share paid-in Retained cash ow Other trolling Total Amounts in NOK thousands Note capital premium equity earnings hedges equity interest equity At 06 December 2019 30 - 30 - - - 30 Prot or loss for the period - 191 347 191 347 38 678 230 025 Other comprehensive income - -13 921 -13 921 -13 921 Total comprehensive income - - - 191 347 -13 921 177 426 38 678 216 104 Acquisition of a subsidiary 6.2 69 925 1 328 578 1 398 503 378 156 -1 865 376 291 23 297 1 798 091 Acquisition of non-controlling interests 6.2 - - 68 421 68 421 Acquisition of non-controlling interests 6.1 - -12 818 -12 818 -104 182 -117 000 Dividends paid to minority in subsidiary - - -646 -646 Tax eect of group contribution 5.1 - 6 411 6 411 6 411 At 31 December 2020 69 955 1 328 578 1 398 533 563 096 -15 786 547 310 25 568 1 971 411 FRØY ASA | ANNUAL REPORT 202166 NOTES TO THE FINANCIAL STATEMENTS 1.1 General information and significant accounting policies Corporate information Frøy ASA and its subsidiaries (collectively "the Group", or "the Frøy Group") is a Euronext listed company at the Oslo Stock Exchange, and one of the leading providers of services to the Norwegian fish-farming industry. The Group operates a fleet of vessels which it uses to serve its clients, primarely along the Norwegian coastline. The consolidated financial statements of the Group for 2021 were authorised for issue in accordance with a resolution of the Board of Directors on 7 April 2022. Frøy ASA is incorporated in Norway with headquarters in Sistranda, Frøya. The address of its registered office is Siholmveien 34, 7260 Sistranda, Norway. Frøy ASA was renamed from Frøygruppen AS. The name change was registered in the Company Register on 3 March 2021. Basis of preparation The consolidated financial statements of the Group comprise consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity, and related notes. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by The European Union ("EU"). The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value through P&L or OCI (note 4.1). Further, the financial statements are prepared based on the going concern assumption. All figures are presented in NOK thousands (000), except when otherwise indicated. Presentation currency and functional currency The consolidated financial statements are presented in Norwegian Kroner (NOK), which is also the functional currency of the parent company. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. Financial statement period As the Group was established at 6 December 2019, the Group prepared its first set of financial statements covering the period 6 December 2019 to 31 December 2020 as allowed by Norwegian Accounting Act §1-7. This set of financial statements represents the comparative period for the 2021 financial statements. Page 6 1.1 SIGNIFICANT ACCOUNTING POLICIES FRØY ASA | ANNUAL REPORT 2021 67 1.1 General information and significant accounting policies (Continued) Other accounting policies: Current versus non-current classification The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is: Expected to be realised or intended to be sold or consumed in the normal operating cycle, Held primarily for the purpose of trading, Expected to be realised within twelve months after the reporting period, or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: It is expected to be settled in the normal operating cycle, It is held primarily for the purpose of trading, It is due to be settled within twelve months after the reporting period, or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. Significant accounting judgements, estimates and assumptions The preparation of the consolidated financial statements in accordance with IFRS and applying the chosen accounting policies requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. The accounting policies applied by management which includes a significant degree of estimates and assumptions or judgements that may have the most significant effect on the amounts recognised in the financial statements, are summarised below: Estimates and assumptions: Useful lives and methods of depreciation considerations of property, vessels and equipment (note 3.1) Impairment considerations of property, vessels and equipment and goodwill (note 3.4) The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. A detailed description of the significant estimates and assumptions are included in the individual note where applicable. Accounting judgements: A detailed description of the significant accounting judgements are included in the individual note where applicable. The group's loan agreements contain financial and non-financial covenant clauses, including cross default clauses. The assessment of whether the Group meets the requirements for classifying its borrowings as non-current requires signficant judgement by management. See note 4.2 for further information. Covid-19 Effects The Frøy Group is a part of the seafood industry and has carefully monitored the development of Covid-19, and how the pandemic has affected the industry throughout the year. It is challenging to determine the actual effects from Covid-19. The Group notes that there may be a certain impact on factors like changes in demand, access to workforce and credit risk. The main risks related to Covid-19 for the Group are linked to operations of vessels and safety procedures for the employees. Th is could potentially lead to increased costs related to testing, increased personnel expenses related to overtime, and delays in the deliveries of equipment and spare parts. More specifically, a Covid-19 outbreak on one vessel could result in lost revenues if the vessel was to be isolated and is unable to operate for a certain period of time. By the end of 2021, virtually all covid-related restrictions have been lifted in the areas in which the Group operates, so hence pandemic now has very small impact on day-to-day operations. However, the Group is continuously evaluating the situation, and clear procedures related to Covid-19 has been implemented following instructions as provided by the central and local government agencies. Furthermore, the Group constantly assesses the counterpart risk of its customers and subcontractors. The Group’s customers for the most part comprise of large and well-established companies where the credit risk is assessed to be low. During 2021 the Group has noted no material Covid- 19 effects and no provisions or impairments have been recorded. Page 7 1.1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FRØY ASA | ANNUAL REPORT 202168 2.1 OPERATING SEGMENTS 2.1 Operating Segments Wellboat Service Sea transport Elimination and non-allocated 2021 Revenues from external customers - Contract revenue 509 700 338 500 56 100 904 300 Framework agreements 56 600 294 200 7 400 358 200 Spot 113 900 85 723 66 100 1 766 267 489 Fuel and other reinvoiced costs 143 700 20 500 1 600 165 800 Other 52 100 35 677 3 000 90 777 Total revenues 876 000 774 600 134 200 1 766 1 786 566 Depreciation 149 502 139 050 19 630 5 611 313 793 Operating costs 481 820 503 151 95 282 14 763 1 095 015 Operating profit 244 678 132 399 19 288 -18 607 377 758 Financial income 749 2 182 697 4 110 7 737 Financial expenses 48 272 24 936 9 765 6 318 89 292 Share of profit (loss) from associates (note 6.3) 2 548 793 3 341 Earnings before tax 197 154 109 644 12 768 -20 023 299 544 Tax 155 15 838 11 15 991 Net income 196 999 93 806 12 758 -20 023 283 553 ACCOUNTING POLICIES An operating segment is a component of an entity: a) that engages in business activities from which it may earn revenues and incur expenses b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and c) for which discrete financial information is available. The operating segments represent the business units for which the chief operating decision maker monitors the operating resul ts of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The Group operates within three main segments; wellboats, service and sea transport. Wellboat The wellboat segment is characterised by contracts ranging from five to eight year fixed term TC contracts with salmon farmers. The wellboats are mainly utilized for transportation of live fish and de-licing of fish in the breeding cages. As of 31 December 2021, the Group had 16 wellboats in operations including one vessel under a lease agreement. In addidition, the Group has two vessels under construction scheduled for delivery in 2022 and 2023. Service The Group has 49 service vessels in operation, and five service vessels under construction scheduled to be delivered during 2022. The service vessels operate under TC contracts, bareboat contracts, frame agreements and in the spot market. The share of the fleet that operates under the different contract structures varies over time. As of 31 December 2021, 17 vessels operated under TC contracts, one vessels operated under bareboat contracts, 31 vessels operated under frame agreements and in the spot market. The service vessels are performing a wide range of operations including diving, inspection, net cleaning and installation of infrastructure. Sea transport In 2021, the sea transportation segment included four vessels engaged in transportation of feed to the salmon facilities and frozen fish. One vessel operated under a TC contract, two operated under frame agreements and one vessel operated in the spot market. In Q4 2021, the smallest and oldest vessel - MS Safir - was sold. The remaining of the Group's activities and business are shown in the "non-allocated & financial" column below. These activities are mainly related to the administrative and financial components of the entity's revenue generating segments. Transactions between the segments are made as a part of the day-to-day operating business under applicable business terms. Group management monitors the segments' operating profit regularly and is using the information to generate analyzes of the different segments' performance as well as making decisions with regards to allocation of resources. Geographical markets In 2021, the Group recognised revenue from customers in the following geographical markets: Norway, UK, Scotland, Russia and Iceland. Information about major customers Three of the Group's external customers amounted to 10% or more of the Group’s total revenues (2020: four). Revenue from thes e customers amounted to MNOK 987 for 2021. Page 8 2.1 Operating Segments Wellboat Service Sea transport Elimination and non-allocated 2021 Revenues from external customers - Contract revenue 509 700 338 500 56 100 904 300 Framework agreements 56 600 294 200 7 400 358 200 Spot 113 900 85 723 66 100 1 766 267 489 Fuel and other reinvoiced costs 143 700 20 500 1 600 165 800 Other 52 100 35 677 3 000 90 777 Total revenues 876 000 774 600 134 200 1 766 1 786 566 Depreciation 149 502 139 050 19 630 5 611 313 793 Operating costs 481 820 503 151 95 282 14 763 1 095 015 Operating profit 244 678 132 399 19 288 -18 607 377 758 Financial income 749 2 182 697 4 110 7 737 Financial expenses 48 272 24 936 9 765 6 318 89 292 Share of profit (loss) from associates (note 6.3) 2 548 793 3 341 Earnings before tax 197 154 109 644 12 768 -20 023 299 544 Tax 155 15 838 11 15 991 Net income 196 999 93 806 12 758 -20 023 283 553 ACCOUNTING POLICIES An operating segment is a component of an entity: a) that engages in business activities from which it may earn revenues and incur expenses b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and c) for which discrete financial information is available. The operating segments represent the business units for which the chief operating decision maker monitors the operating resul ts of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The Group operates within three main segments; wellboats, service and sea transport. Wellboat The wellboat segment is characterised by contracts ranging from five to eight year fixed term TC contracts with salmon farmers. The wellboats are mainly utilized for transportation of live fish and de-licing of fish in the breeding cages. As of 31 December 2021, the Group had 16 wellboats in operations including one vessel under a lease agreement. In addidition, the Group has two vessels under construction scheduled for delivery in 2022 and 2023. Service The Group has 49 service vessels in operation, and five service vessels under construction scheduled to be delivered during 2022. The service vessels operate under TC contracts, bareboat contracts, frame agreements and in the spot market. The share of the fleet that operates under the different contract structures varies over time. As of 31 December 2021, 17 vessels operated under TC contracts, one vessels operated under bareboat contracts, 31 vessels operated under frame agreements and in the spot market. The service vessels are performing a wide range of operations including diving, inspection, net cleaning and installation of infrastructure. Sea transport In 2021, the sea transportation segment included four vessels engaged in transportation of feed to the salmon facilities and frozen fish. One vessel operated under a TC contract, two operated under frame agreements and one vessel operated in the spot market. In Q4 2021, the smallest and oldest vessel - MS Safir - was sold. The remaining of the Group's activities and business are shown in the "non-allocated & financial" column below. These activities are mainly related to the administrative and financial components of the entity's revenue generating segments. Transactions between the segments are made as a part of the day-to-day operating business under applicable business terms. Group management monitors the segments' operating profit regularly and is using the information to generate analyzes of the different segments' performance as well as making decisions with regards to allocation of resources. Geographical markets In 2021, the Group recognised revenue from customers in the following geographical markets: Norway, UK, Scotland, Russia and Iceland. Information about major customers Three of the Group's external customers amounted to 10% or more of the Group’s total revenues (2020: four). Revenue from thes e customers amounted to MNOK 987 for 2021. Page 8 FRØY ASA | ANNUAL REPORT 2021 69 2.1 OPERATING SEGMENTS (CONTINUED) Balance sheet items 31.12.2021 Assets 4 456 845 1 462 594 422 338 1 315 050 7 656 827 Liabilities 3 340 483 1 027 575 303 778 -200 990 4 470 846 Equity 1 116 361 435 019 118 560 1 516 040 3 185 981 Other disclosures Investements in associates (note 6.3) 25 860 2 193 28 053 Capital expenditure 1 735 484 444 654 138 756 6 318 2 325 213 Wellboat Service Sea transport Elimination and non-allocated 2021 Revenue from external customers Norway 809 972 762 517 94 445 1 766 1 668 700 Russia 52 100 52 100 Scotland 21 993 21 993 United Kingdom (excl. Scotland) 9 457 11 634 21 091 Iceland 4 471 12 083 38 16 592 Other 6 091 6 091 Total revenue from external customers 876 000 774 600 134 200 1 766 1 786 566 Wellboat Service Sea transport Elimination and non-allocated 2021 Revenue from major customers Major customer 1 155 391 226 963 4 962 387 317 Major customer 2 251 974 103 690 355 664 Major customer 3 7 197 236 419 243 616 Other customers 461 438 207 528 129 238 1 766 799 970 Total revenue from external customers 876 000 774 600 134 200 1 766 1 786 566 Wellboat Service Sea transport Elimination and non-allocated 06.12.2019-31.12.2020 Revenues from external customers - Contract revenue 405 000 224 200 57 400 686 600 Framework agreements 154 200 154 200 Spot 113 757 160 255 51 382 2 956 328 350 Fuel and other reinvoiced costs 109 200 47 900 1 700 158 800 Other 4 500 4 500 Total revenues 627 957 591 055 110 482 2 956 1 332 450 Depreciation 100 647 107 673 15 021 792 224 925 Operating costs 391 874 340 069 88 777 -2 638 815 444 Operating profit 135 436 143 313 6 685 4 802 290 235 Financial income 614 472 1 055 26 127 28 267 Financial expenses 35 131 23 735 8 995 353 68 214 Share of profit (loss) from associates (note 6.3) 809 -43 766 Earnings before tax 100 919 120 100 -577 30 613 251 054 Tax 27 24 019 8 -3 025 21 029 Net income 100 892 96 081 -585 33 638 230 025 The revenue information above is based on the locations of the customers. Revenue from Russia is in its entirety a sale of an older wellboat Page 9 Balance sheet items 31.12.2021 Assets 4 456 845 1 462 594 422 338 1 315 050 7 656 827 Liabilities 3 340 483 1 027 575 303 778 -200 990 4 470 846 Equity 1 116 361 435 019 118 560 1 516 040 3 185 981 Other disclosures Investements in associates (note 6.3) 25 860 2 193 28 053 Capital expenditure 1 735 484 444 654 138 756 6 318 2 325 213 Wellboat Service Sea transport Elimination and non-allocated 2021 Revenue from external customers Norway 809 972 762 517 94 445 1 766 1 668 700 Russia 52 100 52 100 Scotland 21 993 21 993 United Kingdom (excl. Scotland) 9 457 11 634 21 091 Iceland 4 471 12 083 38 16 592 Other 6 091 6 091 Total revenue from external customers 876 000 774 600 134 200 1 766 1 786 566 Wellboat Service Sea transport Elimination and non-allocated 2021 Revenue from major customers Major customer 1 155 391 226 963 4 962 387 317 Major customer 2 251 974 103 690 355 664 Major customer 3 7 197 236 419 243 616 Other customers 461 438 207 528 129 238 1 766 799 970 Total revenue from external customers 876 000 774 600 134 200 1 766 1 786 566 Wellboat Service Sea transport Elimination and non-allocated 06.12.2019-31.12.2020 Revenues from external customers - Contract revenue 405 000 224 200 57 400 686 600 Framework agreements 154 200 154 200 Spot 113 757 160 255 51 382 2 956 328 350 Fuel and other reinvoiced costs 109 200 47 900 1 700 158 800 Other 4 500 4 500 Total revenues 627 957 591 055 110 482 2 956 1 332 450 Depreciation 100 647 107 673 15 021 792 224 925 Operating costs 391 874 340 069 88 777 -2 638 815 444 Operating profit 135 436 143 313 6 685 4 802 290 235 Financial income 614 472 1 055 26 127 28 267 Financial expenses 35 131 23 735 8 995 353 68 214 Share of profit (loss) from associates (note 6.3) 809 -43 766 Earnings before tax 100 919 120 100 -577 30 613 251 054 Tax 27 24 019 8 -3 025 21 029 Net income 100 892 96 081 -585 33 638 230 025 The revenue information above is based on the locations of the customers. Revenue from Russia is in its entirety a sale of an older wellboat Page 9 FRØY ASA | ANNUAL REPORT 202170 Balance sheet items 31.12.2020 Assets 2 827 458 1 442 339 325 677 645 178 5 240 652 Liabilities 1 886 353 973 811 219 783 189 295 3 269 242 Equity 941 104 468 528 105 895 455 884 1 971 411 Other disclosures Investements in associates (note 6.3) 23 312 1 400 24 712 Capital expenditure 424 191 177 585 103 - 601 879 Wellboat Service Sea transport Elimination and non-allocated 06.12.2019-31.12.2020 Revenue from external customers Norway 608 443 589 549 96 554 3 037 1 297 582 United Kingdom 10 116 - 13 713 - 23 829 Ireland 9 398 - - - 9 398 Iceland - 1 556 85 - 1 641 Total revenue from external customers 627 957 591 105 110 352 3 037 1 332 450 Wellboat Service Sea transport Elimination and non-allocated 06.12.2019-31.12.2020 Revenue from major customers Major customer 1 120 762 200 866 18 321 646 Major customer 2 5 770 175 070 - 180 839 Major customer 3 126 951 65 153 - 192 103 Major customer 4 137 138 - - 137 138 Other customers 237 337 150 017 110 352 3 019 500 724 Total revenue from external customers 627 957 591 105 110 352 3 037 1 332 450 The revenue information above is based on the locations of the customers. Page 10 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.1 OPERATING SEGMENTS (CONTINUED) FRØY ASA | ANNUAL REPORT 2021 71 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.2 REVENUE FRØY ASA | ANNUAL REPORT 202172 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.3 Other income Other income 31.12.2021 06.12.2019 - 31.12.2020 Gain related to sale of PV&E 90 777 4 530 Other - - Total other income 90 777 4 530 ACCOUNTING POLICIES Other income is recognized when control is transferred, where its probable that economic benefits will be controlled by the Group and the consideration can reliably be estimated. Gains or losses that arise from sale of property, vessels and equipment are calculated as the differance between net sales price and the booked value of the asset. Page 12 2.2 REVENUE (CONTINUED) 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.2 Revenue 31.12.2021 06.12.2019 - 31.12.2020 Revenue from contracts from customers 1 206 468 1 008 933 Lease revenues 489 321 318 987 Other 90 777 4 530 Total revenue 1 786 566 1 332 450 Set out below is the disaggregation of the Group’s revenue from contracts with customers: 31.12.2021 06.12.2019 - 31.12.2020 Wellboat 542 207 503 104 Service 570 576 416 536 Sea transport 91 919 89 293 Non-allocated 1 766 Total revenue 1 206 468 1 008 933 31.12.2021 06.12.2019 - 31.12.2020 Geographical markets Norway 1 152 485 987 863 Scotland 16 299 United Kingdom (excl. Scotland) 15 396 10 116 Iceland 16 198 1 556 Ireland 9 398 Other 6 091 Total revenue 1 206 468 1 008 933 Future minimum lease payments (lease revenues) under non-cancellable operating leases as at 31 December are, as follows: 31.12.2021 06.12.2019 - 31.12.2020 Within one year 959 340 680 262 After one year but no more than five years 2 185 295 1 982 900 More than five years 587 761 656 897 Total 3 732 396 3 320 059 Timing of revenue recognition 31.12.2021 06.12.2019 - 31.12.2020 Point in time 267 489 313 864 Services transferred over time 938 979 695 069 Total 1 206 468 1 008 933 Source of revenue The Group has three main sources of revenue consisting of the sale of service vessel capacity, wellboat and sea transport to the fish-farming industry. ACCOUNTING POLICIES General Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is presented net of VAT and variable considerations The Group considers whether there are other contract obligations in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Revenue from wellboats, services and sea transport Revenues from wellboats, service and sea transport are primarily obtained from bareboat and TC-contracts (leasing of vessels and crew). TC contracts are accounted for as operating leases, and the revenue from these contracts are separated into two different elements: lease revenues (IFRS 16) and delivery of services (IFRS 15). Bareboat contracts are accounted as operating leases (IFRS 16). Revenues from rental of service vessels and wellboats (IFRS 16) are recognized on a straight-line basis throughout the lease term. The revenues are recognized from the delivery day of the service vessel until the end of the tenancy. Revenues from sale and delivery of services (in relation to IFRS 15) are recognized over time (as the service is performed), which normally would match the accrual of such income. When allocating the contract consideration between leasing of vessels and sale of other services the Group determines, upon signing of the contract the value of the stand-alone parts included in the delivery of services to the customer. The stand-alone value is the actual price of a good or service the Group would charge the customer if sold separately. The best way of calculating the stand-alone value of the good or service is to observe comparable transactions with comparable customers on a stand-alone basis. Service elements, which primarily consist of services conducted by the crew onboard the vessels, is regulated by IFRS 15 and is considered to be a performance obligation. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract applying the principles in IFRS 16 Leases. Revenues from vessels that operate on spot-agreements are recognised over time (as the service is performed in accordance with rates agreed). Expenses are recognised on an ongoing basis as the principle of "load to discharge" is used. SIGNIFICANT ACCOUNTING JUDGEMENTS For contracts where the Group acts as a lessor, it classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Payment is generally due within 14 days after delivery. Page 11 2.3 Other income Other income 31.12.2021 06.12.2019 - 31.12.2020 Gain related to sale of PV&E 90 777 4 530 Other - - Total other income 90 777 4 530 ACCOUNTING POLICIES Other income is recognized when control is transferred, where its probable that economic benefits will be controlled by the Group and the consideration can reliably be estimated. Gains or losses that arise from sale of property, vessels and equipment are calculated as the differance between net sales price and the booked value of the asset. Page 12 FRØY ASA | ANNUAL REPORT 2021 73 2.3 Other income Other income 31.12.2021 06.12.2019 - 31.12.2020 Gain related to sale of PV&E 90 777 4 530 Other - - Total other income 90 777 4 530 ACCOUNTING POLICIES Other income is recognized when control is transferred, where its probable that economic benefits will be controlled by the Group and the consideration can reliably be estimated. Gains or losses that arise from sale of property, vessels and equipment are calculated as the differance between net sales price and the booked value of the asset. Page 12 2.4 Direct expense and Inventory Direct expenses 31.12.2021 06.12.2019 - 31.12.2020 Marine gas oil 110 984 86 246 Hire of external boat and crew 2 962 25 628 Reimbursable cost by customers, incl fuel and chemicals 165 800 63 845 Other 7 465 17 833 Total direct expenses 287 211 193 551 Inventories 31.12.2021 31.12.2020 Bunkers 7 067 4 439 Spare parts and other equipment 4 422 3 754 Total inventories (gross) 11 488 8 193 Write down of inventories Total inventories at the lower of cost and net realisable value 11 488 8 193 ACCOUNTING POLICIES Inventories are measured at the lower of cost and net realisable value. Purchase cost is allocated using the FIFO method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost of materials are recognized as expenses in the period in which they occur. Page 13 2.3 OTHER INCOME 2.4 OTHER EXPENSES AND INVENTORY 2.4 Direct expense and Inventory Direct expenses 31.12.2021 06.12.2019 - 31.12.2020 Marine gas oil 110 984 86 246 Hire of external boat and crew 2 962 25 628 Reimbursable cost by customers, incl fuel and chemicals 165 800 63 845 Other 7 465 17 833 Total direct expenses 287 211 193 551 Inventories 31.12.2021 31.12.2020 Bunkers 7 067 4 439 Spare parts and other equipment 4 422 3 754 Total inventories (gross) 11 488 8 193 Write down of inventories Total inventories at the lower of cost and net realisable value 11 488 8 193 ACCOUNTING POLICIES Inventories are measured at the lower of cost and net realisable value. Purchase cost is allocated using the FIFO method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost of materials are recognized as expenses in the period in which they occur. Page 13 2.3 Other income Other income 31.12.2021 06.12.2019 - 31.12.2020 Gain related to sale of PV&E 90 777 4 530 Other - - Total other income 90 777 4 530 ACCOUNTING POLICIES Other income is recognized when control is transferred, where its probable that economic benefits will be controlled by the Group and the consideration can reliably be estimated. Gains or losses that arise from sale of property, vessels and equipment are calculated as the differance between net sales price and the booked value of the asset. Page 12 FRØY ASA | ANNUAL REPORT 202174 2.5 Employee benefit expenses Employee benefit expenses 31.12.2021 06.12.2019 - 31.12.2020 Salaries 425 122 317 284 Social security costs 39 895 16 312 Pension costs 18 503 24 527 Other employee expenses 16 311 17 674 Total employee benefit expenses 499 830 375 796 Average number of full time employees (FTEs) 814 768 ACCOUNTING POLICIES Employee benefit expenses comprise of all types of remuneration to personnel employed by the Group (ie. not contracted manpower) and are expensed when incurred. Ordinary salaries can be both fixed pay and hourly wages and are earned and paid periodically. Holiday pay is earned on the basis of ordinary pay and is normally paid in the holiday months of the following year. The employer’s national insurance contribution (social security) is calculated and expensed for all payroll related costs including pensions. Pension contributions are earned on a monthly basis. Government grants related to the net salary scheme Government grants related to the net salary scheme for sailors are recognized as a reduction of salary expenses in the same year as the corresponding employee benefit expenses. Pensions The Group has a defined contribution pension plan for its employees which satisfies the statutory requirements under the Norwegian law on required occupational pension (“lov om obligatorisk tjenestepensjon”). The scheme is a defined contribution plan where contributions are paid to pension insurance plans and charged to the income statement in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations. The Group also had a defined benefit plan until 01.03.2020, for more information see note 7.4. For information on remuneration to key management personnel, see note 7.1. The Group has received government wage support of MNOK 97.509 during 2021 under the net salary scheme (2020: MNOK 85.076 ). At the end of the year, the total pension funds for the Group amounts to NOK 586,000. Page 14 2.6 Other operating expenses Other operating expenses 31.12.2021 06.12.2019 - 31.12.2020 Freight 1 768 1 482 Harbour and cleaning cost 14 948 16 056 Maintenance cost and repairs 163 385 142 011 Travel expenses 36 039 25 221 Consulting expenses and insourcing 30 696 25 744 Marketing expenses 5 748 2 345 Insurance 19 760 16 050 Other 35 630 19 827 Total other operating expenses 307 975 248 735 Auditor related fees 31.12.2021 06.12.2019 - 31.12.2020 Audit fee 2 094 2 100 Audit related services 702 141 Tax advisory services 282 Other advisory services 968 208 Total auditor fees (excl. VAT) 3 764 2 731 ACCOUNTING POLICIES Other operating expenses are recognized as they occur and represent a broad range of operating expenses incurred by the Group in its day-to-day activities. Other operating expenses consist of expenses that are not classified as cost of materials, employee benefit expen ses, depreciation or amortization. The audit fees presented above are related to the Group, including the parent company and subsidiaries. The fees presented ab ove include fees both to the previous auditor, and current auditor. All amounts are excl. VAT. Page 15 2.5 Employee benefit expenses Employee benefit expenses 31.12.2021 06.12.2019 - 31.12.2020 Salaries 425 122 317 284 Social security costs 39 895 16 312 Pension costs 18 503 24 527 Other employee expenses 16 311 17 674 Total employee benefit expenses 499 830 375 796 Average number of full time employees (FTEs) 814 768 ACCOUNTING POLICIES Employee benefit expenses comprise of all types of remuneration to personnel employed by the Group (ie. not contracted manpower) and are expensed when incurred. Ordinary salaries can be both fixed pay and hourly wages and are earned and paid periodically. Holiday pay is earned on the basis of ordinary pay and is normally paid in the holiday months of the following year. The employer’s national insurance contribution (social security) is calculated and expensed for all payroll related costs including pensions. Pension contributions are earned on a monthly basis. Government grants related to the net salary scheme Government grants related to the net salary scheme for sailors are recognized as a reduction of salary expenses in the same year as the corresponding employee benefit expenses. Pensions The Group has a defined contribution pension plan for its employees which satisfies the statutory requirements under the Norwegian law on required occupational pension (“lov om obligatorisk tjenestepensjon”). The scheme is a defined contribution plan where contributions are paid to pension insurance plans and charged to the income statement in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations. The Group also had a defined benefit plan until 01.03.2020, for more information see note 7.4. For information on remuneration to key management personnel, see note 7.1. The Group has received government wage support of MNOK 97.509 during 2021 under the net salary scheme (2020: MNOK 85.076 ). At the end of the year, the total pension funds for the Group amounts to NOK 586,000. Page 14 2.5 Employee benefit expenses Employee benefit expenses 31.12.2021 06.12.2019 - 31.12.2020 Salaries 425 122 317 284 Social security costs 39 895 16 312 Pension costs 18 503 24 527 Other employee expenses 16 311 17 674 Total employee benefit expenses 499 830 375 796 Average number of full time employees (FTEs) 814 768 ACCOUNTING POLICIES Employee benefit expenses comprise of all types of remuneration to personnel employed by the Group (ie. not contracted manpower) and are expensed when incurred. Ordinary salaries can be both fixed pay and hourly wages and are earned and paid periodically. Holiday pay is earned on the basis of ordinary pay and is normally paid in the holiday months of the following year. The employer’s national insurance contribution (social security) is calculated and expensed for all payroll related costs including pensions. Pension contributions are earned on a monthly basis. Government grants related to the net salary scheme Government grants related to the net salary scheme for sailors are recognized as a reduction of salary expenses in the same year as the corresponding employee benefit expenses. Pensions The Group has a defined contribution pension plan for its employees which satisfies the statutory requirements under the Norwegian law on required occupational pension (“lov om obligatorisk tjenestepensjon”). The scheme is a defined contribution plan where contributions are paid to pension insurance plans and charged to the income statement in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations. The Group also had a defined benefit plan until 01.03.2020, for more information see note 7.4. For information on remuneration to key management personnel, see note 7.1. The Group has received government wage support of MNOK 97.509 during 2021 under the net salary scheme (2020: MNOK 85.076 ). At the end of the year, the total pension funds for the Group amounts to NOK 586,000. Page 14 2.5 EMPLOYEE BENEFIT EXPENSES 2.6 Other operating expenses Other operating expenses 31.12.2021 06.12.2019 - 31.12.2020 Freight 1 768 1 482 Harbour and cleaning cost 14 948 16 056 Maintenance cost and repairs 163 385 142 011 Travel expenses 36 039 25 221 Consulting expenses and insourcing 30 696 25 744 Marketing expenses 5 748 2 345 Insurance 19 760 16 050 Other 35 630 19 827 Total other operating expenses 307 975 248 735 Auditor related fees 31.12.2021 06.12.2019 - 31.12.2020 Audit fee 2 094 2 100 Audit related services 702 141 Tax advisory services 282 Other advisory services 968 208 Total auditor fees (excl. VAT) 3 764 2 731 ACCOUNTING POLICIES Other operating expenses are recognized as they occur and represent a broad range of operating expenses incurred by the Group in its day-to-day activities. Other operating expenses consist of expenses that are not classified as cost of materials, employee benefit expen ses, depreciation or amortization. The audit fees presented above are related to the Group, including the parent company and subsidiaries. The fees presented ab ove include fees both to the previous auditor, and current auditor. All amounts are excl. VAT. Page 15 FRØY ASA | ANNUAL REPORT 2021 75 2.5 Employee benefit expenses Employee benefit expenses 31.12.2021 06.12.2019 - 31.12.2020 Salaries 425 122 317 284 Social security costs 39 895 16 312 Pension costs 18 503 24 527 Other employee expenses 16 311 17 674 Total employee benefit expenses 499 830 375 796 Average number of full time employees (FTEs) 814 768 ACCOUNTING POLICIES Employee benefit expenses comprise of all types of remuneration to personnel employed by the Group (ie. not contracted manpower) and are expensed when incurred. Ordinary salaries can be both fixed pay and hourly wages and are earned and paid periodically. Holiday pay is earned on the basis of ordinary pay and is normally paid in the holiday months of the following year. The employer’s national insurance contribution (social security) is calculated and expensed for all payroll related costs including pensions. Pension contributions are earned on a monthly basis. Government grants related to the net salary scheme Government grants related to the net salary scheme for sailors are recognized as a reduction of salary expenses in the same year as the corresponding employee benefit expenses. Pensions The Group has a defined contribution pension plan for its employees which satisfies the statutory requirements under the Norwegian law on required occupational pension (“lov om obligatorisk tjenestepensjon”). The scheme is a defined contribution plan where contributions are paid to pension insurance plans and charged to the income statement in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations. The Group also had a defined benefit plan until 01.03.2020, for more information see note 7.4. For information on remuneration to key management personnel, see note 7.1. The Group has received government wage support of MNOK 97.509 during 2021 under the net salary scheme (2020: MNOK 85.076 ). At the end of the year, the total pension funds for the Group amounts to NOK 586,000. Page 14 2.6 Other operating expenses Other operating expenses 31.12.2021 06.12.2019 - 31.12.2020 Freight 1 768 1 482 Harbour and cleaning cost 14 948 16 056 Maintenance cost and repairs 163 385 142 011 Travel expenses 36 039 25 221 Consulting expenses and insourcing 30 696 25 744 Marketing expenses 5 748 2 345 Insurance 19 760 16 050 Other 35 630 19 827 Total other operating expenses 307 975 248 735 Auditor related fees 31.12.2021 06.12.2019 - 31.12.2020 Audit fee 2 094 2 100 Audit related services 702 141 Tax advisory services 282 Other advisory services 968 208 Total auditor fees (excl. VAT) 3 764 2 731 ACCOUNTING POLICIES Other operating expenses are recognized as they occur and represent a broad range of operating expenses incurred by the Group in its day-to-day activities. Other operating expenses consist of expenses that are not classified as cost of materials, employee benefit expen ses, depreciation or amortization. The audit fees presented above are related to the Group, including the parent company and subsidiaries. The fees presented ab ove include fees both to the previous auditor, and current auditor. All amounts are excl. VAT. Page 15 2.6 OTHER OPERATING EXPENSES 2.6 Other operating expenses Other operating expenses 31.12.2021 06.12.2019 - 31.12.2020 Freight 1 768 1 482 Harbour and cleaning cost 14 948 16 056 Maintenance cost and repairs 163 385 142 011 Travel expenses 36 039 25 221 Consulting expenses and insourcing 30 696 25 744 Marketing expenses 5 748 2 345 Insurance 19 760 16 050 Other 35 630 19 827 Total other operating expenses 307 975 248 735 Auditor related fees 31.12.2021 06.12.2019 - 31.12.2020 Audit fee 2 094 2 100 Audit related services 702 141 Tax advisory services 282 Other advisory services 968 208 Total auditor fees (excl. VAT) 3 764 2 731 ACCOUNTING POLICIES Other operating expenses are recognized as they occur and represent a broad range of operating expenses incurred by the Group in its day-to-day activities. Other operating expenses consist of expenses that are not classified as cost of materials, employee benefit expen ses, depreciation or amortization. The audit fees presented above are related to the Group, including the parent company and subsidiaries. The fees presented ab ove include fees both to the previous auditor, and current auditor. All amounts are excl. VAT. Page 15 2.6 Other operating expenses Other operating expenses 31.12.2021 06.12.2019 - 31.12.2020 Freight 1 768 1 482 Harbour and cleaning cost 14 948 16 056 Maintenance cost and repairs 163 385 142 011 Travel expenses 36 039 25 221 Consulting expenses and insourcing 30 696 25 744 Marketing expenses 5 748 2 345 Insurance 19 760 16 050 Other 35 630 19 827 Total other operating expenses 307 975 248 735 Auditor related fees 31.12.2021 06.12.2019 - 31.12.2020 Audit fee 2 094 2 100 Audit related services 702 141 Tax advisory services 282 Other advisory services 968 208 Total auditor fees (excl. VAT) 3 764 2 731 ACCOUNTING POLICIES Other operating expenses are recognized as they occur and represent a broad range of operating expenses incurred by the Group in its day-to-day activities. Other operating expenses consist of expenses that are not classified as cost of materials, employee benefit expen ses, depreciation or amortization. The audit fees presented above are related to the Group, including the parent company and subsidiaries. The fees presented ab ove include fees both to the previous auditor, and current auditor. All amounts are excl. VAT. Page 15 FRØY ASA | ANNUAL REPORT 202176 2.7 Trade and other receivables Trade receivables 31.12.2021 31.12.2020 Trade receivables from revenue contracts with customers at nominal value - external 187 978 156 176 Total trade receivables (gross) 187 978 156 176 Allowance for expected credit losses -70 Total trade receivables (net) 187 908 156 176 Other receivables 31.12.2021 31.12.2020 Prepaid rent and other expenses 29 833 15 896 Receivable government wage support 16 382 12 414 Other receivables related parties (note 7.2) 398 Other 37 491 20 370 Total other receivables (net) 83 706 49 078 Allowance for expected credit losses Financial instrument 31.12.2021 31.12.2020 At the beginning of the period Financial asset at amortized cost Provision for expected credit losses Financial asset at amortized cost -70 At the end of the period Financial asset at amortized cost -70 - 31.12.2021 Contract assets Current < 30 days 31-60 days 61 - 90 days over 90 days Total Trade receivables 131 217 46 535 6 711 1 772 1 674 187 908 31.12.2020 Contract assets Current < 30 days 31-60 days 61 - 90 days over 90 days Total Trade Receivables 134 147 17 586 4 350 123 -31 156 175 Trade receivables Days past due Trade receivables Days past due ACCOUNTING POLICIES Trade and other receivables Trade receivables are assets that, at initial recognition should be valued at their transaction price. Trade and other receivables are subject to impairment by recognizing an allowance for Expected Credit Losses (ECLs). For details regarding the Group's accounting polici es and procedures on managing credit risk (including ECLs), reference is made to note 4.7. The information about ECLs on the Group’s trade receivables is disclosed below . The credit risk of financial assets has not increased significantly from initial recognition. Set out below is the information about the credit risk exposure on the Group's trade reveivables: Page 16 2.8 Trade payables and other current liabilities Trade payables and other current liabilities 31.12.2021 31.12.2020 Trade payables - external 110 731 134 378 Payroll tax, VAT payable and social security 70 004 58 635 Seller credit purchase of shares in subsidiary - 58 500 Other current liabilities 42 524 30 208 Trade payables and other current liabilities 223 259 281 721 ACCOUNTING POLICIES Trade payables and other current liabilities are present contractual obligations arising from a result of past events where settlement is expected to result in an outflow of resources (payment). Trade payables and other current liabilities are measured at fair value of their transaction price upon initial recognition and subsequently at amortized cost. Trade payables and other current liabilities are expected to be settled within the normal operating cycle within twelve months after the reporting period. Trade payables and other current liabilities are non-interest bearing on general due dates between 10-40 days. For an overview of the term date of trade payables and other current liabilities see note 4.3. Page 17 2.7 TRADE AND OTHER RECEIVABLES FRØY ASA | ANNUAL REPORT 2021 77 2.8 Trade payables and other current liabilities Trade payables and other current liabilities 31.12.2021 31.12.2020 Trade payables - external 110 731 134 378 Payroll tax, VAT payable and social security 70 004 58 635 Seller credit purchase of shares in subsidiary - 58 500 Other current liabilities 42 524 30 208 Trade payables and other current liabilities 223 259 281 721 ACCOUNTING POLICIES Trade payables and other current liabilities are present contractual obligations arising from a result of past events where settlement is expected to result in an outflow of resources (payment). Trade payables and other current liabilities are measured at fair value of their transaction price upon initial recognition and subsequently at amortized cost. Trade payables and other current liabilities are expected to be settled within the normal operating cycle within twelve months after the reporting period. Trade payables and other current liabilities are non-interest bearing on general due dates between 10-40 days. For an overview of the term date of trade payables and other current liabilities see note 4.3. Page 17 2.8 TRADE PAYABLES AND OTHER CURRENT LIABILITIES 2.8 Trade payables and other current liabilities Trade payables and other current liabilities 31.12.2021 31.12.2020 Trade payables - external 110 731 134 378 Payroll tax, VAT payable and social security 70 004 58 635 Seller credit purchase of shares in subsidiary - 58 500 Other current liabilities 42 524 30 208 Trade payables and other current liabilities 223 259 281 721 ACCOUNTING POLICIES Trade payables and other current liabilities are present contractual obligations arising from a result of past events where settlement is expected to result in an outflow of resources (payment). Trade payables and other current liabilities are measured at fair value of their transaction price upon initial recognition and subsequently at amortized cost. Trade payables and other current liabilities are expected to be settled within the normal operating cycle within twelve months after the reporting period. Trade payables and other current liabilities are non-interest bearing on general due dates between 10-40 days. For an overview of the term date of trade payables and other current liabilities see note 4.3. Page 17 FRØY ASA | ANNUAL REPORT 202178 3.1 PROPERTY, VESSELS AND EQUIPMENT 3.1 Property, vessels and equipment Wellboats Service vessels Sea Transport Periodic Maintenance Land and buildings Other machines and equipment Total Acquisition cost 01.01.2021 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 710 Additions 1 675 983 275 156 128 866 11 229 238 27 171 2 118 643 Disposals -47 801 -10 984 -58 785 Acquisition cost 31.12.2021 4 418 654 842 045 402 327 44 658 24 016 108 866 5 840 567 Accumulated depreciation and impairment 01.01.2021 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Depreciation for the period 134 631 35 140 19 462 6 321 1 776 32 936 230 266 Accumulated depreciation and impairment 31.12.2021 223 944 66 194 33 125 14 330 2 877 52 959 393 430 Carrying amount PV&E 31.12.2021 4 194 710 775 851 369 202 30 328 21 140 55 907 5 447 138 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Wellboats Service vessels Sea Transport Periodic Maintenance Land and buildings Other machines and equipment Total Acquisition cost 06.12.2019 - - - - - - - Additions 308 379 115 240 -1 251 10 586 646 6 613 440 213 Additions from acquisitions (note 6.2) 2 482 093 459 441 295 070 30 011 23 132 79 840 3 369 587 Disposals - -7 791 -9 373 -7 169 - -4 757 -29 090 Acquisition cost 31.12.2020 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 710 Accumulated depreciation and impairment 06.12.2019 - - - - - - - Depreciation for the period 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Accumulated depreciation and impairment 31.12.2020 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Carrying amount PV&E 31.12.2020 2 701 159 535 835 270 782 25 420 22 678 61 672 3 617 546 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Straight-line method Straight-line method ACCOUNTING POLICIES Property, vessels and equipment ("PV&E") is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the PV&E and borrowing costs for similar construction projects if they meet the recognition criteria. The gain or loss arising from the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset. When significant parts of PV&E are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in profit or loss as incurred. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives and methods of depreciation of PV&E are reviewed at each financial year end and adjusted prospectively, if appropriate. Ships are decomposed into vessels and periodic maintenance and vessels are depreciated on a straight-line basis over the defined useful life. The depreciation period is 16-25 years for wellboats, 10-20 years for service vessels, 15-25 years for sea transport vessels, 20 years for buildings, 3-5 years for other machines and equipment. Periodic maintenance is depreciated over the period until the next maintenance, usually 5 years. Periodic maintance only applies for owned vessels. No impairments of property, plant and equipment were made in 2021. For the Group's principles related to impairment of property, plant and equipment, see note 3.4. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The economic life of vessels and other property and equipment, as well as the carrying amounts and depreciation of periodic mantenance for vessels, are based on estimates by management. Uncertainty in the use of accounting principles are primarily related to the determination of economic life of vessels and other property and equipment. Page 18 3.2 Goodwill and other intangible assets Trade Marks Goodwill Total Acquisition cost 01.01.2021 - 687 361 687 361 Additions 250 250 Acquisition cost 31.12.2021 250 687 361 687 612 Impairment for the period - - Accumulated impairment 01.01.2021 - - - Amortization for the period - - Impairment for the period - - Accumulated impairment 31.12.2021 - - - Carrying amount 01.01.2021 - 687 361 687 361 Carrying amount 31.12.2021 250 687 361 687 612 Goodwill Total Acquisition cost 06.12.2019 - - Additions through acquisitions (note 6.2) 687 361 687 361 Acquisition cost 31.12.2020 687 361 687 361 Accumulated impairment 06.12.2019 - - Impairment for the period - - Accumulated impairment 31.12.2020 - - Carrying amount 06.12.2019 - - Carrying amount 31.12.2020 687 361 687 361 ACCOUNTING POLICIES Nature of the Group's intangible assets The Group's intangible assets comprise of goodwill and trade marks. Goodwill Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s ca sh-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment The value of goodwill is primarily related to synergies, assembled workforce and their competency. Goodwill also arises due to the requirement to recognise deferred tax liabilities for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combination. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. For the Group's principles related to impairment of goodwill, see note 3.4. Page 19 3.1 Property, vessels and equipment Wellboats Service vessels Sea Transport Periodic Maintenance Land and buildings Other machines and equipment Total Acquisition cost 01.01.2021 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 710 Additions 1 675 983 275 156 128 866 11 229 238 27 171 2 118 643 Disposals -47 801 -10 984 -58 785 Acquisition cost 31.12.2021 4 418 654 842 045 402 327 44 658 24 016 108 866 5 840 567 Accumulated depreciation and impairment 01.01.2021 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Depreciation for the period 134 631 35 140 19 462 6 321 1 776 32 936 230 266 Accumulated depreciation and impairment 31.12.2021 223 944 66 194 33 125 14 330 2 877 52 959 393 430 Carrying amount PV&E 31.12.2021 4 194 710 775 851 369 202 30 328 21 140 55 907 5 447 138 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Wellboats Service vessels Sea Transport Periodic Maintenance Land and buildings Other machines and equipment Total Acquisition cost 06.12.2019 - - - - - - - Additions 308 379 115 240 -1 251 10 586 646 6 613 440 213 Additions from acquisitions (note 6.2) 2 482 093 459 441 295 070 30 011 23 132 79 840 3 369 587 Disposals - -7 791 -9 373 -7 169 - -4 757 -29 090 Acquisition cost 31.12.2020 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 710 Accumulated depreciation and impairment 06.12.2019 - - - - - - - Depreciation for the period 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Accumulated depreciation and impairment 31.12.2020 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Carrying amount PV&E 31.12.2020 2 701 159 535 835 270 782 25 420 22 678 61 672 3 617 546 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Straight-line method Straight-line method ACCOUNTING POLICIES Property, vessels and equipment ("PV&E") is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the PV&E and borrowing costs for similar construction projects if they meet the recognition criteria. The gain or loss arising from the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset. When sig nificant parts of PV&E are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in profit or loss as incurred. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives and methods of depreciation of PV&E are reviewed at each financial year end and adjusted prospectively, if appropriate. Ships are decomposed into vessels and periodic maintenance and vessels are depreciated on a straight-line basis over the defined useful life. The depreciation period is 16-25 years for wellboats, 10-20 years for service vessels, 15-25 years for sea transport vessels, 20 years for buildings, 3-5 years for other machines and equipment. Periodic maintenance is depreciated over the period until the next maintenance, usually 5 years. Periodic maintance only applies for owned vessels. No impairments of property, plant and equipment were made in 2021. For the Group's principles related to impairment of property, plant and equipment, see note 3.4. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The economic life of vessels and other property and equipment, as well as the carrying amounts and depreciation of periodic mantenance for vessels, are based on estimates by management. Uncertainty in the use of accounting principles are primarily related to the determination of economic life of vessels and other property and equipment. Page 18 3.2 Goodwill and other intangible assets Trade Marks Goodwill Total Acquisition cost 01.01.2021 - 687 361 687 361 Additions 250 250 Acquisition cost 31.12.2021 250 687 361 687 612 Impairment for the period - - Accumulated impairment 01.01.2021 - - - Amortization for the period - - Impairment for the period - - Accumulated impairment 31.12.2021 - - - Carrying amount 01.01.2021 - 687 361 687 361 Carrying amount 31.12.2021 250 687 361 687 612 Goodwill Total Acquisition cost 06.12.2019 - - Additions through acquisitions (note 6.2) 687 361 687 361 Acquisition cost 31.12.2020 687 361 687 361 Accumulated impairment 06.12.2019 - - Impairment for the period - - Accumulated impairment 31.12.2020 - - Carrying amount 06.12.2019 - - Carrying amount 31.12.2020 687 361 687 361 ACCOUNTING POLICIES Nature of the Group's intangible assets The Group's intangible assets comprise of goodwill and trade marks. Goodwill Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment The value of goodwill is primarily related to synergies, assembled workforce and their competency. Goodwill also arises due to the requirement to recognise deferred tax liabilities for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combination. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. For the Group's principles related to impairment of goodwill, see note 3.4. Page 19 FRØY ASA | ANNUAL REPORT 2021 79 3.2 GOODWILL 3.1 Property, vessels and equipment Wellboats Service vessels Sea Transport Periodic Maintenance Land and buildings Other machines and equipment Total Acquisition cost 01.01.2021 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 710 Additions 1 675 983 275 156 128 866 11 229 238 27 171 2 118 643 Disposals -47 801 -10 984 -58 785 Acquisition cost 31.12.2021 4 418 654 842 045 402 327 44 658 24 016 108 866 5 840 567 Accumulated depreciation and impairment 01.01.2021 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Depreciation for the period 134 631 35 140 19 462 6 321 1 776 32 936 230 266 Accumulated depreciation and impairment 31.12.2021 223 944 66 194 33 125 14 330 2 877 52 959 393 430 Carrying amount PV&E 31.12.2021 4 194 710 775 851 369 202 30 328 21 140 55 907 5 447 138 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Wellboats Service vessels Sea Transport Periodic Maintenance Land and buildings Other machines and equipment Total Acquisition cost 06.12.2019 - - - - - - - Additions 308 379 115 240 -1 251 10 586 646 6 613 440 213 Additions from acquisitions (note 6.2) 2 482 093 459 441 295 070 30 011 23 132 79 840 3 369 587 Disposals - -7 791 -9 373 -7 169 - -4 757 -29 090 Acquisition cost 31.12.2020 2 790 472 566 889 284 445 33 429 23 778 81 696 3 780 710 Accumulated depreciation and impairment 06.12.2019 - - - - - - - Depreciation for the period 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Accumulated depreciation and impairment 31.12.2020 89 313 31 054 13 663 8 009 1 101 20 023 163 164 Carrying amount PV&E 31.12.2020 2 701 159 535 835 270 782 25 420 22 678 61 672 3 617 546 Economic useful lives 16-25 years 10-20 years 15-25 years 5 years 20 years 3-5 years Depreciation method Straight-line method Straight-line method ACCOUNTING POLICIES Property, vessels and equipment ("PV&E") is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the PV&E and borrowing costs for similar construction projects if they meet the recognition criteria. The gain or loss arising from the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset. When sig nificant parts of PV&E are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in profit or loss as incurred. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives and methods of depreciation of PV&E are reviewed at each financial year end and adjusted prospectively, if appropriate. Ships are decomposed into vessels and periodic maintenance and vessels are depreciated on a straight-line basis over the defined useful life. The depreciation period is 16-25 years for wellboats, 10-20 years for service vessels, 15-25 years for sea transport vessels, 20 years for buildings, 3-5 years for other machines and equipment. Periodic maintenance is depreciated over the period until the next maintenance, usually 5 years. Periodic maintance only applies for owned vessels. No impairments of property, plant and equipment were made in 2021. For the Group's principles related to impairment of property, plant and equipment, see note 3.4. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The economic life of vessels and other property and equipment, as well as the carrying amounts and depreciation of periodic mantenance for vessels, are based on estimates by management. Uncertainty in the use of accounting principles are primarily related to the determination of economic life of vessels and other property and equipment. Page 18 3.2 Goodwill and other intangible assets Trade Marks Goodwill Total Acquisition cost 01.01.2021 - 687 361 687 361 Additions 250 250 Acquisition cost 31.12.2021 250 687 361 687 612 Impairment for the period - - Accumulated impairment 01.01.2021 - - - Amortization for the period - - Impairment for the period - - Accumulated impairment 31.12.2021 - - - Carrying amount 01.01.2021 - 687 361 687 361 Carrying amount 31.12.2021 250 687 361 687 612 Goodwill Total Acquisition cost 06.12.2019 - - Additions through acquisitions (note 6.2) 687 361 687 361 Acquisition cost 31.12.2020 687 361 687 361 Accumulated impairment 06.12.2019 - - Impairment for the period - - Accumulated impairment 31.12.2020 - - Carrying amount 06.12.2019 - - Carrying amount 31.12.2020 687 361 687 361 ACCOUNTING POLICIES Nature of the Group's intangible assets The Group's intangible assets comprise of goodwill and trade marks. Goodwill Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s ca sh-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment The value of goodwill is primarily related to synergies, assembled workforce and their competency. Goodwill also arises due to the requirement to recognise deferred tax liabilities for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combination. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. For the Group's principles related to impairment of goodwill, see note 3.4. Page 19 3.2 Goodwill and other intangible assets Trade Marks Goodwill Total Acquisition cost 01.01.2021 - 687 361 687 361 Additions 250 250 Acquisition cost 31.12.2021 250 687 361 687 612 Impairment for the period - - Accumulated impairment 01.01.2021 - - - Amortization for the period - - Impairment for the period - - Accumulated impairment 31.12.2021 - - - Carrying amount 01.01.2021 - 687 361 687 361 Carrying amount 31.12.2021 250 687 361 687 612 Goodwill Total Acquisition cost 06.12.2019 - - Additions through acquisitions (note 6.2) 687 361 687 361 Acquisition cost 31.12.2020 687 361 687 361 Accumulated impairment 06.12.2019 - - Impairment for the period - - Accumulated impairment 31.12.2020 - - Carrying amount 06.12.2019 - - Carrying amount 31.12.2020 687 361 687 361 ACCOUNTING POLICIES Nature of the Group's intangible assets The Group's intangible assets comprise of goodwill and trade marks. Goodwill Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment The value of goodwill is primarily related to synergies, assembled workforce and their competency. Goodwill also arises due to the requirement to recognise deferred tax liabilities for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combination. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. For the Group's principles related to impairment of goodwill, see note 3.4. Page 19 3.2 Goodwill and other intangible assets Trade Marks Goodwill Total Acquisition cost 01.01.2021 - 687 361 687 361 Additions 250 250 Acquisition cost 31.12.2021 250 687 361 687 612 Impairment for the period - - Accumulated impairment 01.01.2021 - - - Amortization for the period - - Impairment for the period - - Accumulated impairment 31.12.2021 - - - Carrying amount 01.01.2021 - 687 361 687 361 Carrying amount 31.12.2021 250 687 361 687 612 Goodwill Total Acquisition cost 06.12.2019 - - Additions through acquisitions (note 6.2) 687 361 687 361 Acquisition cost 31.12.2020 687 361 687 361 Accumulated impairment 06.12.2019 - - Impairment for the period - - Accumulated impairment 31.12.2020 - - Carrying amount 06.12.2019 - - Carrying amount 31.12.2020 687 361 687 361 ACCOUNTING POLICIES Nature of the Group's intangible assets The Group's intangible assets comprise of goodwill and trade marks. Goodwill Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment The value of goodwill is primarily related to synergies, assembled workforce and their competency. Goodwill also arises due to the requirement to recognise deferred tax liabilities for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combination. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. For the Group's principles related to impairment of goodwill, see note 3.4. Page 19 FRØY ASA | ANNUAL REPORT 202180 3.3 Right-of-use assets and lease liabilities Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 01.01.2021 415 671 16 715 104 028 536 414 Additions 62 808 552 53 918 117 279 Additions from acquisitions (note 6.2) - Depreciations -39 066 -4 832 -39 629 -83 527 Termination of contracts -96 729 -1 358 -98 087 Termination of contracts - gains and losses -16 708 40 -16 669 Carrying amount 31.12.2021 325 976 12 434 116 999 455 410 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line ACCOUNTING POLICIES At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee At the commencement date, the Group recognizes a lease liability and corresponding right-of-use asset for all lease agreements in which the Group is the lessee. Measuring the lease liability The lease liability is initially measured at the present value of the lease payments for the right to use the underlying asset during the lease term that are not paid at the commencement date. The lease term represents the non-cancellable period of the lease, together with periods covered by an option to extend the lease when the Group is reasonably certain to exercise this option, and periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. The lease payments included in the measurement comprise: Fixed lease payments, less any lease incentives received Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect adjustments in lease payments due to an adjustment in and index or rate. Measuring the right-of-use asset The right-of-use asset is initially measured at cost. The cost of the right-of-use asset includes the corresponding amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date and initial direct costs incurred. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses, applying the same p olicies for impairment as for property, vessels and equipment (Note 3.1). The right-of-use asset is depreciated from the commencement date to the earlier of the lease term and the remaining useful life of the right-of-use asset. Depreciation is calculated on a straight-line basis. Maturity of lease liabilities For undiscounted lease liabilities and maturity of cash outflows, see note 4.3 The Group's leased assets The Group leases several assets, mainly ships and vessels. Leases of land and buildings generally have lease terms between 5 and 10 years, vessels have lease terms between 7- 10 years, while motor vehicles and other equipment generally have lease terms between 3 and 7 years. The Group also leases some machinery and equipment that are expensed as incurred as they are either considered short term or of low value, the total expense for these leases amounts to MNOK 7.356 in 2021 (2020: 9.862). The weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the statement of financial position is 3.46% for 2021 (2020: 3.75%). Page 20 3.3 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES 3.3 Right-of-use assets and lease liabilities Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 01.01.2021 415 671 16 715 104 028 536 414 Additions 62 808 552 53 918 117 279 Additions from acquisitions (note 6.2) - Depreciations -39 066 -4 832 -39 629 -83 527 Termination of contracts -96 729 -1 358 -98 087 Termination of contracts - gains and losses -16 708 40 -16 669 Carrying amount 31.12.2021 325 976 12 434 116 999 455 410 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line ACCOUNTING POLICIES At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee At the commencement date, the Group recognizes a lease liability and corresponding right-of-use asset for all lease agreements in which the Group is the lessee. Measuring the lease liability The lease liability is initially measured at the present value of the lease payments for the right to use the underlying asset during the lease term that are not paid at the commencement date. The lease term represents the non-cancellable period of the lease, together with periods covered by an option to extend the lease when the Group is reasonably certain to exercise this option, and periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. The lease payments included in the measurement comprise: Fixed lease payments, less any lease incentives received Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect adjustments in lease payments due to an adjustment in and index or rate. Measuring the right-of-use asset The right-of-use asset is initially measured at cost. The cost of the right -of-use asset includes the corresponding amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date and initial direct costs incurred. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses, applying the same p olicies for impairment as for property, vessels and equipment (Note 3.1). The right-of-use asset is depreciated from the commencement date to the earlier of the lease term and the remaining useful life of the right-of-use asset. Depreciation is calculated on a straight-line basis. Maturity of lease liabilities For undiscounted lease liabilities and maturity of cash outflows, see note 4.3 The Group's leased assets The Group leases several assets, mainly ships and vessels. Leases of land and buildings generally have lease terms between 5 and 10 years, vessels have lease terms between 7- 10 years, while motor vehicles and other equipment generally have lease terms between 3 and 7 years. The Group also leases some machinery and equipment that are expensed as incurred as they are either considered short term or of low value, the total expense for these leases amounts to MNOK 7.356 in 2021 (2020: 9.862). The weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the statement of financial position is 3.46% for 2021 (2020: 3.75%). Page 20 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 06.12.2019 New leases recognised during the period 128 223 New leases recognised during the period from acquisitions (note 6.2) 499 322 Cash payments for the principal portion of the lease liability -98 324 Interest expense on lease liabilities 14 101 Termination of contracts -68 258 Total lease liabilities at 31.12.2020 475 064 Current lease liabilities in the statement of financial position 103 493 Non-current lease liabilities in the statement of financial position 371 571 Total cash outflow during the period -112 425 Lease commitments not included in the lease liabilities Extension and termination options The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the Group’s business needs. Management applies judgement in evaluating whether it is reasonably certain or not to exercise the option to renew or terminate the lease. That is, they considers all relevant factors that create an economic incentive to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. The Group has not included the renewal period for leases of vessles as part of the lease term because management was not reasonably certain to exercise the option to renew the leases. Furthermore, the periods covered by termination options are included as part of the lease term only whenthey are reasonably certain not to be exercised. Purchase options The Group does not have any lease contracts that includes purchase options. Page 22 3.3 Right-of-use assets and lease liabilities Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 01.01.2021 415 671 16 715 104 028 536 414 Additions 62 808 552 53 918 117 279 Additions from acquisitions (note 6.2) - Depreciations -39 066 -4 832 -39 629 -83 527 Termination of contracts -96 729 -1 358 -98 087 Termination of contracts - gains and losses -16 708 40 -16 669 Carrying amount 31.12.2021 325 976 12 434 116 999 455 410 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line ACCOUNTING POLICIES At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee At the commencement date, the Group recognizes a lease liability and corresponding right-of-use asset for all lease agreements in which the Group is the lessee. Measuring the lease liability The lease liability is initially measured at the present value of the lease payments for the right to use the underlying asset during the lease term that are not paid at the commencement date. The lease term represents the non-cancellable period of the lease, together with periods covered by an option to extend the lease when the Group is reasonably certain to exercise this option, and periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. The lease payments included in the measurement comprise: Fixed lease payments, less any lease incentives received Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect adjustments in lease payments due to an adjustment in and index or rate. Measuring the right-of-use asset The right-of-use asset is initially measured at cost. The cost of the right -of-use asset includes the corresponding amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date and initial direct costs incurred. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses, applying the same p olicies for impairment as for property, vessels and equipment (Note 3.1). The right-of-use asset is depreciated from the commencement date to the earlier of the lease term and the remaining useful life of the right-of-use asset. Depreciation is calculated on a straight-line basis. Maturity of lease liabilities For undiscounted lease liabilities and maturity of cash outflows, see note 4.3 The Group's leased assets The Group leases several assets, mainly ships and vessels. Leases of land and buildings generally have lease terms between 5 and 10 years, vessels have lease terms between 7- 10 years, while motor vehicles and other equipment generally have lease terms between 3 and 7 years. The Group also leases some machinery and equipment that are expensed as incurred as they are either considered short term or of low value, the total expense for these leases amounts to MNOK 7.356 in 2021 (2020: 9.862). The weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the statement of financial position is 3.46% for 2021 (2020: 3.75%). Page 20 FRØY ASA | ANNUAL REPORT 2021 81 3.3 Right-of-use assets and lease liabilities Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 01.01.2021 415 671 16 715 104 028 536 414 Additions 62 808 552 53 918 117 279 Additions from acquisitions (note 6.2) - Depreciations -39 066 -4 832 -39 629 -83 527 Termination of contracts -96 729 -1 358 -98 087 Termination of contracts - gains and losses -16 708 40 -16 669 Carrying amount 31.12.2021 325 976 12 434 116 999 455 410 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line ACCOUNTING POLICIES At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee At the commencement date, the Group recognizes a lease liability and corresponding right-of-use asset for all lease agreements in which the Group is the lessee. Measuring the lease liability The lease liability is initially measured at the present value of the lease payments for the right to use the underlying asset during the lease term that are not paid at the commencement date. The lease term represents the non-cancellable period of the lease, together with periods covered by an option to extend the lease when the Group is reasonably certain to exercise this option, and periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. The lease payments included in the measurement comprise: Fixed lease payments, less any lease incentives received Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect adjustments in lease payments due to an adjustment in and index or rate. Measuring the right-of-use asset The right-of-use asset is initially measured at cost. The cost of the right-of-use asset includes the corresponding amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date and initial direct costs incurred. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses, applying the same p olicies for impairment as for property, vessels and equipment (Note 3.1). The right-of-use asset is depreciated from the commencement date to the earlier of the lease term and the remaining useful life of the right-of-use asset. Depreciation is calculated on a straight-line basis. Maturity of lease liabilities For undiscounted lease liabilities and maturity of cash outflows, see note 4.3 The Group's leased assets The Group leases several assets, mainly ships and vessels. Leases of land and buildings generally have lease terms between 5 and 10 years, vessels have lease terms between 7- 10 years, while motor vehicles and other equipment generally have lease terms between 3 and 7 years. The Group also leases some machinery and equipment that are expensed as incurred as they are either considered short term or of low value, the total expense for these leases amounts to MNOK 7.356 in 2021 (2020: 9.862). The weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the statement of financial position is 3.46% for 2021 (2020: 3.75%). Page 20 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 01.01.2021 475 064 New leases recognised during the period 117 279 New leases recognised during the period from acquisitions (note 6.2) Cash payments for the principal portion of the lease liability -146 082 Interest expense on lease liabilities 14 168 Termination of contracts -98 087 Total lease liabilities at 31.12.2021 362 342 Current lease liabilities in the statement of financial position 92 918 Non-current lease liabilities in the statement of financial position 269 423 Total cash outflow during the period -146 082 Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 06.12.2019 - Additions 72 570 55 652 128 222 Additions from acquisitions (note 6.2) 434 906 21 031 91 313 547 250 Depreciations -33 169 -4 316 -23 484 -60 970 Termination of contracts -49 292 - -18 966 -68 258 Termination of contracts - gains and losses -9 343 -486 -9 830 Carrying amount 31.12.2020 415 671 16 715 104 028 536 414 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line Page 21 3.3 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED) 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 01.01.2021 475 064 New leases recognised during the period 117 279 New leases recognised during the period from acquisitions (note 6.2) Cash payments for the principal portion of the lease liability -146 082 Interest expense on lease liabilities 14 168 Termination of contracts -98 087 Total lease liabilities at 31.12.2021 362 342 Current lease liabilities in the statement of financial position 92 918 Non-current lease liabilities in the statement of financial position 269 423 Total cash outflow during the period -146 082 Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 06.12.2019 - Additions 72 570 55 652 128 222 Additions from acquisitions (note 6.2) 434 906 21 031 91 313 547 250 Depreciations -33 169 -4 316 -23 484 -60 970 Termination of contracts -49 292 - -18 966 -68 258 Termination of contracts - gains and losses -9 343 -486 -9 830 Carrying amount 31.12.2020 415 671 16 715 104 028 536 414 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line Page 21 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 06.12.2019 New leases recognised during the period 128 223 New leases recognised during the period from acquisitions (note 6.2) 499 322 Cash payments for the principal portion of the lease liability -98 324 Interest expense on lease liabilities 14 101 Termination of contracts -68 258 Total lease liabilities at 31.12.2020 475 064 Current lease liabilities in the statement of financial position 103 493 Non-current lease liabilities in the statement of financial position 371 571 Total cash outflow during the period -112 425 Lease commitments not included in the lease liabilities Extension and termination options The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the Group’s business needs. Management applies judgement in evaluating whether it is reasonably certain or not to exercise the option to renew or terminate the lease. That is, they considers all relevant factors that create an economic incentive to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. The Group has not included the renewal period for leases of vessles as part of the lease term because management was not reasonably certain to exercise the option to renew the leases. Furthermore, the periods covered by termination options are included as part of the lease term only when they are reasonably certain not to be exercised. Purchase options The Group does not have any lease contracts that includes purchase options. Page 22 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 06.12.2019 New leases recognised during the period 128 223 New leases recognised during the period from acquisitions (note 6.2) 499 322 Cash payments for the principal portion of the lease liability -98 324 Interest expense on lease liabilities 14 101 Termination of contracts -68 258 Total lease liabilities at 31.12.2020 475 064 Current lease liabilities in the statement of financial position 103 493 Non-current lease liabilities in the statement of financial position 371 571 Total cash outflow during the period -112 425 Lease commitments not included in the lease liabilities Extension and termination options The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the Group’s business needs. Management applies judgement in evaluating whether it is reasonably certain or not to exercise the option to renew or terminate the lease. That is, they considers all relevant factors that create an economic incentive to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. The Group has not included the renewal period for leases of vessles as part of the lease term because management was not reasonably certain to exercise the option to renew the leases. Furthermore, the periods covered by termination options are included as part of the lease term only whenthey are reasonably certain not to be exercised. Purchase options The Group does not have any lease contracts that includes purchase options. Page 22 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 01.01.2021 475 064 New leases recognised during the period 117 279 New leases recognised during the period from acquisitions (note 6.2) Cash payments for the principal portion of the lease liability -146 082 Interest expense on lease liabilities 14 168 Termination of contracts -98 087 Total lease liabilities at 31.12.2021 362 342 Current lease liabilities in the statement of financial position 92 918 Non-current lease liabilities in the statement of financial position 269 423 Total cash outflow during the period -146 082 Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 06.12.2019 - Additions 72 570 55 652 128 222 Additions from acquisitions (note 6.2) 434 906 21 031 91 313 547 250 Depreciations -33 169 -4 316 -23 484 -60 970 Termination of contracts -49 292 - -18 966 -68 258 Termination of contracts - gains and losses -9 343 -486 -9 830 Carrying amount 31.12.2020 415 671 16 715 104 028 536 414 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line Page 21 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 01.01.2021 475 064 New leases recognised during the period 117 279 New leases recognised during the period from acquisitions (note 6.2) Cash payments for the principal portion of the lease liability -146 082 Interest expense on lease liabilities 14 168 Termination of contracts -98 087 Total lease liabilities at 31.12.2021 362 342 Current lease liabilities in the statement of financial position 92 918 Non-current lease liabilities in the statement of financial position 269 423 Total cash outflow during the period -146 082 Right-of-use assets Service vessels Land and buildings Other machines and equipment Total Carrying amount 06.12.2019 - Additions 72 570 55 652 128 222 Additions from acquisitions (note 6.2) 434 906 21 031 91 313 547 250 Depreciations -33 169 -4 316 -23 484 -60 970 Termination of contracts -49 292 - -18 966 -68 258 Termination of contracts - gains and losses -9 343 -486 -9 830 Carrying amount 31.12.2020 415 671 16 715 104 028 536 414 Remaining lease term or useful life 10 years 10 years 3-5 years Depreciation plan Straight-line Page 21 3.3 Right-of-use assets and lease liabilities (Continued) The Group's lease liabilities Changes in the lease liabilities Total Total lease liabilities at 06.12.2019 New leases recognised during the period 128 223 New leases recognised during the period from acquisitions (note 6.2) 499 322 Cash payments for the principal portion of the lease liability -98 324 Interest expense on lease liabilities 14 101 Termination of contracts -68 258 Total lease liabilities at 31.12.2020 475 064 Current lease liabilities in the statement of financial position 103 493 Non-current lease liabilities in the statement of financial position 371 571 Total cash outflow during the period -112 425 Lease commitments not included in the lease liabilities Extension and termination options The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the Group’s business needs. Management applies judgement in evaluating whether it is reasonably certain or not to exercise the option to renew or terminate the lease. That is, they considers all relevant factors that create an economic incentive to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. The Group has not included the renewal period for leases of vessles as part of the lease term because management was not reasonably certain to exercise the option to renew the leases. Furthermore, the periods covered by termination options are included as part of the lease term only when they are reasonably certain not to be exercised. Purchase options The Group does not have any lease contracts that includes purchase options. Page 22 FRØY ASA | ANNUAL REPORT 202182 3.4 Impairment considerations ACCOUNTING POLICIES Property, vessels and equipment and right-of-use assets Property, vessels and equipment (and intangible assets that are subject to depreciation) and right-of-use assets are tested for impairment when there are indications that the recoverable amount does not exceed the carrying amount. The recoverable amount of an asset is defined as the higher of fair value less costs to sell and the value in use. Goodwill Goodwill is not amortized, but subject to impairment testing. The testing is performed annually as at 31 December and when circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of each CGU (or group of CGUs) to which goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS Basis for determining the recoverable amount The CGUs' recoverable amounts have been determined based on their value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The cash flows are derived from budgets for each individual vessel for 2022, with assumption for increase in sales price linked to CPI and an estimate of wage increase for the following 24 years, in line with a historic performance. There is also an element for capex for periodic maintenance of the vessel every 5 years. Restructuring activities and significant future investments are excluded from the budgets. For the last year, a terminal value is calculated, using a terminal rate of 2%. Key assumptions applied to determine the recoverable amount The calculation of value in use for the service vessels and wellboat CGU is most sensitive to the following assumptions: - Pre-tax discount rate - Future price development Pre-tax discount rate: The discount rate reflects the current market assessment of the risks specific to the CGU. The discount rate for the Group is estimated based on the weighted average cost of capital (WACC). The main components of the WACC are the risk-free rate, the market equity premium, the CGU's Beta, interest cost of debt, expected debt/enterprise value ratio and the corporate tax rate. The pre-tax discount rate is determined by an iterative computation so that value in use determined using pre-tax cash flows and a pre-tax discount rate equals value in use determined using post-tax cash flows and a post-tax discount rate (WACC). Future contract price: The market for aquaservices, including service vessels and wellboats, is a quite young market. Future price development is therefore hard to assess with high accuracy. For the forecast period, there is a mix of firm contracts and expected income, mostly for the service vessel fleet. The future contract price is an uncertain factor when predicting revenues. Management assumes that the price will be adjusted following a normal consumer-price index, and therefore a factor of 1.02 has been added to the 2021 prices . Page 23 3.4 IMPAIRMENT CONSIDERATIONS 3.4 Impairment considerations (Continued) The key assumptions used to determine the recoverable amount for the CGU are presented below: Key assumptions used to determine the recoverable amount for the CGU, 31.12.2021 Service vessel Wellboats Pre-tax discount rate 6,80 % 5,63 % Annual increase in free cashflow 2,0 % 2,0 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Carrying amount of goodwill - Total carrying amount 246 075 441 286 Key assumptions used to determine the recoverable amount for the CGU, 31.12.2020 Service vessel Wellboats Pre-tax discount rate 5,15 % 6,11 % Annual increase in free cashflow 2 % 2 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2020 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 The recoverable amount of the cash generating unit is significantly higher than its carrying amount and no impairment loss is recognised in the period. Headroom for service vessel CGU will according to the test results be depleted if future aggregated contract revenues over the 25 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 11.2% (2020: 9.1%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 9.3% (2020: 10.6%). Page 24 3.4 Impairment considerations (Continued) The key assumptions used to determine the recoverable amount for the CGU are presented below: Key assumptions used to determine the recoverable amount for the CGU, 31.12.2021 Service vessel Wellboats Pre-tax discount rate 6,80 % 5,63 % Annual increase in free cashflow 2,0 % 2,0 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Carrying amount of goodwill - Total carrying amount 246 075 441 286 Key assumptions used to determine the recoverable amount for the CGU, 31.12.2020 Service vessel Wellboats Pre-tax discount rate 5,15 % 6,11 % Annual increase in free cashflow 2 % 2 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2020 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 The recoverable amount of the cash generating unit is significantly higher than its carrying amount and no impairment loss is recognised in the period. Headroom for service vessel CGU will according to the test results be depleted if future aggregated contract revenues over the 25 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 11.2% (2020: 9.1%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 9.3% (2020: 10.6%). Page 24 3.4 Impairment considerations (Continued) The key assumptions used to determine the recoverable amount for the CGU are presented below: Key assumptions used to determine the recoverable amount for the CGU, 31.12.2021 Service vessel Wellboats Pre-tax discount rate 6,80 % 5,63 % Annual increase in free cashflow 2,0 % 2,0 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Carrying amount of goodwill - Total carrying amount 246 075 441 286 Key assumptions used to determine the recoverable amount for the CGU, 31.12.2020 Service vessel Wellboats Pre-tax discount rate 5,15 % 6,11 % Annual increase in free cashflow 2 % 2 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2020 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 The recoverable amount of the cash generating unit is significantly higher than its carrying amount and no impairment loss is recognised in the period. Headroom for service vessel CGU will according to the test results be depleted if future aggregated contract revenues over the 25 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 11.2% (2020: 9.1%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 9.3% (2020: 10.6%). Page 24 FRØY ASA | ANNUAL REPORT 2021 83 3.4 IMPAIRMENT CONSIDERATIONS (CONTINUED) 3.4 Impairment considerations (Continued) The key assumptions used to determine the recoverable amount for the CGU are presented below: Key assumptions used to determine the recoverable amount for the CGU, 31.12.2021 Service vessel Wellboats Pre-tax discount rate 6,80 % 5,63 % Annual increase in free cashflow 2,0 % 2,0 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Carrying amount of goodwill - Total carrying amount 246 075 441 286 Key assumptions used to determine the recoverable amount for the CGU, 31.12.2020 Service vessel Wellboats Pre-tax discount rate 5,15 % 6,11 % Annual increase in free cashflow 2 % 2 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2020 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 The recoverable amount of the cash generating unit is significantly higher than its carrying amount and no impairment loss is recognised in the period. Headroom for service vessel CGU will according to the test results be depleted if future aggregated contract revenues over the 25 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 11.2% (2020: 9.1%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 9.3% (2020: 10.6%). Page 24 3.4 Impairment considerations (Continued) The key assumptions used to determine the recoverable amount for the CGU are presented below: Key assumptions used to determine the recoverable amount for the CGU, 31.12.2021 Service vessel Wellboats Pre-tax discount rate 6,80 % 5,63 % Annual increase in free cashflow 2,0 % 2,0 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Carrying amount of goodwill - Total carrying amount 246 075 441 286 Key assumptions used to determine the recoverable amount for the CGU, 31.12.2020 Service vessel Wellboats Pre-tax discount rate 5,15 % 6,11 % Annual increase in free cashflow 2 % 2 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2020 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 The recoverable amount of the cash generating unit is significantly higher than its carrying amount and no impairment loss is recognised in the period. Headroom for service vessel CGU will according to the test results be depleted if future aggregated contract revenues over the 25 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 11.2% (2020: 9.1%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 9.3% (2020: 10.6%). Page 24 3.4 Impairment considerations (Continued) The key assumptions used to determine the recoverable amount for the CGU are presented below: Key assumptions used to determine the recoverable amount for the CGU, 31.12.2021 Service vessel Wellboats Pre-tax discount rate 6,80 % 5,63 % Annual increase in free cashflow 2,0 % 2,0 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2021 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Carrying amount of goodwill - Total carrying amount 246 075 441 286 Key assumptions used to determine the recoverable amount for the CGU, 31.12.2020 Service vessel Wellboats Pre-tax discount rate 5,15 % 6,11 % Annual increase in free cashflow 2 % 2 % Carrying amount of the intangible assets allocated to the CGU, 31.12.2020 Service vessel Wellboats Carrying amount of goodwill 246 075 441 286 Total carrying amount 246 075 441 286 The recoverable amount of the cash generating unit is significantly higher than its carrying amount and no impairment loss is recognised in the period. Headroom for service vessel CGU will according to the test results be depleted if future aggregated contract revenues over the 25 year analyses period decreases by 13% (ceteris paribus), or the discount rate increases to 11.2% (2020: 9.1%). The corresponding sensitivity for the wellboat CGU are 15% decrease in revenue and discount rate increased to 9.3% (2020: 10.6%). Page 24 FRØY ASA | ANNUAL REPORT 202184 4.1 Overview of financial instruments ACCOUNTING POLICIES A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equityinstrument of another entity. Classification of financial instruments The Group's financial instruments are grouped in the following categories: Financial Assets - Financial assets measured subsequently at amortized cost: Includes mainly trade receivables and cash and cash equivalents. - Financial assets measured subsequently at fair value through profit and loss: Includes non-listed equity investments. All the Group's financial assets are part of the Group's business model with the sole objective to collect contractual cash flows. Additionally, the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, thereby passing the "SPPI test", constituting debt instruments measured at amortized cost. Financial Liabilities - Financial liabilities measured subsequently at amortized cost: Represent the Group's interest-bearing liabilities as well as non-interest bearing liabilities such as trade payables. - Financial liabilities measured subsequently at fair value through OCI: Represents the Group's derivative financial instruments, see separate disclosures in note 4.10. Initial recognition and subsequent measurement The Group's financial assets and liabilities are initially recognized at fair value plus directly attributable transaction expenses. Subsequently, these instruments are measured at amortized cost using the effective interest method (EIR). Gains and losses are recognized in profit or loss upon impairment, when the instruments are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statement of comprehensive income. Impairment of financial assets Financial assets measured at amortized cost are considered for impairment by recognizing an allowance for expected credit losses (ECLs). The Group applies a simplified approach in calculating ECLs for trade receivables and lease receivables, where the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group bases its ECLs on its historical losses, adjusted forforward-looking factors specific to the debtors and the economic environment. See note 4.7 for further information related to management of credit risk. Derecognition of financial instruments A financial asset is derecognized when the rights to receive cash flows from the asset have expired, the Group has transferred its rights to receive cash flows from the asset or the Group has assumed an obligation to pay the received cash flows in full under a "pass-through" arrangement. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statement of comprehensive income. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously. Page 25 4.1 Overview of financial instruments (Continued) 31.12.2021 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 14 602 1 863 16 464 Trade receivables 2.7 187 908 187 908 Other receivables 2.7 83 706 83 706 Cash and cash equivalents 4.4 738 462 738 462 Total financial assets 1 024 678 1 863 - 1 026 541 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 3 367 799 2 598 3 370 397 Non-current lease liabilities 3.3 269 423 269 423 Subordinated loan from related parties 7.2 - - Current interest-bearing liabilities 4.2 474 259 474 259 Current lease liabilties 3.3 92 918 92 918 Other financial liabilities - Trade payables and other current liabilities 2.8 223 259 223 259 Total financial liabilities 4 427 659 2 598 4 430 257 31.12.2020 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 3 029 1 800 4 830 Trade receivables 2.7 156 176 156 176 Other receivables 2.7 49 078 49 078 Cash and cash equivalents 4.4 148 811 148 811 Total financial assets 357 094 1 800 - 358 895 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 1 816 385 15 271 1 831 656 Non-current lease liabilities 3.3 371 571 371 571 Subordinated loan from related parties 7.2 985 985 Current interest-bearing liabilities 4.2 648 675 648 675 Current lease liabilties 3.3 103 493 103 493 Other financial liabilities - Trade payables and other current liabilities 2.8 281 721 281 721 Total financial liabilities 3 222 830 15 271 3 238 101 There are no changes in classification and measurement for the Group’s financial assets and liabilities. Other financial assets mainly consist of lease receivables and shares in a non-listed equity investment. Significant finance income and finance costs arising from the Group's financial instruments are disclosed separately in note 4.5. Page 26 4.1 OVERVIEW OF FINANCIAL INSTRUMENTS 4.1 Overview of financial instruments (Continued) 31.12.2021 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 14 602 1 863 16 464 Trade receivables 2.7 187 908 187 908 Other receivables 2.7 83 706 83 706 Cash and cash equivalents 4.4 738 462 738 462 Total financial assets 1 024 678 1 863 - 1 026 541 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 3 367 799 2 598 3 370 397 Non-current lease liabilities 3.3 269 423 269 423 Subordinated loan from related parties 7.2 - - Current interest-bearing liabilities 4.2 474 259 474 259 Current lease liabilties 3.3 92 918 92 918 Other financial liabilities - Trade payables and other current liabilities 2.8 223 259 223 259 Total financial liabilities 4 427 659 2 598 4 430 257 31.12.2020 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 3 029 1 800 4 830 Trade receivables 2.7 156 176 156 176 Other receivables 2.7 49 078 49 078 Cash and cash equivalents 4.4 148 811 148 811 Total financial assets 357 094 1 800 - 358 895 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 1 816 385 15 271 1 831 656 Non-current lease liabilities 3.3 371 571 371 571 Subordinated loan from related parties 7.2 985 985 Current interest-bearing liabilities 4.2 648 675 648 675 Current lease liabilties 3.3 103 493 103 493 Other financial liabilities - Trade payables and other current liabilities 2.8 281 721 281 721 Total financial liabilities 3 222 830 15 271 3 238 101 There are no changes in classification and measurement for the Group’s financial assets and liabilities. Other financial assets mainly consist of lease receivables and shares in a non-listed equity investment. Significant finance income and finance costs arising from the Group's financial instruments are disclosed separately in note 4.5. Page 26 FRØY ASA | ANNUAL REPORT 2021 85 4.1 Overview of financial instruments (Continued) 31.12.2021 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 14 602 1 863 16 464 Trade receivables 2.7 187 908 187 908 Other receivables 2.7 83 706 83 706 Cash and cash equivalents 4.4 738 462 738 462 Total financial assets 1 024 678 1 863 - 1 026 541 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 3 367 799 2 598 3 370 397 Non-current lease liabilities 3.3 269 423 269 423 Subordinated loan from related parties 7.2 - - Current interest-bearing liabilities 4.2 474 259 474 259 Current lease liabilties 3.3 92 918 92 918 Other financial liabilities - Trade payables and other current liabilities 2.8 223 259 223 259 Total financial liabilities 4 427 659 2 598 4 430 257 31.12.2020 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 3 029 1 800 4 830 Trade receivables 2.7 156 176 156 176 Other receivables 2.7 49 078 49 078 Cash and cash equivalents 4.4 148 811 148 811 Total financial assets 357 094 1 800 - 358 895 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 1 816 385 15 271 1 831 656 Non-current lease liabilities 3.3 371 571 371 571 Subordinated loan from related parties 7.2 985 985 Current interest-bearing liabilities 4.2 648 675 648 675 Current lease liabilties 3.3 103 493 103 493 Other financial liabilities - Trade payables and other current liabilities 2.8 281 721 281 721 Total financial liabilities 3 222 830 15 271 3 238 101 There are no changes in classification and measurement for the Group’s financial assets and liabilities. Other financial assets mainly consist of lease receivables and shares in a non-listed equity investment. Significant finance income and finance costs arising from the Group's financial instruments are disclosed separately in note 4.5. Page 26 4.1 OVERVIEW OF FINANCIAL INSTRUMENTS (CONTINUED) 4.1 Overview of financial instruments (Continued) 31.12.2021 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 14 602 1 863 16 464 Trade receivables 2.7 187 908 187 908 Other receivables 2.7 83 706 83 706 Cash and cash equivalents 4.4 738 462 738 462 Total financial assets 1 024 678 1 863 - 1 026 541 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 3 367 799 2 598 3 370 397 Non-current lease liabilities 3.3 269 423 269 423 Subordinated loan from related parties 7.2 - - Current interest-bearing liabilities 4.2 474 259 474 259 Current lease liabilties 3.3 92 918 92 918 Other financial liabilities - Trade payables and other current liabilities 2.8 223 259 223 259 Total financial liabilities 4 427 659 2 598 4 430 257 31.12.2020 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 3 029 1 800 4 830 Trade receivables 2.7 156 176 156 176 Other receivables 2.7 49 078 49 078 Cash and cash equivalents 4.4 148 811 148 811 Total financial assets 357 094 1 800 - 358 895 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 1 816 385 15 271 1 831 656 Non-current lease liabilities 3.3 371 571 371 571 Subordinated loan from related parties 7.2 985 985 Current interest-bearing liabilities 4.2 648 675 648 675 Current lease liabilties 3.3 103 493 103 493 Other financial liabilities - Trade payables and other current liabilities 2.8 281 721 281 721 Total financial liabilities 3 222 830 15 271 3 238 101 There are no changes in classification and measurement for the Group’s financial assets and liabilities. Other financial assets mainly consist of lease receivables and shares in a non-listed equity investment. Significant finance income and finance costs arising from the Group's financial instruments are disclosed separately in note 4.5. Page 26 4.1 Overview of financial instruments (Continued) 31.12.2021 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 14 602 1 863 16 464 Trade receivables 2.7 187 908 187 908 Other receivables 2.7 83 706 83 706 Cash and cash equivalents 4.4 738 462 738 462 Total financial assets 1 024 678 1 863 - 1 026 541 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 3 367 799 2 598 3 370 397 Non-current lease liabilities 3.3 269 423 269 423 Subordinated loan from related parties 7.2 - - Current interest-bearing liabilities 4.2 474 259 474 259 Current lease liabilties 3.3 92 918 92 918 Other financial liabilities - Trade payables and other current liabilities 2.8 223 259 223 259 Total financial liabilities 4 427 659 2 598 4 430 257 31.12.2020 Note Financial instruments at amortized cost Financial instruments at FV through P&L Financial instruments at FV through OCI Total Assets Other financial assets 2.3, 4.6 3 029 1 800 4 830 Trade receivables 2.7 156 176 156 176 Other receivables 2.7 49 078 49 078 Cash and cash equivalents 4.4 148 811 148 811 Total financial assets 357 094 1 800 - 358 895 Liabilities Interest-bearing loans and borrowings Non-current interest-bearing liabilities 4.2, 4.6, 4.10 1 816 385 15 271 1 831 656 Non-current lease liabilities 3.3 371 571 371 571 Subordinated loan from related parties 7.2 985 985 Current interest-bearing liabilities 4.2 648 675 648 675 Current lease liabilties 3.3 103 493 103 493 Other financial liabilities - Trade payables and other current liabilities 2.8 281 721 281 721 Total financial liabilities 3 222 830 15 271 3 238 101 There are no changes in classification and measurement for the Group’s financial assets and liabilities. Other financial assets mainly consist of lease receivables and shares in a non-listed equity investment. Significant finance income and finance costs arising from the Group's financial instruments are disclosed separately in note 4.5. Page 26 FRØY ASA | ANNUAL REPORT 202186 4.2 Interest-bearing liabilities Non-current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions 3 370 397 1 831 656 Non-current lease liabilities 269 423 371 571 Total non-current interest-bearing loans and borrowings 3 639 821 2 203 227 Current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions, due within 12 months 474 259 648 675 Current lease liabilities 92 918 103 493 Subordinated loan from related parties (principal), due within 12 months - 985 Current interest-bearing loans and borrowings 567 177 753 154 Assets pledged as security for interest bearing loans and borrowings 31.12.2021 31.12.2020 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 639 821 2 203 227 Current interest-bearing liabilities 567 177 752 169 Total 4 206 998 2 955 395 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 118 041 205 254 Inventories - 8 193 Cash and cash equivalents - 148 811 Right-of-use assets 455 410 536 414 Property, vessels and equipment 5 341 687 3 617 546 Other 77 685 Total 5 992 823 4 516 219 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest -bearing liabilities: • Equity Ratio >15% -25% • Market value / loan value > 125-140% • EBITDA/(net interest and repayment) >1.5 • NIBD/EBITDA < 3-6.0 Interest-bearing loans and borrowings are provided by five Norwegian credit institutions. The relevant loan agreements contain cross default provisions which might result in the relevant borrowings becoming payable on demand if an entity controlled by Frøy ASA breaches a significant provi sion in another loan agreement with the same issuer (Danske Bank) or any other significant financial obligation (Nordea). The Group is compliant with its covenants at year end 2021. For reconciliation of changes in liabilities incurred as a result of financing activities, see note 4.3. For undiscounted liabilities and maturity of cash outflows, see note 4.3. Overdraft facility The Group has overdraft facilities in place which may be drawn at any time up to MNOK 38.5 (2020: MNOK 42.5). The Group has pledged assets as security for its liabilities, presented in the table below: Page 27 4.2 Interest-bearing liabilities Non-current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions 3 370 397 1 831 656 Non-current lease liabilities 269 423 371 571 Total non-current interest-bearing loans and borrowings 3 639 821 2 203 227 Current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions, due within 12 months 474 259 648 675 Current lease liabilities 92 918 103 493 Subordinated loan from related parties (principal), due within 12 months - 985 Current interest-bearing loans and borrowings 567 177 753 154 Assets pledged as security for interest bearing loans and borrowings 31.12.2021 31.12.2020 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 639 821 2 203 227 Current interest-bearing liabilities 567 177 752 169 Total 4 206 998 2 955 395 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 118 041 205 254 Inventories - 8 193 Cash and cash equivalents - 148 811 Right-of-use assets 455 410 536 414 Property, vessels and equipment 5 341 687 3 617 546 Other 77 685 Total 5 992 823 4 516 219 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest -bearing liabilities: • Equity Ratio >15% -25% • Market value / loan value > 125-140% • EBITDA/(net interest and repayment) >1.5 • NIBD/EBITDA < 3-6.0 Interest-bearing loans and borrowings are provided by five Norwegian credit institutions. The relevant loan agreements contain cross default provisions which might result in the relevant borrowings becoming payable on demand if an entity controlled by Frøy ASA breaches a significant provi sion in another loan agreement with the same issuer (Danske Bank) or any other significant financial obligation (Nordea). The Group is compliant with its covenants at year end 2021. For reconciliation of changes in liabilities incurred as a result of financing activities, see note 4.3. For undiscounted liabilities and maturity of cash outflows, see note 4.3. Overdraft facility The Group has overdraft facilities in place which may be drawn at any time up to MNOK 38.5 (2020: MNOK 42.5). The Group has pledged assets as security for its liabilities, presented in the table below: Page 27 4.2 Interest-bearing liabilities Non-current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions 3 370 397 1 831 656 Non-current lease liabilities 269 423 371 571 Total non-current interest-bearing loans and borrowings 3 639 821 2 203 227 Current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions, due within 12 months 474 259 648 675 Current lease liabilities 92 918 103 493 Subordinated loan from related parties (principal), due within 12 months - 985 Current interest-bearing loans and borrowings 567 177 753 154 Assets pledged as security for interest bearing loans and borrowings 31.12.2021 31.12.2020 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 639 821 2 203 227 Current interest-bearing liabilities 567 177 752 169 Total 4 206 998 2 955 395 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 118 041 205 254 Inventories - 8 193 Cash and cash equivalents - 148 811 Right-of-use assets 455 410 536 414 Property, vessels and equipment 5 341 687 3 617 546 Other 77 685 Total 5 992 823 4 516 219 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest -bearing liabilities: • Equity Ratio >15% -25% • Market value / loan value > 125-140% • EBITDA/(net interest and repayment) >1.5 • NIBD/EBITDA < 3-6.0 Interest-bearing loans and borrowings are provided by five Norwegian credit institutions. The relevant loan agreements contain cross default provisions which might result in the relevant borrowings becoming payable on demand if an entity controlled by Frøy ASA breaches a significant provi sion in another loan agreement with the same issuer (Danske Bank) or any other significant financial obligation (Nordea). The Group is compliant with its covenants at year end 2021. For reconciliation of changes in liabilities incurred as a result of financing activities, see note 4.3. For undiscounted liabilities and maturity of cash outflows, see note 4.3. Overdraft facility The Group has overdraft facilities in place which may be drawn at any time up to MNOK 38.5 (2020: MNOK 42.5). The Group has pledged assets as security for its liabilities, presented in the table below: Page 27 4.2 Interest-bearing liabilities Non-current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions 3 370 397 1 831 656 Non-current lease liabilities 269 423 371 571 Total non-current interest-bearing loans and borrowings 3 639 821 2 203 227 Current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions, due within 12 months 474 259 648 675 Current lease liabilities 92 918 103 493 Subordinated loan from related parties (principal), due within 12 months - 985 Current interest-bearing loans and borrowings 567 177 753 154 Assets pledged as security for interest bearing loans and borrowings 31.12.2021 31.12.2020 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 639 821 2 203 227 Current interest-bearing liabilities 567 177 752 169 Total 4 206 998 2 955 395 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 118 041 205 254 Inventories - 8 193 Cash and cash equivalents - 148 811 Right-of-use assets 455 410 536 414 Property, vessels and equipment 5 341 687 3 617 546 Other 77 685 Total 5 992 823 4 516 219 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest -bearing liabilities: • Equity Ratio >15% -25% • Market value / loan value > 125-140% • EBITDA/(net interest and repayment) >1.5 • NIBD/EBITDA < 3-6.0 Interest-bearing loans and borrowings are provided by five Norwegian credit institutions. The relevant loan agreements contain cross default provisions which might result in the relevant borrowings becoming payable on demand if an entity controlled by Frøy ASA breaches a significant provi sion in another loan agreement with the same issuer (Danske Bank) or any other significant financial obligation (Nordea). The Group is compliant with its covenants at year end 2021. For reconciliation of changes in liabilities incurred as a result of financing activities, see note 4.3. For undiscounted liabilities and maturity of cash outflows, see note 4.3. Overdraft facility The Group has overdraft facilities in place which may be drawn at any time up to MNOK 38.5 (2020: MNOK 42.5). The Group has pledged assets as security for its liabilities, presented in the table below: Page 27 4.2 Interest-bearing liabilities Non-current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions 3 370 397 1 831 656 Non-current lease liabilities 269 423 371 571 Total non-current interest-bearing loans and borrowings 3 639 821 2 203 227 Current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions, due within 12 months 474 259 648 675 Current lease liabilities 92 918 103 493 Subordinated loan from related parties (principal), due within 12 months - 985 Current interest-bearing loans and borrowings 567 177 753 154 Assets pledged as security for interest bearing loans and borrowings 31.12.2021 31.12.2020 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 639 821 2 203 227 Current interest-bearing liabilities 567 177 752 169 Total 4 206 998 2 955 395 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 118 041 205 254 Inventories - 8 193 Cash and cash equivalents - 148 811 Right-of-use assets 455 410 536 414 Property, vessels and equipment 5 341 687 3 617 546 Other 77 685 Total 5 992 823 4 516 219 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest -bearing liabilities: • Equity Ratio >15% -25% • Market value / loan value > 125-140% • EBITDA/(net interest and repayment) >1.5 • NIBD/EBITDA < 3-6.0 Interest-bearing loans and borrowings are provided by five Norwegian credit institutions. The relevant loan agreements contain cross default provisions which might result in the relevant borrowings becoming payable on demand if an entity controlled by Frøy ASA breaches a significant provi sion in another loan agreement with the same issuer (Danske Bank) or any other significant financial obligation (Nordea). The Group is compliant with its covenants at year end 2021. For reconciliation of changes in liabilities incurred as a result of financing activities, see note 4.3. For undiscounted liabilities and maturity of cash outflows, see note 4.3. Overdraft facility The Group has overdraft facilities in place which may be drawn at any time up to MNOK 38.5 (2020: MNOK 42.5). The Group has pledged assets as security for its liabilities, presented in the table below: Page 27 4.2 Interest-bearing liabilities Non-current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions 3 370 397 1 831 656 Non-current lease liabilities 269 423 371 571 Total non-current interest-bearing loans and borrowings 3 639 821 2 203 227 Current interest-bearing loans and borrowings 31.12.2021 31.12.2020 Loan from credit institutions, due within 12 months 474 259 648 675 Current lease liabilities 92 918 103 493 Subordinated loan from related parties (principal), due within 12 months - 985 Current interest-bearing loans and borrowings 567 177 753 154 Assets pledged as security for interest bearing loans and borrowings 31.12.2021 31.12.2020 Secured balance sheet liabilities: Non-current interest-bearing liabilities 3 639 821 2 203 227 Current interest-bearing liabilities 567 177 752 169 Total 4 206 998 2 955 395 Carrying amount of assets pledged as security for secured liabilities: Trade and other receivables 118 041 205 254 Inventories - 8 193 Cash and cash equivalents - 148 811 Right-of-use assets 455 410 536 414 Property, vessels and equipment 5 341 687 3 617 546 Other 77 685 Total 5 992 823 4 516 219 Covenant requirements Subsidiaries in the Group are obligated to adhere to the following covenant requirement for there interest -bearing liabilities: • Equity Ratio >15% -25% • Market value / loan value > 125-140% • EBITDA/(net interest and repayment) >1.5 • NIBD/EBITDA < 3-6.0 Interest-bearing loans and borrowings are provided by five Norwegian credit institutions. The relevant loan agreements contain cross default provisions which might result in the relevant borrowings becoming payable on demand if an entity controlled by Frøy ASA breaches a significant provi sion in another loan agreement with the same issuer (Danske Bank) or any other significant financial obligation (Nordea). The Group is compliant with its covenants at year end 2021. For reconciliation of changes in liabilities incurred as a result of financing activities, see note 4.3. For undiscounted liabilities and maturity of cash outflows, see note 4.3. Overdraft facility The Group has overdraft facilities in place which may be drawn at any time up to MNOK 38.5 (2020: MNOK 42.5). The Group has pledged assets as security for its liabilities, presented in the table below: Page 27 4.2 INTEREST-BEARING LIABILITIES FRØY ASA | ANNUAL REPORT 2021 87 4.3 AGEING OF FINANCIAL LIABILITIES 4.3 Ageing of financial liabilities Contractual undiscounted cash flows from financial liabilities, including interest payments are presented below: 31.12.2021 Less than 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Total Financial liabilities Loans from credit institutions 553 075 502 666 906 120 2 160 962 79 508 2 494 4 204 825 Trade payables and other current liabilities 223 300 223 300 Lease liabilities 103 441 92 371 73 260 51 999 32 503 39 175 392 749 Total financial liabilities 879 816 595 037 979 380 2 212 961 112 011 41 669 4 820 874 Reconciliation of changes in liabilities incurred as a result of financing activities: Non-cash changes 01.01.2021 Repayment of borrowings Payments for principal portion of the lease liability Proceeds from borrowings New leases Reclassified Termination of leasing contracts 31.12.2021 Loans from credit institutions non-current 1 831 656 -950 044 2 488 785 3 370 397 Lease liabilties non-current 371 571 -41 595 30 347 8 489 -99 389 269 423 Subordinated loans from related parties (principal) - - Non-current interest-bearing liabilities 2 203 227 -950 044 -41 595 2 488 785 30 347 8 489 -99 389 3 639 821 Loans from credit institutions current 648 675 -174 416 474 259 Lease liabilties current 103 493 -90 319 86 932 -8 489 1 302 92 919 Current interest-bearing liabilities 752 168 -174 416 -90 319 - 86 932 -8 489 1 302 567 178 Total liabilities from financing 2 955 395 -1 124 460 -131 914 2 488 785 117 279 - -98 087 4 206 998 31.12.2020 Less than 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Total Financial liabilities Loans from credit institutions 673 573 379 530 188 403 257 738 243 053 840 767 2 583 063 Trade payables and other current liabilities 281 721 281 721 Lease liabilities 118 873 104 505 91 524 71 599 51 307 89 778 527 586 Total financial liabilities 1 074 167 484 035 279 927 329 337 294 360 930 545 3 392 370 Reconciliation of changes in liabilities incurred as a result of financing activities: Non-cash changes 06.12.2019 Repayment of borrowings Payments for principal portion of the lease liability Proceeds from borrowings New leases incl from mergers and aquistions Reclassified Termination of leasing contracts New loans from transfer of NTS companies New loans from acquisition of Frøy Gruppen (note 6.2) 31.12.2020 Loans from credit institutions non-current - -173 965 323 168 -214 390 805 470 1 091 372 1 831 656 Lease liabilties non-current - - -98 324 - 526 057 - -56 162 371 571 Subordinated loans from related parties (principal) - Non-current interest-bearing liabilities - -173 965 -98 324 323 168 526 057 -214 390 -56 162 805 470 1 091 372 2 203 227 Loans from credit institutions current 214 390 341 743 92 543 648 675 Lease liabilties current - - - 115 589 -12 096 103 493 Current interest-bearing liabilities - - - - 115 589 214 390 -12 096 341 743 92 543 752 168 Total liabilities from financing - -173 965 -98 324 323 168 641 646 - -68 258 1 147 213 1 183 915 2 955 395 Remaining contractual maturity Remaining contractual maturity Several of the Group's current loan agreements contain change of control and ownership change clauses. The Group will obtain consents prior to any ownership changes or change of control events. Page 28 FRØY ASA | ANNUAL REPORT 202188 4.4 Cash and cash equivalents Cash and cash equivalents 31.12.2021 31.12.2020 Bank deposits, unrestricted 714 112 127 007 Bank deposits, restricted 24 350 21 804 Total in the statement of financial position 738 462 148 811 ACCOUNTING POLICIES Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Gro up’s cash management. Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. For more information on the Group's credit facilities see note 4.2. There are no restrictions on the use of these funds. The amount of included in "Bank deposits, restricted" consists of payroll tax withholdings. Page 29 4.5 Financial income and expenses Financial income 31.12.2021 06.12.2019 - 31.12.2020 Interest income 6 535 465 Gain on sale of other financial assets - 25 604 Other finance income 1 203 2 197 Total finance income 7 737 28 267 Financial expenses 31.12.2021 06.12.2019 - 31.12.2020 Interest expenses -66 362 -50 639 Interest expense on lease liabilities -14 168 -14 101 Other finance expenses -8 762 -3 473 Total Financial expense -89 292 -68 214 ACCOUNTING POLICIES Interest income and interest expenses on loans and receivables are calculated using the effective interest method. Foreign currency gains or losses are reported as gain or loss on foreign exchange in finance income or finance expense. Gain on sale of other financial assets in 2020 are related to NRS Shares. Interest expenses on lease liabilities represents the interest rate implicit in the lease, or the incremental borrowing rate use d to measure the lease liabilities recognized Interest income and expenses Interest income represents mainly interest income on cash deposits, and interest expenses represents mainly interest expenses on external financing, measured and classified at amortised cost in the statement of financial position. Page 30 4.6 Fair value measurement Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2021 1 863 1 863 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2021 3 639 3 639 x Loan from credit institutions 31.12.2021 3 841 920 3 841 920 x There were no transfers between the levels during the current period. Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2020 1 800 1 800 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2020 13 921 13 921 x Loan from credit institutions 31.12.2020 2 480 331 2 480 331 x There were no transfers between the levels during the current period. ACCOUNTING POLICIES Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: ▪ In the principal market for the asset or liability, or ▪ In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: ▪ Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities ▪ Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable ▪ Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Fair value disclosures Management has assessed that the fair values of cash and short-term deposits, trade and other receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments and the current risk-free interest rates. The fair values of the Group’s interest-bearing loans and borrowings are determined by using the DCF method using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The fair values of the Group's interest-bearing loans and borrowings are in most cases similar to carrying amount, as the interest rates are floating and the non-performance risk as at 31.12.21 was assessed to be insignificant. The fair values of the Group's hedge accounted interest swaps are based on future cash flow using the market values mid-rates on the 31.12.2021. Because most of the input is observable prices, the hedge accounted interest swaps are assessed to be on level 2 in the fair-value hierarchy. In 2020, the Group acquired 6% of the shares in Naviaq Holding AS, a non-listed equity investment measured to fair value of MNOK 1.8 at the acquisition date. Management has determined that the fair value of the investment in all material aspects is similar to the carrying amount at the balance sheet date. Information on fair value for the Group's financial assets and liabilities: Page 31 4.4 CASH AND CASH EQUIVALENTS 4.5 FINANCIAL INCOME AND EXPENSES 4.4 Cash and cash equivalents Cash and cash equivalents 31.12.2021 31.12.2020 Bank deposits, unrestricted 714 112 127 007 Bank deposits, restricted 24 350 21 804 Total in the statement of financial position 738 462 148 811 ACCOUNTING POLICIES Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Gro up’s cash management. Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. For more information on the Group's credit facilities see note 4.2. There are no restrictions on the use of these funds. The amount of included in "Bank deposits, restricted" consists of payroll tax withholdings. Page 29 4.5 Financial income and expenses Financial income 31.12.2021 06.12.2019 - 31.12.2020 Interest income 6 535 465 Gain on sale of other financial assets - 25 604 Other finance income 1 203 2 197 Total finance income 7 737 28 267 Financial expenses 31.12.2021 06.12.2019 - 31.12.2020 Interest expenses -66 362 -50 639 Interest expense on lease liabilities -14 168 -14 101 Other finance expenses -8 762 -3 473 Total Financial expense -89 292 -68 214 ACCOUNTING POLICIES Interest income and interest expenses on loans and receivables are calculated using the effective interest method. Foreign currency gains or losses are reported as gain or loss on foreign exchange in finance income or finance expense. Gain on sale of other financial assets in 2020 are related to NRS Shares. Interest expenses on lease liabilities represents the interest rate implicit in the lease, or the incremental borrowing rate used to measure the lease liabilities recognized Interest income and expenses Interest income represents mainly interest income on cash deposits, and interest expenses represents mainly interest expenses on external financing, measured and classified at amortised cost in the statement of financial position. Page 30 4.5 Financial income and expenses Financial income 31.12.2021 06.12.2019 - 31.12.2020 Interest income 6 535 465 Gain on sale of other financial assets - 25 604 Other finance income 1 203 2 197 Total finance income 7 737 28 267 Financial expenses 31.12.2021 06.12.2019 - 31.12.2020 Interest expenses -66 362 -50 639 Interest expense on lease liabilities -14 168 -14 101 Other finance expenses -8 762 -3 473 Total Financial expense -89 292 -68 214 ACCOUNTING POLICIES Interest income and interest expenses on loans and receivables are calculated using the effective interest method. Foreign currency gains or losses are reported as gain or loss on foreign exchange in finance income or finance expense. Gain on sale of other financial assets in 2020 are related to NRS Shares. Interest expenses on lease liabilities represents the interest rate implicit in the lease, or the incremental borrowing rate used to measure the lease liabilities recognized Interest income and expenses Interest income represents mainly interest income on cash deposits, and interest expenses represents mainly interest expenses on external financing, measured and classified at amortised cost in the statement of financial position. Page 30 4.5 Financial income and expenses Financial income 31.12.2021 06.12.2019 - 31.12.2020 Interest income 6 535 465 Gain on sale of other financial assets - 25 604 Other finance income 1 203 2 197 Total finance income 7 737 28 267 Financial expenses 31.12.2021 06.12.2019 - 31.12.2020 Interest expenses -66 362 -50 639 Interest expense on lease liabilities -14 168 -14 101 Other finance expenses -8 762 -3 473 Total Financial expense -89 292 -68 214 ACCOUNTING POLICIES Interest income and interest expenses on loans and receivables are calculated using the effective interest method. Foreign currency gains or losses are reported as gain or loss on foreign exchange in finance income or finance expense. Gain on sale of other financial assets in 2020 are related to NRS Shares. Interest expenses on lease liabilities represents the interest rate implicit in the lease, or the incremental borrowing rate used to measure the lease liabilities recognized Interest income and expenses Interest income represents mainly interest income on cash deposits, and interest expenses represents mainly interest expenses on external financing, measured and classified at amortised cost in the statement of financial position. Page 30 4.4 Cash and cash equivalents Cash and cash equivalents 31.12.2021 31.12.2020 Bank deposits, unrestricted 714 112 127 007 Bank deposits, restricted 24 350 21 804 Total in the statement of financial position 738 462 148 811 ACCOUNTING POLICIES Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Gro up’s cash management. Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. For more information on the Group's credit facilities see note 4.2. There are no restrictions on the use of these funds. The amount of included in "Bank deposits, restricted" consists of payroll tax withholdings. Page 29 FRØY ASA | ANNUAL REPORT 2021 89 4.6 Fair value measurement Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2021 1 863 1 863 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2021 3 639 3 639 x Loan from credit institutions 31.12.2021 3 841 920 3 841 920 x There were no transfers between the levels during the current period. Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2020 1 800 1 800 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2020 13 921 13 921 x Loan from credit institutions 31.12.2020 2 480 331 2 480 331 x There were no transfers between the levels during the current period. ACCOUNTING POLICIES Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: ▪ In the principal market for the asset or liability, or ▪ In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: ▪ Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities ▪ Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable ▪ Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Fair value disclosures Management has assessed that the fair values of cash and short-term deposits, trade and other receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments and the current risk-free interest rates. The fair values of the Group’s interest-bearing loans and borrowings are determined by using the DCF method using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The fair values of the Group's interest-bearing loans and borrowings are in most cases similar to carrying amount, as the interest rates are floating and the non-performance risk as at 31.12.21 was assessed to be insignificant. The fair values of the Group's hedge accounted interest swaps are based on future cash flow using the market values mid-rates on the 31.12.2021. Because most of the input is observable prices, the hedge accounted interest swaps are assessed to be on level 2 in the fair-value hierarchy. In 2020, the Group acquired 6% of the shares in Naviaq Holding AS, a non-listed equity investment measured to fair value of MNOK 1.8 at the acquisition date. Management has determined that the fair value of the investment in all material aspects is similar to the carrying amount at the balance sheet date. Information on fair value for the Group's financial assets and liabilities: Page 31 4.6 FAIR VALUE MEASUREMENT 4.6 Fair value measurement Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2021 1 863 1 863 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2021 3 639 3 639 x Loan from credit institutions 31.12.2021 3 841 920 3 841 920 x There were no transfers between the levels during the current period. Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2020 1 800 1 800 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2020 13 921 13 921 x Loan from credit institutions 31.12.2020 2 480 331 2 480 331 x There were no transfers between the levels during the current period. ACCOUNTING POLICIES Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: ▪ In the principal market for the asset or liability, or ▪ In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: ▪ Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities ▪ Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable ▪ Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Fair value disclosures Management has assessed that the fair values of cash and short-term deposits, trade and other receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments and the current risk-free interest rates. The fair values of the Group’s interest-bearing loans and borrowings are determined by using the DCF method using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The fair values of the Group's interest-bearing loans and borrowings are in most cases similar to carrying amount, as the interest rates are floating and the non-performance risk as at 31.12.21 was assessed to be insignificant. The fair values of the Group's hedge accounted interest swaps are based on future cash flow using the market values mid-rates on the 31.12.2021. Because most of the input is observable prices, the hedge accounted interest swaps are assessed to be on level 2 in the fair-value hierarchy. In 2020, the Group acquired 6% of the shares in Naviaq Holding AS, a non-listed equity investment measured to fair value of MNOK 1.8 at the acquisition date. Management has determined that the fair value of the investment in all material aspects is similar to the carrying amount at the balance sheet date. Information on fair value for the Group's financial assets and liabilities: Page 31 4.6 Fair value measurement Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2021 1 863 1 863 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2021 3 639 3 639 x Loan from credit institutions 31.12.2021 3 841 920 3 841 920 x There were no transfers between the levels during the current period. Date Carrying amount Fair value Level 1 Level 2 Level 3 Assets disclosed at fair value Non-listed equity investments 31.12.2020 1 800 1 800 x Liabilities disclosed at fair value Hedge accounted interest swaps 31.12.2020 13 921 13 921 x Loan from credit institutions 31.12.2020 2 480 331 2 480 331 x There were no transfers between the levels during the current period. ACCOUNTING POLICIES Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: ▪ In the principal market for the asset or liability, or ▪ In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: ▪ Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities ▪ Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable ▪ Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Fair value disclosures Management has assessed that the fair values of cash and short-term deposits, trade and other receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments and the current risk-free interest rates. The fair values of the Group’s interest-bearing loans and borrowings are determined by using the DCF method using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The fair values of the Group's interest-bearing loans and borrowings are in most cases similar to carrying amount, as the interest rates are floating and the non-performance risk as at 31.12.21 was assessed to be insignificant. The fair values of the Group's hedge accounted interest swaps are based on future cash flow using the market values mid-rates on the 31.12.2021. Because most of the input is observable prices, the hedge accounted interest swaps are assessed to be on level 2 in the fair-value hierarchy. In 2020, the Group acquired 6% of the shares in Naviaq Holding AS, a non-listed equity investment measured to fair value of MNOK 1.8 at the acquisition date. Management has determined that the fair value of the investment in all material aspects is similar to the carrying amount at the balance sheet date. Information on fair value for the Group's financial assets and liabilities: Page 31 FRØY ASA | ANNUAL REPORT 202190 4.7 Capital management and financial risk Capital management The primary objective of the Group’s capital management is to maximize value creation over time. The Group seeks to optimize the capital structure by balancing risk and return on equity against collateral for lenders, requirements for liquidity and investment capacity. The Group manages its capital structure and adjusts in light of changes in economic conditions and the requirements of the financial covenants. The Group considers a solid equity ratio to be important to achieve its strategic goals in the future. Management regularly uses the ratio between net interest-bearing debt / earnings before interest, tax and depreciation and amortization (NIBD / EBITDA) to assess the Group's financial flexibility, as well as the ability to assume new debt. This key ratio and the equity ratio also constitute the Group's financial covenants to the banks. See note 4.2 for further information on the Group's covenant requirements. Net interest-bearing debt (NIBD) corresponds to the sum of "Non-current interest bearing liabilities", "Current interest bearing liabilities" and "Cash and cash equivalents" in the statement of financial position. The equity ratio corresponds to the carrying amount of "Total equity" divided by the "total equity and liabilities" in in the consolidated statement of financial position. The Group's equity ratio was 41.6% as of 31.12.2021 (2020: 37.6%). The NIBD / EBITDA ratio was 5.02 as of 31.12.2021 (2020: 5.46). The Group is not in breach with any covenants. Financial risk management The Group’s principal financial liabilities comprise interest-bearing liabilities, and trade and other current liabilities. The main purpose of these financial liabilities is to finance the Group’s operations and investments. The Group’s principal financial assets include trade and other receivables, other financial assets (mainly lease receivables) and cash and short-term deposits that derive directly from its operations. The Group is exposed to a range of risks affecting its financial performance, including market risk, financial risk and credit risk. The Group seeks to minimize potential adverse effects of such risks through sound business practice, risk management and hedging. At the current time the liquidity risk of the Group is assessed to be low based on the operating cash flows, scheduled repayments of debt and the availability of credit facilities. Risk management is carried out by Group management under policies approved by the Board. The Board reviews and agrees policies for managing each of these risks, which are summarized below. (i) CREDIT RISK Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables). As the counterparty to cash and cash equivalents is reputable banks the credit risk associated is considered to be small. The Group manages its credit risks by trading with creditworthy third parties only. It is the Group's policy that customers that want to trade on credit terms are subject to credit verification procedures, which include an assessment of credit rating and review of prior payment issues. The Group obtains sufficient collateral (where appropriate) from customers and ensures that the outstanding amounts do not exceed the set credit limits as means of mitigating the risk of financial loss from defaults. In addition, receivable balances are monitored on an ongoing basis. As a result, the risk that counterparties do not have the financial ability to meet their obligations is considered low in the markets in which the Group operates. The Group does not have significant credit risk related to a single counterparty or several counterparties with similar credit risk. Further, the Group did not provide any guarantees to or on behalf of third-parties liabilities. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 4.1 No agreements have been entered into for set-off/netting of financial instruments. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e., by geographical region, product type, customer type and rating, and coverage by letters of credit or other forms of credit insurance). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. Page 32 4.7 CAPITAL MANAGEMENT AND FINANCIAL RISK 4.7 Capital management and financial risk (Continued) Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31.12.2021 +/- 100 38 234 31.12.2020 +/- 100 29 554 Interest-bearing liabilities 31.12.2021 31.12.2020 Interest-bearing loans and borrowings 3 840 162 2 480 331 Lease liabilities 362 300 475 064 ((ii) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include interest bearing loans and borrowings and cash and cash equivalents. Currency risk represents the risk for fluctuation of future cash flows due to fluctuations in foreign currencies. Interest rate risk The Group is exposed to changes in the market interest rate, as the Group's interest-bearing loans and borrowings have a floating interest rate. Furthermore, changes in market interest rates may affect investment opportunities in future periods. The Group utilises interest rate swaps to hedge its interest rate risks for parts of its non-current interest-bearing liabilities see further decsription in note 4.10. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and bank loans to finance working capital and capital investments, without incurring any significant economical losses. The Group has flexible financing through an overdraft facility which may draw funds (see note 4.2). Additionally, the Group has a positive cash flow from operating activities which limits its liquidity risk. For overview of ageing of financial liabilites refer to note 4.3. Foreign currency instruments are primarely used to fix budgeted cash outflows related to investments denominated in foreign currencies. These cash outflows are capitalised when incurred, and will affect the income statement in future periods through depreciations. Page 33 4.7 Capital management and financial risk (Continued) Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31.12.2021 +/- 100 38 234 31.12.2020 +/- 100 29 554 Interest-bearing liabilities 31.12.2021 31.12.2020 Interest-bearing loans and borrowings 3 840 162 2 480 331 Lease liabilities 362 300 475 064 ((ii) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include interest bearing loans and borrowings and cash and cash equivalents. Currency risk represents the risk for fluctuation of future cash flows due to fluctuations in foreign currencies. Interest rate risk The Group is exposed to changes in the market interest rate, as the Group's interest-bearing loans and borrowings have a floating interest rate. Furthermore, changes in market interest rates may affect investment opportunities in future periods. The Group utilises interest rate swaps to hedge its interest rate risks for parts of its non-current interest-bearing liabilities see further decsription in note 4.10. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and bank loans to finance working capital and capital investments, without incurring any significant economical losses. The Group has flexible financing through an overdraft facility which may draw funds (see note 4.2). Additionally, the Group has a positive cash flow from operating activities which limits its liquidity risk. For overview of ageing of financial liabilites refer to note 4.3. Foreign currency instruments are primarely used to fix budgeted cash outflows related to investments denominated in foreign currencies. These cash outflows are capitalised when incurred, and will affect the income statement in future periods through depreciations. Page 33 FRØY ASA | ANNUAL REPORT 2021 91 4.7 Capital management and financial risk (Continued) Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31.12.2021 +/- 100 38 234 31.12.2020 +/- 100 29 554 Interest-bearing liabilities 31.12.2021 31.12.2020 Interest-bearing loans and borrowings 3 840 162 2 480 331 Lease liabilities 362 300 475 064 ((ii) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include interest bearing loans and borrowings and cash and cash equivalents. Currency risk represents the risk for fluctuation of future cash flows due to fluctuations in foreign currencies. Interest rate risk The Group is exposed to changes in the market interest rate, as the Group's interest-bearing loans and borrowings have a floating interest rate. Furthermore, changes in market interest rates may affect investment opportunities in future periods. The Group utilises interest rate swaps to hedge its interest rate risks for parts of its non-current interest-bearing liabilities see further decsription in note 4.10. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and bank loans to finance working capital and capital investments, without incurring any significant economical losses. The Group has flexible financing through an overdraft facility which may draw funds (see note 4.2). Additionally, the Group has a positive cash flow from operating activities which limits its liquidity risk. For overview of ageing of financial liabilites refer to note 4.3. Foreign currency instruments are primarely used to fix budgeted cash outflows related to investments denominated in foreign currencies. These cash outflows are capitalised when incurred, and will affect the income statement in future periods through depreciations. Page 33 4.7 CAPITAL MANAGEMENT AND FINANCIAL RISK (CONTINUED) 4.7 Capital management and financial risk (Continued) Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31.12.2021 +/- 100 38 234 31.12.2020 +/- 100 29 554 Interest-bearing liabilities 31.12.2021 31.12.2020 Interest-bearing loans and borrowings 3 840 162 2 480 331 Lease liabilities 362 300 475 064 ((ii) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include interest bearing loans and borrowings and cash and cash equivalents. Currency risk represents the risk for fluctuation of future cash flows due to fluctuations in foreign currencies. Interest rate risk The Group is exposed to changes in the market interest rate, as the Group's interest-bearing loans and borrowings have a floating interest rate. Furthermore, changes in market interest rates may affect investment opportunities in future periods. The Group utilises interest rate swaps to hedge its interest rate risks for parts of its non-current interest-bearing liabilities see further decsription in note 4.10. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and bank loans to finance working capital and capital investments, without incurring any significant economical losses. The Group has flexible financing through an overdraft facility which may draw funds (see note 4.2). Additionally, the Group has a positive cash flow from operating activities which limits its liquidity risk. For overview of ageing of financial liabilites refer to note 4.3. Foreign currency instruments are primarely used to fix budgeted cash outflows related to investments denominated in foreign currencies. These cash outflows are capitalised when incurred, and will affect the income statement in future periods through depreciations. Page 33 4.7 Capital management and financial risk (Continued) Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31.12.2021 +/- 100 38 234 31.12.2020 +/- 100 29 554 Interest-bearing liabilities 31.12.2021 31.12.2020 Interest-bearing loans and borrowings 3 840 162 2 480 331 Lease liabilities 362 300 475 064 ((ii) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include interest bearing loans and borrowings and cash and cash equivalents. Currency risk represents the risk for fluctuation of future cash flows due to fluctuations in foreign currencies. Interest rate risk The Group is exposed to changes in the market interest rate, as the Group's interest-bearing loans and borrowings have a floating interest rate. Furthermore, changes in market interest rates may affect investment opportunities in future periods. The Group utilises interest rate swaps to hedge its interest rate risks for parts of its non-current interest-bearing liabilities see further decsription in note 4.10. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and bank loans to finance working capital and capital investments, without incurring any significant economical losses. The Group has flexible financing through an overdraft facility which may draw funds (see note 4.2). Additionally, the Group has a positive cash flow from operating activities which limits its liquidity risk. For overview of ageing of financial liabilites refer to note 4.3. Foreign currency instruments are primarely used to fix budgeted cash outflows related to investments denominated in foreign currencies. These cash outflows are capitalised when incurred, and will affect the income statement in future periods through depreciations. Page 33 4.7 Capital management and financial risk (Continued) Interest rate sensitivity Increase / decrease in basis points Effect on profit before tax (+/-) 31.12.2021 +/- 100 38 234 31.12.2020 +/- 100 29 554 Interest-bearing liabilities 31.12.2021 31.12.2020 Interest-bearing loans and borrowings 3 840 162 2 480 331 Lease liabilities 362 300 475 064 ((ii) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include interest bearing loans and borrowings and cash and cash equivalents. Currency risk represents the risk for fluctuation of future cash flows due to fluctuations in foreign currencies. Interest rate risk The Group is exposed to changes in the market interest rate, as the Group's interest-bearing loans and borrowings have a floating interest rate. Furthermore, changes in market interest rates may affect investment opportunities in future periods. The Group utilises interest rate swaps to hedge its interest rate risks for parts of its non-current interest-bearing liabilities see further decsription in note 4.10. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group monitors its risk to a shortage of funds by monitoring its working capital, overdue trade receivables and establishing credit facilities. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and bank loans to finance working capital and capital investments, without incurring any significant economical losses. The Group has flexible financing through an overdraft facility which may draw funds (see note 4.2). Additionally, the Group has a positive cash flow from operating activities which limits its liquidity risk. For overview of ageing of financial liabilites refer to note 4.3. Foreign currency instruments are primarely used to fix budgeted cash outflows related to investments denominated in foreign currencies. These cash outflows are capitalised when incurred, and will affect the income statement in future periods through depreciations. Page 33 FRØY ASA | ANNUAL REPORT 202192 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.9 Earnings per share 31/12/2021 06.12.2019 - 31.12.2020 Profit or loss attributable to ordinary equity holders - for basic EPS 283 553 191 347 Profit or loss attributable to ordinary equity holders adjusted for the effect of dilution 283 553 191 347 Weighted average number of ordinary shares - for basic EPS 66 422 072 1 789 427 Weighted average number of ordinary shares adjusted for the effect of dilution 66 422 072 1 789 427 Basic EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Diluted EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Earnings per share (EPS) Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The following table reflects the income and share data used in the EPS calculations: 4.8 SHARE CAPITAL AND SHAREHOLDER INFORMATION 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.8 Share capital and shareholder information 31.12.2021 31.12.2020 Ordinary shares, par value 1 NOK per share 86 348 603 69 955 181 Total ordinary shares issued and fully paid 86 348 603 69 955 181 All shares are ordinary and have the equal voting rights and rights to dividends. Changes in share capital 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Beginning of period 69 955 181 300 69 955 181 30 000 Split 1-100 29 700 Issuance of share capital 16 393 422 10 952 206 16 393 422 10 952 206 Conversion of debt - 58 972 975 - 58 972 975 End of period 86 348 603 69 955 181 86 348 603 69 955 181 Number of shares Share capital ACCOUNTING POLICIES Equity and liabilities Financial instruments are classified as liabilities or equity in accordance with the underlying economic substance. Share capital and share premiums are classified as equity. Costs related to equity transactions Transaction costs are deducted from equity, net of associated income tax. Distribution to shareholders The Group recognises a liability to make distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. As per the corporate laws of Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. Reconciliation of equity is shown in the consolidated statement of changes in equity. Dividends The Board has proposed to distribute dividend of MNOK 129.523 for 2021. The dividend per share is NOK 1.5. The Group’s major shareholders: Name Ownership NTS ASA 72,1 % State Street bank and trust comp 4,8 % HSBC Bank Plc 1,2 % Skandinaviska Enskilda Banken AB 1,2 % Gåsø Næringsutvikling AS 0,9 % Trøndelag Helgeland Invest AS 0,8 % Amble Investment AS 0,7 % Verdipapirfondet Pareto Investment 0,7 % Torghatten Aqua AS 0,7 % Skipsinvest AS 0,7 % Page 34 4.9 Earnings per share 31/12/2021 06.12.2019 - 31.12.2020 Profit or loss attributable to ordinary equity holders - for basic EPS 283 553 191 347 Profit or loss attributable to ordinary equity holders adjusted for the effect of dilution 283 553 191 347 Weighted average number of ordinary shares - for basic EPS 66 422 072 1 789 427 Weighted average number of ordinary shares adjusted for the effect of dilution 66 422 072 1 789 427 Basic EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Diluted EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Earnings per share (EPS) Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The following table reflects the income and share data used in the EPS calculations: FRØY ASA | ANNUAL REPORT 2021 93 4.9 Earnings per share 31/12/2021 06.12.2019 - 31.12.2020 Profit or loss attributable to ordinary equity holders - for basic EPS 283 553 191 347 Profit or loss attributable to ordinary equity holders adjusted for the effect of dilution 283 553 191 347 Weighted average number of ordinary shares - for basic EPS 66 422 072 1 789 427 Weighted average number of ordinary shares adjusted for the effect of dilution 66 422 072 1 789 427 Basic EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Diluted EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Earnings per share (EPS) Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The following table reflects the income and share data used in the EPS calculations: 4.9 EARNINGS PER SHARE 4.9 Earnings per share 31/12/2021 06.12.2019 - 31.12.2020 Profit or loss attributable to ordinary equity holders - for basic EPS 283 553 191 347 Profit or loss attributable to ordinary equity holders adjusted for the effect of dilution 283 553 191 347 Weighted average number of ordinary shares - for basic EPS 66 422 072 1 789 427 Weighted average number of ordinary shares adjusted for the effect of dilution 66 422 072 1 789 427 Basic EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Diluted EPS - profit or loss attributable to equity holders of the parent 4.27 106.93 Earnings per share (EPS) Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to ordinary equity by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The following table reflects the income and share data used in the EPS calculations: FRØY ASA | ANNUAL REPORT 202194 4.10 Derivative financial instruments Balance sheet date Notional amount of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest rate swap 31.12.2021 1 238 641 Other non-current liabilities - Interest rate swap 31.12.2020 405 159 Other non-current liabilities - Fair value of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest-bearing liabilities 31.12.2021 2 598 Other non-current liabilities - Interest-bearing liabilities 31.12.2020 15 271 Other non-current liabilities - The effects on the consolidated statement of profit and loss and comprehensive income for 2021 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements 11 595 - The effects on the consolidated statement of profit and loss and comprehensive income for 06.12.2019-31.12.2020 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements -13 921 - ACCOUNTING POLICIES The Group uses derivative financial instruments, specifically interest rate swaps to hedge its interest rate risks for parts of its non-current interest- bearing liabilities. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. Interest rate swaps At 31 December 2021 the Group had interest rate swap agreements in place whereby the Group pays a fixed rate of interest between 0.99%- 3.55% and receives interests at a variable rate on the notional amount linked to NIBOR. This is accounted for as a cash flow hedging instrument. There is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swap match the terms of the loan (i.e., notional amount, maturity, payment and reset dates). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instrument against the changes in fair value of the hedged item attributable to the hedged risk. The hedge ineffectiveness can arise from: - Different interest rate curve applied to discount the hedged item and hedging instrument - Differences in timing of cash flows of the hedged item and hedging instrument - The counterparties’ credit risk differently impacting the fair value movements of the hedging instrument and hedged item The derivatives are classified on the same line as interest-bearing liabilities in the statement of financial position. For information on fair value and principles related to valuation of derivatives, see note 4.6. The impact of the hedging instruments on the statement of financial position is, as follows: The impact of the hedged items on the statement of financial position is, as follows: Page 36 4.10 DERIVATIVE FINANCIAL INSTRUMENTS 5.1 Taxes Current income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Tax payable - 14 968 Adjustment for income tax payable for previous periods - - Change deferred tax/deferred tax assets (ex. OCI effects) 15 991 6 061 Total income tax expense 15 991 21 029 Reconciliation of income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Profit before tax 299 544 251 054 Profit from business subject to Norwegian tonnage tax -229 113 -128 964 Permanent differences 2 256 -26 502 Basis for income tax expense 72 687 95 588 Income tax expense (22%) 15 991 21 029 Total income tax expense 15 991 21 029 ACCOUNTING POLICIES Income tax expense Income tax expense consists of current income tax and change in deferred tax. Current income tax Current income tax is measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized in equity (OCI) and not in the statement of profit or loss. Deferred tax Deferred tax assets and deferred tax liabilities are calculated based on the differences between the basis for tax assets andliabilities and their carrying amounts for financial reporting purposes at the reporting date, with the exception of: - Initial recognition of goodwill, initial recognition of an asset or liability in a transaction which is not a business combination, and is not at the time of the transaction, affects neither the accounting profit nor taxable profit or loss - Taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Shipping taxation The Groups' shipping business is subject to the Norwegian tonnage tax regime. The Norwegian tonnage tax scheme practically results in zero tax on profit from operations, and only a fee/tax based on each ships/vessels net tonnage. Net finance income is subject to 22% tax. The Group does not recognize a deferred tax asset related to net finance losses in the subsidiaries where shipping taxation is relevant. Net tonnage tax is classified as other operating expenses. Page 37 4.10 Derivative financial instruments Balance sheet date Notional amount of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest rate swap 31.12.2021 1 238 641 Other non-current liabilities - Interest rate swap 31.12.2020 405 159 Other non-current liabilities - Fair value of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest-bearing liabilities 31.12.2021 2 598 Other non-current liabilities - Interest-bearing liabilities 31.12.2020 15 271 Other non-current liabilities - The effects on the consolidated statement of profit and loss and comprehensive income for 2021 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements 11 595 - The effects on the consolidated statement of profit and loss and comprehensive income for 06.12.2019-31.12.2020 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements -13 921 - ACCOUNTING POLICIES The Group uses derivative financial instruments, specifically interest rate swaps to hedge its interest rate risks for parts of its non-current interest- bearing liabilities. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. Interest rate swaps At 31 December 2021 the Group had interest rate swap agreements in place whereby the Group pays a fixed rate of interest between 0.99%- 3.55% and receives interests at a variable rate on the notional amount linked to NIBOR. This is accounted for as a cash flow hedging instrument. There is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swap match the terms of the loan (i.e., notional amount, maturity, payment and reset dates). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instrument against the changes in fair value of the hedged item attributable to the hedged risk. The hedge ineffectiveness can arise from: - Different interest rate curve applied to discount the hedged item and hedging instrument - Differences in timing of cash flows of the hedged item and hedging instrument - The counterparties’ credit risk differently impacting the fair value movements of the hedging instrument and hedged item The derivatives are classified on the same line as interest-bearing liabilities in the statement of financial position. For info rmation on fair value and principles related to valuation of derivatives, see note 4.6. The impact of the hedging instruments on the statement of financial position is, as follows: The impact of the hedged items on the statement of financial position is, as follows: Page 36 FRØY ASA | ANNUAL REPORT 2021 95 4.10 Derivative financial instruments Balance sheet date Notional amount of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest rate swap 31.12.2021 1 238 641 Other non-current liabilities - Interest rate swap 31.12.2020 405 159 Other non-current liabilities - Fair value of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest-bearing liabilities 31.12.2021 2 598 Other non-current liabilities - Interest-bearing liabilities 31.12.2020 15 271 Other non-current liabilities - The effects on the consolidated statement of profit and loss and comprehensive income for 2021 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements 11 595 - The effects on the consolidated statement of profit and loss and comprehensive income for 06.12.2019-31.12.2020 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements -13 921 - ACCOUNTING POLICIES The Group uses derivative financial instruments, specifically interest rate swaps to hedge its interest rate risks for parts of its non-current interest- bearing liabilities. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. Interest rate swaps At 31 December 2021 the Group had interest rate swap agreements in place whereby the Group pays a fixed rate of interest between 0.99%- 3.55% and receives interests at a variable rate on the notional amount linked to NIBOR. This is accounted for as a cash flow hedging instrument. There is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swap match the terms of the loan (i.e., notional amount, maturity, payment and reset dates). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instrument against the changes in fair value of the hedged item attributable to the hedged risk. The hedge ineffectiveness can arise from: - Different interest rate curve applied to discount the hedged item and hedging instrument - Differences in timing of cash flows of the hedged item and hedging instrument - The counterparties’ credit risk differently impacting the fair value movements of the hedging instrument and hedged item The derivatives are classified on the same line as interest-bearing liabilities in the statement of financial position. For info rmation on fair value and principles related to valuation of derivatives, see note 4.6. The impact of the hedging instruments on the statement of financial position is, as follows: The impact of the hedged items on the statement of financial position is, as follows: Page 36 5.1 Taxes Current income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Tax payable - 14 968 Adjustment for income tax payable for previous periods - - Change deferred tax/deferred tax assets (ex. OCI effects) 15 991 6 061 Total income tax expense 15 991 21 029 Reconciliation of income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Profit before tax 299 544 251 054 Profit from business subject to Norwegian tonnage tax -229 113 -128 964 Permanent differences 2 256 -26 502 Basis for income tax expense 72 687 95 588 Income tax expense (22%) 15 991 21 029 Total income tax expense 15 991 21 029 ACCOUNTING POLICIES Income tax expense Income tax expense consists of current income tax and change in deferred tax. Current income tax Current income tax is measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized in equity (OCI) and not in the statement of profit or loss. Deferred tax Deferred tax assets and deferred tax liabilities are calculated based on the differences between the basis for tax assets andliabilities and their carrying amounts for financial reporting purposes at the reporting date, with the exception of: - Initial recognition of goodwill, initial recognition of an asset or liability in a transaction which is not a business combination, and is not at the time of the transaction, affects neither the accounting profit nor taxable profit or loss - Taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Shipping taxation The Groups' shipping business is subject to the Norwegian tonnage tax regime. The Norwegian tonnage tax scheme practically results in zero tax on profit from operations, and only a fee/tax based on each ships/vessels net tonnage. Net finance income is subject to 22% tax. The Group does not recognize a deferred tax asset related to net finance losses in the subsidiaries where shipping taxation is relevant. Net tonnage tax is classified as other operating expenses. Page 37 5.1 TAXES 5.1 Taxes Current income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Tax payable - 14 968 Adjustment for income tax payable for previous periods - - Change deferred tax/deferred tax assets (ex. OCI effects) 15 991 6 061 Total income tax expense 15 991 21 029 Reconciliation of income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Profit before tax 299 544 251 054 Profit from business subject to Norwegian tonnage tax -229 113 -128 964 Permanent differences 2 256 -26 502 Basis for income tax expense 72 687 95 588 Income tax expense (22%) 15 991 21 029 Total income tax expense 15 991 21 029 ACCOUNTING POLICIES Income tax expense Income tax expense consists of current income tax and change in deferred tax. Current income tax Current income tax is measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized in equity (OCI) and not in the statement of profit or loss. Deferred tax Deferred tax assets and deferred tax liabilities are calculated based on the differences between the basis for tax assets andliabilities and their carrying amounts for financial reporting purposes at the reporting date, with the exception of: - Initial recognition of goodwill, initial recognition of an asset or liability in a transaction which is not a business combination, and is not at the time of the transaction, affects neither the accounting profit nor taxable profit or loss - Taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Shipping taxation The Groups' shipping business is subject to the Norwegian tonnage tax regime. The Norwegian tonnage tax scheme practically results in zero tax on profit from operations, and only a fee/tax based on each ships/vessels net tonnage. Net finance income is subject to 22% tax. The Group does not recognize a deferred tax asset related to net finance losses in the subsidiaries where shipping taxation is relevant. Net tonnage tax is classified as other operating expenses. Page 37 5.1 Taxes Current income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Tax payable - 14 968 Adjustment for income tax payable for previous periods - - Change deferred tax/deferred tax assets (ex. OCI effects) 15 991 6 061 Total income tax expense 15 991 21 029 Reconciliation of income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Profit before tax 299 544 251 054 Profit from business subject to Norwegian tonnage tax -229 113 -128 964 Permanent differences 2 256 -26 502 Basis for income tax expense 72 687 95 588 Income tax expense (22%) 15 991 21 029 Total income tax expense 15 991 21 029 ACCOUNTING POLICIES Income tax expense Income tax expense consists of current income tax and change in deferred tax. Current income tax Current income tax is measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized in equity (OCI) and not in the statement of profit or loss. Deferred tax Deferred tax assets and deferred tax liabilities are calculated based on the differences between the basis for tax assets andliabilities and their carrying amounts for financial reporting purposes at the reporting date, with the exception of: - Initial recognition of goodwill, initial recognition of an asset or liability in a transaction which is not a business combination, and is not at the time of the transaction, affects neither the accounting profit nor taxable profit or loss - Taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Shipping taxation The Groups' shipping business is subject to the Norwegian tonnage tax regime. The Norwegian tonnage tax scheme practically results in zero tax on profit from operations, and only a fee/tax based on each ships/vessels net tonnage. Net finance income is subject to 22% tax. The Group does not recognize a deferred tax asset related to net finance losses in the subsidiaries where shipping taxation is relevant. Net tonnage tax is classified as other operating expenses. Page 37 5.1 Taxes Current income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Tax payable - 14 968 Adjustment for income tax payable for previous periods - - Change deferred tax/deferred tax assets (ex. OCI effects) 15 991 6 061 Total income tax expense 15 991 21 029 Reconciliation of income tax expense: 31.12.2021 06.12.2019 - 31.12.2020 Profit before tax 299 544 251 054 Profit from business subject to Norwegian tonnage tax -229 113 -128 964 Permanent differences 2 256 -26 502 Basis for income tax expense 72 687 95 588 Income tax expense (22%) 15 991 21 029 Total income tax expense 15 991 21 029 ACCOUNTING POLICIES Income tax expense Income tax expense consists of current income tax and change in deferred tax. Current income tax Current income tax is measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized in equity (OCI) and not in the statement of profit or loss. Deferred tax Deferred tax assets and deferred tax liabilities are calculated based on the differences between the basis for tax assets andliabilities and their carrying amounts for financial reporting purposes at the reporting date, with the exception of: - Initial recognition of goodwill, initial recognition of an asset or liability in a transaction which is not a business combination, and is not at the time of the transaction, affects neither the accounting profit nor taxable profit or loss - Taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Shipping taxation The Groups' shipping business is subject to the Norwegian tonnage tax regime. The Norwegian tonnage tax scheme practically results in zero tax on profit from operations, and only a fee/tax based on each ships/vessels net tonnage. Net finance income is subject to 22% tax. The Group does not recognize a deferred tax asset related to net finance losses in the subsidiaries where shipping taxation is relevant. Net tonnage tax is classified as other operating expenses. Page 37 4.10 Derivative financial instruments Balance sheet date Notional amount of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest rate swap 31.12.2021 1 238 641 Other non-current liabilities - Interest rate swap 31.12.2020 405 159 Other non-current liabilities - Fair value of interest rate swap Line item in the statement of financial position Change in fair value applied when measuring ineffectiveness Interest-bearing liabilities 31.12.2021 2 598 Other non-current liabilities - Interest-bearing liabilities 31.12.2020 15 271 Other non-current liabilities - The effects on the consolidated statement of profit and loss and comprehensive income for 2021 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements 11 595 - The effects on the consolidated statement of profit and loss and comprehensive income for 06.12.2019-31.12.2020 is as follows: Total hedging gain (loss) recognized in OCI Ineffectiveness recognized in the profit or loss Interest rate swap agreements -13 921 - ACCOUNTING POLICIES The Group uses derivative financial instruments, specifically interest rate swaps to hedge its interest rate risks for parts of its non-current interest- bearing liabilities. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. Interest rate swaps At 31 December 2021 the Group had interest rate swap agreements in place whereby the Group pays a fixed rate of interest between 0.99%- 3.55% and receives interests at a variable rate on the notional amount linked to NIBOR. This is accounted for as a cash flow hedging instrument. There is an economic relationship between the hedged item and the hedging instrument as the terms of the interest rate swap match the terms of the loan (i.e., notional amount, maturity, payment and reset dates). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instrument against the changes in fair value of the hedged item attributable to the hedged risk. The hedge ineffectiveness can arise from: - Different interest rate curve applied to discount the hedged item and hedging instrument - Differences in timing of cash flows of the hedged item and hedging instrument - The counterparties’ credit risk differently impacting the fair value movements of the hedging instrument and hedged item The derivatives are classified on the same line as interest-bearing liabilities in the statement of financial position. For info rmation on fair value and principles related to valuation of derivatives, see note 4.6. The impact of the hedging instruments on the statement of financial position is, as follows: The impact of the hedged items on the statement of financial position is, as follows: Page 36 FRØY ASA | ANNUAL REPORT 202196 6.1 Consolidated entities ACCOUNTING POLICIES The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: - Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the inve stee) - Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement(s) with the other vote holders of the investee - Rights arising from other contractual arrangements - The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated. Non-controlling interests are presented as a separate line item within equity in the consolidated statement of financial position. Change in the ownership of a subsidiary, without a loss of control A change in the ownership of a subsidiary, without a loss of control, is accounted for as an equity transaction. The consideration is recognised at fair value and the difference between the consideration and the carrying amount of non-controlling interests is recognised in equity attributable to the equity holders of the parent. Loss of control of a subsidiary If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. Non-controlling interests Non-controlling interests in the consolidated financial statements constitute the non-controlling interest's share of the carrying amount of equity. Upon acquisition, non-controlling interests are measured at their proportionate share of identified assets. In 2021 the Group acquired the remaining 21,5 % of the voting shares in Polarfjell AS and thereby increasing the Group's owership to 100 % . At the end of 2021 there is no non-controlling interests in the Group. Page 39 5.1 TAXES (CONTINUED) 5.1 Taxes (Continued) Current tax liabilities consist of: 31.12.2021 31.12.2020 Income tax payable for the period as above - 14 968 Tax effect of group contribution to NTS ASA - -6 411 Tonnage tax 61 67 Current tax liabilities 61 8 625 Deferred tax liabilities 31.12.2021 31.12.2020 Property, plant and equipment 150 532 13 347 Right-of-use assets and lease liability 66 786 54 330 Other current assets -70 31 780 Untaxed profit 23 937 29 922 Accounting provisions -230 -27 023 Losses carried forward (including tax credit) -56 737 -13 Basis for deferred tax liabilities 184 218 102 344 Calculated deferred tax liabilities 40 528 22 516 Deferred tax liabilities recognised in balance sheet 40 528 22 516 Changes in deferred tax liabilities 31.12.2021 31.12.2020 Deferred tax liabilities opening balance 22 516 - Recognized in the statement of profit and loss 15 991 6 061 Other changes 2 021 - Effects of acquisitions / disposals - 16 455 Deferred tax liabilities closing balance 40 528 22 516 Ongoing case with Norwegian Tax Authorities At the balance sheet date, there is an ongoing case with the Norwegian Tax Authorities concerning the tonnage tax scheme, and public reimbursements through the net salary scheme. Frøy Rederi AS has received notification of a change in the tax assessment for 2019 and 2020. The notification is justified by the Tax Authorities in that the activities that the company conducts are not covered by the tonnage tax scheme. In a letter dated October 2021, the company disputed the tax authorities' views. On the date of the board's approval of the 2021 accounts, no feedback has been received from the Page 38 5.1 Taxes (Continued) Current tax liabilities consist of: 31.12.2021 31.12.2020 Income tax payable for the period as above - 14 968 Tax effect of group contribution to NTS ASA - -6 411 Tonnage tax 61 67 Current tax liabilities 61 8 625 Deferred tax liabilities 31.12.2021 31.12.2020 Property, plant and equipment 150 532 13 347 Right-of-use assets and lease liability 66 786 54 330 Other current assets -70 31 780 Untaxed profit 23 937 29 922 Accounting provisions -230 -27 023 Losses carried forward (including tax credit) -56 737 -13 Basis for deferred tax liabilities 184 218 102 344 Calculated deferred tax liabilities 40 528 22 516 Deferred tax liabilities recognised in balance sheet 40 528 22 516 Changes in deferred tax liabilities 31.12.2021 31.12.2020 Deferred tax liabilities opening balance 22 516 - Recognized in the statement of profit and loss 15 991 6 061 Other changes 2 021 - Effects of acquisitions / disposals - 16 455 Deferred tax liabilities closing balance 40 528 22 516 Ongoing case with Norwegian Tax Authorities At the balance sheet date, there is an ongoing case with the Norwegian Tax Authorities concerning the tonnage tax scheme, and public reimbursements through the net salary scheme. Frøy Rederi AS has received notification of a change in the tax assessment for 2019 and 2020. The notification is justified by the Tax Authorities in that the activities that the company conducts are not covered by the tonnage tax scheme. In a letter dated October 2021, the company disputed the tax authorities' views. On the date of the board's approval of the 2021 accounts, no feedback has been received from the Page 38 6.1 Consolidated entities ACCOUNTING POLICIES The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: - Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the inve stee) - Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement(s) with the other vote holders of the investee - Rights arising from other contractual arrangements - The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated. Non-controlling interests are presented as a separate line item within equity in the consolidated statement of financial position. Change in the ownership of a subsidiary, without a loss of control A change in the ownership of a subsidiary, without a loss of control, is accounted for as an equity transaction. The consideration is recognised at fair value and the difference between the consideration and the carrying amount of non-controlling interests is recognised in equity attributable to the equity holders of the parent. Loss of control of a subsidiary If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. Non-controlling interests Non-controlling interests in the consolidated financial statements constitute the non-controlling interest's share of the carrying amount of equity. Upon acquisition, non-controlling interests are measured at their proportionate share of identified assets. In 2021 the Group acquired the remaining 21,5 % of the voting shares in Polarfjell AS and thereby increasing the Group's owership to 100 % . At the end of 2021 there is no non-controlling interests in the Group. Page 39 Ongoing case with Norwegian Tax Authories At the balance sheet date, there is an ongoing case with the Norwegian Tax Authories concerning the tonnage tax scheme, and public reimbursements through the net salary scheme. Frøy Rederi AS has received nocaon of a change in the tax assessment for 2019 and 2020. The nocaon is jused by the Tax Authories in that the acvies that the company conducts are not covered by the tonnage tax scheme. In a leer dated October 2021, the company disputed the tax authories’ views. On the date of the board’s approval of the 2021 accounts, no feedback has been received from the tax authories on the company’s interpretaon of the rules. FRØY ASA | ANNUAL REPORT 2021 97 6.1 Consolidated entities ACCOUNTING POLICIES The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: - Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the inve stee) - Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement(s) with the other vote holders of the investee - Rights arising from other contractual arrangements - The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated. Non-controlling interests are presented as a separate line item within equity in the consolidated statement of financial position. Change in the ownership of a subsidiary, without a loss of control A change in the ownership of a subsidiary, without a loss of control, is accounted for as an equity transaction. The consideration is recognised at fair value and the difference between the consideration and the carrying amount of non-controlling interests is recognised in equity attributable to the equity holders of the parent. Loss of control of a subsidiary If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. Non-controlling interests Non-controlling interests in the consolidated financial statements constitute the non-controlling interest's share of the carrying amount of equity. Upon acquisition, non-controlling interests are measured at their proportionate share of identified assets. In 2021 the Group acquired the remaining 21,5 % of the voting shares in Polarfjell AS and thereby increasing the Group's owership to 100 % . At the end of 2021 there is no non-controlling interests in the Group. Page 39 6.1 CONSOLIDATED ENTITIES 6.1 Consolidated entities ACCOUNTING POLICIES The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: - Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the inve stee) - Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement(s) with the other vote holders of the investee - Rights arising from other contractual arrangements - The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated. Non-controlling interests are presented as a separate line item within equity in the consolidated statement of financial position. Change in the ownership of a subsidiary, without a loss of control A change in the ownership of a subsidiary, without a loss of control, is accounted for as an equity transaction. The consideration is recognised at fair value and the difference between the consideration and the carrying amount of non-controlling interests is recognised in equity attributable to the equity holders of the parent. Loss of control of a subsidiary If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. Non-controlling interests Non-controlling interests in the consolidated financial statements constitute the non-controlling interest's share of the carrying amount of equity. Upon acquisition, non-controlling interests are measured at their proportionate share of identified assets. In 2021 the Group acquired the remaining 21,5 % of the voting shares in Polarfjell AS and thereby increasing the Group's owership to 100 % . At the end of 2021 there is no non-controlling interests in the Group. Page 39 FRØY ASA | ANNUAL REPORT 202198 6.1 CONSOLIDATED ENTITIES (CONTINUED) 6.1 Consolidated entities (Continued) Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2021 Profit before tax 2021 Frøy Akvaservice AS Norway Service Vessels 100,0 % 100,0 % 182 678 43 202 Frøy Akvaressurs AS Norway Service Vessels 100,0 % 100,0 % 177 811 28 511 Frøy Vest AS Norway Service Vessels 100,0 % 100,0 % 55 331 15 324 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 44 224 16 678 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 483 601 63 415 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 10 041 -9 009 Frøy Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 118 560 12 676 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 908 2 586 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 462 438 13 661 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 35 058 12 493 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 91 730 8 814 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 101 172 17 443 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 49 042 14 808 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 130 224 510 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 43 715 7 127 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 89 624 62 362 Polarfjell AS ** Norway Wellboat 100,0 % 100,0 % 133 172 14 496 MS Kristiansund AS Norway Wellboat 100,0 % 100,0 % 90 074 1 126 MS Åsværfjord AS Norway Wellboat 100,0 % 100,0 % 108 516 667 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA ** In 2021, the groups acquired the remaining 21.5% of the voting shares, increasing the group ownership to 100%. Consolidated entities 31.12.2020 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2020 Profit before tax 2020 Frøy Akvaservice AS ** Norway Service Vessels 100,0 % 100,0 % 163 347 69 523 Frøy Akvaressurs AS ** Norway Service Vessels 100,0 % 100,0 % 149 301 41 952 Frøy Vest AS ** Norway Service Vessels 100,0 % 100,0 % 67 162 12 074 Stava Sjø AS ** Norway Service Vessels 100,0 % 100,0 % 13 233 6 518 Evja AS ** Norway Non-allocated 100,0 % 100,0 % 8 062 493 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 38 287 18 638 NCE AS ** Norway Service Vessels 100,0 % 100,0 % 96 638 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 390 185 76 028 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 9 051 4 508 NTS Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 105 896 7 022 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 124 3 211 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 448 793 13 152 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 22 567 9 403 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 82 919 -3 078 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 83 733 -11 617 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 34 235 10 795 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 4 -26 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 36 589 8 567 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 27 264 7 528 Polarfjell AS Norway Wellboat 78,5 % 78,5 % 118 679 13 542 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. In 2020, the Group acquired the remaining 13.7% of the voting shares, increasing the group ownership to 100%. ** In 2020, the groups acquired the remaining 17.5% of the voting shares, increasing the group ownership to 100%. The financial information in the below table is based on amounts according to NGAAP before intercompany eliminations. Page 40 6.2 Business combinations ACCOUNTING POLICIES A business combination is as a transaction or other event in which an acquirer obtains control of one or more businesses. A business consists of inputs and processes applied to those inputs that have the ability to create outputs. Determining whether a particular set of assets and activities is a business should be based on whether the integrated set is capable of being conducted and managed as a business by a market participant. Business combinations are accounted for according to IFRS 3 using the acquisition method, also called purchase price allocation (PPA). The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value according to IFRS 13, and the amount of any non- controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in other operating expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at tihe acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments: Classification, is measured at fair value with the changes in fair value recognised in the statement of comprehensive income. Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment. Reference is made to note 3.2 for an overview of the Group's goodwill and note 3.4 gives an overview of the Group's CGUs and annual impairment testing of the CGU to which goodwill is allocated. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS In a business combination, the assets acquired and liabilities assumed are valued at fair value at the time of acquisition. The various assets and liabilities are valued on the basis of different models, requiring estimates and assumptions to be made. Goodwill is the residual in this type of purchase price allocation. Errors in estimates and assumptions can lead to an error in the split of the value between the various assets and liabilities incl. goodwill, but the sum of the total excess values will always be consistent with the purchase price paid. The useful lives of the intangible assets acquired in a business combination are assessed as either finite or indefinite and may in some cases involve considerable judgements. Intangible assets with indefinite useful lives are initially measured at fair value and subsequently tested for impairment by assessing the recoverable amount of each CGU (or group of CGUs) to which the intangible assets relates. Reference to note 3.4. Intangible assets acquired with finite useful lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The following assets outside of goodwill were identified in the Frøy ASA business combination in 2020, including management's expectation of economic useful life: Service vessels - 10-20 years Wellboats - 16-25 years Further details on the Frøy ASA acquisition are provided below. According to IFRS 3, goodwill is to be allocated at the acquisition date, to each of the acquirers CGU’s, or groups of CGU’s, which are expected to benefit from the business combination. This can include existing CGU’s of the acquirer irrespective of whether other assets or liabilities of the acquirer are assigned to those units. Each unit or group of units to which goodwill is allocated should; - represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, and - not be larger than an operating segment determined in accordance with IFRS 8 Operating Segments. Page 41 6.1 Consolidated entities (Continued) Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2021 Profit before tax 2021 Frøy Akvaservice AS Norway Service Vessels 100,0 % 100,0 % 182 678 43 202 Frøy Akvaressurs AS Norway Service Vessels 100,0 % 100,0 % 177 811 28 511 Frøy Vest AS Norway Service Vessels 100,0 % 100,0 % 55 331 15 324 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 44 224 16 678 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 483 601 63 415 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 10 041 -9 009 Frøy Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 118 560 12 676 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 908 2 586 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 462 438 13 661 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 35 058 12 493 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 91 730 8 814 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 101 172 17 443 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 49 042 14 808 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 130 224 510 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 43 715 7 127 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 89 624 62 362 Polarfjell AS ** Norway Wellboat 100,0 % 100,0 % 133 172 14 496 MS Kristiansund AS Norway Wellboat 100,0 % 100,0 % 90 074 1 126 MS Åsværfjord AS Norway Wellboat 100,0 % 100,0 % 108 516 667 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA ** In 2021, the groups acquired the remaining 21.5% of the voting shares, increasing the group ownership to 100%. Consolidated entities 31.12.2020 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2020 Profit before tax 2020 Frøy Akvaservice AS ** Norway Service Vessels 100,0 % 100,0 % 163 347 69 523 Frøy Akvaressurs AS ** Norway Service Vessels 100,0 % 100,0 % 149 301 41 952 Frøy Vest AS ** Norway Service Vessels 100,0 % 100,0 % 67 162 12 074 Stava Sjø AS ** Norway Service Vessels 100,0 % 100,0 % 13 233 6 518 Evja AS ** Norway Non-allocated 100,0 % 100,0 % 8 062 493 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 38 287 18 638 NCE AS ** Norway Service Vessels 100,0 % 100,0 % 96 638 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 390 185 76 028 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 9 051 4 508 NTS Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 105 896 7 022 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 124 3 211 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 448 793 13 152 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 22 567 9 403 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 82 919 -3 078 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 83 733 -11 617 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 34 235 10 795 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 4 -26 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 36 589 8 567 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 27 264 7 528 Polarfjell AS Norway Wellboat 78,5 % 78,5 % 118 679 13 542 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. In 2020, the Group acquired the remaining 13.7% of the voting shares, increasing the group ownership to 100%. ** In 2020, the groups acquired the remaining 17.5% of the voting shares, increasing the group ownership to 100%. The financial information in the below table is based on amounts according to NGAAP before intercompany eliminations. Page 40 6.1 Consolidated entities (Continued) Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2021 Profit before tax 2021 Frøy Akvaservice AS Norway Service Vessels 100,0 % 100,0 % 182 678 43 202 Frøy Akvaressurs AS Norway Service Vessels 100,0 % 100,0 % 177 811 28 511 Frøy Vest AS Norway Service Vessels 100,0 % 100,0 % 55 331 15 324 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 44 224 16 678 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 483 601 63 415 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 10 041 -9 009 Frøy Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 118 560 12 676 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 908 2 586 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 462 438 13 661 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 35 058 12 493 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 91 730 8 814 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 101 172 17 443 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 49 042 14 808 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 130 224 510 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 43 715 7 127 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 89 624 62 362 Polarfjell AS ** Norway Wellboat 100,0 % 100,0 % 133 172 14 496 MS Kristiansund AS Norway Wellboat 100,0 % 100,0 % 90 074 1 126 MS Åsværfjord AS Norway Wellboat 100,0 % 100,0 % 108 516 667 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA ** In 2021, the groups acquired the remaining 21.5% of the voting shares, increasing the group ownership to 100%. Consolidated entities 31.12.2020 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2020 Profit before tax 2020 Frøy Akvaservice AS ** Norway Service Vessels 100,0 % 100,0 % 163 347 69 523 Frøy Akvaressurs AS ** Norway Service Vessels 100,0 % 100,0 % 149 301 41 952 Frøy Vest AS ** Norway Service Vessels 100,0 % 100,0 % 67 162 12 074 Stava Sjø AS ** Norway Service Vessels 100,0 % 100,0 % 13 233 6 518 Evja AS ** Norway Non-allocated 100,0 % 100,0 % 8 062 493 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 38 287 18 638 NCE AS ** Norway Service Vessels 100,0 % 100,0 % 96 638 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 390 185 76 028 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 9 051 4 508 NTS Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 105 896 7 022 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 124 3 211 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 448 793 13 152 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 22 567 9 403 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 82 919 -3 078 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 83 733 -11 617 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 34 235 10 795 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 4 -26 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 36 589 8 567 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 27 264 7 528 Polarfjell AS Norway Wellboat 78,5 % 78,5 % 118 679 13 542 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. In 2020, the Group acquired the remaining 13.7% of the voting shares, increasing the group ownership to 100%. ** In 2020, the groups acquired the remaining 17.5% of the voting shares, increasing the group ownership to 100%. The financial information in the below table is based on amounts according to NGAAP before intercompany eliminations. Page 40 FRØY ASA | ANNUAL REPORT 2021 99 6.2 BUSINESS COMBINATIONS 6.1 Consolidated entities (Continued) Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2021 Profit before tax 2021 Frøy Akvaservice AS Norway Service Vessels 100,0 % 100,0 % 182 678 43 202 Frøy Akvaressurs AS Norway Service Vessels 100,0 % 100,0 % 177 811 28 511 Frøy Vest AS Norway Service Vessels 100,0 % 100,0 % 55 331 15 324 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 44 224 16 678 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 483 601 63 415 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 10 041 -9 009 Frøy Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 118 560 12 676 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 908 2 586 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 462 438 13 661 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 35 058 12 493 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 91 730 8 814 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 101 172 17 443 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 49 042 14 808 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 130 224 510 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 43 715 7 127 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 89 624 62 362 Polarfjell AS ** Norway Wellboat 100,0 % 100,0 % 133 172 14 496 MS Kristiansund AS Norway Wellboat 100,0 % 100,0 % 90 074 1 126 MS Åsværfjord AS Norway Wellboat 100,0 % 100,0 % 108 516 667 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA ** In 2021, the groups acquired the remaining 21.5% of the voting shares, increasing the group ownership to 100%. Consolidated entities 31.12.2020 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2020 Profit before tax 2020 Frøy Akvaservice AS ** Norway Service Vessels 100,0 % 100,0 % 163 347 69 523 Frøy Akvaressurs AS ** Norway Service Vessels 100,0 % 100,0 % 149 301 41 952 Frøy Vest AS ** Norway Service Vessels 100,0 % 100,0 % 67 162 12 074 Stava Sjø AS ** Norway Service Vessels 100,0 % 100,0 % 13 233 6 518 Evja AS ** Norway Non-allocated 100,0 % 100,0 % 8 062 493 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 38 287 18 638 NCE AS ** Norway Service Vessels 100,0 % 100,0 % 96 638 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 390 185 76 028 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 9 051 4 508 NTS Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 105 896 7 022 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 124 3 211 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 448 793 13 152 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 22 567 9 403 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 82 919 -3 078 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 83 733 -11 617 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 34 235 10 795 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 4 -26 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 36 589 8 567 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 27 264 7 528 Polarfjell AS Norway Wellboat 78,5 % 78,5 % 118 679 13 542 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. In 2020, the Group acquired the remaining 13.7% of the voting shares, increasing the group ownership to 100%. ** In 2020, the groups acquired the remaining 17.5% of the voting shares, increasing the group ownership to 100%. The financial information in the below table is based on amounts according to NGAAP before intercompany eliminations. Page 40 6.2 Business combinations ACCOUNTING POLICIES A business combination is as a transaction or other event in which an acquirer obtains control of one or more businesses. A business consists of inputs and processes applied to those inputs that have the ability to create outputs. Determining whether a particular set of assets and activities is a business should be based on whether the integrated set is capable of being conducted and managed as a business by a market participant. Business combinations are accounted for according to IFRS 3 using the acquisition method, also called purchase price allocation (PPA). The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value according to IFRS 13, and the amount of any non- controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in other operating expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at tihe acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments: Classification, is measured at fair value with the changes in fair value recognised in the statement of comprehensive income. Goodwill arises in a business combination when the fair value of consideration transferred exceeds the fair value of identifiable assets acquired less the fair value of identifiable liabilities assumed. Goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units, and tested subsequently for impairment. Reference is made to note 3.2 for an overview of the Group's goodwill and note 3.4 gives an overview of the Group's CGUs and annual impairment testing of the CGU to which goodwill is allocated. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS In a business combination, the assets acquired and liabilities assumed are valued at fair value at the time of acquisition. The various assets and liabilities are valued on the basis of different models, requiring estimates and assumptions to be made. Goodwill is the residual in this type of purchase price allocation. Errors in estimates and assumptions can lead to an error in the split of the value between the various assets and liabilities incl. goodwill, but the sum of the total excess values will always be consistent with the purchase price paid. The useful lives of the intangible assets acquired in a business combination are assessed as either finite or indefinite and may in some cases involve considerable judgements. Intangible assets with indefinite useful lives are initially measured at fair value and subsequently tested for impairment by assessing the recoverable amount of each CGU (or group of CGUs) to which the intangible assets relates. Reference to note 3.4. Intangible assets acquired with finite useful lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The following assets outside of goodwill were identified in the Frøy ASA business combination in 2020, including management's expectation of economic useful life: Service vessels - 10-20 years Wellboats - 16-25 years Further details on the Frøy ASA acquisition are provided below. According to IFRS 3, goodwill is to be allocated at the acquisition date, to each of the acquirers CGU’s, or groups of CGU’s, which are expected to benefit from the business combination. This can include existing CGU’s of the acquirer irrespective of whether other assets or liabilities of the acquirer are assigned to those units. Each unit or group of units to which goodwill is allocated should; - represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, and - not be larger than an operating segment determined in accordance with IFRS 8 Operating Segments. Page 41 6.1 Consolidated entities (Continued) Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2021 Profit before tax 2021 Frøy Akvaservice AS Norway Service Vessels 100,0 % 100,0 % 182 678 43 202 Frøy Akvaressurs AS Norway Service Vessels 100,0 % 100,0 % 177 811 28 511 Frøy Vest AS Norway Service Vessels 100,0 % 100,0 % 55 331 15 324 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 44 224 16 678 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 483 601 63 415 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 10 041 -9 009 Frøy Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 118 560 12 676 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 908 2 586 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 462 438 13 661 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 35 058 12 493 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 91 730 8 814 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 101 172 17 443 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 49 042 14 808 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 130 224 510 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 43 715 7 127 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 89 624 62 362 Polarfjell AS ** Norway Wellboat 100,0 % 100,0 % 133 172 14 496 MS Kristiansund AS Norway Wellboat 100,0 % 100,0 % 90 074 1 126 MS Åsværfjord AS Norway Wellboat 100,0 % 100,0 % 108 516 667 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA ** In 2021, the groups acquired the remaining 21.5% of the voting shares, increasing the group ownership to 100%. Consolidated entities 31.12.2020 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2020 Profit before tax 2020 Frøy Akvaservice AS ** Norway Service Vessels 100,0 % 100,0 % 163 347 69 523 Frøy Akvaressurs AS ** Norway Service Vessels 100,0 % 100,0 % 149 301 41 952 Frøy Vest AS ** Norway Service Vessels 100,0 % 100,0 % 67 162 12 074 Stava Sjø AS ** Norway Service Vessels 100,0 % 100,0 % 13 233 6 518 Evja AS ** Norway Non-allocated 100,0 % 100,0 % 8 062 493 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 38 287 18 638 NCE AS ** Norway Service Vessels 100,0 % 100,0 % 96 638 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 390 185 76 028 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 9 051 4 508 NTS Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 105 896 7 022 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 124 3 211 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 448 793 13 152 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 22 567 9 403 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 82 919 -3 078 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 83 733 -11 617 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 34 235 10 795 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 4 -26 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 36 589 8 567 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 27 264 7 528 Polarfjell AS Norway Wellboat 78,5 % 78,5 % 118 679 13 542 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. In 2020, the Group acquired the remaining 13.7% of the voting shares, increasing the group ownership to 100%. ** In 2020, the groups acquired the remaining 17.5% of the voting shares, increasing the group ownership to 100%. The financial information in the below table is based on amounts according to NGAAP before intercompany eliminations. Page 40 6.1 Consolidated entities (Continued) Consolidated entities 31.12.2021 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2021 Profit before tax 2021 Frøy Akvaservice AS Norway Service Vessels 100,0 % 100,0 % 182 678 43 202 Frøy Akvaressurs AS Norway Service Vessels 100,0 % 100,0 % 177 811 28 511 Frøy Vest AS Norway Service Vessels 100,0 % 100,0 % 55 331 15 324 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 44 224 16 678 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 483 601 63 415 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 10 041 -9 009 Frøy Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 118 560 12 676 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 908 2 586 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 462 438 13 661 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 35 058 12 493 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 91 730 8 814 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 101 172 17 443 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 49 042 14 808 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 130 224 510 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 43 715 7 127 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 89 624 62 362 Polarfjell AS ** Norway Wellboat 100,0 % 100,0 % 133 172 14 496 MS Kristiansund AS Norway Wellboat 100,0 % 100,0 % 90 074 1 126 MS Åsværfjord AS Norway Wellboat 100,0 % 100,0 % 108 516 667 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA ** In 2021, the groups acquired the remaining 21.5% of the voting shares, increasing the group ownership to 100%. Consolidated entities 31.12.2020 Country of incorporation Business Group's ownership share Group's voting ownership share Equity 31.12.2020 Profit before tax 2020 Frøy Akvaservice AS ** Norway Service Vessels 100,0 % 100,0 % 163 347 69 523 Frøy Akvaressurs AS ** Norway Service Vessels 100,0 % 100,0 % 149 301 41 952 Frøy Vest AS ** Norway Service Vessels 100,0 % 100,0 % 67 162 12 074 Stava Sjø AS ** Norway Service Vessels 100,0 % 100,0 % 13 233 6 518 Evja AS ** Norway Non-allocated 100,0 % 100,0 % 8 062 493 Frøy Nord AS Norway Service Vessels 100,0 % 100,0 % 38 287 18 638 NCE AS ** Norway Service Vessels 100,0 % 100,0 % 96 638 Frøy Rederi AS Norway Wellboat 100,0 % 100,0 % 390 185 76 028 Fisketransport AS Norway Wellboat 100,0 % 100,0 % 9 051 4 508 NTS Shipping AS Norway Shipping Vessels 100,0 % 100,0 % 105 896 7 022 NTS Management AS Norway Non-allocated 100,0 % 100,0 % 11 124 3 211 Norsk Fisketransport AS Norway Wellboat 100,0 % 100,0 % 448 793 13 152 MS Dønnland AS Norway Wellboat 100,0 % 100,0 % 22 567 9 403 MS Havtrans AS Norway Wellboat 100,0 % 100,0 % 82 919 -3 078 MS Namsos AS Norway Wellboat 100,0 % 100,0 % 83 733 -11 617 MS Novatrans AS Norway Wellboat 100,0 % 100,0 % 34 235 10 795 MS Reisa AS Norway Wellboat 100,0 % 100,0 % 4 -26 MS Viknatrans AS Norway Wellboat 100,0 % 100,0 % 36 589 8 567 MS Veidnes AS Norway Wellboat 100,0 % 100,0 % 27 264 7 528 Polarfjell AS Norway Wellboat 78,5 % 78,5 % 118 679 13 542 Frøy Nord AS is owned 50% by Akvaservice AS and 50% by Frøy ASA. In 2020, the Group acquired the remaining 13.7% of the voting shares, increasing the group ownership to 100%. ** In 2020, the groups acquired the remaining 17.5% of the voting shares, increasing the group ownership to 100%. The financial information in the below table is based on amounts according to NGAAP before intercompany eliminations. Page 40 FRØY ASA | ANNUAL REPORT 2021100 6.2 BUSINESS COMBINATIONS (CONTINUED) 6.2 Business combinations (Continued) Fair value ASSETS Non-current assets Intangible assets - Property, plant and equipment 1 693 934 Right-of-use assets 547 250 Other financial assets 1 421 049 Total non-current assets 3 662 233 Current assets Inventories 3 064 Trade and other receivables 157 909 Cash and cash equivalents 55 253 Total current assets 216 226 Total assets 3 878 459 Non-current liabilities Deferred tax liability 16 308 Non-current interest-bearing liabilities 1 179 731 Non-current lease liabilities 388 482 Total non-current liabilities 1 584 521 Current liabilities Trade and other payables 58 869 Current interest-bearing liabilities 4 184 Current lease liabilities 101 019 Income tax payable 10 202 Dividends 50 000 Current provisions and other liabilities 60 426 Total current liabilities 284 700 Total liabilities 1 869 221 Business combinatons in 2021 There has been no business combinations during 2021. Business combinaton in 2020 Frøy ASA On 3 April 2020, the Group acquired 100% of the voting shares of Frøy ASA. Frøy ASA provides maritime services and lease of s hips and vessels with crew. The company provides maritime service such as inspections, maintenance, cleaning, freight and towing for businesses and private c ustomers. The company is part of the service vessel, wellboat and non -allocated segments after the acquisition. The Group acquired this business to enhance the combined value of the Group from the possible benefits of being a larger service provider and with a more diversified fleet, being present at a larger strech of the Norwegian coastline. The transaction was recorded as a business combination in accordance with IFRS 3. The acquisition date corresponds to the dat e when Frøy ASA obtained control of the legal entities, April 3, 2020. The acquisition -date fair value of the total consideration transferred was MNOK 2,628.18 settled in shares in NTS ASA. The below table illustrates the fair values of the identifiable assets in Frøy ASA at the acquisition date: Page 42 6.2 Business combinations (Continued) Total identifiable net assets at fair value 2 009 237 Equity holders of the parent 1 940 816 Non-controlling interest 68 421 Purchase consideration 2 628 178 Goodwill arising on acquisition 687 361 Purchase consideration Contingent consideration - Shares in NTS ASA - consideration 2 628 178 Total consideration 2 628 178 Goodwill as a result of deferred tax - technical goodwill 8 477 Goodwill related to synergies & employees - residual goodwill 678 884 Net goodwill from acquisition 687 361 Analysis of cash flows on acquisition Net cash acquired (included in the cash flows from operating activities) 55 253 Cash paid (included in the cash flows from investing activities) - Net cash flow from acquisition 55 253 Provision for deferred tax is made for the difference between acquisition cost and acquired tax base in accordance with IAS 1 2. Offsetting entry of this non-cash deferred tax is technical goodwill. The remaining goodwill of MNOK 679 comprises the value of expected synergies arising from the acquisition and assembled workforce, which is not separately recognised. The identification of CGU's in the Frøy ASA acquisition was made based on operating segments, as these were seen as the most efficient way to monitor goodwill going forward, and at the same time representing the minimum requirement. The segments Wellboat and Service Vessels were allocated goodwill from the aquisition, based on the assesment that these segments will have the highest potential for positive benefits from the aqu isition related to operational synergies. None of the goodwill recognised is expected to be deductible for income tax purposes. Page 43 6.2 Business combinations (Continued) Fair value ASSETS Non-current assets Intangible assets - Property, plant and equipment 1 693 934 Right-of-use assets 547 250 Other financial assets 1 421 049 Total non-current assets 3 662 233 Current assets Inventories 3 064 Trade and other receivables 157 909 Cash and cash equivalents 55 253 Total current assets 216 226 Total assets 3 878 459 Non-current liabilities Deferred tax liability 16 308 Non-current interest-bearing liabilities 1 179 731 Non-current lease liabilities 388 482 Total non-current liabilities 1 584 521 Current liabilities Trade and other payables 58 869 Current interest-bearing liabilities 4 184 Current lease liabilities 101 019 Income tax payable 10 202 Dividends 50 000 Current provisions and other liabilities 60 426 Total current liabilities 284 700 Total liabilities 1 869 221 Business combinatons in 2021 There has been no business combinations during 2021. Business combinaton in 2020 Frøy ASA On 3 April 2020, the Group acquired 100% of the voting shares of Frøy ASA. Frøy ASA provides maritime services and lease of s hips and vessels with crew. The company provides maritime service such as inspections, maintenance, cleaning, freight and towing for businesses and private c ustomers. The company is part of the service vessel, wellboat and non -allocated segments after the acquisition. The Group acquired this business to enhance the combined value of the Group from the possible benefits of being a larger service provider and with a more diversified fleet, being present at a larger strech of the Norwegian coastline. The transaction was recorded as a business combination in accordance with IFRS 3. The acquisition date corresponds to the dat e when Frøy ASA obtained control of the legal entities, April 3, 2020. The acquisition -date fair value of the total consideration transferred was MNOK 2,628.18 settled in shares in NTS ASA. The below table illustrates the fair values of the identifiable assets in Frøy ASA at the acquisition date: Page 42 6.2 Business combinations (Continued) Fair value ASSETS Non-current assets Intangible assets - Property, plant and equipment 1 693 934 Right-of-use assets 547 250 Other financial assets 1 421 049 Total non-current assets 3 662 233 Current assets Inventories 3 064 Trade and other receivables 157 909 Cash and cash equivalents 55 253 Total current assets 216 226 Total assets 3 878 459 Non-current liabilities Deferred tax liability 16 308 Non-current interest-bearing liabilities 1 179 731 Non-current lease liabilities 388 482 Total non-current liabilities 1 584 521 Current liabilities Trade and other payables 58 869 Current interest-bearing liabilities 4 184 Current lease liabilities 101 019 Income tax payable 10 202 Dividends 50 000 Current provisions and other liabilities 60 426 Total current liabilities 284 700 Total liabilities 1 869 221 Business combinatons in 2021 There has been no business combinations during 2021. Business combinaton in 2020 Frøy ASA On 3 April 2020, the Group acquired 100% of the voting shares of Frøy ASA. Frøy ASA provides maritime services and lease of s hips and vessels with crew. The company provides maritime service such as inspections, maintenance, cleaning, freight and towing for businesses and private c ustomers. The company is part of the service vessel, wellboat and non -allocated segments after the acquisition. The Group acquired this business to enhance the combined value of the Group from the possible benefits of being a larger service provider and with a more diversified fleet, being present at a larger strech of the Norwegian coastline. The transaction was recorded as a business combination in accordance with IFRS 3. The acquisition date corresponds to the dat e when Frøy ASA obtained control of the legal entities, April 3, 2020. The acquisition -date fair value of the total consideration transferred was MNOK 2,628.18 settled in shares in NTS ASA. The below table illustrates the fair values of the identifiable assets in Frøy ASA at the acquisition date: Page 42 6.2 Business combinations (Continued) Fair value ASSETS Non-current assets Intangible assets - Property, plant and equipment 1 693 934 Right-of-use assets 547 250 Other financial assets 1 421 049 Total non-current assets 3 662 233 Current assets Inventories 3 064 Trade and other receivables 157 909 Cash and cash equivalents 55 253 Total current assets 216 226 Total assets 3 878 459 Non-current liabilities Deferred tax liability 16 308 Non-current interest-bearing liabilities 1 179 731 Non-current lease liabilities 388 482 Total non-current liabilities 1 584 521 Current liabilities Trade and other payables 58 869 Current interest-bearing liabilities 4 184 Current lease liabilities 101 019 Income tax payable 10 202 Dividends 50 000 Current provisions and other liabilities 60 426 Total current liabilities 284 700 Total liabilities 1 869 221 Business combinatons in 2021 There has been no business combinations during 2021. Business combinaton in 2020 Frøy ASA On 3 April 2020, the Group acquired 100% of the voting shares of Frøy ASA. Frøy ASA provides maritime services and lease of s hips and vessels with crew. The company provides maritime service such as inspections, maintenance, cleaning, freight and towing for businesses and private c ustomers. The company is part of the service vessel, wellboat and non -allocated segments after the acquisition. The Group acquired this business to enhance the combined value of the Group from the possible benefits of being a larger service provider and with a more diversified fleet, being present at a larger strech of the Norwegian coastline. The transaction was recorded as a business combination in accordance with IFRS 3. The acquisition date corresponds to the dat e when Frøy ASA obtained control of the legal entities, April 3, 2020. The acquisition -date fair value of the total consideration transferred was MNOK 2,628.18 settled in shares in NTS ASA. The below table illustrates the fair values of the identifiable assets in Frøy ASA at the acquisition date: Page 42 FRØY ASA | ANNUAL REPORT 2021 101 6.2 BUSINESS COMBINATIONS (CONTINUED) 6.2 Business combinations (Continued) Total identifiable net assets at fair value 2 009 237 Equity holders of the parent 1 940 816 Non-controlling interest 68 421 Purchase consideration 2 628 178 Goodwill arising on acquisition 687 361 Purchase consideration Contingent consideration - Shares in NTS ASA - consideration 2 628 178 Total consideration 2 628 178 Goodwill as a result of deferred tax - technical goodwill 8 477 Goodwill related to synergies & employees - residual goodwill 678 884 Net goodwill from acquisition 687 361 Analysis of cash flows on acquisition Net cash acquired (included in the cash flows from operating activities) 55 253 Cash paid (included in the cash flows from investing activities) - Net cash flow from acquisition 55 253 Provision for deferred tax is made for the difference between acquisition cost and acquired tax base in accordance with IAS 1 2. Offsetting entry of this non-cash deferred tax is technical goodwill. The remaining goodwill of MNOK 679 comprises the value of expected synergies arising from the acquisition and assembled workforce, which is not separately recognised. The identification of CGU's in the Frøy ASA acquisition was made based on operating segments, as these were seen as the most efficient way to monitor goodwill going forward, and at the same time representing the minimum requirement. The segments Wellboat and Service Vessels were allocated goodwill from the aquisition, based on the assesment that these segments will have the highest potential for positive benefits from the aqu isition related to operational synergies. None of the goodwill recognised is expected to be deductible for income tax purposes. Page 43 FRØY ASA | ANNUAL REPORT 2021102 6.3 ASSOCIATED ENTITIES 6.3 Associated entities Associated entities 31.12.2021 Country of incorporation Ownership share Group's voting ownership share Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % Halten AS Norway 33,4 % 33,4 % Total Summarized statement of financial position as per 31.12.2021 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 9 988 28 854 Non-current assets 1 891 86 675 Liabilities Current liabilities 2 155 5 969 Non-current liabilities 192 32 180 Total equity 9 533 77 380 Summarized statement of profit and loss 2021 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 16 126 79 972 Operating expenses -12 455 -68 033 Net financial items -41 -1 115 Profit (loss) before tax 3 630 10 824 Income tax - -20 Profit (loss) for the period 3 400 10 804 2021 Sikkerhetssenteret Halten AS SUM Group's share of profit (loss) from investments in associates Rørvik AS Share of profit 793 3 618 4 411 Impairment loss - - - Corr. of earlier periodes estimated profit (loss) - 1 070- 1 070- Group's share of profit 2021 793 2 548 3 341 2021 Sikkerhetssenteret Halten AS SUM Group's carrying amount of investments in associates Rørvik AS Carrying amount 01.01 1 400 23 312 24 712 Additions - Addiotions from acquisitions - Share of periodes profit (loss) 793 2 548 3 341 Dividends - Disposals - Group's carrying amount of investments in associates 31.12.2021 2 193 25 860 28 053 * The numbers in the table above are preliminary numbers for 2021. Associated entities 31.12.2020 Country of incorporation Ownership share Group's voting ownership share Group's share of equity Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % 1 400 Halten AS Norway 33,4 % 33,4 % 23 312 Total 24 712 Summarized statement of financial position as per 31.12.2020 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 6 327 87 313 Non-current assets 5 850 33 579 Liabilities Current liabilities 4 952 3 913 Non-current liabilities 1 141 47 225 Total equity 6 078 69 754 Summarized statement of profit and loss 2020 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 9 972 57 823 Operating expenses -8 877 -57 715 Net financial items -95 9 625 Profit (loss) before tax 1 000 9 733 Income tax - - Profit (loss) for the period 1 000 9 733 Group's share of profit for the year 230 3 253 Group's share of profit (loss) for previous periods adjusted for the year -273 -2 444 Total share of profit booked 2020 -43 809 * The numbers in the table above are preliminary numbers for 2020. ACCOUNTING POLICIES Associated entities are entities where the Group has signitificant influence but no control or joint control over the financi al and operating policy decisions of the investee. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investmen t is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill r elating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of comprenhensive income reflects the Group’s share of the results of operations of the associate. Any change i n OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equit y of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losse s resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate or joint ventu re. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive i ncome outside operating profit and represents profit or loss after tax and non -controlling interests in the subsidiaries of the associate. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recogni ses any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of signi ficant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Page 44 6.3 Associated entities Associated entities 31.12.2021 Country of incorporation Ownership share Group's voting ownership share Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % Halten AS Norway 33,4 % 33,4 % Total Summarized statement of financial position as per 31.12.2021 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 9 988 28 854 Non-current assets 1 891 86 675 Liabilities Current liabilities 2 155 5 969 Non-current liabilities 192 32 180 Total equity 9 533 77 380 Summarized statement of profit and loss 2021 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 16 126 79 972 Operating expenses -12 455 -68 033 Net financial items -41 -1 115 Profit (loss) before tax 3 630 10 824 Income tax - -20 Profit (loss) for the period 3 400 10 804 2021 Sikkerhetssenteret Halten AS SUM Group's share of profit (loss) from investments in associates Rørvik AS Share of profit 793 3 618 4 411 Impairment loss - - - Corr. of earlier periodes estimated profit (loss) - 1 070- 1 070- Group's share of profit 2021 793 2 548 3 341 2021 Sikkerhetssenteret Halten AS SUM Group's carrying amount of investments in associates Rørvik AS Carrying amount 01.01 1 400 23 312 24 712 Additions - Addiotions from acquisitions - Share of periodes profit (loss) 793 2 548 3 341 Dividends - Disposals - Group's carrying amount of investments in associates 31.12.2021 2 193 25 860 28 053 * The numbers in the table above are preliminary numbers for 2021. Associated entities 31.12.2020 Country of incorporation Ownership share Group's voting ownership share Group's share of equity Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % 1 400 Halten AS Norway 33,4 % 33,4 % 23 312 Total 24 712 Summarized statement of financial position as per 31.12.2020 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 6 327 87 313 Non-current assets 5 850 33 579 Liabilities Current liabilities 4 952 3 913 Non-current liabilities 1 141 47 225 Total equity 6 078 69 754 Summarized statement of profit and loss 2020 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 9 972 57 823 Operating expenses -8 877 -57 715 Net financial items -95 9 625 Profit (loss) before tax 1 000 9 733 Income tax - - Profit (loss) for the period 1 000 9 733 Group's share of profit for the year 230 3 253 Group's share of profit (loss) for previous periods adjusted for the year -273 -2 444 Total share of profit booked 2020 -43 809 * The numbers in the table above are preliminary numbers for 2020. ACCOUNTING POLICIES Associated entities are entities where the Group has signitificant influence but no control or joint control over the financi al and operating policy decisions of the investee. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investmen t is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill r elating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of comprenhensive income reflects the Group’s share of the results of operations of the associate. Any change i n OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equit y of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losse s resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate or joint ventu re. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive i ncome outside operating profit and represents profit or loss after tax and non -controlling interests in the subsidiaries of the associate. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recogni ses any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of signi ficant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Page 44 6.3 Associated entities Associated entities 31.12.2021 Country of incorporation Ownership share Group's voting ownership share Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % Halten AS Norway 33,4 % 33,4 % Total Summarized statement of financial position as per 31.12.2021 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 9 988 28 854 Non-current assets 1 891 86 675 Liabilities Current liabilities 2 155 5 969 Non-current liabilities 192 32 180 Total equity 9 533 77 380 Summarized statement of profit and loss 2021 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 16 126 79 972 Operating expenses -12 455 -68 033 Net financial items -41 -1 115 Profit (loss) before tax 3 630 10 824 Income tax - -20 Profit (loss) for the period 3 400 10 804 2021 Sikkerhetssenteret Halten AS SUM Group's share of profit (loss) from investments in associates Rørvik AS Share of profit 793 3 618 4 411 Impairment loss - - - Corr. of earlier periodes estimated profit (loss) - 1 070- 1 070- Group's share of profit 2021 793 2 548 3 341 2021 Sikkerhetssenteret Halten AS SUM Group's carrying amount of investments in associates Rørvik AS Carrying amount 01.01 1 400 23 312 24 712 Additions - Addiotions from acquisitions - Share of periodes profit (loss) 793 2 548 3 341 Dividends - Disposals - Group's carrying amount of investments in associates 31.12.2021 2 193 25 860 28 053 * The numbers in the table above are preliminary numbers for 2021. Associated entities 31.12.2020 Country of incorporation Ownership share Group's voting ownership share Group's share of equity Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % 1 400 Halten AS Norway 33,4 % 33,4 % 23 312 Total 24 712 Summarized statement of financial position as per 31.12.2020 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 6 327 87 313 Non-current assets 5 850 33 579 Liabilities Current liabilities 4 952 3 913 Non-current liabilities 1 141 47 225 Total equity 6 078 69 754 Summarized statement of profit and loss 2020 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 9 972 57 823 Operating expenses -8 877 -57 715 Net financial items -95 9 625 Profit (loss) before tax 1 000 9 733 Income tax - - Profit (loss) for the period 1 000 9 733 Group's share of profit for the year 230 3 253 Group's share of profit (loss) for previous periods adjusted for the year -273 -2 444 Total share of profit booked 2020 -43 809 * The numbers in the table above are preliminary numbers for 2020. ACCOUNTING POLICIES Associated entities are entities where the Group has signitificant influence but no control or joint control over the financi al and operating policy decisions of the investee. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investmen t is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill r elating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of comprenhensive income reflects the Group’s share of the results of operations of the associate. Any change i n OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equit y of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losse s resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate or joint ventu re. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive i ncome outside operating profit and represents profit or loss after tax and non -controlling interests in the subsidiaries of the associate. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recogni ses any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of signi ficant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Page 44 FRØY ASA | ANNUAL REPORT 2021 103 6.3 ASSOCIATED ENTITIES (CONTINUED) 6.3 Associated entities Associated entities 31.12.2021 Country of incorporation Ownership share Group's voting ownership share Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % Halten AS Norway 33,4 % 33,4 % Total Summarized statement of financial position as per 31.12.2021 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 9 988 28 854 Non-current assets 1 891 86 675 Liabilities Current liabilities 2 155 5 969 Non-current liabilities 192 32 180 Total equity 9 533 77 380 Summarized statement of profit and loss 2021 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 16 126 79 972 Operating expenses -12 455 -68 033 Net financial items -41 -1 115 Profit (loss) before tax 3 630 10 824 Income tax - -20 Profit (loss) for the period 3 400 10 804 2021 Sikkerhetssenteret Halten AS SUM Group's share of profit (loss) from investments in associates Rørvik AS Share of profit 793 3 618 4 411 Impairment loss - - - Corr. of earlier periodes estimated profit (loss) - 1 070- 1 070- Group's share of profit 2021 793 2 548 3 341 2021 Sikkerhetssenteret Halten AS SUM Group's carrying amount of investments in associates Rørvik AS Carrying amount 01.01 1 400 23 312 24 712 Additions - Addiotions from acquisitions - Share of periodes profit (loss) 793 2 548 3 341 Dividends - Disposals - Group's carrying amount of investments in associates 31.12.2021 2 193 25 860 28 053 * The numbers in the table above are preliminary numbers for 2021. Associated entities 31.12.2020 Country of incorporation Ownership share Group's voting ownership share Group's share of equity Sikkerhetssenteret Rørvik AS Norway 23,0 % 23,0 % 1 400 Halten AS Norway 33,4 % 33,4 % 23 312 Total 24 712 Summarized statement of financial position as per 31.12.2020 Sikkerhetssenteret Rørvik AS Halten AS Assets Current assets 6 327 87 313 Non-current assets 5 850 33 579 Liabilities Current liabilities 4 952 3 913 Non-current liabilities 1 141 47 225 Total equity 6 078 69 754 Summarized statement of profit and loss 2020 Sikkerhetssenteret Rørvik AS Halten AS Total revenue 9 972 57 823 Operating expenses -8 877 -57 715 Net financial items -95 9 625 Profit (loss) before tax 1 000 9 733 Income tax - - Profit (loss) for the period 1 000 9 733 Group's share of profit for the year 230 3 253 Group's share of profit (loss) for previous periods adjusted for the year -273 -2 444 Total share of profit booked 2020 -43 809 * The numbers in the table above are preliminary numbers for 2020. ACCOUNTING POLICIES Associated entities are entities where the Group has signitificant influence but no control or joint control over the financi al and operating policy decisions of the investee. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investmen t is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill r elating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of comprenhensive income reflects the Group’s share of the results of operations of the associate. Any change i n OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equit y of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losse s resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate or joint ventu re. The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive i ncome outside operating profit and represents profit or loss after tax and non -controlling interests in the subsidiaries of the associate. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recogni ses any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of signi ficant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Page 44 FRØY ASA | ANNUAL REPORT 2021104 7.1 Remuneration to Management and the Board 2 4 Variable remuneration Year Fixed salary Fees Benefits 2021 1874 8 40 1914 8 100% 0% 2020 1007 8 50 1057 8 99% 1% n/a n/a 2021 1474 241 4 32 1747 4 100% 0% 2020 948 211 4 0 1159 4 100% 0% n/a n/a 2021 1950 9 39 1989 9 100% 0% 2020 1950 98 2048 0 100% 0% n/a n/a 2021 347 347 0 100% 0% 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 1184 85 13 24 1293 13 99% 1% 2020 1260 98 12 63 1421 12 99% 1% n/a n/a 2021 1065 9 20 1085 9 99% 1% 2020 1056 9 53 1109 9 99% 1% n/a n/a 2021 1028 9 21 1049 9 99% 1% 2020 997 21 50 1047 21 98% 2% n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a * Employed by the Group from 1 December 2020 until 31 october 2021. The disclosed amount in the table above consists of agreed fixed yearly salary for both 2020 and 2021. Pension represent the premium paid for defined contribution plans. Remuneration to executive management Executive management 2021 1 5 6 Helge Gåsø, CEO Frøy ASA Anders Gåsø, COO Arne J. Rødsjø, CFO 01.01.2021 - 31.10.2021 Tore Helgesen, interim CFO 01.10.2021 -> Oddleif Wigdahl (COO Wellboat) Eirin Ervik (COO Service vessel) Bjarne Johannessen (COO Shipping) Svein Sivertsen, chairman of the board Frøy ASA Dagfinn Eliassen, member of the board Frøy ASA Hege Aasen Veiseth, member of the board Frøy ASA Anne Sofie Utne, member oft the board Frøy ASA Harry Asmund Bøe, member of the board Frøy ASA 7 Fixed remuneration Pension Total remuneration and variable remuneration the same group Share fixed Companies in Remuneration to the Board of Directors Remuneration for the members of the Board is determined by the Annual General Meeting (AGM) based on a proposal from the nomination committee. The remuneration is not linked to the Group's performance but reflects the Board’s responsibilities, expertise, time and commitment. Remuneration to executive management: The Board of Frøy ASA determines the principles applicable to the Group’s policy for compensation of executive management. The Board is directly responsible for determining the CEO’s salary and other benefits. The Group’s executive management includes the CEO and the management team of each business unit. Principles for determining salary The main principle for determining salary for each executive management member has been a fixed annual salary with the addition of benefits in kind such as telephone, insurance, internet subscription and newspaper subscription. The fixed salary has been determined on the basis of the following factors: competitive salary level, scope of work and responsibilities, as well as an assessment of the business and individual performance. Pension All executive management are members of the defined contribution pension scheme. Beyond this, there is no agreement on special pension schemes in the group. Other benefits There are no special benefits beyond ordinary salary and pension. The exception is the CFO who has a bonus based on performance/profit. Severance Arrangements If the CEO is terminated by the Board, he is entitled to no severance pay. For other executive management, there will be an individual assessment of severance packages that are reasonable in relation to responsibility and seniority and the reason for the termination of the employment. The policy regarding the determination of salaries and other remuneration to executive management has been unchanged in recent periods and is expected to remain unchanged in the future. Shares held by Executive Management and the Board of Directors 31.12.2021 The Group's CEO holds 51% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's COO/CMO holds 24.5% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's Chairman of the Board holds 0.02% of shares in Frøy ASA. No remuneration has been paid to the Board of Directors in 2021. No loans have been granted or collateral provided to Executive Management or members of the Board. 7.1 REMUNERATION TO MANAGEMENT AND THE BOARD 7.1 Remuneration to Management and the Board 2 4 Variable remuneration Year Fixed salary Fees Benefits 2021 1874 8 40 1914 8 100% 0% 2020 1007 8 50 1057 8 99% 1% n/a n/a 2021 1474 241 4 32 1747 4 100% 0% 2020 948 211 4 0 1159 4 100% 0% n/a n/a 2021 1950 9 39 1989 9 100% 0% 2020 1950 98 2048 0 100% 0% n/a n/a 2021 347 347 0 100% 0% 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 1184 85 13 24 1293 13 99% 1% 2020 1260 98 12 63 1421 12 99% 1% n/a n/a 2021 1065 9 20 1085 9 99% 1% 2020 1056 9 53 1109 9 99% 1% n/a n/a 2021 1028 9 21 1049 9 99% 1% 2020 997 21 50 1047 21 98% 2% n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a * Employed by the Group from 1 December 2020 until 31 october 2021. The disclosed amount in the table above consists of agreed fixed yearly salary for both 2020 and 2021. Pension represent the premium paid for defined contribution plans. Remuneration to executive management Executive management 2021 1 5 6 Helge Gåsø, CEO Frøy ASA Anders Gåsø, COO Arne J. Rødsjø, CFO 01.01.2021 - 31.10.2021 Tore Helgesen, interim CFO 01.10.2021 -> Oddleif Wigdahl (COO Wellboat) Eirin Ervik (COO Service vessel) Bjarne Johannessen (COO Shipping) Svein Sivertsen, chairman of the board Frøy ASA Dagfinn Eliassen, member of the board Frøy ASA Hege Aasen Veiseth, member of the board Frøy ASA Anne Sofie Utne, member oft the board Frøy ASA Harry Asmund Bøe, member of the board Frøy ASA 7 Fixed remuneration Pension Total remuneration and variable remuneration the same group Share fixed Companies in Remuneration to the Board of Directors Remuneration for the members of the Board is determined by the Annual General Meeting (AGM) based on a proposal from the nomination committee. The remuneration is not linked to the Group's performance but reflects the Board’s responsibilities, expertise, time and commitment. Remuneration to executive management: The Board of Frøy ASA determines the principles applicable to the Group’s policy for compensation of executive management. The Board is directly responsible for determining the CEO’s salary and other benefits. The Group’s executive management includes the CEO and the management team of each business unit. Principles for determining salary The main principle for determining salary for each executive management member has been a fixed annual salary with the addition of benefits in kind such as telephone, insurance, internet subscription and newspaper subscription. The fixed salary has been determined on the basis of the following factors: competitive salary level, scope of work and responsibilities, as well as an assessment of the business and individual performance. Pension All executive management are members of the defined contribution pension scheme. Beyond this, there is no agreement on special pension schemes in the group. Other benefits There are no special benefits beyond ordinary salary and pension. The exception is the CFO who has a bonus based on performance/profit. Severance Arrangements If the CEO is terminated by the Board, he is entitled to no severance pay. For other executive management, there will be an individual assessment of severance packages that are reasonable in relation to responsibility and seniority and the reason for the termination of the employment. The policy regarding the determination of salaries and other remuneration to executive management has been unchanged in recent periods and is expected to remain unchanged in the future. Shares held by Executive Management and the Board of Directors 31.12.2021 The Group's CEO holds 51% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's COO/CMO holds 24.5% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's Chairman of the Board holds 0.02% of shares in Frøy ASA. No remuneration has been paid to the Board of Directors in 2021. No loans have been granted or collateral provided to Executive Management or members of the Board. 7.1 Remuneration to Management and the Board 2 4 Variable remuneration Year Fixed salary Fees Benefits 2021 1874 8 40 1914 8 100% 0% 2020 1007 8 50 1057 8 99% 1% n/a n/a 2021 1474 241 4 32 1747 4 100% 0% 2020 948 211 4 0 1159 4 100% 0% n/a n/a 2021 1950 9 39 1989 9 100% 0% 2020 1950 98 2048 0 100% 0% n/a n/a 2021 347 347 0 100% 0% 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 1184 85 13 24 1293 13 99% 1% 2020 1260 98 12 63 1421 12 99% 1% n/a n/a 2021 1065 9 20 1085 9 99% 1% 2020 1056 9 53 1109 9 99% 1% n/a n/a 2021 1028 9 21 1049 9 99% 1% 2020 997 21 50 1047 21 98% 2% n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a * Employed by the Group from 1 December 2020 until 31 october 2021. The disclosed amount in the table above consists of agreed fixed yearly salary for both 2020 and 2021. Pension represent the premium paid for defined contribution plans. Remuneration to executive management Executive management 2021 1 5 6 Helge Gåsø, CEO Frøy ASA Anders Gåsø, COO Arne J. Rødsjø, CFO 01.01.2021 - 31.10.2021 Tore Helgesen, interim CFO 01.10.2021 -> Oddleif Wigdahl (COO Wellboat) Eirin Ervik (COO Service vessel) Bjarne Johannessen (COO Shipping) Svein Sivertsen, chairman of the board Frøy ASA Dagfinn Eliassen, member of the board Frøy ASA Hege Aasen Veiseth, member of the board Frøy ASA Anne Sofie Utne, member oft the board Frøy ASA Harry Asmund Bøe, member of the board Frøy ASA 7 Fixed remuneration Pension Total remuneration and variable remuneration the same group Share fixed Companies in Remuneration to the Board of Directors Remuneration for the members of the Board is determined by the Annual General Meeting (AGM) based on a proposal from the nomination committee. The remuneration is not linked to the Group's performance but reflects the Board’s responsibilities, expertise, time and commitment. Remuneration to executive management: The Board of Frøy ASA determines the principles applicable to the Group’s policy for compensation of executive management. The Board is directly responsible for determining the CEO’s salary and other benefits. The Group’s executive management includes the CEO and the management team of each business unit. Principles for determining salary The main principle for determining salary for each executive management member has been a fixed annual salary with the addition of benefits in kind such as telephone, insurance, internet subscription and newspaper subscription. The fixed salary has been determined on the basis of the following factors: competitive salary level, scope of work and responsibilities, as well as an assessment of the business and individual performance. Pension All executive management are members of the defined contribution pension scheme. Beyond this, there is no agreement on special pension schemes in the group. Other benefits There are no special benefits beyond ordinary salary and pension. The exception is the CFO who has a bonus based on performance/profit. Severance Arrangements If the CEO is terminated by the Board, he is entitled to no severance pay. For other executive management, there will be an individual assessment of severance packages that are reasonable in relation to responsibility and seniority and the reason for the termination of the employment. The policy regarding the determination of salaries and other remuneration to executive management has been unchanged in recent periods and is expected to remain unchanged in the future. Shares held by Executive Management and the Board of Directors 31.12.2021 The Group's CEO holds 51% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's COO/CMO holds 24.5% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's Chairman of the Board holds 0.02% of shares in Frøy ASA. No remuneration has been paid to the Board of Directors in 2021. No loans have been granted or collateral provided to Executive Management or members of the Board. 7.1 Remuneration to Management and the Board 2 4 Variable remuneration Year Fixed salary Fees Benefits 2021 1874 8 40 1914 8 100% 0% 2020 1007 8 50 1057 8 99% 1% n/a n/a 2021 1474 241 4 32 1747 4 100% 0% 2020 948 211 4 0 1159 4 100% 0% n/a n/a 2021 1950 9 39 1989 9 100% 0% 2020 1950 98 2048 0 100% 0% n/a n/a 2021 347 347 0 100% 0% 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 1184 85 13 24 1293 13 99% 1% 2020 1260 98 12 63 1421 12 99% 1% n/a n/a 2021 1065 9 20 1085 9 99% 1% 2020 1056 9 53 1109 9 99% 1% n/a n/a 2021 1028 9 21 1049 9 99% 1% 2020 997 21 50 1047 21 98% 2% n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a * Employed by the Group from 1 December 2020 until 31 october 2021. The disclosed amount in the table above consists of agreed fixed yearly salary for both 2020 and 2021. Pension represent the premium paid for defined contribution plans. Remuneration to executive management Executive management 2021 1 5 6 Helge Gåsø, CEO Frøy ASA Anders Gåsø, COO Arne J. Rødsjø, CFO 01.01.2021 - 31.10.2021 Tore Helgesen, interim CFO 01.10.2021 -> Oddleif Wigdahl (COO Wellboat) Eirin Ervik (COO Service vessel) Bjarne Johannessen (COO Shipping) Svein Sivertsen, chairman of the board Frøy ASA Dagfinn Eliassen, member of the board Frøy ASA Hege Aasen Veiseth, member of the board Frøy ASA Anne Sofie Utne, member oft the board Frøy ASA Harry Asmund Bøe, member of the board Frøy ASA 7 Fixed remuneration Pension Total remuneration and variable remuneration the same group Share fixed Companies in Remuneration to the Board of Directors Remuneration for the members of the Board is determined by the Annual General Meeting (AGM) based on a proposal from the nomination committee. The remuneration is not linked to the Group's performance but reflects the Board’s responsibilities, expertise, time and commitment. Remuneration to executive management: The Board of Frøy ASA determines the principles applicable to the Group’s policy for compensation of executive management. The Board is directly responsible for determining the CEO’s salary and other benefits. The Group’s executive management includes the CEO and the management team of each business unit. Principles for determining salary The main principle for determining salary for each executive management member has been a fixed annual salary with the addition of benefits in kind such as telephone, insurance, internet subscription and newspaper subscription. The fixed salary has been determined on the basis of the following factors: competitive salary level, scope of work and responsibilities, as well as an assessment of the business and individual performance. Pension All executive management are members of the defined contribution pension scheme. Beyond this, there is no agreement on special pension schemes in the group. Other benefits There are no special benefits beyond ordinary salary and pension. The exception is the CFO who has a bonus based on performance/profit. Severance Arrangements If the CEO is terminated by the Board, he is entitled to no severance pay. For other executive management, there will be an individual assessment of severance packages that are reasonable in relation to responsibility and seniority and the reason for the termination of the employment. The policy regarding the determination of salaries and other remuneration to executive management has been unchanged in recent periods and is expected to remain unchanged in the future. Shares held by Executive Management and the Board of Directors 31.12.2021 The Group's CEO holds 51% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's COO/CMO holds 24.5% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's Chairman of the Board holds 0.02% of shares in Frøy ASA. No remuneration has been paid to the Board of Directors in 2021. No loans have been granted or collateral provided to Executive Management or members of the Board. 7.2 Related party transactions Parent company Siholmen AS Gåsø Nærings utvikling Frøy Utvikling AS Frøy Sjøstrans port AS Mix og Match SS Invest Blått Kompetan sesenter Salmonor AS NRS ASA NTS ASA Total Related party balances Current trade and other receivables to related parties 3 3 Related party transactions - Sales to related parties 30 711 45 865 25 956 18 72 580 Purchases from related parties (incl. Management fees) 1 267 350 100 845 7 024 9 586 Entity under common control Parent company Siholmen AS Frøy Utvikling AS Frøy Sjøstrans port AS Blått Kompetan sesenter Midt- Norsk Havbruk AS NTS ASA Total Related party balances Current trade and other receivables from related parties 378 20 398 Current loans and borrowings to related parties 260 725 985 Current trade and other payables to related parties 26 147 26 147 Related party transactions Sales to related parties 607 8 757 30879 32 251 Purchases from related parties (incl. Management fees) 10 054 10 054 Related party transactions 01.01.2021-31.12.2021 and balances 31.12.2021 Other related parties Other related parties Related party transactions 06.12.2019-31.12.2020 and balances 31.12.2020 Entity under common control Related parties are group companies, associates, major shareholders, members of the board and management in the parent company and the group subsidiaries. Note 6.1 provides information about the Group structure, including details of the subsidiaries and the holding company (related parties). All transactions within the group or with other related parties are based on the principle of arm's length. * Other related parties consist of enties that are considered related parties to the CEO. * Other related parties consist of enties that are considered related parties to the CEO. FRØY ASA | ANNUAL REPORT 2021 105 7.2 RELATED PARTY TRANSACTIONS 7.1 Remuneration to Management and the Board 2 4 Variable remuneration Year Fixed salary Fees Benefits 2021 1874 8 40 1914 8 100% 0% 2020 1007 8 50 1057 8 99% 1% n/a n/a 2021 1474 241 4 32 1747 4 100% 0% 2020 948 211 4 0 1159 4 100% 0% n/a n/a 2021 1950 9 39 1989 9 100% 0% 2020 1950 98 2048 0 100% 0% n/a n/a 2021 347 347 0 100% 0% 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 1184 85 13 24 1293 13 99% 1% 2020 1260 98 12 63 1421 12 99% 1% n/a n/a 2021 1065 9 20 1085 9 99% 1% 2020 1056 9 53 1109 9 99% 1% n/a n/a 2021 1028 9 21 1049 9 99% 1% 2020 997 21 50 1047 21 98% 2% n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2021 2020 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a * Employed by the Group from 1 December 2020 until 31 october 2021. The disclosed amount in the table above consists of agreed fixed yearly salary for both 2020 and 2021. Pension represent the premium paid for defined contribution plans. Remuneration to executive management Executive management 2021 1 5 6 Helge Gåsø, CEO Frøy ASA Anders Gåsø, COO Arne J. Rødsjø, CFO 01.01.2021 - 31.10.2021 Tore Helgesen, interim CFO 01.10.2021 -> Oddleif Wigdahl (COO Wellboat) Eirin Ervik (COO Service vessel) Bjarne Johannessen (COO Shipping) Svein Sivertsen, chairman of the board Frøy ASA Dagfinn Eliassen, member of the board Frøy ASA Hege Aasen Veiseth, member of the board Frøy ASA Anne Sofie Utne, member oft the board Frøy ASA Harry Asmund Bøe, member of the board Frøy ASA 7 Fixed remuneration Pension Total remuneration and variable remuneration the same group Share fixed Companies in Remuneration to the Board of Directors Remuneration for the members of the Board is determined by the Annual General Meeting (AGM) based on a proposal from the nomination committee. The remuneration is not linked to the Group's performance but reflects the Board’s responsibilities, expertise, time and commitment. Remuneration to executive management: The Board of Frøy ASA determines the principles applicable to the Group’s policy for compensation of executive management. The Board is directly responsible for determining the CEO’s salary and other benefits. The Group’s executive management includes the CEO and the management team of each business unit. Principles for determining salary The main principle for determining salary for each executive management member has been a fixed annual salary with the addition of benefits in kind such as telephone, insurance, internet subscription and newspaper subscription. The fixed salary has been determined on the basis of the following factors: competitive salary level, scope of work and responsibilities, as well as an assessment of the business and individual performance. Pension All executive management are members of the defined contribution pension scheme. Beyond this, there is no agreement on special pension schemes in the group. Other benefits There are no special benefits beyond ordinary salary and pension. The exception is the CFO who has a bonus based on performance/profit. Severance Arrangements If the CEO is terminated by the Board, he is entitled to no severance pay. For other executive management, there will be an individual assessment of severance packages that are reasonable in relation to responsibility and seniority and the reason for the termination of the employment. The policy regarding the determination of salaries and other remuneration to executive management has been unchanged in recent periods and is expected to remain unchanged in the future. Shares held by Executive Management and the Board of Directors 31.12.2021 The Group's CEO holds 51% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's COO/CMO holds 24.5% of shares in Gåsø Næringsutvikling AS, which has an ownership share in NTS ASA of 37%. The Group's Chairman of the Board holds 0.02% of shares in Frøy ASA. No remuneration has been paid to the Board of Directors in 2021. No loans have been granted or collateral provided to Executive Management or members of the Board. 7.2 Related party transactions Parent company Siholmen AS Gåsø Nærings utvikling Frøy Utvikling AS Frøy Sjøstrans port AS Mix og Match SS Invest Blått Kompetan sesenter Salmonor AS NRS ASA NTS ASA Total Related party balances Current trade and other receivables to related parties 3 3 Related party transactions - Sales to related parties 30 711 45 865 25 956 18 72 580 Purchases from related parties (incl. Management fees) 1 267 350 100 845 7 024 9 586 Entity under common control Parent company Siholmen AS Frøy Utvikling AS Frøy Sjøstrans port AS Blått Kompetan sesenter Midt- Norsk Havbruk AS NTS ASA Total Related party balances Current trade and other receivables from related parties 378 20 398 Current loans and borrowings to related parties 260 725 985 Current trade and other payables to related parties 26 147 26 147 Related party transactions Sales to related parties 607 8 757 30879 32 251 Purchases from related parties (incl. Management fees) 10 054 10 054 Related party transactions 01.01.2021-31.12.2021 and balances 31.12.2021 Other related parties Other related parties Related party transactions 06.12.2019-31.12.2020 and balances 31.12.2020 Entity under common control Related parties are group companies, associates, major shareholders, members of the board and management in the parent company and the group subsidiaries. Note 6.1 provides information about the Group structure, including details of the subsidiaries and the holding company (related parties). All transactions within the group or with other related parties are based on the principle of arm's length. * Other related parties consist of enties that are considered related parties to the CEO. * Other related parties consist of enties that are considered related parties to the CEO. 7.2 Related party transactions Parent company Siholmen AS Gåsø Nærings utvikling Frøy Utvikling AS Frøy Sjøstrans port AS Mix og Match SS Invest Blått Kompetan sesenter Salmonor AS NRS ASA NTS ASA Total Related party balances Current trade and other receivables to related parties 3 3 Related party transactions - Sales to related parties 30 711 45 865 25 956 18 72 580 Purchases from related parties (incl. Management fees) 1 267 350 100 845 7 024 9 586 Entity under common control Parent company Siholmen AS Frøy Utvikling AS Frøy Sjøstrans port AS Blått Kompetan sesenter Midt- Norsk Havbruk AS NTS ASA Total Related party balances Current trade and other receivables from related parties 378 20 398 Current loans and borrowings to related parties 260 725 985 Current trade and other payables to related parties 26 147 26 147 Related party transactions Sales to related parties 607 8 757 30879 32 251 Purchases from related parties (incl. Management fees) 10 054 10 054 Related party transactions 01.01.2021-31.12.2021 and balances 31.12.2021 Other related parties Other related parties* Related party transactions 06.12.2019-31.12.2020 and balances 31.12.2020 Entity under common control Related parties are group companies, associates, major shareholders, members of the board and management in the parent company and the group subsidiaries. Note 6.1 provides information about the Group structure, including details of the subsidiaries and the holding company (related parties). All transactions within the group or with other related parties are based on the principle of arm's length. * Other related parties consist of enties that are considered related parties to the CEO. * Other related parties consist of enties that are considered related parties to the CEO. FRØY ASA | ANNUAL REPORT 2021106 7.4 Defined benefit plans ACCOUNTING POLICIES Defined benefit pension is a pension plan that defines the amount that an employee will receive at the time of his/her retiremen t. The payment depends on various factors, such as age, tenure and salary. The plan is recognized at the net present value of future pension benefits that is considered to be earned at the balance sheet date. Pension funds are recognized at fair value. Earned pensions in the period and net interest expense/income is recognized in the consolidated income statement on an ongoing basis and presented under the line item Employee benefit expenses. Changes in net pension obligation related to pension premiums and payment of pensions are accounted for. Actuarial gains or losses (estimate deviations) are recognized in other comprehensive income and not reclassified to profit or loss. The employees that has been covered by the defined benefit plans until 01.03.2020 are offshore employees, working in Norway. The agreements was terminated 01.03.2020, and after that date there has been no defined benefit pension obligations in the Group. Page 48 7.3 Subsequent events ACCOUNTING POLICIES If the Group receives information after the reporting period, but prior to the date of authorisation for issue, about conditi ons that existed at the end of the reporting period, the Group will assess if the information affects the amounts that it recognises in the Group’s consolidated financial statements. The Group will adjust the amounts recognised in its financial statements to reflect any adjusting events after the reporting period and upda te the disclosures that relate to those conditions in the light of the new information. For non -adjusting events after the reporting period, the Group will not change the amounts recognised in its consolidated financial statements but will disclose the nature of the non -adjusting event and an estimate of its financial effect, or a statement that such an estimate cannot be made, if applicable. Management is not aware of any subsequent events at the date of the release of this annual report. Page 47 7.3 SUBSEQUENT EVENTS 7.4 DEFINED BENEFIT PLANS 7.3 Subsequent events ACCOUNTING POLICIES If the Group receives information after the reporting period, but prior to the date of authorisation for issue, about conditi ons that existed at the end of the reporting period, the Group will assess if the information affects the amounts that it recognises in the Group’s consolidated fi nancial statements. The Group will adjust the amounts recognised in its financial statements to reflect any adjusting events after the reporting period and upda te the disclosures that relate to those conditions in the light of the new information. For non -adjusting events after the reporting period, the Group will not change the amounts recognised in its consolidated financial statements but will disclose the nature of the non -adjusting event and an estimate of its financial effect, or a statement that such an estimate cannot be made, if applicable. Management is not aware of any subsequent events at the date of the release of this annual report. Page 47 7.4 Defined benefit plans ACCOUNTING POLICIES Defined benefit pension is a pension plan that defines the amount that an employee will receive at the time of his/her retiremen t. The payment depends on various factors, such as age, tenure and salary. The plan is recognized at the net present value of future pension benefits that is considered to be earned at the balance sheet date. Pension funds are recognized at fair value. Earned pensions in the period and net interest expense/income is recognized in the consolidated income statement on an ongoing basis and presented under the line item Employee benefit expenses. Changes in net pension obligation related to pension premiums and payment of pensions are accounted for. Actuarial gains or losses (estimate deviations) are recognized in other comprehensive income and not reclassified to profit or loss. The employees that has been covered by the defined benefit plans until 01.03.2020 are offshore employees, working in Norway. The agreements was terminated 01.03.2020, and after that date there has been no defined benefit pension obligations in the Group. Page 48 FRØY ASA | ANNUAL REPORT 2021 107 8.1 Changes in IFRS and new standards Standards issued but not yet effective New and amended accounting standards and interpretations issued by the IASB may affect the Group's future reporting. All possible effects of the new standards have not been reviewed, but none of the published changes are assumed to have a significant effect on the group's financial statements. Of the new standards and interpretations that are issued and, but not yet effective, the following amendmends are considered most relevant to the Group's future financial reporting: Amendments to IAS 1: Classification of Liabilities as Current or Non-current In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify: • What is meant by a right to defer settlement • That a right to defer must exist at the end of the reporting period • That classification is unaffected by the likelihood that an entity will exercise its deferral right • That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must be applied retrospectively. The Group is currently assessing the impact the amendments will have on current practice and whether existing loan agreements may require renegotiation. Preliminary assessment indicates that the amendments will not have a significant impact on the Group's consolidated financial statements. Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 In May 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. Preliminary assessment indicates that the amendments will not have a significant impact on the Group's consolidated financial statements. Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. Preliminary assessment indicates that the amendments will not have a significant impact on the Group's consolidated financial statements. Page 49 8.1 CHANGES IN IFRS AND NEW STANDARDS 7.3 Subsequent events ACCOUNTING POLICIES If the Group receives information after the reporting period, but prior to the date of authorisation for issue, about conditi ons that existed at the end of the reporting period, the Group will assess if the information affects the amounts that it recognises in the Group’s consolidated fi nancial statements. The Group will adjust the amounts recognised in its financial statements to reflect any adjusting events after the reporting period and upda te the disclosures that relate to those conditions in the light of the new information. For non -adjusting events after the reporting period, the Group will not change the amounts recognised in its consolidated financial statements but will disclose the nature of the non -adjusting event and an estimate of its financial effect, or a statement that such an estimate cannot be made, if applicable. Management is not aware of any subsequent events at the date of the release of this annual report. Page 47 FRØY ASA | ANNUAL REPORT 2021108 CONTENT FRØY ASA 2021 FINANCIAL STATEMENTS Income Statement 109 Balance Sheet 110 Cash Flow Statement 112 Notes to the Financial Statements 113 Accounting principles 113 1 Shareholders 115 2 Equity 116 3 Non-current Assets 116 4 Investments in Shares 117 5 Subsidiaries 117 6 Taxes 118 7 Restricted Bank Deposits, Cash in Hand etc. 119 8 Intercompany Balances 119 9 Revenues 119 10 Personnel Expenses, Number of Employees, Remuneration, Loan to Employees 120 11 Specication of Financial Income and Financial Expenses 121 12 Debtors, Liabilities, Pledged Assets and Guarantees etc. 121 13 Related Party Transactions 122 14 Other Current Liabilities 122 15 Specication of Other Expenses 122 FRØY ASA | ANNUAL REPORT 2021 109 Amounts in NOK Note 2021 2020 Operating income and operating expenses Sales revenue 9, 13 60 595 434 5 988 968 Total revenues 60 595 434 5 988 968 Employee benets expense 10 49 496 300 8 330 566 Depreciation of tangible and intangible xed assets 3 233 333 136 111 Other expenses 10, 13, 15 32 486 721 11 093 031 Total expenses 82 216 354 19 559 708 Operating prot/loss -21 620 920 -13 570 740 Financial income and expenses Share dividend 19 593 937 17 300 000 Interest income from group companies 3 858 791 - Other interest income 373 579 43 Other nancial income - 25 604 227 Interest expense to group companies 608 277 - Other interest expenses 1 680 186 9 144 Other nancial expenses 203 503 100 750 Net nancial items 11 21 334 342 42 794 376 Result before tax -286 579 29 223 635 Tax expense 6 -34 586 857 871 Result for the year -251 993 28 365 764 Allocation of result for the year Dividends 129 522 905 - Transferred form Share premium 104 402 836 -28 365 764 Transferred from Retained earnings 25 372 061 - Total brought forward 2 -251 993 28 365 764 INCOME STATEMENT FINANCIAL STATEMENTS - FRØY ASA FRØY ASA | ANNUAL REPORT 2021110 BALANCE SHEET as at 31 December Amounts in NOK Note 2021 2020 ASSETS Non-current assets Intangible assets Licenses, patents etc. 3 250 000 - Deferred tax assets 6 6 276 274 - Total intangible assets 6 526 274 - Property, plant and equipment Plant and machinery 3 330 556 563 889 Total property, plant and equipment 3 330 556 563 889 Non-current nancial assets Investments in subsidiaries 5 1 620 184 775 1 570 590 838 Loan to group companies 8 188 126 776 - Investments in shares and other securities 4 1 860 348 1 800 337 Total non-current nancial assets 1 810 171 899 1 572 391 175 Total non-current assets 1 817 028 729 1 572 955 064 Current assets Receivables Accounts receivables 8 18 177 121 7 482 Other short-term receivables 2 534 143 1 291 907 Receivables from group companies 8 149 065 325 17 300 000 Total receivables 169 776 589 18 599 388 Bank deposits, cash and cash equivalents Bank deposits, cash and cash equivalents 7 457 889 316 918 299 Total bank deposits, cash and cash equivalents 457 889 316 918 299 Total current assets 627 665 904 19 517 687 TOTAL ASSETS 2 444 694 633 1 592 472 751 FRØY ASA | ANNUAL REPORT 2021 111 Amounts in NOK Note 2021 2020 EQUITY AND LIABILITIES Equity Paid-in equity Share capital 1, 2 86 348 603 69 955 181 Share premium reserve 2 2 185 603 469 1 328 578 441 Total paid-up equity 2 271 952 072 1 398 533 622 Retained earnings Other equity 2 - 25 372 061 Total retained earnings - 25 372 061 Total equity 2 271 952 072 1 423 905 683 Liabilities Provisions Deferred tax 6 - 13 493 Total provisions - 13 493 Other non-current liabilities Liabilities to nancial institutions 12 - 50 000 000 Total non-current liabilities - 50 000 000 Current liabilities Trade payables 3 124 019 4 288 291 Public duties payable 5 400 480 692 004 Dividends 129 522 905 - Liabilities to group companies 8 30 000 019 53 843 486 Other current liabilities 14 4 695 137 59 729 794 Total current liabilities 172 742 560 118 553 575 Total liabilities 172 742 560 168 567 068 TOTAL EQUITY AND LIABILITIES 2 444 694 633 1 592 472 751 Frøya, 7 April 2022 Board of Directors Frøy ASA Svein Sivertsen Chairman Paul Birger Torgnes Board Member Ivar Sigmund Williksen Board Member Hege Veiseth Board Member Linda Johnsen Board Member Tonje Foss Chief Executive Ocer FRØY ASA | ANNUAL REPORT 2021112 CASH FLOW STATEMENT Amounts in NOK 2021 2020 Cash ows from operating activities Prot or loss before tax -286 579 29 223 635 Income taxes paid 0 0 Gain/loss on disposal of nancial assets 0 -25 604 227 Depreciation and impairment 233 333 136 111 Changes in inventories, trade receivables, trade payables and other current liabilities -90 496 263 -45 350 370 Change in intercompany balances -373 735 568 0 Net cash ows from operating activities -464 285 077 -41 594 851 Cash ows from investment activities Purchase of property, plant and equipment -250 000 -700 000 Purchase of nancial assets -60 011 0 Acquisition of a subsidiary, net of cash acquired 0 -60 600 337 Net cash ow from investing activities -310 011 -61 300 337 Cash ows from nancing activities Proceeds from borrowings 0 103 843 486 Repayment of borrowings -50 000 000 0 Repayments of equity 0 -30 000 Issue of Share Capital 999 998 741 0 Transaction cost -28 432 635 0 Net cash ows from nancing activities 921 566 106 103 813 486 Net change in cash and cash equivalents 456 971 018 918 298 Cash and cash equivalents, beginning of period 918 298 0 Cash and cash equivalents, end of period 457 889 316 918 298 FRØY ASA | ANNUAL REPORT 2021 113 NOTES TO THE FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES The annual accounts have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway. Use of estimates The preparation of accounts in accordance with the Accounting Act requires the use of estimates. It also requires Group management to exer- cise judgment in applying the Group’s accounting policies. Revenue Income from sale of goods and services are recognised at fair value, net after deduction of VAT, returns and reductions. Revenue from sale for services Revenues for services are recognised when the services are performed and the company has a right to payment for performed. Classication and assessment of balance sheet items Assets intended for long term ownership or use are classied as xed assets. Assets relating to the operating cycle have been classied as current assets. Other receivables are classied as current assets if they are to be repaid within one year after the transaction date. Similar criteria apply to liabilities. First year’s instalment on long term liabilities and long-term receivables are, however, not classied as short-term liabilities and current assets. Intangible assets Intangible assets that have been acquired separately are carried at cost. Trademarks are not amortized, but subject to impairment testing. The testing is performed annually and when circumstances indicate that the carrying value may be impaired. Tangible xed assets Tangible xed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the asset and borrowing costs for similar construction projects if they meet the recognition criteria. The gain or loss arising from the disposal or retirement of an asset is determined as the dierence between the sales proceeds and the carrying amount of the asset. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives and methods of depreciation of tangible xed are reviewed at each nancial year end and adjusted prospectively, if appropriate. Costs related to leases of xed assets are expensed over the lease period. Prepayments are reected in the balance sheet as a prepaid expense and are distributed over the rental period. Impairment of xed assets Impairment tests are carried out if there is indication that the carrying amount of an asset exceeds the estimated recoverable amount. The test is performed on the lowest level of xed assets at which independent ingoing cashows can be identied. If the carrying amount is higher than both the fair value less cost to sell and the value in use (net present value of future use/ownership), the asset is written down to the high- est of fair value less cost to sell and the value in use. Previous impairment charges, except write-down of goodwill, are reversed in later periods if the conditions causing the write-down are no longer present. Investments in other companies The cost method is applied to investments in other companies. The carrying amount is increased when funds are added through capital increases or when group contributions are made to subsidiaries. Dividends received are generally recognised as income. Dividends/group contribution from subsidiaries are booked in the same year as the subsidiary makes the provision for the amount. Dividends from other com- panies are reected as nancial income when the dividends are approved. Investments are written down to fair value if the fair value is lower than the carrying amount. FRØY ASA | ANNUAL REPORT 2021114 ACCOUNTING PRINCIPLES (CONTINUED) Receivables Accounts receivables and other receivables are recorded in the balance sheet at face value after deduction of provisions for expected loss. Provisions for losses are made on the basis of individual assessments of the individual receivables. Additionally, for accounts receivables, an unspecied provision is made to cover expected losses. Pensions The company has a dened contribution pension plan for its employees which satises the statutory requirements under the Norwegian law on required occupational pension (“lov om obligatorisk tjenestepensjon”). Tax The tax charge in the income statement includes both payable taxes for the period and changes in deferred tax. Deferred tax is calculated at 22 % on the basis of the temporary dierences that exist between accounting and tax values, as well as any possible taxable loss carried forwards at the end of the accounting year. Tax enhancing or tax reducing temporary dierences, which are reversed or may be reversed in the same period, have been oset and netted. The disclosure of deferred tax benets on net tax reducing dierences which have not been eliminated, and tax losses varied forward losses, is based on estimated future earnings. Deferred tax and tax benets which may be shown in the balance sheet are presented net. Cash Flow statement The cash ow statement has been prepared according to the indirect method. Cash and cash equivalents include cash, bank deposits, and other short-term investments which immediately and with minimal exchange risk can be converted into known cash amounts, with due date less than three months from purchase date. FRØY ASA | ANNUAL REPORT 2021 115 1 SHAREHOLDERS Share capital in Frøy ASA at 31.12: Amounts in NOK Total Par value Share capital 86348603 1 86348603 Total 1 86348603 Prior to the initial public oering (IPO) in 2021 the capital was increased by 86 348 303 shares and par value was decreased from 300 NOK to 1 NOK. The Company was listed on Oslo Børs Euronext® on 29th March 2021. All shares are fully paid and have the same rights. As of 31st December 2021, Frøy ASA had 4 398 shareholders. Shareholders with more than 1 % holding at 31.12.2021: Number of Owner Share of shares interest votes NTS ASA 62 269 112 72.1% 72.1 % State Street Bank and Trust Comp 4 127 910 4.8% 4.8 % HSBC Bank Plc 1 019 098 1.2% 1.2% Skandinaviska Enskilda Banken AB 1 001 000 1.2% 1.2% The members of the board and the CEO had the following share holdings at 31.12.2021: Number of Member of board/ CEO Shares Svein Sivertsen 20 000 Dagnn Eliassen 0 Hege Aasen Veiseth 0 Anne Soe Utne 0 Harry Asmund Bøe 564 626 Helge Gåsø 819 672 Skipsinvest AS, a close associate to Harry Bøe owns 564 626 shares in Frøy ASA. As a shareholder in Namsos Invest AS and SS-Invest AS Mr. Bøe also indirectly owns shares in Frøy ASA through NTS ASA. Gåsø Næringsutvikling AS, a close associate to Helge Gåsø owns 819 672 shares in Frøy ASA and 45 516 416 shares in NTS ASA. FRØY ASA | ANNUAL REPORT 2021116 2 EQUITY 3 NON-CURRENT ASSETS Share Share Retained Total Amounts in NOK capital premium earnings equity Equity as at 06.12.2019 30 000 30000 Prot or loss for the period 01.01.19 - 30.03.2020 -2 993 703 -2993703 From Frøy Gruppen AS related to the merger Prot or loss for the period 28 365 764 28365764 Issue of Share Capital (not registered) 10 952 206 208 091 916 219044122 Conversion of debt (not registered) 58 972 975 1 120 486 525 1179459500 Equity as at 31.12.2020 69955181 1328578441 25372061 1423905683 Share Share Retained Total Amounts in NOK capital premium earnings equity Equity as at 01.01.2021 69955181 1328578441 25372061 1423905683 Prot or loss for the period -251993 -251 993 Issue of Share Capital 16393422 983605319 0 999998741 Transaction cost -22 177 455 0 -22177455 Suggested dividends -129522905 -129522905 Share premium reserve -104402836 104402837 0 Equity as at 31.12.2021 86348603 2185603469 0 2271952072 Oce Amounts in NOK equipment Trademark Total Purchase cost as of 01.01.21 700000 700000 Inow purchased xed assets 250000 250000 Acquisition cost 31.12.21 700000 250000 950000 Accumulated depreciation 31.12.21 369411 369411 Book value 31.12.21 330589 250000 580589 This year’s ordinary depreciations 233300 233300 Economic life 3 years FRØY ASA | ANNUAL REPORT 2021 117 4 INVESTMENTS IN SHARES 5 SUBSIDIARIES Share Purchase Balance Amounts in NOK Shares of votes cost value Naviaq AS 6.0% 6.0% 1860348 1860348 Total 1860348 1860348 Owner Share of Purchase Share of Share of Amounts in NOK Municipality share votes cost equity result Subsidiaries Frøy Akvaservice AS FRØYA 100% 100% 501 408 618 182677798 33697670 Frøy Nord AS SENJA 50% 50% 67888653 22112121 6495596 Frøy Rederi AS FRØYA 100% 100% 831 843 382 483601056 63415420 Frøy Shipping AS FRØYA 98.2% 98.2% 68506040 116 425 920 12 447 832 Norsk Fisketransport AS NÆRØYSUND 100% 100% 149944082 1 334 765 153 507 000 NTS Management AS NÆRØYSUND 100% 100% 594000 11 908 000 2 586 000 Total 1620184775 818059660 272149518 Frøy Shipping AS – Frøy ASA owns 98.2 % of the shares in Frøy Shipping. Other shares are owned by Frøy Shipping AS. Frøy Nord AS - Frøy ASA controls 100 % of the shares in Frøy Nord AS. 50 % is owned directly and 50 % is owned by Frøy Akvaservice AS. FRØY ASA | ANNUAL REPORT 2021118 6 TAXES Amounts in NOK 2021 Current income tax expense: Entered tax on ordinary prot/loss: Tax payable 0 Change deferred tax/deferred tax assets 34 586 Total income tax expense 34586 Reconciliation of income tax expense: Prot before tax -286579 Permanent dierences -28303268 Changes in temporary dierences 86333 Basis for income tax expense -28503513 31/12/2021 Current tax liabilities consist of: Income tax payable for the period as above 0 Current tax liabilities 0 The tax eect of temporary dierences and loss for to be carried forward that has formed the basis for deferred tax and deferred tax assets, specied on type of temporary dierences. 31/12/2021 Deferred tax assets Property, plant and equipment -12444 Losses carried forward (including tax credit) -28516073 Basis for deferred tax assets -28528517 Deferred tax assets recognised in balance sheet -6276274 Frøy ASA incurred costs related to a share capital issue in 2021. These costs were partly charged against equity and partly recognised as an expense in the income statement. The tax eect from the costs charged directly against equity has also been charged directly against equity, thus explaining the deviation between change in deferred tax/deferred tax asset as per the income statement and change in deferred tax/ deferred tax asset as per the balance sheet. FRØY ASA | ANNUAL REPORT 2021 119 7 RESTRICTED BANK DEPOSITS, CASH IN HAND ETC. 8 INTERCOMPANY BALANCES 9 REVENUES Amounts in NOK 2021 2020 Bank deposits, restricted in Frøy ASA 2413935 556127 Amounts in NOK 2021 2020 Receivables Long term receivables 188126776 0 Accounts receivables 18177121 7482 Other receivables 149065325 17300000 Total receivables 355369222 17307482 Liabilities Short term liabilities 30000019 53843486 Total liabilities 30000019 53843486 Amounts in NOK 2021 2020 Activity distribution Revenues from services performed 60595434 5988968 Total 60595434 5988968 Geographical distribution Norway 60595434 5988968 Total 60595434 5988968 FRØY ASA | ANNUAL REPORT 2021120 10 PERSONNEL EXPENSES, NUMBER OF EMPLOYEES, REMUNERATION, LOAN TO EMPLOYEES Amounts in NOK 2021 2020 Salaries/wages 43139147 6642625 Social security fees 2421336 341676 Pension expenses 3193602 381954 Other remuneration 742216 964311 Total 49496300 8330566 Average number of employees during the nancial year 52 14 Amounts in NOK Position Salaries Pension Other Total Helge Gåsø CEO (2021) 1 874 000 40 000 8 000 1922000 Arne Rødsjø CFO (1.1.21 - 31.10.21) 1 950 000 39 000 9 000 1998000 Tore Helgesen CFO (1.11.21 - 31.12.21) 347 000 347 000 Oddleif Wigdahl Head of Wellboats 1 184 000 24 000 98 000 1306000 Bjarne Johannessen Head of Sea Transportation 1 028 000 21 000 9 000 1058000 Eirin Pedersen Head of Service 1 065 000 20 000 9 000 1094000 Anders Gåsø Head of Larger Service Vessels 1 474 000 32 000 245 000 1751000 No remuneration has been paid to the Board of Directors in 2021. No loans have been granted or collateral provided to Executive Manage- ment or members of the Board. Other benets There are no special benets beyond ordinary salary and pension. The exception is the CFO who has a bonus based on performance/prot. Pension All executive management are members of the dened contribution pension scheme. Beyond this, there is no agreement on special pension schemes in the group. Severance Arrangements If the CEO is terminated by the Board, he is entitled to no severance pay. For other executive management, there will be an individual assessment of severance packages that are reasonable in relation to responsibil- ity and seniority and the reason for the termination of the employment. OTP (Statutory occupational pension) The company is required to have a pension scheme in accordance with the Norwegian law on required occupational pension (“lov om obliga- torisk tjenestepensjon”). The company’s pension scheme meets the requirement of this law. Audit fee Audit fees for 2021 amount to NOK 2076125 excl. VAT. Amounts in NOK Fees Statutory audit fee 620000 Other assurance services 488046 Other assistance 968079 Total audit fees 2076125 FRØY ASA | ANNUAL REPORT 2021 121 11 SPECIFICATION OF FINANCIAL INCOME AND FINANCIAL EXPENSES 12 DEBTORS, LIABILITIES, PLEDGED ASSETS AND GUARANTEES ETC. Amounts in NOK 2021 2020 Financial income Share dividend 19 593 937 17 300 000 Interest income from group companies 3858791 0 Interest income 373 579 43 Other nancial income 0 25604227 Total nancial income 23826307 42904270 Financial expenses Interest expenses to group companies 608277 0 Interest expenses 1 680 186 9 144 Other nancial expenses 203503 100750 Total nancial expenses 2491966 109894 Amounts in NOK 2021 2020 Liabilities secured by mortgage Liabilities to credit institution 0 50000000 Other long term liabilities Total 0 50000000 Fisketransport AS has a NOK 400,000,000 credit facility related to the construction of Frøy Odin witch Frøy ASA has guaranteed (“Selvskyldner- kausjon”). This guarantee will be cancelled when Fisketransport AS exceed an equity ratio of 30 %. FRØY ASA | ANNUAL REPORT 2021122 13 RELATED PARTY TRANSACTIONS 14 OTHER CURRENT LIABILITIES 15 SPECIFICATION OF OTHER EXPENSES Related-party transactions Amounts in NOK 2021 2020 Sales of goods / services: Subsidiaries 60595434 5988968 Purchase of goods / services: Subsidiaries 134124 0 Amounts in NOK 2021 2020 Others 0 260 000 Holiday pay 4 695 137 969 795 Obligation to previous minorities in Frøy Akvaservice AS 0 58 499 999 Total 4695137 59729794 Amounts in NOK 2021 2020 Rent and other housing expenses 4 024 250 1 004 749 Travel expenses 1 260 327 323 852 Consulting expenses and insourcing 19 953 606 7 037 017 Marketing expenses 2 336 436 603 106 Insurance 342 727 33 026 Other 4 569 375 2 091 281 Total other expenses 32486721 11093031 FRØY ASA | ANNUAL REPORT 2021 123 AUDITORS REPORT Statsautoriserte revisorer Ernst & Young AS Havnegata 9, 7010 Trondheim Postboks 1299 P irsenteret, 7462 Trondheim Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 24 00 www.ey.no Medlemmer av Den norske Revisorforening A member firm of Ernst & Young Global Limited INDEPENDENT AUDITOR'S REPORT To the Annual Shareholders' Meeting of Frøy ASA Report on the audit of the financial statements Opinion We have audited the financial statements of Frøy ASA (the Company) which comprise the financial statements of the Company and the consolidated financial statements of the Company and its subsidiaries (the Group). The financial statements of the Company comprise the balance sheet as at 31 December 2021 and the income statement, statement of cash flows and statement of changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements of the Group comprise the consolidated statement of financial position as at 31 December 2021, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable legal requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2021 and its financial performance and cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2021 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the audit committee. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the requirements of the relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 2 years from the election by the general meeting of the shareholders on 10 January 2020 for the accounting year 2020. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2021. These matters were addressed in the context of our audit of the FRØY ASA | ANNUAL REPORT 2021124 2 Independent auditor's report - Frøy ASA 2021 A member firm of Ernst & Young Global Limited financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements. Impairment assessment of goodwill Basis for the key audit matter The carrying amount of goodwill as 31 December 2021 was NOK 687 million, with no impairment reported in 2021. The goodwill is related to an acquisition in 2020 and is allocated to two cash generating units. Key assumptions in the impairment assessment included the existing contracts and expected future utilization, operating cost, useful life and discount rate. Considering the degree of management’s judgement in establishing the key assumptions and the potential impacts on the estimated recoverable amounts of changes in such assumptions, we considered the impairment assessment as a key audit matter. We refer to note 3.4: Impairment considerations. Our audit response Our audit procedures included an assessment of the key assumptions and methods used by management in the impairment assessment. We performed an assessment of the discounted cash flows projected by management through review of the underlying assumptions such as revenue growth rates, EBITDA margins and operating profit. We compared the input data used by management to supporting evidence such as actual results, agreements and budgets approved by the board of directors. Furthermore, we involved our internal valuation experts and assessed the reasonability of the weighted average cost of capital (the discount rate) used in the discounted cash flow model by comparing the estimated beta, risk-free interest rates on government bonds, market risk premium and cost for debt to peer group data, relevant external sources and the Group’s specific factors. We also tested the mathematical accuracy of the valuation model and performed sensitivity analysis on the most critical assumptions. Other information Other information consists of the information included in the annual report other than the financial statements and our auditor’s report thereon. Management (the board of directors and the chief executive officer) is responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the board of directors’ report, the statement on corporate governance and the statement on corporate social responsibility contain the information required by applicable legal requirements and whether the other information is materially inconsistent with the 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 or that the information required by applicable legal requirements is not included, we are required to report that fact. FRØY ASA | ANNUAL REPORT 2021 125 3 Independent auditor's report - Frøy ASA 2021 A member firm of Ernst & Young Global Limited We have nothing to report in this regard, and in our opinion, the board of directors’ report, the statement on corporate governance and the statement on corporate social responsibility are consistent with the financial statements and contain the information required by applicable legal requirements. Responsibilities of management for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of the Company in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway and of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group, or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’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 and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. FRØY ASA | ANNUAL REPORT 2021126 4 Independent auditor's report - Frøy ASA 2021 A member firm of Ernst & Young Global Limited • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the board of directors 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 the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirement Report on compliance with regulation on European Single Electronic Format (ESEF) Opinion As part of our audit of the financial statements of Frøy ASA we have performed an assurance engagement to obtain reasonable assurance whether the financial statements included in the annual report, with the file name 549300U4W5TODHJ1RL14-2021-12-31-en.zip, has been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation given with legal basis in Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements included in the annual report have been prepared, in all material respects, in compliance with the ESEF Regulation. Management’s responsibilities Management is responsible for the preparation of an annual report and iXBRL tagging of the consolidated financial statements that complies with the ESEF Regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary to enable the preparation of an annual report and iXBRL tagging of the consolidated financial statements that is compliant with the ESEF Regulation. Auditor’s responsibilities Our responsibility is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in accordance with the ESEF Regulation based on the evidence we have obtained. We conducted our engagement in accordance with the International Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial information”. The standard requires us to plan and perform procedures to obtain reasonable assurance that the financial statements included in the annual report have been prepared in accordance with the ESEF Regulation. FRØY ASA | ANNUAL REPORT 2021 127 5 Independent auditor's report - Frøy ASA 2021 A member firm of Ernst & Young Global Limited As part of our work, we performed procedures to obtain an understanding of the company’s processes for preparing its annual report in XHTML format. We evaluated the completeness and accuracy of the iXBRL tagging and assessed management’s use of judgement. Our work comprised reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Trondheim, 7 April 2022 ERNST & YOUNG AS The auditor's report is signed electronically Amund P. Amundsen State Authorised Public Accountant (Norway) 5 Independent auditor's report - Frøy ASA 2021 A member firm of Ernst & Young Global Limited As part of our work, we performed procedures to obtain an understanding of the company’s processes for preparing its annual report in XHTML format. We evaluated the completeness and accuracy of the iXBRL tagging and assessed management’s use of judgement. Our work comprised reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Trondheim, 7 April 2022 ERNST & YOUNG AS The auditor's report is signed electronically Amund P. Amundsen State Authorised Public Accountant (Norway) FRØY ASA | ANNUAL REPORT 2021128 Frøya – Hovedkontor Siholmveien 34 7260 Sistranda T: 40 00 72 60 E: [email protected] W: froygruppen.no ANNUAL REPORT 2021 549300U4W5TODHJ1RL142021-01-012021-12-31549300U4W5TODHJ1RL142020-01-012020-12-31549300U4W5TODHJ1RL142021-12-31549300U4W5TODHJ1RL142020-12-31549300U4W5TODHJ1RL142020-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142021-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142020-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142021-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142020-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142021-01-012021-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142021-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142020-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142021-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142020-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142021-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142020-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142021-01-012021-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142021-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142020-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142021-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142019-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142020-01-012020-12-31ifrs-full:IssuedCapitalMember549300U4W5TODHJ1RL142019-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142020-01-012020-12-31ifrs-full:SharePremiumMember549300U4W5TODHJ1RL142019-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142020-01-012020-12-31FRO:PaidInCapitalMember549300U4W5TODHJ1RL142019-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142020-01-012020-12-31ifrs-full:RetainedEarningsMember549300U4W5TODHJ1RL142020-01-012020-12-31ifrs-full:ReserveOfCashFlowHedgesMember549300U4W5TODHJ1RL142019-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142020-01-012020-12-31FRO:RetainedEarningsAndOtherReservesMember549300U4W5TODHJ1RL142019-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142020-01-012020-12-31ifrs-full:NoncontrollingInterestsMember549300U4W5TODHJ1RL142019-12-31iso4217:NOKiso4217:NOKxbrli:shares
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